It's not Economic Inequality, It's Economic Unfairness People Care About

​Nature has a very interesting new paper out titled "Why People Prefer Unequal Societies," which, of course, runs counter to everything we hear.

"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."

The authors then conclude that,

"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."

Indeed, unfairness can often lead to inequality. Crony capitalism often causes people to become undeservedly rich. In fact, Pew found that 65 percent of Americans believe our economic system "unfairly favors powerful interests." But notice, it didn't say just that Americans are upset that people are rich, just upset that it's unfair. Which is likely why people get just as upset as a welfare queen living off the system than a corporate fat cat who's skimming off the top.

If John puts in 75 percent of the effort and Eric puts in 25 percent, the average person does not want a 50/50 split. This is what economists, pundits and politicians are missing in the inequality debate. Indeed, as I've pointed out elsewhere, just looking at raw numbers is absurd as it doesn't even control for age! Yes, a 20 year old and 45 year old will likely have different incomes.

To return to the article though, it notes the Frans de Waal quote, "“Robin Hood had it right. Humanity's deepest wish is to spread the wealth.” But we should remember, Robin Hood stole from tax collectors.