Unequality: Who Gets What and Why It Matters

Michael I. Norton

Article | Policy Insights from the Behavioral and Brain Sciences | 2014

Unequality: Who Gets What and Why It Matters

Abstract

Who should get what, and what are the consequences? Economic inequality in the United States has been rising for decades, yet only recently have behavioral scientists explored two central questions surrounding the optimal level of inequality. First, what are the effects of increased inequality on citizens' decisions and behavior? Second, what do citizens believe the "ideal" level of inequality should be? Critical input comes from better understanding increased inequality's impact on the overall health of the economy—such as labor productivity—and assessing citizens' preferences for distributing assets—such as income and wealth. Inequality's impacts and citizens' preferences inform the likely effects (and likely voter acceptance) of policies that affect inequality, from taxation to spending on education and health care. Research reveals that Americans from all walks of life—rich and poor, liberal and conservative—endorse unequality: unequal outcomes (rich people have more than poor people) but far less inequality than the current state of affairs. For example, the actual pay ratio of CEOs to unskilled workers in the United States is 354:1, but Americans report an ideal ratio of 7:1—unequal, but more equal. Moreover, research shows that increasing inequality often has negative effects: decreasing motivation and labor productivity, impairing decision making, and increasing ethical lapses. In sum, behavioral research supports the benefits of policies aimed at achieving unequality.

Keywords: inequality; fairness; ethics; productivity; gambling; Equality and Inequality; Fairness; Income; Performance Productivity; United States;

Format: Print

Read Now

Citation:

Norton, Michael I. "Unequality: Who Gets What and Why It Matters." Policy Insights from the Behavioral and Brain Sciences 1, no. 1 (2014): 151–155.

The 2010 Patient Protection and Affordable Care Act intensified debates over the role of government in the distribution of healthcare. A nationally-representative sample of Americans reported their estimated and ideal distributions of healthcare (unmet need for prescription medications) and death (gains in life expectancy). Respondents across the demographic and political spectrum wanted mortality and healthcare to be distributed more evenly among the rich and poor than they estimated them to be. For example, respondents estimated that Americans in the poorest quintile lived 1.5 months longer over the previous 20 years while those in the richest quintile lived 4.7 months longer, but reported ideal figures of 2.5 and 3.6 months – both were far more equal than the actual figures: -1.8 and 7.2 months. Despite heated debates about healthcare, Americans share a consensus belief that current disparities in death and healthcare are far from their ideals.

How do the very wealthy spend their time, and how does time use relate to well-being? In two studies in the Netherlands, the affluent (N=863, N=690) and the general population (N=1232, N=306) spent time in surprisingly similar ways, such as by spending the same amount of time working. Yet, the nature of their time-use differed in critical ways that are related to life satisfaction. In Study 1, millionaires spent more time engaged in active leisure (e.g., exercising and volunteering) rather than passive leisure (e.g., watching television and relaxing). In Study 2, millionaires spent more time engaged in tasks at work over which they had more control. The affluent sample belongs to the top of the income and wealth distribution, representing a significantly wealthier sample than in previous studies. These results further our understanding of when and how wealth may translate into greater well-being.

Article | Advances in Experimental Social Psychology

Prosocial Spending and Buying Time: Money as a Tool for Increasing Subjective Well-Being

Elizabeth Dunn, A.V. Whillans, Michael I. Norton and Lara B. Aknin

Researchers have long been interested in the relationship between income and happiness, but a newer wave of work suggests that how people use their money also matters. We discuss the three primary areas in which psychologists have explored the relationship between spending decisions and subjective well-being, beginning with a brief review of seminal research on the benefits of buying experiences. We then offer an in-depth review of two other domains in which changes in spending decisions have been shown to increase well-being: using money to benefit others (“prosocial spending”) and giving up money to have more time (“buying time”). We discuss how, when, and why prosocial spending and buying time promote happiness. In doing so, we critically consider the evidentiary value of past findings (particularly our own) and provide links to all of our available data as well as practical recommendations about how to replicate our findings (e.g., which measures and manipulations produce the most consistent results). Taken together, our studies on prosocial spending and buying time underscore the value of conceptualizing money not only as a stable life circumstance but also as a tool that individuals can intentionally utilize to alter their own happiness levels.

Keywords: wellbeing; Money; Spending; Decision Making; Happiness;

Citation:

Dunn, Elizabeth, A.V. Whillans, Michael I. Norton, and Lara B. Aknin. "Prosocial Spending and Buying Time: Money as a Tool for Increasing Subjective Well-Being." Advances in Experimental Social Psychology 61 (2020). View Details

Cite View Details Find at Harvard Read Now