Public ignorance about economic inequality

|The Volokh Conspiracy |

An important new study by Vladimir Gimpelson and Daniel Treismanfor the National Bureau of Economic Research finds that the general public in numerous different nations is largely ignorant about economic inequality in their societies, and whether it is increasing or decreasing. This is despite the fact that inequality has become a major political issue in many democracies, particularly in recent years. Here is the abstract, which summarizes their findings:

Since Aristotle, a vast literature has suggested that economic inequality has important political consequences. Higher inequality is thought to increase demand for government income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships. Most such arguments crucially assume that ordinary people know how high inequality is, how it has been changing, and where they fit in the income distribution. Using a variety of large, cross-national surveys, we show that, in recent years, ordinary people have had little idea about such things. What they think they know is often wrong. Widespread ignorance and misperceptions of inequality emerge robustly, regardless of the data source, operationalization, and method of measurement. Moreover, we show that the perceived level of inequality-and not the actual level-correlates strongly with demand for redistribution and reported conflict between rich and poor. We suggest that most theories about political effects of inequality need to be either abandoned or reframed as theories about the effects of perceived inequality.

Unfortunately, the study itself is only available for free to those affiliated with institutions that have a subscription to NBER. Others must pay $5 to get it at SSRN. However, economist Bryan Caplan has summarized some of the more important conclusions here. Sam Bowman of the Adam Smith Institute offers additional commentary.

Public ignorance about inequality should not be surprising in view of widespread political ignorance about numerous other issues. Most voters are rationally ignorant about the basic structure of government and its policies, and basic science relevant to many public policy debates. Because any one voters' odds of influencing electoral outcomes are vanishingly small, there is little incentive to spend more than minimal time studying political issues, or to evaluate the evidence you learn in an unbiased way.

As both the authors and Bowman emphasize, their data undercut longstanding claims that inequality is a major cause of revolution, political conflict, and voting decisions. Perceived inequality turns out to be a much more important influence on public opinion than actual inequality. And the relationship between the two turns out to be weak, at best. This reality undercuts an important longstanding argument for reducing economic inequality: the claim that doing so fosters social peace and reduces the likelihood of conflict between economic classes, up to and including violent revolution.

This result does not directly undermine a variety of other arguments for reducing inequality. Advocates of redistribution can still plausibly claim that we need more of it—not because it will reduce conflict, but because it will promote social justice and human welfare, or prevent the rich from accumulating too much political power.

But if voters are systematically ignorant of even basic facts about economic inequality, this should reduce our confidence that the democratic process can produce good policies to address the issue. If voters routinely don't even know how much inequality there is and whether it is increasing or decreasing, they can hardly be expected to monitor government policies in this field effectively.

In a world of widespread public ignorance, giving the government more power over the economy for purposes of reducing inequality can easily result in harmful policies that cater to ignorant public opinion, or policies that favor small, well-organized interest groups at the expense of the general public. The latter type of policies are more likely in cases where generally ignorant voters may not even notice their existence, or are easily persuaded that these interest-group power grabs actually benefit the poor or the middle class. For example, as I explain in my recent book on eminent domain, alleviating poverty and inequality was one of the main rationales for blight and urban renewal programs that ended up forcibly displacing millions of the poor, often for the benefit of politically connected developers and other interest groups. Voter ignorance was one of the factors that enabled such policies to continue for decades.

Moreover, public ignorance about inequality isn't easy to eliminate. As Gimpelson and Treisman show, it is widespread in numerous democracies in Europe and Asia, as well in this country. Ignorance in the US seems to be roughly average compared to the other nations they cover. This suggests that ignorance persists despite considerable differences in educational systems and the structure of media. As with many other aspects of political ignorance, the problem is not that the information isn't available, but that most citizens are unwilling to take the time to find it and study it. This makes it difficult or impossible to "solve" the problem through education or media reform.

None of this, by itself, proves that we should oppose all forms of redistribution or all efforts to reduce economic equality. I don't categorically oppose all such policies myself. But widespread public ignorance about inequality should make us more skeptical about government intervention in this field than we might be otherwise.

UPDATE: It is worth noting that the authors find that public perceptions of inequality are roughly equally inaccurate, regardless of whether we measure inequality by the distribution of income or the distribution of wealth.