Tanvi Misra is a staff writer for CityLab covering immigrant communities, housing, economic inequality, and culture. She also authors Navigator, a weekly newsletter for urban explorers (subscribe here). Her work also appears in The Atlantic, NPR, and BBC.
The American elite tend to trade equality for efficiency.
America suffers from shockingly deep income and racial gaps—inequalities that persist despite promises by public officials to reduce them. A new study published in Science offers a possible explanation why policymakers have made such little progress on these social problems: simply put, the country’s economic and political elite may be more likely than an average person to make decisions that worsen disparities.
“[The study] helps to make sense of why the policies enacted by the elite seem to diverge from the apparent state of preferences of everyday people,” Raymond Fisman, the now-Boston University economist who co-authored the study, tells CityLab. “Lots of people say they're looking for more redistribution, yet we get a relatively muted response to rising inequality."
Fisman and his colleagues studied whether elite participants divide up the proverbial pie differently from how average folks do. Studies have shown that such “distributional preferences” among elites are likely to influence public policies, such as income taxes and economic transfers, that might alleviate income inequalities.
For the new work, the researchers used a sample of Yale Law School students as proxy for the elite, while their non-elite sample drew from a broad cross-section of Americans. To make sure they weren’t just picking up results specific to law school, they also took a sample from an “intermediate elite” student body at the University of California, Berkeley.
On these samples, the researchers conducted a modified “dictator game” experiment. Each test participant was given 50 choices that resulted in consequences for themselves and another anonymous person. The experiment was designed to capture whether or not the participant was fair-minded (did she give equal weight to herself as she did to others?) or selfish (did she prefer to give to herself rather than the other person?). It also measured how participants traded off between efficiency and equality.
"Someone who is efficiency-minded will give everything when giving is cheap,” Fisman explains. “Because why on earth would you keep a dollar when by just giving that one dollar, someone else could have 10? An efficiency-minded person will, similarly, keep everything when giving is expensive, because why would I give up a dollar if all it leads to is someone else getting 10 cents."
An equality-minded person, meanwhile, tries to redistribute wealth equally, no matter the cost. Efficient decisions exacerbate inequalities—one person gets everything, the other person gets nothing—but equality-based decisions tend to shrink the pie, Fisman says.
As it turns out, Yale Law School students were much more likely than the general population to be efficiency-oriented. Almost 80 percent of them made efficient decisions compared to 50 percent of the general population. The study highlights that this was the case “in spite of overwhelmingly (by more than 10 to 1) self-identifying as Democrats rather than Republicans.”
Study participants from the elite group were also much more likely to make selfish, rather than fair, decisions. Interestingly, the results of the “intermediate elite” sample from Berkeley fell in the middle of Yale and the general public with respect to efficiency-mindedness. Here’s a chart that reflects these results:
What this means is that policymakers on both sides of the aisle might be more reluctant to implement retributive tax policies that aim to narrow the gap between the rich and the poor—even if that’s something their constituents want or need. The study’s findings ultimately signal this disconnect between the preferences of the electorate and the elected. "It is, in some sense, a corruption of democracy, if you want to be a bit histrionic about it,” Fisman says.