Attitudes to inequality: preferences and beliefs

Date
May 23, 2022
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  • In order to understand attitudes to inequality, we need to understand people’s fairness preferences and beliefs about sources of inequality.
  • People are more willing to accept inequalities that reflect performance than inequalities that reflect luck – and, people care more about fairness than efficiency.
  • People differ in their fairness preferences both within and between countries – richer countries, and within countries richer people, are more meritocratic.
  • People differ in their beliefs about the sources of inequality both between and within countries. The evidence is consistent with people having a self-serving bias in beliefs.

Background

The IFS Deaton Review of Inequalities is a token of the increased awareness and concern for inequality that we have witnessed in recent times. In order to understand this concern, and attitudes to inequality more generally, it is important to understand the perceived unfairness of existing inequalities. Inequalities may be perceived as unfair because existing inequalities deviate from what people consider to be fair, or because people have distorted beliefs about existing inequalities. Both fairness views and beliefs about the source of inequality have been shown to be important determinants of people’s attitudes to inequality (Fong, 2001; Alesina and Angeletos, 2005; Almås, Cappelen and Tungodden, 2020). Hence, it is important to broaden the public discourse on inequality to capture that people distinguish between fair and unfair inequalities based on the source of the inequality, and that people differ in their beliefs about the sources of existing inequalities.

Turning to fairness preferences first, what could be considered fair sources of inequalities? Piketty (2020) emphasises that justifications of existing inequalities in modern societies are often based on differences in merits. Young (1958) introduced the term ‘meritocracy’ but raised concerns that this idea would widen the gap between socio-economic classes in society rather than narrowing them through equality of opportunity. More recent work has also expressed concerns about meritocracy as an organising principle for society (Case and Deaton, 2020; Sandel, 2020).

In this paper, we discuss whether performance and other sources of inequality are seen as legitimate sources of inequality. We define a meritocratic view as one where inequalities that reflect differences in performance are acceptable, but inequalities that reflect luck are unacceptable. We also discuss whether meritocracy is primarily a Western phenomenon or reflects the fairness view of people across the globe. Further, we discuss the prevalence of other potential fairness views, such as egalitarianism – holding that no sources of inequality are legitimate – and libertarianism – holding that all sources of inequality are justified (as long as there is procedural fairness).

In order to understand attitudes to inequality, we also need to understand how important concerns for fairness are relative to other factors, such as self-interest (own income) and efficiency (the total income in society). We discuss to what extent fairness is important relative to such other concerns and we discuss how the concern for fairness differs across countries and across individuals within countries.

Further, we discuss beliefs about sources of inequality. An important implication of the meritocratic fairness view is that people’s beliefs about the source of inequality become a critical determinant of their attitudes to inequalities in society. Individuals who are meritocratic would view an income inequality as unfair if they believe that it largely reflects luck, but would view the same income inequality to be fair if they believe it largely reflects difference in performance. Such differences in beliefs about the sources of inequality may reflect actual differences within or between societies, but self-serving biases and irrational updating may also contribute to heterogeneity in beliefs. We discuss differences in beliefs about sources of inequality across countries, and we discuss differences in beliefs across individuals within countries.

Last, we discuss general attitudes to inequality, including whether people find existing inequalities unfair and whether they believe that the government should redistribute incomes. Comparisons of economic inequality often rely on the Gini index or some other inequality measure that compares the actual distribution to a distribution where everyone has the same income, that is, we compare it to an egalitarian distribution (Atkinson, 1970, 1975, 2015). However, as many people view some inequalities as fair (e.g. those arising from differences in performance), such standard inequality measures are not well suited to capture perceived unfairness in society. We discuss how such standard inequality measures may be adjusted to capture deviation from a different distribution than the egalitarian (i.e. a ‘fair’ distribution), and we discuss the challenges related to agreeing on such a norm when people hold different views on what constitutes a fair distribution of income.

Cite this as:

Almås, I. et al. (2022), ‘Attitudes to inequality: preferences and beliefs’, IFS Deaton Review of Inequalities, https://ifs.org.uk/inequality/attitudes-to-inequality-preferences/