Tuesday 8 March 2016

Inequality, envy, and earning

Desert matters. And so inequality statistics on their own don't tell us much.

One of the reasons the macro literature on inequality and growth has issues is that inequality's bad for growth where the road to riches is the license raj, but inequality can be one of the things that comes with economic growth where effort and productivity are rewarded.

Zizzo and Oswald, a while back, found that people were willing to pay money in lab experiments to burn others' income where that income wasn't earned:
Dan Zizzo has found in experimental environments, folks are willing to spend their own money to burn the money-holdings of folks who have more money than they do, especially when they reckon that the folks with more money don't deserve it. I tend to think this sort of behaviour a nasty holdover from the Pleistocene - check Paul Rubin's work on Darwinian Politics for the evolutionary advantages of inequality aversion on the Savanna.
A new experimental result also finds that desert matters. Here's Faillo and coauthors:
Thou shalt not steal (from hard-working people)
An experiment on respect for property claims
Marco Faillo†, Matteo Rizzolli‡ and Stephan Tontrup§

The institution of property is void without legal and social enforcement against theft. To address wasteful competition over resources, societies have long developed strategies that encompass -inter alia- behavioral traits, social norms and legal institutions to promote the respect and enforcement of property rights. On the other hand, a growing body of biological and ethological evidence suggests that several other animal species establish and respect some forms of property even in the absence of institutions. Would human beings respect others’ property in the absence of institutions? Do people posses some innate sense of property, or do they respect property only because of legal and social enforcement? In this study, we explore this issue with a lab experiment that resembles a famous thought experiment proposed by Plato. As Plato sought to understand how one ought to behave when he or she is completely shielded by the consequences of his actions,we study whether people respect property once full anonymity is granted. In this experiment, we implement a FreeForm Dictator game where participants can both give and take up to five scratchcards from a passive counterpart that they have either previously bought outside the lab with their own money (legal treatments) or gained inside the lab via an effort task (effortful treatments). In conclusion to the experiment, evidence is provided of a (weak) sense of property. We also provide evidence that property in the lab is better established through an effort tasks than through the use of subject’s own real property brought from outside the lab.
The neat twist here is that they required physical theft rather than just punching a button on the computer.

Where it's easier to tell that people have earned what they have, there's stronger respect for property rights. One might wonder how much that gets eroded by Wall Street bailouts.

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