I think Timex is getting at one of the potential explanations I offered up: our political system mostly doesn’t care about the opinions of the bottom 9 income deciles.
I really need to dig up the study I’m thinking of. The implications were that this isn’t just true for economic policy - it goes for everything.
Well, there’s Larry Bartels, which I read about on Kevin Drum’s blog:
But there’s been at least one other article highlighted on this topic in the last few months.
Thanks for your input Timex. Compulsory voting I would like to look at, but as I said earlier in response to Chris I think I will only be able to get extensive data for one country that does use compulsory voting; Australia. More direct democracies is also a factor that will be interesting to look at.
That is a good question, and I have not come to the point of surveying the datasets that are out there and deciding on a specific variable to measure redistribution. At the moment it is public social expenditure as a % of GDP. However, I am also able to get “public and mandatory private” social expenditure as a % of GDP. I am hoping that the OECD’s definition of ‘mandatory private’ includes Government-mandated health care and so on.
Countries from all three groups will be in there, but I don’t see a need to make any direct references to Esping-Andersen if that is what you mean.
I think Timex is getting at one of the potential explanations I offered up: our political system mostly doesn't care about the opinions of the bottom 9 income deciles.I really need to dig up the study I’m thinking of. The implications were that this isn’t just true for economic policy - it goes for everything.
That wouldn’t surprise me, but in this context it would have to be the case that there is evidence that the bottom 9 deciles want greater redistribution, but due to a variety of things they are unable to achieve that in the political process. I really doubt there is a very strong desire for greater redistribution in response to the income share of the top 10% ever increasing.
Thanks for the responses so far everyone, it’s been good. Two things i’d like to throw out there:
To what extent is this puzzle due to people simply being unaware of rising inequality? I have read surveys where the vast majority of the population significantly underestimate the level of inequality. Furthermore, increases in inequality is hardly noticable news beyond a very small minority who care about this kind of thing. Could it be a case of voters not perceiving movements in inequality, and hence there is no greater demand for redistribution in response? If so, why?
To what extent can the puzzle be explained by religion and race? This is an explanation that has already been presented by a few political economists. They argue essentially that issues of religion and race can cause voters to vote for a political party that goes against their economic self-interest. Conservative politicians are often the most religious, and arguably matters of redistribution can often be clouded by racial prejudice (i.e. this redistribution program is mostly targeted towards a racial group that I do not like). I do not see this extending that forcibly to many developed countries beyond the US (especially race), but it is a common explanation.
That book was heinously problematic. If you’re using it without taking the time to assess the wide ranging criticism against it, you’re making a huge mistake.
The discussion it spawned amongst academics was pretty nifty, but you’re better off going to that than using the book.
Yes, I wanted to mention that as well. I recall a study where many Americans underestimated income inequality, but before that can be turned into an argument for lack of redistribution two more questions need to be asked:
And then, after telling the interviewee the actual income difference:
The defense of income inequality generally uses arguments (market forces, property rights) that would justify practically any amount of inequality, whereas the criticism uses arguments (inequality is inherently bad, value is created by workers rather than managers/owners) that would tolerate almost no inequality at all. So I don’t think it’s a foregone conclusion whether a significant portion of voters would actually demand more redistribution upon learning that actual inequality is greater than they thought, when their original guess was already pretty high.
(Note: I only know the survey results from second-hand reporting, so perhaps the original surveys or other like it already asked those questions.)
I dunno, I wouldn’t agree with either set of arguments.
Well, you might favor some particular level of income inequality rather than “any” or “none”, but in that case the survey would still need those follow-up questions to determine whether your threshold is between guessed and actual inequality or not.
Not really! I guess I should elaborate:
That’s all reasonable, but you can still answer “yes” or “no” to the question “do you think inequality X is too high and redistribution is needed”, right? That, and substituting both guessed and actual inequality for X, is really the whole point.
Oh sure, I just don’t think of it in terms that would “justify practically any level of inequality.”
I think human nature has something to do with it. People largely seem to have no problem with success, riches, hot bitches, etc being showered down upon people who actually deserve it. They like having someone to look up to. When your own situation is a good fit for you, what’s the difference? I think self-sacrifice plays a role in a lot of people’s sense of well-being, as well. Some people will stop at nothing to acquire character, or self-respect, or whatever the kids are calling it these days, but once attained people tend to realize how little some things actually matter.
That is an explanation for “why is there inequality at all?”, and does not explain the presence of redistribution at the extent to which it exists today. The question is rather why doesn’t the level of redistribution increase when pre-tax inequality increases?
Some things to consider:
Just how appropriate is “inequality” as a metric? Is there anything it reliably predicts in economics?
Not all democracies are the same. While they do grant equal political participation if they are a true democracy, many democratic societies also value economic freedom. Economic freedom does tend to produce economic inequality, though the majority of society often still benefits from increased economic growth.
It is probably wise to consider different levels of economic development, along with other national features. Rapidly growing economies in transition may produce greater inequality, but ultimately many are moving up and do not mind. Conversely, economies in contraction that still produce inequality are the ones that this theory should be most evident. Or, economies highly integrated into the global economy might make workers realize they can’t have it better since capital can just go elsewhere. Just throwing ideas out, but should be thought of.
How do you plan on using class? While in the US the stereotype is everyone is middle class, the actual middle class (say those making $30,000-$80,000 plus benefits) realize they would also have the should the burden of reducing inequality for those under them. Hence, they are ultimately fine with the growing inequality.
It is worth realizing that modern politicians typically do not pay for greater social programs by taxing the wealthy, but more commonly by simply taking on greater debt and let later politicians sort out how to pay for it.
Long story short, I do not think this theory is on solid methodological grounds. Its not a matter of being right or wrong, but simply using crude metrics to prove a reasonable hypothesis. If you want to delve into it, I recommend focusing only a handful of examples and creating a narrative on how voters and politicians responded to a rise of economic inequality.
I think it’s pretty easy to explain, Timsfucker.
While it may benefit some people in a free-market democracy (specifically our democracy) to be taxed higher and get some redistribution benefit, they will never buy into a system that just redistributes wealth as a whole, across the board. The simple reason for this is that every poor person in America is under the belief that some day they may be one of those rich people - from skill, hard work, luck, or some combination. If not them, their children. If not them, their children’s children. This unwavering belief in The American Dream (as I’m calling it here… obviously we have to rename it for use elsewhere) leads us to the seeming paradox you mentioned.
Any theory that depends on people being across the board stupid strikes me as very ill reasoned and difficult to support. Do a survey of your local fast food workers over 25 and ask them if they feel they or their children will ever move up a bracket and I imagine your argument will be very quickly disproved.
It’s not stupid, Greatatlantic. It’s American optimism. Don’t you think you have it in you to be a multi millionaire some day? Of course you never will be, but it’s nice to keep the dream alive. Don’t give up, you can do it!
In the meantime, buy more consumer goods.
Ya, it’s not like you can invent a website and become a billionaire.
Timsfker,
While I don’t really have a good mental model of what drives inequality (especially outside of the industrialized west) I would try to investigate/model the following:
