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Wednesday, 26 April 2017
 

Why People Prefer Unequal Societies (1)

(Christina Starmans, Mark Sheskin and Paul Bloom) - Abstract: There is immense concern about economic inequality, both among the scholarly

community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.
We live in an age of inequality—or at least in an age of worrying about inequality. Pope Francis remarked that “inequality is the root of social evil”, while President Obama called economic inequality “the defining challenge of our time”. A recent Pew report found that Europeans and Americans judged inequality as posing the greatest threat to the world, beating religious and ethnic hatred, pollution, nuclear weapons, and diseases like AIDS. A majority of respondents in each of the 44 countries polled said the gap between rich and poor is a big or very big problem facing their country. And a new report by Oxfam revealed that the wealth owned by the eight richest people in the world is equivalent to the wealth owned by the poorest 50% of the world, sparking widespread outrage.
Academics—from philosophers, economists, and political scientists to psychologists, archaeologists, and even physicists—are also fascinated by the causes, consequences, and extent of economic inequality. This interest is reflected in the extent of attention to Thomas Piketty's book, Capital in the Twenty-First Century, and is grounded in a growing public and scholarly appreciation of the startling extent of economic inequality. Globally, the top 1% of the population owns 50% of the wealth, and the bottom 70% owns only 3% of the wealth.
Many are particularly concerned about the level of inequality in the United States, which has been growing rapidly since the 1970s. The Gini coefficient (a measure of inequality whereby 0 is perfect equality and 100 is perfect inequality, or one person owning all the wealth) in the United States is now 85—the highest of all western nations, and sixth highest worldwide among countries with populations over 1 million. A typical American CEO currently makes about 354 times as much as a typical worker, while just 50 years ago the ratio was 20/18. Although the United States has been getting richer overall, the vast majority of this increase in wealth (over 95%) has gone to the top 1% of wealthiest Americans.

The concern that people express about inequality is also found in controlled laboratory studies, which find that a desire for equal distributions of goods emerges early in human development and is apparent in many different cultures. As such, Frans de Waal nicely summarizes a broad consensus across many fields when he writes: “Robin Hood had it right. Humanity's deepest wish is to spread the wealth.”
A puzzle arises, however, when we consider a largely separate body of research in political psychology and behavioural economics: it turns out that when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. This preference for inequality materializes in a wide range of countries, across people on opposite sides of the political spectrum, and even in adolescents. So, when people are asked to distribute resources among a small number of people in a lab study, they insist on an exactly equal distribution. But when people are asked to distribute resources among a large group of people in the actual world, they reject an equal distribution, and prefer a certain extent of inequality. How can the strong preference for equality found in public policy discussion and laboratory studies coincide with the preference for societal inequality found in political and behavioural economic research?
We argue here that these two sets of findings can be reconciled through a surprising empirical claim: when the data are examined closely, it turns out that there is no evidence that people are actually concerned with economic inequality at all. Rather, they are bothered by something that is often confounded with inequality: economic unfairness.
We should stress that our argument is not that scholars and researchers fail to notice the distinction between inequality and unfairness. On the contrary, the scientists we cite below are often careful to distinguish equality and fairness in their studies. However, researchers, public figures, and the media often claim that people are specifically concerned about inequality of outcome. Much political discourse frames the problem in terms of growing economic inequality, with no reference to fairness concerns. And, as we discuss immediately below, many experimental studies claim to have discovered ‘inequality aversion’ or ‘egalitarian motives’. We leave open the question of whether these researchers intend to claim that there is evidence for a specific aversion to inequality, above and beyond an aversion to fairness, or whether this is just ‘loose talk’. However, to our knowledge, none of these researchers have made the specific claim we wish to make here: that there is no empirical evidence so far that people have any aversion to inequality itself.
We suggest that the perception that there is a preference for equality arises through an undue focus on special circumstances, often studied in the laboratory, where inequality and unfairness coincide. In most situations, however, including those involving real-world distributions of wealth, people's concerns about fairness lead them to favour unequal distributions.
An equality bias in the lab

Anyone looking for evidence that people have a natural aversion to inequality will find numerous laboratory studies that seemingly confirm their view. For example, studies have found “a universal desire for more equal pay”, “egalitarian motives in humans”, “egalitarianism in young children”, and that “equality trumps reciprocity”. A Google Scholar search for “inequality aversion” yields over 10,000 papers that bear on this topic.
And, indeed, when subjects in laboratory studies are asked to divide resources among unrelated individuals, they tend to divide them equally. If a previous situation has led to a pre-existing inequality, people will divide future resources unequally in order to correct or minimize the inequality between others. This bias is so powerful that subjects sometimes prefer equal outcomes in which everyone gets less overall to unequal outcomes where everyone gets more overall. The desire for equality, even at the expense of better average consequences, appears in non-monetary domains as well. For example, people object to medical interventions that would save more lives overall by reducing cure rates for a small group of people and increasing cure rates for a larger group of people.
Furthermore, people appear to view the equal distribution of resources as a moral good; they express anger toward those who benefit from unequal distributions. This outrage is sufficiently strong that subjects will pay to punish unequal distributors. One study examining this across 15 diverse cultures found that members of all populations demonstrated some willingness to administer costly third-party punishment for unequal division of resources (costing themselves the equivalent of a half-day's wages in some cases)—although the magnitude of this punishment varied substantially across populations. Moreover, people expect others to engage in this kind of costly third-party punishment for those that make unequal offers.