For the purpose of these explorations, I'll define inequality simply: differences in economic well-being between individual households in a country. Income, wealth, and consumption are the standard metrics of economic well-being. Inequality is not to be confused with standard of living, social mobility, or economic security. High inequality can co-exist with low poverty rates, high social mobility, and/or a robust safety net. Whether high inequality influences these other indicators of economic well-being is an empirical question, to be addressed later.
For now, I want to look at inequality in itself - the bare fact that some people are a lot richer than others. What bothers us about inequality in its bare essentials? Ignoring possible economic effects for the time being, does inequality cause psychological harm or violate moral principles?
For instance, inequality may:
- Cause unhappiness related to social comparison and status anxiety.
- Cause unhappiness and spiritual emptiness as people consume too much to assuage status anxiety.
- Violate principles of distributive fairness.
- Reward the undeserving.
Some thoughts:
Social Comparison and Status Anxiety: We're less happy when we see people doing better than us. We're less happy when their status markers are more impressive than ours. As Gore Vidal said: “Every time a friend succeeds I die a little.” However, this effect is stronger when the reference group is closer to us on the status scale. For most of us, the super-rich are just too distant - physically, financially, socially, psychologically - to have much impact on our social comparison and status concerns. Getting rid of the super-rich isn't likely to make us feel better, as least when it comes to status anxiety. The merely better-off will still be around to fuel our self-doubt.
Keeping up with the Joneses: When people in our reference group display high-status "visible goods", we tend to want the same. So we go shopping (or traveling or dining at fancy restaurants), budget be damned. We get caught up in our own status displays, endlessly wanting more, unable to just be. However, you don't need a super-rich class to trigger society-wide competitive consumption. After all, the phrase "keeping up with the Joneses" is over a century old and was especially popular during the Great Depression, a time of great poverty but lower inequality. The Joneses were neighbors, not rich people.
Sense of Fairness: In a common study design, researchers ask a study participant to distribute goodies to her fellow participants; typically, she gives each the same amount. However, this equal distribution principle applies only when all study participants are perceived as equally deserving. In an alternative research design, study participants have to engage in some effortful activity first, after which a single participant distributes goodies according to whatever system she chooses. No surprise: those who appeared to have worked harder are given more than the rest. Thus, considerations of fairness may result in either equal or unequal distribution, depending.
Deservingness: Assuming some degree of inequality is compatible with the principle of fairness, on what basis would some people deserve more than others? In surveys and lab studies, participants have generally considered it fair to reward ability, effort, and moral behavior with more stuff. But when people are presented with hypothetical scenarios of economic good fortune, they're fine with "brute luck" as a source of riches. No begrudging the lottery winner. And many of us acknowledge that life is a lottery, at least on some level.
And yet it does seem that moral qualms about inequality focus on the issue of deservingness: no one deserves to be insanely rich and no one deserves to be poor.
Next: Unpacking deservingness while unpacking inequality.
References:
Starmans, C., Sheskin, M. & Bloom, P. (2017). Why people prefer unequal societies. Nat. Hum. Behav. 1, 0082
Weinzierl, Matthew (2016). "Popular Acceptance of Inequality due to Brute Luck and Support for Classical Benefit-Based Taxation," NBER Working Paper 22462