Cognitive Barriers to Reducing Income Inequality

Abstract

As economic inequality grows, more people stand to benefit from wealth redistribution. Yet in many countries, increasing inequality has not produced growing support for redistribution, and people often appear to vote against their economic interest. Here we suggest that two cognitive tendencies contribute to these paradoxical voting patterns. First, people gauge their income through social comparison, and those comparisons are usually made to similar others. Second, people are insensitive to large numbers, which leads them to underestimate the gap between themselves and the very wealthy. These two tendencies can help explain why subjective income is normally distributed (therefore most people think they are middle class) and partly explain why many people who would benefit from redistribution oppose it. We support our model’s assumptions using survey data, a controlled experiment, and agent-based modeling. Our model sheds light on the cognitive barriers to reducing inequality.