Do Americans care about equality?

By Kathy G.

There's a certain species of hack libertarian argument that claims that the economic world we Americans live in is one that is more or less an unmediated reflection of our preferences. Because we're all rational actors maximizing our utility by doing what's best for ourselves, right? So the collective result must be what we all as individuals prefer. As per Pope, "whatever is, is right." Or as one of the heroes of this blog, Voltaire, wrote in a considerably more ironic spirit, "Tout est bien": it's all good.

For instance, it is argued that the reason Americans have so little vacation time is that we prefer it this way. We workers have simply chosen to take the gains from productivity in the form of income, not leisure, or so it is claimed (not that wages are rising all that much in the first place, at least for most people, but that's a whole other subject). Another example: Megan McArdle has contended that because people haven't voluntarily contributed money to Virginia's so-called "tax me more" fund, that means no one wants to pay higher taxes: "this is what economists call 'revealed preference," saith McArdle.

But as anyone could tell you who has even a nodding acquaintance with some of the classic rational choice literature by Mancur Olson, Thomas Schelling, Russell Hardin, and others, this kind of faux-clever argument is shallow and deeply suspect. Why? Because it glosses over a fundamental concept: the interdependence of choice. As Henry Farrell has written :

When choices are genuinely interdependent, behaviour doesn’t necessarily tell us anything about the ‘true’ preferences of the actors in question. What it does tell us about, (if we think that actors are behaving rationally) is what actors think the best reply to other actors’ strategies is in a given strategic situation.

Indeed, the interdependence of choice is the basic insight of the most famous model in game theory, the prisoner's dilemma. Among other things, the prisoner's dilemma reveals that individuals acting rationally can  bring about a collective result that is suboptimal. There is an outcome that both players would prefer, but barriers to cooperation prevent them from getting there.

I say this all by way of an introduction to the question I ask in the title of this post: do Americans care about equality? Many conservatives and libertarians would argue: not very much. Because if we did, wouldn't those preferences be reflected in the economy as a whole? Wouldn't we see public policies -- labor regulations, more progressive taxes, universal health care, and the like  -- that create more economic equality? And wouldn't we elect more politicians who advocated these policies?

Not necessarily. Even if all (or almost all) of us agree on a certain policy that might decrease inequality, the barriers to collective action are formidable. And the reason, to a great extent, is the interdependence of choice. We don't make individual choices according to what we believe would be best for society in the abstract. Rather, we act according to what is best for ourselves in a concrete situation where other people's strategies strongly influence our choices.

As Mancur Olson's classic work The Logic of Collective Action shows, small, well-organized special interest groups can often thwart the will of the majority. In fact, Olson counterintuitively argues that sometimes, the smaller a special interest group is, the more likely it is to succeed (it's a really neat, albeit highly depressing, argument, which I won't go into here -- check out the book for the details).

The delusions of some libertarians aside, the world as it exists is not an unmediated expression of our individual preferences. Given this state of affairs, what  is the best way to determine what people's choices actually are? Well -- how about asking them?

Good idea! It would be especially interesting to ask not only Americans, but citizens of other countries which have non-American style economic policies. Do countries whose citizens express more pro-equality preferences tend to have more egalitarian economic policies? If that's the case, then it might be seen as evidence for the argument that the policies are to some extent at least an expression of individuals' preferences. If so, then maybe collective action problems are not thwarting individual preferences as much as I believed.

As Lane Kenworthy reports (via Mark Thoma), in 1999, the International Social Survey Programme asked citizens of several countries the following: “What do you think the distribution in your country ought to be like — which do you prefer?” They were given the following diagrams to choose from:

The above diagrams were described as follows:

Type A - A small elite at the top, very few people in the middle and a great mass of people at the bottom.

Type B - A society like a pyramid with a small elite at the top, more people in the middle, and most at the bottom.

Type C - A pyramid except that just a few people are at the very bottom.

Type D - A society with most people in the middle.

Type E -  Many people near the top, and only a few near the bottom.

In most countries, fewer than 20% of respondents said they preferred A, B, or C. Most preferred D and E. As Kenworthy writes, "D and E are identical in their population shares at the bottom. The difference between them is that D has a larger share in the middle, whereas E has a larger share at the top. Average income is higher in E. Inequality is lower in D." More respondents preferred D than E.

Here's a look at the percentage of respondents who preferred D and E, by country.

  

What is striking about this chart is how similar the countries look. In Kenworthy's words, "even among nations that seemingly have very different orientations toward affluence and equality," the preferences look very similar. On the basis of this survey, it would appear that, like people in other countries, Americans care about equality a great deal, and that the very high level of economic inequality that exists today does not represent their preferred outcome.

One cautionary note: this is just one survey; other research may produce different results. But I plan to look at more of the literature about what people in America and other countries think about inequality, and I'll let you know what I find.

Comments

[arbitrista]

Well, most public opinion polls over the last forty years indicate fairly stable support for New Deal economic policies promoting equality. The U.S. isn't different with respect to citizen attitudes, but with respect to the policies of the last generation - which have been implemented WITHOUT majority popular support. It's much like the basic isolationism and neo-protectionism of the American population, which doesn't have much support in either party. This disjuncture can be at least partially explained by the fact that politicians react to the preferences not if all their constituents, but the elite (top 20% of income earners). I'll try to find the reference....

[mathgeek]

I propose a different survey.

Which of the following would you prefer?

1. You develop 20/20 vision (or 10/10 if you already have 20/20), but everyone else in the world develops x-ray vision.

2. You lose one eye, but everyone else loses two.

Many people might prefer 2 to 1. Should society support that preference?

(Studies, which I'm too lazy to look up, have obtained similar results concerning house size/quality, buying power, and other such things.)

[Noni Mausa]

It seems evident to me that since the prosperity of the US began to slide around 1970, the general public has become in their actions (and the government in their actions) more self centred and meaner about progressive taxation.

I think what has happened here has two parts. Part one is that real incomes for the majority of individuals leveled off and have stayed flat since then. At the same time, there's been a jump in some fixed costs (housing, health, education among others) which is not compensated by the drop in other costs.

At the same time, much of the formerly paid service work has been shoved onto either the customers (witness loss of bank tellers, switchboard operators, and such) or left to the family to do in their "free time" (home nursing as an example).

Like an arid aquifer which used to water the roots, much of that money that nourished the grass roots has been diverted.

Yet the people who received that money are not around to attract jealousy at the church, the grocery store, or the school. They are increasingly like another nation which keeps to itself.

But everyone else knows they are worse off than the 70s and 80s. In the absence of real malefactors, people will turn on each other in accordance with their preconceived ideas.

At the same time they are being pushed down to a common, poorly watered level, they are being expected to hoist up the care of each other, and mean spiritedness and anger are bound to arise when you think your neighbour is trying to mooch off you -- or do so second hand and unawares by way of taxes.

People are not stupid. They know that if you tighten your belt and learn to do with less, keep up a cheerful face, reduce their needs in a practical manner, then their wages and benefits will over time degrade to match the new poverty level.

Like a boa constrictor, the prey is not crushed in the mighty coils like an empty beer can, no. Instead, the snake feels when the rodent breathes out a little more air, and then takes up the slack.

The mean-spiritedness found in some Americans is, I think, their refusal to give up more cash just so their income and their neighbour's income both become more equal -- and more poor.

[Brian Repko]

Will Hutton talks alot about what we had in the US from the New Deal and how this has slowly been eaten away by the Strauss/Freidman school of thought from the University of Chicago. As far as employment goes, we give up a certain amount of rights in order to keep business "free" to do what they want. We do so because we believe that flexible companies perform better. They don't. So we have made a false bargain. The shift in "who says" what a business does from managers to shareowners (largely financial and insurance institutions) has also been a false bargain as well. American business is losing its ability to actually create wealth (which requires investment and sometimes long-term investment).

But I do think Americans care about equality but I would argue this by asking the Rawlsian question - tell someone that they will randomly be placed in one of 5 (20%) slots in an economy. Now ask them what type of society would they want knowing that their placement in it is random. That will get you to what most people consider a "just society" and what it would take to build an infrastructure of justice. I think this is correct because we are starting to see demand for solutions to random risk - healthcare being one and education being another.

[M.J. O'Brien]

How about a distribution that looks approximately like this?

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

If I were to be randomly placed in the economy, this would be my choice.

Not realistic, of course, but it might make sense as an ideal. (Smacks of pure socialism, you say?) There will always be upward and downward mobility, but an intact social net would insulate against the wild fluctuations and inequalities that now exist.

[David Nieporent]

The delusions of some libertarians aside, the world as it exists is not an unmediated expression of our individual preferences. Given this state of affairs, what is the best way to determine what people's choices actually are? Well -- how about asking them?
Good idea!

Well, it would be a good idea -- if people's statements about what they wanted matched what they actually wanted. But there's no reason to believe that this is the case. You cite Olson; I'll cite Samuelson's "Revealed Preference." In politics, there's the Bradley Effect. The point is, people are unreliable narrators.