Unequality

Abstract

Who should get what, and what are the consequences? Economic inequality in the United States has been rising for decades, yet only recently have behavioral scientists explored two central questions surrounding the optimal level of inequality. First, what are the effects of increased inequality on citizens’ decisions and behavior? Second, what do citizens believe the “ideal” level of inequality should be? Critical input comes from better understanding increased inequality’s impact on the overall health of the economy—such as labor productivity—and assessing citizens’ preferences for distributing assets—such as income and wealth. Inequality’s impacts and citizens’ preferences inform the likely effects (and likely voter acceptance) of policies that affect inequality, from taxation to spending on education and health care. Research reveals that Americans from all walks of life—rich and poor, liberal and conservative—endorse unequality: unequal outcomes (rich people have more than poor people) but far less inequality than the current state of affairs. For example, the actual pay ratio of CEOs to unskilled workers in the United States is 354:1, but Americans report an ideal ratio of 7:1—unequal, but more equal. Moreover, research shows that increasing inequality often has negative effects: decreasing motivation and labor productivity, impairing decision making, and increasing ethical lapses. In sum, behavioral research supports the benefits of policies aimed at achieving unequality.