...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.
One bit of that bears repeating (and in bold): it turns out that there is no evidence that people are actually concerned with economic inequality at all. What people really care about is ensuring that there is no unfairness. And that would explain the unusual differences between laboratory experiments and real-world observations, which Starmans et al. do a good job of explaining in their paper. I also like this bit in the conclusion:
Worries about inequality are conflated with worries about poverty, an erosion of basic rights, and—as we have focused on here—unfairness. If it’s true that inequality in itself isn’t really what is bothering people, then we might be better off by more carefully pulling apart these concerns, and shifting the focus to the problems that matter to us more.This is a point I have made before - most of the arguments I have heard about why inequality is bad and should be addressed, are really arguments about why poverty is bad and should be addressed. People conflate inequality and poverty, when they are not the same thing at all. To see why, consider this thought experiment I do with my ECON110 students every year: Think about a problem that you associate with inequality. Would the problem be reduced by burning 10% of the wealth of all of the richest people? If the answer is yes, then the problem probably stems primarily from inequality. Otherwise it is more likely to be primarily a problem of poverty.
Now, if you are concerned about fairness you are very likely to be concerned about poverty. In most circumstances, it would be hard to argue that poverty is a fair outcome for the poor person. But that doesn't mean that all inequality is also unfair. In fact, equality may be seen as unfair, if it means that some people work harder than others to achieve the same outcome. And that was one of the points that Starmans et al. were making.
[HT: Berk Ozler at Development Impact, and Marginal Revolution]