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Wed Mar 11, 2015, 03:42 AM

Inequality sustains itself by generating an ideology which favours the rich. This might sound like c

Inequality sustains itself by generating an ideology which favours the rich. This might sound like classic Marxism - which it is. But it is also orthodox social science, as a new paper from the NBER shows (ungated pdf).




Jimmy Charitie, Raymond Fisman and Ilyana Kuziemko ran a simple experiment. They randomly gave $5 and $15 to two people and then asked others whether they wanted to redistribute the money between those two people. On average, subjects voted to close 94% of the $10 gap. However, when subjects were told that the two people already knew whether they were getting $5 or $15, they closed only 77% of the gap.

This suggests that preferences for redistribution depend upon reference points. In the first experiment, the reference point is an equal allocation. In the second, however, there's another possible reference point - people's expectations. Such expectations reduce demand for equality.

The effect here is big. The experimenters also allocated the $5 or $15 according to scores on a SAT and then asked people to redistribute. On average, they closed 56% of the difference. This tells us that the effect of tweaking reference points on people's tastes for equality is equal to about half the effect of the difference between random allocations and merit-based ones. I reckon this is quite a lot.


http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2015/03/tolerating-inequality.html

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Reply Inequality sustains itself by generating an ideology which favours the rich. This might sound like c (Original post)
Ichingcarpenter Mar 2015 OP
rogerashton Mar 2015 #1

Response to Ichingcarpenter (Original post)

Wed Mar 11, 2015, 05:59 AM

1. Thanks! eom

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