Magical Thinking vs. Reason

An alert reader clued me in to an interesting study that has yet to make a big splash in the media. The study, conducted by Cornell's Peter Enns and University of Tennessee's Nathan Kelly, compared attitudes towards progressive taxation and welfare spending in times of higher and lower income inequality.

New research findings add complexity to the basic assumption that humans act in their own economic self-interest. By analyzing hundreds of survey questions from 1952 to 2006, Peter Enns, assistant professor of government, and Nathan Kelly of the University of Tennessee found that as inequality rises, low income individuals' attitudes toward redistribution become more conservative. Their paper appears in the October issue of the American Journal of Political Science. "It's a bit of a conundrum," Enns admits. The researchers also examined public opinion data on the question: Should government increase spending on welfare, keep it the same or decrease it? "As inequality rose, the high- and low-income respondents on average become less supportive of spending on welfare," Enns said. "And this is not because low-income people are unaware of inequality; our results show they are more aware of it than most people." The researchers found that higher levels of household income inequality in the United States generate more conservative public opinion. "We broke down pubic opinion by income group and found the high- and low-income groups responding in a similar way, both becoming more conservative when inequality rises," Enns said. "We were very surprised to observe that the self-reinforcing aspect of inequality holds for high- and low-income groups, and how they move together in parallel over time." Previous economic models predicted that low-income individuals will consistently support government redistribution. "If anything, when inequality rises, low-income people should become more supportive, and that's not what we observe in the data," said Enns, a member of the Institute for Social Sciences theme project on Judgment, Decision Making, and Social Behavior and faculty director of the Cornell Prison Education Program. Conversely, when inequality declines, the public becomes more liberal. The public works projects and other social programs following the Great Depression helped promote decades of declining inequality into the 1960s, Enns said. "And then there's a shift," he said. "Once inequality starts going back up, it appears to be perpetuated by public opinion. If inequality declined in the United States, our results suggest that then the public would become more supportive of government redistribution." Nevertheless, people in the lowest income group favor more redistribution than those in the highest income group.

How can we explain this? Part of it may be simply a reflection of greater conservative domination of media after Reagan's first election. Yet I have another theory. People tend to approach the world with a rational or magical bias. When the reality you observe seems to follow reasonable rules, then it makes sense to apply rational solutions to problems. When the world is way out of balance, then praying for miracles seems the best approach. When your uncle goes to college on the G.I. bill, prospers, and builds a house, then you might feel part of an economic and political system that can work for all. When the Reagan government starts saying that ketchup is a vegetable, and raises payroll taxes while cutting income taxes on the wealthy, then alienation begins. When CEOs, who used to make about 40 times what their workers made, start making more than 400 times an average worker's salary, then lower-income folks see they no longer live in the bosses' world. Capitalism is now obviously an obscure and impenetrable system, lavishing huge rewards on an ever smaller ruling class, while leaving most working folks to fall behind. The mythology of stardom replaces the belief in the Great Society. Rap stars from the projects, country music stars from the farm, these become heroic figures, while making good money as a union shop steward recedes as an impossible dream. Better to buy lottery scratch tickets than study engineering. Who can trust government to do the right thing with our tax dollars? Better to imagine the possibility of sudden, improbable success. In this magical world, the rich will someday take care of the poor without a government middleman, and we'll all live happily ever after. The sad truth is, without any faith that the system cares, then transferring some money from the rich to the government seems futile. Only those of us who still feel connected to the system might worry about making it work better. Sadly, many of the rich and powerful, who could do something about it, seem content to see income inequality get even worse.