Tuesday 28 April 2009

Opposition to redistribution: self-interest, or economic thinking?

Andrew Leigh points to recent work showing that preferences for redistribution correlate negatively with education, income, being male, and being white rather than black. The work pointed-to suggests that as folks move up the ladder (education, income, etc), they want to pull the ladder up behind them.

I'll suggest an alternative explanation. Each of the covariates mentioned correlate VERY STRONGLY with "economic thinking". Bryan Caplan's work (US sample) says that the gap in beliefs on positive economic matters between economists and the public is narrowed by education, being male, and income growth; my work (NZ sample) says that economic thinking on a more mixed set of positive and normative questions (though none relating to the desirability of redistribution) correlates positively with being male, having higher income, and having higher education.

What's going on then, in my account, is folks who are more likely to understand economics are more likely to understand the costs of redistribution in terms of economic growth foregone.


  1. I seem to remember Caplan's work showing that the general public overestimated the proportion of the budget spent on welfare and the economic cost, as compared to economists' judgement.

  2. To be clear, that I don't mean to suggest that this means people who think more like economists prefer redistribution more (or at least, not any less) than the average person, but it's a good prima facie reason to think they might...

  3. Caplan does find that the public thinks the damage caused by welfare spending is higher than what economists think. I find in NZ that economic thinking negatively predicts support for redistribution. A standard deviation increase in economic thinking in my study correlates with a 0.2 sd decrease in support for redistribution.

    I'll have to ponder more potential reasons for this.

  4. You are familiar, I assume, with Irving Fisher's arguments in favor of a graduated consumption tax?

    Higher marginal rates would increase the incentive to save and invest, and hence the future rate of growth.

    It's on the web (Google Books) under the title: Constructive Income Taxation:

    I would appreciate your thoughts.