Do People Have Weird, Abstract, Pareto-Damaging Preferences?

Lane Kenworthy shows some evidence that when asked to choose one of five pictures that best represents their preference for their country’s income distribution, people tended to pick one of two options — options D and E:

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.

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I wouldn’t go so far as to conclude from this that people tend to value low inequality over high incomes. Other ways of posing the question might yield different results. But it does suggest that inequality matters to people.

I find these pictures a bit hard to interpret myself, and I think the idea that people have some kind of standing preference over the shape of the national income distribution is plain bizarre. The question embodies and encourages a nationalist orientation to economic patterns, as if this is the natural level at which to look at economic patterns, as if this is the natural level at which people will have preferences about such patterns. But why think people actually have prior preferences about such things? The national income distribution is not experienced. The local income distribution isn’t experienced. Differences in local visible consumption may be experienced, and it seems plausible that people would have preferences about that. But that’s not what the question was about. Anyway, this seems to me a bit like asking about my preference over the proportion of luxury to compact cars in the nearest parking garage. Why would I have one?

Anyhoo, if people really have these preferences then many of them are malicious. E is a world in which many people are better off than in D but in which no one is worse off. It’s Pareto Awesome! If so many people really do like D better, does that tell us that there is latent support for egalitarian political institutions, that such support is based on a deep moral error, or both?

How about tackling the question a bit more rigorously? Will Ambrosini points us to Matthew Rabin and Gary Charness’s “Understanding Social Preferences with Simple Tests” [pdf], which tests plausible local preferences for equality, efiiciency, and reciprocity in a lab setting:

Our findings suggest that the role of inequality-reduction in motivating subjects has been exaggerated. Few subjects sacrifice money to reduce inequality by lowering another subjects’ payoff, and only a minority do so even when this is free. Indeed, we observed Pareto-damaging behavior more often when it increased inequality than when it decreased inequality. While this comparison is itself confounded by other explanations, our data strongly suggest that inequality reduction is not a good explanation of Pareto-damaging behavior.

My faith in humanity is restored. Sort of.

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