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Why do people think that others should earn this or that?
Published online by Cambridge University Press: 30 August 2018
Abstract
Some questions, such as when a statistical distribution of incomes becomes too unequal, seem highly attention-grabbing, inferentially productive, and morally vexing. Yet many other questions that are crucial to the functioning of a modern economy seem uninteresting non-issues. An evolutionary–psychological framework to study folk-economic beliefs has the potential to illuminate this puzzle.
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References
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We commend Boyer & Petersen (B&P) for outlining an evolutionarily and cognitively informed program for studying folk-economic beliefs. Here we consider recent work documenting the folk-economic belief that the current level of economic inequality is too high. This work suggests that people underestimate the actual degree of wealth inequality, prefer less wealth inequality (Arsenio & Willems Reference Arsenio and Willems2017; Norton & Ariely Reference Norton and Ariely2011; Norton et al. Reference Norton, Neal, Govan, Ariely and Holland2014), underestimate the actual income gap between CEOs and unskilled workers, and think this gap should be smaller (Kiatpongsan & Norton Reference Kiatpongsan and Norton2014; see also Davidai & Gilovich Reference Davidai and Gilovich2015; Kraus & Tan Reference Kraus and Tan2015). We offer some reflections on the last of these claims – that people desire a smaller income gap (Kiatpongsan & Norton Reference Kiatpongsan and Norton2014; henceforth KN) – although similar arguments apply to the rest of this burgeoning literature.
KN's conclusions are based on their analyses of the Social Inequality IV Questionnaire of the International Social Survey Programme (ISSP, 2009). This is a data-set with survey data from 40 countries which includes participants' open-ended responses to, among others, the questions: “How much do you think X earns?” (estimate question) and “How much do you think X should earn?” (ideal question), where X is “a chairman of a large national corporation” (CEO) or “an unskilled worker in a factory” (worker). KN found that in all 40 countries the ratio of ideal CEO:worker earnings is significantly lower than the ratio of estimated CEO:worker earnings.
To see the significance of this finding, consider how an evolved human mind untrained in economics might estimate the salary of a CEO or indicate the ideal salary for a worker. Over human evolutionary history, our ancestors engaged in many cooperative enterprises (e.g., cooperative hunting) that produced surpluses that were then allocated. From an evolutionary perspective, it seems inevitable that we evolved powerful sentiments about how allocations should be made. It seems plausible that the questions in the ISSP questionnaire activate, to some degree, these evolved systems. There is now a large literature on cooperative game behavior, emotions, and their evolutionary logic (e.g., Frank Reference Frank1988; Hammerstein Reference Hammerstein2003; Tooby et al. Reference Tooby, Cosmides, Sell, Lieberman, Sznycer and Elliot2008). One plausible evolved system is a set of sentiments that mobilize compassion for the needy (Goetz Reference Goetz, Keltner and Simon-Thomas2010; Sznycer et al. Reference Sznycer, Lopez Seal, Sell, Lim, Porat, Shalvi, Halperin, Cosmides and Tooby2017), and sharing directed at those who have tried to be productive but have suffered bad luck (Kaplan & Hill Reference Kaplan and Hill1985a; Petersen et al. Reference Petersen, Sznycer, Cosmides and Tooby2012). In systems of joint production, this compassion is paired with punitive sentiments toward those who free-ride (Delton et al. Reference Delton, Cosmides, Guemo, Robertson and Tooby2012; Fehr & Gächter Reference Fehr and Gächter2000). Ancestrally, these games took place among small groups of people, and although there was a range of highly productive people, it is extremely unlikely that anyone was able to be hundreds of times more productive than the average worker, as some can today.
To judge whether an allocation is fair or ideal or objectionable, it seems likely that the human mind evolved to take as input a number of variables (e.g., the need of the least productive, the amount of group benefit contributed by the highly productive). However, in the ISSP data analyzed by KN, workers and CEOs are presented in decontextualized form, so that all of those parameters are unspecified and must be filled in by the subjects. Since we don't know how subjects filled in these parameters, we don't know how to generalize from these results to an enduring construct of people's actual preferences about the real world.
Do people weight relevant information when judging what an ideal earning should be? To find out, we asked people questions about four types of earnings: CEO estimate and ideal, and unskilled worker estimate and ideal. We created two between-subjects conditions. In one condition, the CEO was described as causing a company to increase its yearly profits by $12,000,000. In the other, the CEO caused an increase in profits of $500,000. The worker questions were the same in both conditions, and the same as in (a) the ISSP (2009) dataset and (b) the KN (Kiatpongsan & Norton Reference Kiatpongsan and Norton2014) report based on the ISSP (2009) data. There were 99 participants per condition, recruited with Amazon Mechanical Turk. As predicted, and unsurprisingly, subjects thought the CEO earned and should earn more in the $12,000,000 condition (medians: estimate: $1,000,000; ideal: $500,000) than in the $500,000 condition (medians: estimate: $300,000; ideal: $200,000). Also the ideal CEO:worker earnings ratio was higher in the $12,000,000 condition (median: 14:1) than in the $500,000 condition (median: 6:1; Mann-Whitney's Us > 3,082, ps ≤ .019).
So, yes: Information about productivity calibrates people's judgments of ideal earnings, as would be expected in an ancestral world in which one would have to incentivize the participation of the productive. That estimated and ideal earnings scale with productivity shows that any specific expressed political preference is not fixed, but a function of input parameters. That estimated and ideal earnings don't scale linearly is interesting, where, ancestrally, much higher productivity than normal would have involved not only greater skill but also unreliable luck.
If perceptions of how much others should earn are shaped by these and other relevant factors, then responses about statistical aggregates stripped of specificity (e.g., “a chairman of a large national corporation”) may not translate into stable preferences in specific cases in the real world.
The fact that the ISSP survey asks people how much an unskilled worker and a CEO should earn, and that KN found the responses illuminating, raises the question of just what economic questions are interesting to an evolved human mind. Some questions, like how much others earn or should earn, seem highly attention-grabbing, engaging, inferentially productive, and morally vexing. Others, like how a company should handle its accounting or manage its distribution channels, seem uninteresting non-issues, even though in a modern economy they are every bit as critical as CEO or worker compensation. We believe KN's findings are an important if indirect demonstration of how consistent and compelling folk-economic beliefs can be.
We think the framework sketched by B&P can be productively applied to understanding the epidemiology of this folk-economic belief, and of popular discourse on economics in general.