Arnold Kling  

Don't Tell Tyler Cowen

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About this paper by Ilyana Kuziemko, and others.


Why do low-income individuals often oppose redistribution? We hypothesize that an aversion to being in "last place" undercuts support for redistribution, with low-income individuals punishing those slightly below themselves to keep someone \beneath" them. In laboratory experiments, we find support for "last-place aversion" in the contexts of risk aversion and redistributive preferences.

If you tell him, Tyler will probably boast that he has been saying that folks care more about relative status, particularly vis-a-vis those with whom they interact frequently, than about the overall distribution of income.

If what people care most about is relative status, then you can see why an affluent college professor would be more upset by the higher incomes of executives in business than by poverty elsewhere. Even if high taxes on the "rich" do nothing for the poor, they help the professor's status relative to the reference group that concerns him.


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CATEGORIES: Income Distribution



COMMENTS (14 to date)
Nick Rowe writes:

I'm trying to figure out if this reasoning is also consistent with the (casual) observation that poorer people buy lottery tickets, thereby voting for redistribution that increases inequality.

Evan writes:
I'm trying to figure out if this reasoning is also consistent with the (casual) observation that poorer people buy lottery tickets, thereby voting for redistribution that increases inequality.
I think that can be explained by the fact that poor people overestimate their odds of winning (otherwise they wouldn't buy the darned things). Thus they believe that by buying lottery tickets, they are greatly increasing the odds of their relative status going up. This would result in many more people being beneath them than before. Their reasoning is wrong, but it is consistent with the study.
tom writes:

I seem to remember Obama stating that he'd support higher taxes even though they would not generate additional income - out of 'fairness'.

Rick Hull writes:

Maybe things are different at a macro scale, but as someone who views lottery tickets as completely foolish yet associates with those who indulge, here is what I gather:

The price scale is not linear, so things at the (say) $1 level escape our budgetary mental facilities. We are more than 100x as likely to buy a $1 lottery ticket than a $100 lottery ticket.

The lottery payoff is gargantuan, relative to reasonable earning expectations. It's a ticket to a purported fantasy life.

Related to #1, humans suck at large numbers. So it's not entirely clear that one-in-a-million odds are equivalent to hitting one-in-a-thousand twice consecutively.

Thus, it's clear that most lotteries exploit shortcomings in human reasoning.

TallDave writes:

Of course.

Why does every country have a different "poverty line"? Because the class-warfare crowd knows that an objective standard for poverty would result in too many people noticing rich countries have near-zero poverty by the standards of the rest of the world, which would diminish public support for redistribution programs.

The U.S. poverty line today stands at about the U.S. median income of the 1950s.

jim writes:

When I was low income person, I opposed it because I thought it was (more or less) immoral.
I thought people deserved what the earned, had no right to the fruits of others labor or good fortune.
Still do.

Mario Rizzo writes:

If this explanation is correct, it is certainly of the as-if variety. College professors would be loath to admit this to THEMSELVES much less anyone else.

Ryan Vann writes:

Perhaps I'm just a cynic, but this all smacks of psychobabble nonsense to me. First a quantum leap of logic is involved. Claiming people care more about their individual relative income rather than general income distribution does not imply that relative income is what matters most. Individual absolute income is probably very important, if not more important. I suppose some would celebrate incessantly about being the world's tallest midget, but I'd just lament being an inch too tall for the circus.

The lottery comments seem besides the point entirely.

Ryan Vann writes:

To take my viewpoint further, imagine your typical fitness center. Sure, some comparisons to others will be made, but I'm sure the main motivating factor to go was something along the lines of "I'm tired of being a gelatinous blob" for the vast majority, and "need more weight" (to quote Lou Ferrigno) for the elite few. Of course, there are those that just go for the eye candy.

Floccina writes:

To the lottery discussion, what do you think would happen if the state lotteries paid out 90% of the income to winners in $100K chunks paid to winners in an annuity similar to what they do now but indexed to a safe bond fund?

Floccina writes:

BTW IMO the most important reason that people worry about relative income is that they do not want to have to live with/around poor people, who often have problems. That is not solvable through redistribution.

John writes:

You probably don't want to tell that to Jim Buchanan either -- he has said the same things you say Tyler has been saying about relative status.

Actually one would think that most economists should see things that way.

Evan writes:
When I was low income person, I opposed it because I thought it was (more or less) immoral. I thought people deserved what the earned, had no right to the fruits of others labor or good fortune. Still do.
This is an excellent point. Bryan Caplan pointed out in his 1st book that people rarely act as self-interested individuals in the political sphere. He focused on the bad consequences of this, but you've just provided an example of a good consequence of this: poor people opposing redistribution.
Joey C. writes:

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