Economic inequality

There’s a problem with the way we define inequality

We are failing to look at inequality in the right way, according to researchers who study people’s attitudes to wealth disparity.

Haves and have-nots. The 99%. The income gap. The chasm between rich and poor has never mattered more. It’s estimated that the top 1% of the world’s richest people owns 50% of the planet’s wealth.

Solving this level of inequality is often held up as a ‘grand challenge’ for the world. But is that the right way to look at it?

Some researchers argue that income disparity itself may not be the main problem. The issue, they say, is not the existence of a gap between rich and poor, but the existence of unfairness. Some people are treated preferentially and others unjustly – and acknowledging that both poverty and unfairness are related may be the challenge that matters more in the 21st Century.

While many people may already view inequality as unfairness, making the distinction much clearer is important: to improve the society we live in, these researchers are arguing that we need to all be on the same page as to what inequality actually is. Only then can we direct resources to the places that matter.

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What is it about inequality that bothers us: the fact that some people are rich and others are poor? Or that not everyone has an equal shot? Or something else?

In a paper published in April in the journal Nature Human Behaviour called ‘Why people prefer unequal societies’, a team of researchers from Yale University argue that humans – even as young children and babies – actually prefer living in a world in which inequality exists. It sounds counter-intuitive, so why would that be? Because if people find themselves in a situation where everyone is equal, studies suggest that many become angry or bitter if people who work hard aren’t rewarded, or if slackers are over-rewarded.

For example, in one study, a group of six- to eight-year-olds was tasked with divvying up erasers among two boys who cleaned a room as rewards. Researchers found that, if they told the group of children that both boys did a good job, and then gave the group an odd number of erasers, the kids made the unanimous decision to throw away the extra eraser rather than give it to one of the boys as an unfair bonus.

And yet? When the researchers told the kids that one boy worked harder than the other, the group awarded the extra prize to the harder worker.

“We argue that the public perception of wealth inequality itself being aversive to most people is incorrect, and that instead, what people are truly concerned about is unfairness,” says Christina Starmans, a psychology post-doc at Yale who worked on the paper.

“In the present-day US, and much of the world, these two issues are confounded, because there is so much inequality that the assumption is that it must be unfair. But this has led to an incorrect focus on wealth inequality itself as the problem that needs addressing, rather than the more central issue of fairness.”

Starman’s co-author Mark Sheskin, a cognitive science post-doc at Yale, puts the findings of this research succinctly: “People typically prefer fair inequality to unfair equality”.

The reason this matters is that trying to create a world with no wealth disparity is at odds with people’s perception of fairness, and that could potentially lead to instability. A society where no poverty exists sounds rather utopian, but if that society is equal-but-unfair then it risks collapsing, argues Nicholas Bloom, an economics professor at Stanford University.

“As reasonable as it sounds, people don’t typically work, create or strive without the motivation to do so,” says Bloom. “If I’m a painter, dentist or builder, why would I work for 50 hours a week if everything I’m given is free? From my own experience managing people, humans actually think it’s unreasonable for people that skive to get rewarded. When you run large teams, there is nothing that sends people mad more than lazy individuals getting the same rewards and promotions as the hard workers.”

But how can we define inequality?

Researchers argue that we need an agreed-upon definition of the term ‘inequality’.

It’s important to remember that, as we figure out ways to combat inequality, that there are three separate (but related) ideas.

First, the idea that people should have equal opportunity in society, regardless of their background, race, sexuality, gender and so on.

The second idea is fair distribution, which says that benefits or rewards should be distributed fairly based on merit.

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The final idea is the notion of equality of outcome, or that people receive equal outcomes regardless of circumstance. This last one is a little trickier to grasp. Many of the experts BBC Future talked to brought up the phrase ‘inequality of outcome’: say if you were given £5 and your friend was given £10. That represents inequality of outcome, since the two of you have different amounts of money, regardless of how that came to be.

Each of these ideas represent a different kind of inequality that manifests in everyday life and that contributes to the overarching mega-trend that many regular people think of as ‘economic inequality’. Recognising these different dimensions is crucial for formulating a holistic battle plan.

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So which of these types of inequality should be addressed? Which leads to a potentially better society?                                 

Fighting the real issue

Many of the researchers and economists interviewed for this piece agree: too much attention is paid to the fact that the 1%, and the super-rich all exist.

Instead, they argue we need to concentrate more on helping those less fortunate, who via a lack of fairness, are unable to improve their situation.

Harry G Frankfurt is a professor emeritus of philosophy at Princeton University. In his book On Inequality, he argues that the moral obligation should be on eliminating poverty, not achieving equality, and striving to make sure everyone has the means to lead a good life.

“I do think that people are likely to respond with greater sympathy to the suffering brought on by poverty than to the harms necessarily imposed on those who are less wealthy than some others,” Frankfurt says. “This might support appropriate legislation to relieve the disadvantages of poverty.”

Economic inequality is such a massive, sprawling, nuanced, intense issue; the product of complex cultural and political forces around the world throughout history.

However, by understanding the different definitions of inequality – like inequality of opportunity – it highlights more clearly that not everyone is afforded the same opportunities to succeed, even if they put in that hard work.

Depending on your political viewpoint, the way of addressing inequality might be different: perhaps the left might favour universal health care for all, while the right might favour job creation that employs low-wage workers. Whatever the political plan of action, however, experts say the solution lies in in addressing the fact that poverty and unfairness exist.

Because that should be the real moral obligation, these researchers say – empathising with our fellow humans.

“It will be beneficial to shift the conversation, and the research, away from inequality itself,” says Starmans, “and toward issues such as unfairness and poverty, which are the core of what we are concerned about.”

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Bryan Lufkin is the editor of Future Now. Follow him on Twitter @bryan_lufkin.

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