Tolerating inequality
Inequality sustains itself by generating an ideology which favours the rich. This might sound like classic Marxism - which it is. But it is also orthodox social science, as a new paper from the NBER shows ( ungated pdf ).
Jimmy Charitie, Raymond Fisman and Ilyana Kuziemko ran a simple experiment. They randomly gave $5 and $15 to two people and then asked others whether they wanted to redistribute the money between those two people. On average, subjects voted to close 94% of the $10 gap. However, when subjects were told that the two people already knew whether they were getting $5 or $15, they closed only 77% of the gap.
This suggests that preferences for redistribution depend upon reference points. In the first experiment, the reference point is an equal allocation. In the second, however, there's another possible reference point - people's expectations. Such expectations reduce demand for equality.
The effect here is big. The experimenters also allocated the $5 or $15 according to scores on a SAT and then asked people to redistribute. On average, they closed 56% of the difference. This tells us that the effect of tweaking reference points on people's tastes for equality is equal to about half the effect of the difference between random allocations and merit-based ones. I reckon this is quite a lot.
You might be thinking here of Scott Alexander's wise warning : beware the man of one study. Except this is not the only research on this point. Experiments by Kris-Stella Trump have found a similar thing. She says :
Public ideas of what constitutes fair income inequality are influenced by actual inequality: when inequality changes, opinions regarding what is acceptable change in the same direction.
The very fact that the share of the top 1% in UK incomes has more than doubled since the 1970s (from under 6% to 12.9%) might therefore reduce demand for redistribution.
Several cognitive biases feed into this: the status quo bias , anchoring effect and just world illusion .
The point here is surely important. Public tolerance of inequality can increase as inequality increases. This isn't (just) because of a biased media - the media doesn't exist in these experiments - but because actual inequalities condition our attitude to fair inequalities.As Marx said :
Men, developing their material production and their material intercourse, alter, along with this their real existence, their thinking and the products of their thinking.
Marx was right.
Tolerating inequality , by Chris Dillow, Stumbling and Mumbling
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As real circumstances evolve, so does perception of them. And so the nation that was born of equality slowly becomes the most stratified of all...
The perception problem is pretty well summarized by:
The seed explains how Americans' perceptions got so very, very erroneous...