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Nearly a month ago, friend-of-the-site and renowned behavioral economics researcher Dan Ariely invited our readers to take part in one of his experiments. Readers were asked to fill out a survey that asked questions about a hypothetical country and the manner in which they would prefer to see wealth distributed within it.
Nearly one thousand of you completed the survey and the ensuing discussion on the site was animated, to say the least. Many railed against the injustice of confiscatory tax codes and the lack of social mobility proposed within the study.
Well, the results are in, and Dan explains below what he was testing for, how the survey was structured (Surprise! Many of you saw different versions than your peers), and the conclusions you helped his team reach regarding people's perception of wealth inequality. Suffice it to say, you're an admirably fair-minded bunch. Here are the results:
Thanks to all who took part in our survey a few weeks ago about wealth inequality. We received 937 complete responses, and from the discussion board it looks like many of you had strong opinions on this important topic. Now, as promised, here are the results.
The Premise
As you recall, this survey was based on philosopher John Rawls’ concept of justice. Rawls famously defined “justice as fairness,” and proposed the “veil of ignorance” thought experiment to help determine what constitutes true social justice. The thought experiment goes like this:
Instead of trying to consider what society should look like in an abstract sense (i.e., for everyone else), you will decide what kind of society you personally would want to live in.
Here’s the catch: before you decide, you must don a veil of ignorance that hides from you all information about your personal characteristics and situation. That is, you might be wealthy beyond your wildest dreams or in complete poverty, predisposed to good health or have a severe disability, but you won’t find out until after you design your society.
Think of it like this -- the stork is about to randomly drop you somewhere in the world, and you have to choose, mid-flight, what kind of a world you want to be dropped into.
What this means to you is this: You must decide on a world that you will be happy to live in no matter where you end up.
The Experimental Design (What You Knew)
Rawls’ theory can be used to consider almost any type of moral issue, but we were primarily interested in your opinions of wealth inequality. We gave nine different pie charts, each split into a maximum of five slices to represent quintile distributions of wealth. The pie charts ranged from very equal to very unequal. We can’t precisely say perfectly unequal or perfectly equal since we’re dealing with quintiles, but that’s the idea.
The first pie chart had five equal slices, meaning that each 20% of the population has exactly 20% of the total wealth. The next seven charts had increasingly unequal slices. In the second chart, for example, the top 20% of people had 30% of the wealth, and the bottom quintile had 15%. The ninth pie chart was as unequal as possible -- the top 20% had 100% of the wealth, and the other 80% had nothing.
Most of these charts were made up so that we could gather opinions about the full range of possible wealth distributions, but a few were based on real data from different countries. The most equal wealth distribution data from any country belongs to Spain, which resembles distribution #5 in this study. Wealth distribution data is incredibly hard to measure and to obtain, so Spain may or may not really be the most equal country in the world. Distribution #6 below looks like the wealth distribution in Norway, and Distribution #7 resembles that in the United States.
You rated each distribution on a sliding scale from 0 – 100, indicating how much you would or wouldn’t want your country’s wealth distribution to look similar to each example. A rating of 0 meant “I don’t want it to look like this,” and a rating of 100 meant “I want it to look like this.”
The Experimental Design Continued (What You Didn’t Know)
All of you rated the same nine distributions, based on the prompt that you were about to join a new country and would be randomly assigned to some place in the country’s wealth distribution.
For some of you, this is all you were told about the new country. This was the control group. Now the other 5/6ths of you received a little bit more information about the new country.
We manipulated two variables between subjects: 1) the degree of social mobility in the new country, and 2) the effects of redistribution on taxes.
Variable #1: Social Mobility
This variable had three different levels, so you received one of these three variations:
Variation 1: There is Social Mobility
In the social mobility condition, we said this about the new country:
There is social mobility, so wherever you start after being randomly assigned is not necessarily where you will stay for the rest of your life. Based on your skills, abilities, and opportunities, your situation can change.
Variation 2: There is No Social Mobility
In the no-mobility condition, we said this instead:
There is no social mobility, so wherever you start after being randomly assigned is where you will stay for the rest of your life.
Variation 3: Control
The control condition did not mention social mobility at all. We assume that this led people to assume some degree of mobility, since responses resemble those in the social mobility condition (Variation 1).
Variable #2: Taxes
In addition to these three variations on social mobility, there were two conditions regarding the presence of tax information:
Variation 1: Tax Information is Provided
In the taxes condition, we said:
You may have to pay taxes. The wealthier you are, the more money you will pay.
In this country, taxes are the only way to achieve a more equal wealth distribution. That is, if you see a distribution that of wealth that is very equal, then the government of that country collects more money from the wealthy to redistribute to the poor. What this means to you is that if you are wealthy, a more equal distribution means that you are paying more in taxes, and if you are poor, a more equal distribution means that you are getting more.
Variation 2: No Tax Information Provided/Control
In this condition, we did not include any information about taxes at all.
Hypothesis
The tax information was intended to remind people that equality isn’t necessarily fair, and that the cost of redistributing money to the poor is often higher taxes on the rich. We predicted that the conditions with tax information provided would favor more inequality than those without the tax prime.
We also predicted that inequality is perceived to be more permissible when social mobility is high. This led us to expect the no social mobility conditions to rate the more equal distributions higher than people in the conditions with social mobility.
Based on past studies, we expected that social mobility would affect the results more than the tax information, but we did expect that the tax information would lead to somewhat lower ratings for equal distributions,
Results
We had 849 people rate pie charts, excluding those that gave a rating of zero for everything (this would mean that either they disliked everything equally, or that they didn’t answer the question since zero was the default answer – and either reason wouldn’t provide meaningful results).
Here’s a brief summary of the interesting results, followed by a chart of average ratings for each distribution:
- Surprisingly, in all 6 conditions, the equal distribution had the highest average rating.
- The middle-range of distributions received similar ratings from all conditions; the manipulations seemed to primarily affect ratings at the extremes (very equal and very unequal).
Regarding Social Mobility
- With no social mobility, the more equal distributions are rated higher, which makes sense.
- With no social mobility, the perfectly unequal distribution is rated higher, which is the opposite of what we predicted. We’re interested to hear readers’ ideas about this – what might explain why, without social mobility, ratings for the most unequal distribution increased?
- On the whole, the control group, which did not mention social mobility at all, and the condition that explicitly mentioned social mobility had similar average ratings for all nine charts. This makes sense, since the control group most likely assumed some degree of social mobility existed.
Regarding Taxes
- In the condition with social mobility, the information about taxes lowered ratings of the three most equal distributions. In the control condition, we see the same result, but the differences are smaller. This is consistent with our hypothesis that taxes would make equality less desirable.
- Taxes had the greatest effect on ratings for those in the control group with an annual household income of $100,000-250,000. For the most equal distribution, the average rating without taxes was 54; with taxes this decreased to 24. On the other end of the spectrum, ratings for the two most unequal distributions more than doubled, from an average of 6 without taxes to 12 (2nd most unequal) and 16 (most unequal) with taxes.
Rankings
Next, we looked at the ranking of distributions, not the actual rating values to get an indication of which distribution people liked best without the potentially confounding effects of differences in people’s individual ranges of rating values. The table shows the percentage of people in each group who ranked each distribution first. To be conservative since the results were skewed to the equal end, any ties went to the less equal distribution (so if charts #3 and #4 were both ranked 100, we coded this as distribution #4). In all six conditions, more than 40% of people liked the perfectly equal distribution best, and we found this very surprising. We’ll be interested to see what readers think about this – would you expect such stable preferences across the conditions?
Demographics
We also asked several demographic questions, and we appreciate that most people responded to all of these questions. The most significant demographic variables were household income and fiscal conservatism. The fiscal policy question was answered on a sliding scale from 0 (very liberal) to 10 (very conservative). 780 people answered this question, with a mean response of 4.9 and a median of 4.5. We split the responses at the median into two groups so that we could compare the more liberal half of our sample with the more conservative half of the sample. Here, we see a large difference in rankings – 58% of liberals rated the perfectly equal distribution the highest, compared with 30% of conservatives. However, liberals and conservatives alike favored the more equal distributions.
Conclusions
Taken as a whole, the results suggest to us that there is much more agreement than disagreement about wealth inequality. Across differences in wealth, income, education, political affiliation and fiscal conservatism, the vast majority of people (89%) preferred distributions of wealth significantly more equal than the current wealth spread in the United States. In fact, only 12 people out of 849 favored the US distribution. The media portrays huge policy divisions about redistribution and inequality – no doubt differences in ideology exist, but we think there may be more of a consensus on what’s fair than people realize.
- Dan Ariely
If you haven't yet heard Chris' interview with Dan, you're missing out on an excellent and fascinating exploration of the emerging and increasingly influential field of behavioral economics. If you find yourself with a free 40 minutes at some point this week, we highly recommend listening to the podcast.
- Adam Taggart's blog
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Comments
Wow, this certainly is very interesting information!
I was surprised to see Pie Chart #1 selected most often, because it seemed to me that following that chart, the top 20% of income earners only had 20% of the wealth: meaning much of of their earnings were taxed in order to bring the lower quintiles up to equal wealth.
Since so many people selected the #1 chart, I would love to know whether people deliberately selected it because of the Rawls concept - not knowing which quintile of society they'd be dropped in - or because they had a different understanding of what Pie Chart #1 meant than I have. If any of you selected Pie Chart #1 the most, would you care to share your thoughts? Thank you!
Personally, I think Pie Chart #7 is a really pathetic situation. It is somewhat tolerable right now because even the poor in the United States are relatively better off, with access to food stamps, social welfare, mindless entertainment, etc.
When there is no money for that (less for government largess), or when there are not enough jobs paying living wages - i.e. when everyone's wealth drops lower in relation to the cost of basic necessities - I think we will descend into social instability met with further authoritarian responses, like what the people in the Middle East are living under...
Poet
What a flawed experiment!
This is like one of those surveys where they are trying to push you towards one outcome. If communism worked as predicted then it would be a wonderful system. Unfortunatly we know know from history that it never works and always leads to dictatorships and tolitarian governments. The key factor is human nature. If we are in a "eat what you kill" world, then people will work harder, protect their property, inovate, and risk capitol to gain more wealth. If the government tries to 'make things equal" or promote 'social justice" then people will do the minimum needed to exist. Pure capitolism can be cruel, but the poor in a capitolist country will live beter than the average in a comunist country.
Anouther problem with this experiment is the concept of dividing the pie. In truth the only way we have enough is if we make more pie. If bill gates makes billions dollars by creating software that people want, did he take that money from someone? Did he redistribute the money from poor to rich? No he made more pie by making wealth. Along the way he employed tens of thousands of people and made thouands of them wealthy as well. He paid bilions of dollars in taxes. Then he gives billions of dollars to charity. Everyone benifits from Bill Gates wealth in this scenario. Do I need to explain how this would not work if someone tried to redistribute Bill gates wealth as his company was growing? He would not have started his company and we would use software produced in anouther country or we would'nt have it at all.
I wish this site would avoid far left or far right politics. Rather than try to design a perfict socialist utopia where we all share equally, you should discuss real world answers for preparing for a future with limited resources.
What a flawed experiment!
I think you don't get the experiment. It's to gauge people's reactions and choices based on the information provided.
You remind me a little of those people who are so far to one side, they think anyone in the center is an extremist in the opposite direction - and if everyone gives in to your definitions, you end up skewing the entire base of the conversation in your favor.
Please, tell me: If you were to be dropped into this world and wouldn't get to choose what station in life you were born in, and there would be limited or no social mobility and you wouldn't even know what merits that mobility would be based on nor whether you would have those traits (looks, facility with math, social skills, fashion sense), what kind of society would you want, knowing you could be at the very top or also at the very bottom?
If it seems to push towards one outcome, think about this: What kind of society would you work towards if you had a hand in shaping it for all not in it, to want to join that society?
(Personally, I liked #5 the most, although I probably wouldn't consider Spain an ideal place to live - it doesn't fit my set of circumstances. The rich clearly have 3 times more, but not overwhelmingly more as to squeeze out and completely crush the poorest. By choice I live in the United States.)
Poet
Ken,
Keep in mind that this experiment wasn't about pressing anyone in any particular direction - it was measuring peoples "instinctive" judgment of what constitutes a fair distribution of wealth within a society.
This is an awkward place for your first post - the vast majority of the dialog here is geared towards "problem solving", and the political debates/diatribes are kept fairly localised within a few threads.
To the actual experiment,
I'd submit that monetary wealth is an easy thing to measure and project. Spiritual, intellectual, emotional and physical wealth are significantly more difficult to track, and in my opinion, are worth drastically more than monetary well-being. I'd further suggest that our standards of living give us a marked bias towards more equal distribution. This *may* be evidenced by the fiscally conservative vote trending more towards the "middle", favoring a less drastic wealth gradient but also provisioning for a proportional relationship between work and wealth.
I'd submit that Hobbs's experiments and observations are flawed, and that while humans tend to "rationalize" an even distribution superficially, when faced with the presence of divying up their possessions, their responses would change drastically. Jungian duality, I suppose - we can be naturally disposed towards sharing and hording without it compromising our moral well-being.
I don't think anyone in their right mind thinks that the top 10% holding 80% of the wealth is favorable.
It might be historically consistent, however, which is worth interrogating further.
Hobbsian philosophy is contextually confused - that's to say, given a certain set of circumstances, those examined might display a certain tendency which is absent under a different set of circumstances. It's also worth noting that in an experiment like this (which was followed by a significant amount of comments regarding it's "vague" nature) that the results can be seen as a representation of peoples "feelings", or emotional beliefs, rather than their true socio-political philosophies.
When examining other dimensions than money and tax, especially in tandem, I think the results would be markedly more centralised, but I could be wrong =)
Cheers,
Aaron
"Subject to no government but that of my own conscience."
@ Poet
I understand the premise. it is just that i understand the code words also. Phrases like 'social justice' and ' redistribution of wealth" are code words for socialism. What you have here is an experiment designed to prove that socialism is the ideal system. The experiment was skewed to produce a consensus that we need income redistribution. I addressed two variables of the variables that lead to the downfall of socialist systems. One is human nature and another is the assumption that we are playing a zero sum game where wealth has to be taken, and is not created.
If I was dropped into this world, unprepared and unequipped to succeed, then I would probably want the state to make me equal to the stronger, more intelligent, and harder working people. If I was one of these productive people I would resent that fact that my income was given away and I would sit on my butt and do nothing to make another person richer. The answer is capitalism with a safety net. The size of the safety net is determined by society. It is also determined by your competition because if you redistribute to much you drive the productive away. Name a State that has successfully redistributed income to make everyone equal without becoming a totalitarian nightmare if you can.
I was in the control group...no tax and no social mobility variables....once a sheeple always a sheeple I guess
Pretty cool study...thanks
Captain Sheeple
Name a State that has successfully redistributed income to make everyone equal without becoming a totalitarian nightmare if you can.
I agree. I don't favor equal distribution. If it's all equal, then that takes away the incentive to work hard for one's betterment. And if life is too comfortable for the poorest, they won't strive to better themselves. This is why I was surprised so many chose that "perfectly equal" distribution.
That said, the only successfully redistributed income occurs within a family, or amongst close friends, or those faced with outside dangers or where collective action is needed (kibbutz). That's about it.
Poet
Sorry if my original post was not in line with this blog.
I believe that we are headed toward economic collapse. One of my big fears is that we will try to find a strong man after the collapse (example Hitler, Putin) that will push us toward a totalitarian, socialist, global government. I think that would be a disaster. I am a libertarian who wants government to be as small as it can be and still provide basic services. I also want government to be more local. The original post set off alarms for me and I wanted to point out that this has never worked. I also wanted to crack the code for people who don’t know the code words for socialism.
I also want to state that charity is a better answer. We have needy in society, but money should come from individuals not the state. People feel entitled when money comes from the state. People are grateful when it comes from an individual. It is better spiritually for the giver and the receiver if it is charity. In the challenging times ahead we need to focus on what we can do, not what the state can do. I liked your last post Poet.
This is such a soup sandwich, I dont even know where to start. But, I just gotta give it a try.
1st, Social mobility. I had to wiki this phrase. I simply dont get it. Im not stupid. I have traveled all over but I'm sorry - I dont give a rip whether you (or I) are in one social class or another. It is just labels and classifications that empower a few at the expense of someone else. Sounds like another manmade illusion just like freedom in America and fiat currency. How are those working out for you?
In my little Rocky Mtn town of 800, my kid goes to school with dirt poor kids off the Indian reservation and kids of millionaires. Yeah, there is differences between the kids and families but I dont see where one could label those differences in social class. BTW I have met quite a few folks visiting or new to the West (usually) from the East Coast who talk about social class. So maybe this is a cultural thing. You might as well be talk to me about pocket lint. I dont care. Shut up, save your breath and help me split wood.
2nd, since when does social class correlate with happiness?
How about happiness without conditions? So, when the stork randomly drops me into the world, how about if I decide to be happy with whatever that world has to offer. Isnt that what happens in the REAL world?
3rd, distribution of taxes. Two words: FLAT TAX. It is fair. It is equitable. It is easy. It is the right thing to do. Everyone know this. But, some folks feel that they are entitled to get a break. I guarenfriggingtee ya that someone talking about social class out of one side of their mouth is or will be talking about distribution of taxes out the other. Tax equity is sick and wrong - but as ubiquitous through history as prostitution. If you are unhappy about that, get over it - pay it, dont pay it or cheat.
Im sorry but all thumbs down on this one.
I agree with Ken.
It is the nature of this type of utopian style research that allows politicians in partnership with big business to mount disastrous public policy. Big business like state intervention because it thwarts new entrants and hence innovation and creativity in the market. With this in mind I find the results both unsurprising and yet disturbing.
The unintended consequences of following through with working towards an equal distribution of wealth would be capital destruction and wide scale poverty. You haven't got to look too hard to find the evidence.
In the absence of strong property rights, which this very model works against, lies a decivilising process that we are now starting to witness.