spends too much money trying to estimate everything down to the third decimal point, and it is very expensive, and when you get those numbers in many cases conceptually they are not all as meaningful as you thought they were when you paid to get them; whereas, policy requires essentially forecasting the future a little bit. Particularly since we have had a lot of rapid social change we need to find out where people are getting their advice, whether they have been shifting, what they are planning to do, and how some of these recent legislative changes have really percolated down into plans to do something different.

We do a lot of laws where we now speculate about what they are going to do, including the new estate and gift tax laws, but we really don't know what is likely to happen until people have talked to their lawyers and then translated this into their own particular preferences and values, and we have asked about these. Often they do things that aren't what economists would have guessed they would have done.

People don't often maximize things. Our early study of the affluent indicated that many high-income people were not taking advantage of all kinds of tax advantages that you might have thought they would use. They were too busy earning the money, and they had rather powerful psychological and emotional reasons why they weren't giving appreciated assets to charity or investing in particular kinds of tax shelters, real estate. The money was all tied up in their own business, and they were too busy and to some extent they thought they owed the Government this income tax money.

On the other hand, when it came to estate taxes, they had an entirely different attitude. At that time that was their money and they wanted to pass it on to their children no matter what. That kind of preparation and attitude still exists, and it is harder to see what tax and Government policy is going to do to this system; so I am more concerned with getting a good enough sample of a wide range of wealth and finding out what is going on than I am with measuring the dollar details precisely.

Mr. FRASER. That raises the other question, whether this should be a one-shot deal again, to update data or whether there ought to be continuing sampling and reporting much as we now get on income. Mr. MORGAN. Given the privacy problems, I think you would have to make this one shot with some notion that you might repeat it every 5 or 10 years. Things don't change that rapidly in society, and I wouldn't think it would be wise to follow individuals across time simply because the whole privacy/confidentiality issue is difficult enough, and these are big enough issues so that a certain amount of retrospective information from a fresh sample every 5 or 10 years would, it seems to me, probably be safer than a very high cost in both protection of privacy and sheer investment in data that would be required to follow individuals over time; so although I am engaged in a massive study following people now, I don't think it is necessary in this case, although repeated measurement at some intervals probably is neces

sary.

Mr. SMITH. I think part of the difference in the cost estimates between Mr. Morgan and Ms. Projector has to do not so much with the differences in the level of precision they would like to obtain or exactly what is going to be measured, but differences in the way that these data are used.

Ms. Projector has been in the situation where she has to be concerned about the implementation of a particular policy. If you talk about a welfare reform, where you are going to reduce the amount of income transferred to an individual by some measure of the value of assets that individual holds, you need to have fairly rich and fairly detailed data bases to answer questions about the cost and impact of such a policy.

The questions that Jim is interested in, which happen to be primarily the longer run issues, where I have slightly greater interest myself, require less detail about specific assets and less geographic detail. One can get by with much smaller samples when answering Mr. Morgan's questions.

I think there is a difference, but I am inclined to think that Mr. Morgan's figure may be a bit low anyway, even if he did only what he said he was going to do.

As far as setting out to measure the wealth, I think it wrong to talk about a study. Out in Illinois, if I may pick up Mr. Simon's regional use of examples, you have an accelerator. It is a nuclear accelerator. I understand it has a price tag of $100 million a year to operate. There is a lot of measurement on out there, and what they are finding out each year is a very, very tiny increment to our store of knowledge about physics.

It is just terribly costly to increase mankind's knowledge about anything that is important. Spending $10 million, to learn how wealth moves in the society and how it is distributed-I think that is peanuts. That is a few flights of PanAm around the world. It is a trivial cost, but it affects how public policy is going to be made, how people are going to be taxed, how people are going to live and be educated, at what level this economy is going to operate.

It is terribly important information, and concerns about whether we spend $10 million or $15 million, I think, are misplaced at this moment, misplaced in relationship to the significance of what we would like to measure, what this means for the way the society functions.

Ms. PROJECTOR. There is one aspect to this that we haven't talked about that I think may also contribute to the difference between Mr. Morgan and me.

I have come increasingly to feel, as I tried to say in the statement, that obviously one wants to know about the concentration and some people are richer than others, and it is important from the point of view of judging how a society is moving along; but I think that the thing that is not understood nearly as well is this whole idea of trying to test out different ideas about what is it that determines the saving rate, for example, so that I subsume under any study of wealth that you also have what we like to call the dependent variable, in other words, that you got saving which is being explained by income and wealth accumulation.

Well, that immediately-and I think Mr. Morgan would agreewould add an enormous amount to the complexity and to the cost of the operation. You either have to have saving or consumption.

Another thing I would like to mention is that you, Mr. Chairman, mentioned the kind of data that we have on income distribution.

Well, you probably either are already aware or will become aware Thursday that everybody is all up in arms about how the income dis

tribution data are no good, and we have to spend millions of dollars fixing that up, and the Department-and I remind you I am not here as a Department representative-is very much involved in a new study of income, so that all of the same questions that arise about problems of collecting wealth data also really pertain to the income data, and to my way of thinking what one really needs is a data base measuring simultaneously income and either consumption or saving, and wealth, along with the demographic information.

Mr. FRASER. Is there in the executive branch someone who is pushing for either improved studies on income distribution or income? And is there someone pushing for studies on wealth?

MS. PROJECTOR. Well, there have traditionally been in OMB and the Office of Statistical Policy a group that worries about quality of income data and wealth, and I think that the Department's effort reflects this interest in income distribtuion; and their approach to the wealth thing, as I understand it, is that they need to get a vehicle started and get the various problems worked out with regard to income, and then they can add variables later.

We have within my group pushed very hard for this combination of saving, income, and wealth and hope that we will be persuasive at some point.

Mr. FRASER. This comes under the Department of Commerce, the Census Bureau? Are they the ones that do it?

MS. PROJECTOR. Of course, I work for HEW in Social Security, and Commerce obviously has an interest because the Census Bureau is part of Commerce; but I was trying to distinguish here the substantive questions of where the questions would arise and the data collection. Mr. FRASER. What I was trying to pin down is, if the President or somebody decided that we needed better data on wealth distribution, who would be expected to carry out the actual survey or study.

MS. PROJECTOR. I don't think anything would necessarily follow from that. I assume what used to be the Office of Statistical Policy would play an important role in that.

Mr. FRASER. What you are saying is that it wouldn't naturally go to the Census?

MS. PROJECTOR. No.

Mr. FRASER. That is where I wasn't clear. I just assumed they would be the ones who would do this kind of work.

Ms. PROJECTOR. It would not occur to me that that necessarily follows.

Mr. MORGAN. The Federal Reserve System has some interest in this and the Federal Reserve System used to fund annual surveys of consumer finances 20 years ago, but in recent years, aside from this small study on credit and credit use, they have done very little in terms of funding data collection. Presumably the National Income Division in the Department of Commerce might have some interest in this, although they are mostly concerned with decent aggregate figures and have not traditionally been saddled with the problem of distribution. of anything.

MS. PROJECTOR. In a sense, this kind of comes back to some of the questions raised earlier about confidentiality problems.

In the past the Census Bureau has, I think, become involved in surveys because they had easier access to tax records than, say, something like the Survey Research Center would.

Mr. SMITH. It would be my judgment, if you are talking about a survey to be done in the Federal Government, the work would be carried out by the Census Bureau, and that would be unfortunate if you are talking about one survey. There are a lot of reasons for that. They have to do with how effectively the data get utilized afterward. They have to do with the way that work gets planned.

I would suggest that if we were really going to find out something about the distribution of wealth we not start out by being concerned about institutional arrangements but that we pose the questions, I think, as has been done somewhat in this committee, what is it you would like to learn about wealth, the distribution, the process by which it is collected? And then you decide afterward how one would best find answers; and I would suspect that many of these questions can be addressed much more effectively by organizations such as that where Mr. Morgan is housed, the Survey Research Center, or the National Opinion Research Center and similar organizations like that.

Some work ought to be done out in the academic types of research organizations because they are far less constrained by political considerations and by modes of doing things than is the Census Bureau. Other parts of this effort to understand wealth and understand things about wealth could probably be done best within the Federal Government, but I wouldn't necessarily focus on a single agency.

Mr. MORGAN. Not only that, but the methodology problems are such that we need to fund a diversity of efforts to see if they come up with the same answer.

Mr. FRASER. To have more than one study.

Mr. SIMON. If I may, I think the illustration you used about the nuclear measurement in Illinois is a good illustration that the package ought to be not so precise that it becomes too expensive. That last 2 percent, 1 percent, of measurement, all of a sudden escalates cost tremendously, and I would like to see someone put together a package that is reasonably conservative in cost and yet gives us some feeling of the basic data that may have a 4-percent variable or whatever you want to come up with.

I see you smiling. You don't like a 4-percent variable; but those of us who are not statisticians are willing to tolerate that. A 4-percent variable is a lot better than where we stand right now with maybe a 100-percent variable, and I think that kind of information we could probably get without astronomical kinds of costs.

So I would just encourage someone to be moving in that direction, and I am willing to help encourage HEW, Census, whoever you want to do that, to start moving in that direction.

Mr. FRASER. One more advocate here for better data gathering. Does the United States in terms of either its traditions or pronouncements have policy objectives with respect to the distribution of wealth as a national goal?

Mr. SMITH. Don't hold me to precise quotes. There is a considerable heritage from the Founding Fathers, from Adams on, about the dangers of inordinate accumulations of wealth in the hands of a few. The impact that great amounts of wealth can have on the political process, as we witnessed during the last decade, can be very serious. You people are closer to this than I. You must feel the concerns of organizations like the American Medical Association and the AFL

and manufacturing firms, the maritime industry, et cetera, who would like to see the world shaped in a particular way. One of the things that they have to help you see the world correctly is a certain largesse that can devolve upon you at the appropriate moment. It takes a great deal of stamina and a great deal of devotion and commitment to certain kinds of ideals to resist that. We know that everyone isn't capable of resisting, and we can get public policies that reflect an aristocratic mentality.

Mr. MORGAN. But you don't have to come at this with the assumption that it is only the overall distribution of wealth that is crucial or there is going to be some simple policy about changing the distribution of wealth. There are a whole lot of specific policy issues about the future of people's retirement plans, about how the present laws which have a purpose are likely to work, and whether they are going to do something other than the framers of the law intended that can be tackled without any particular assumption ahead of time that if the wealth distribution turns out one way there is going to be a huge cry to change it, and if it turns out another way there won't be.

MS. PROJECTOR. The other thing, I think, that one has to remember is, how do you get there? If you have differences in the distribution of wealth, for example, which result from the fact that one guy engaged in riotous living and another saved, is that good or bad? Mr. FRASER. So that nothing automatically flows from a particular distribution?

MS. PROJECTOR. I think it is a very difficult question.

Mr. MORGAN. It does make a difference how it is accumulated.

MS. PROJECTOR. One can always fall back on the idea that you wanted to equalize opportunities and perhaps lifetime income but then you have to face up to the question, what are you going to use as your measure in ranking people in terms of well-being, and if you have looked at a measure of wealth, you may be penalizing the ant rather than the grasshopper.

Mr. SMITH. There is no question about it, we could distinguish the merit of one type of accumulation as opposed to another; but another aspect of this is how the life chances of people are affected by the distribution of wealth, regardless of how virtuous or how culpable my parents were, if they leave me $10 million my life chances are much greater than someone who had parents with the same characteristics who left him $3,000. That really comes back rather fundamentally to the philosophical underpinning of the idea of what you can do if you go out and try.

Mr. FRASER. This raises a related issue: Is this the business of the Government? Should the Government worry about these things, or is this a matter, in terms of either acquiring data or a better analysis, is this something that should be left

MS. PROJECTOR. Unless you in effect abdicate your responsibilities in the tax area and that sort of thing, I think it almost has to be the business of Government.

Mr. FRASER. There are obviously some specific uses of data that would give us a better insight as to public policy choices.

Mr. MORGAN. The difficulty is, they are spread through the Government so your question, where is the logical place for this to happen, is difficult to answer. The Department of Health, Education, and