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The Daily Need

The psychology of Occupy Wall Street, or why we don’t always favor wealth redistribution

Culturally, the moment would seem ripe for a populist movement like Occupy Wall Street. Economic injustice is seemingly everywhere we turn, with taxpayers socializing the costs of risky lending, bankers raking in heftier profits and the highest earners aggregating more of the country’s wealth every day. It’s not a Republican or Democratic proposition, either: Ronald Reagan famously decried what he called “crazy” tax loopholes that made it possible for “millionaires to pay nothing, while a bus driver was paying ten percent of his salary.” Those tax loopholes still exist today.

And yet, Americans remain curiously resistant to policies that would level the playing field. True, respondents in most polls say they support higher taxes on the rich and the elimination of corporate tax loopholes, but not with much fervor: All the energy in politics these days, in both parties, is focused on slashing government spending, not about closing the income gap or disentangling the murky federal tax code. The one Republican candidate who has consistently raised the issue, Jon Huntsman, has been dismissed as an also-ran with virtually no chance of winning.

If, as behavioral scientists often assume, human beings act in most cases to advance their own narrow self-interest, we would expect anyone who isn’t rich to be in favor of redistributing wealth to some degree — especially in times of economic turmoil. Except, as we all know, this isn’t the case. In fact, as two researchers who study economic behavior and decision-making point out in a new paper, our collective opposition to the redistribution of wealth is actually higher now than it has been in times of relative prosperity. Why?

 
Our collective opposition to the redistribution of wealth is actually higher now than it has been in times of relative prosperity. Why?
 

As it turns out, narrow self-interest expresses itself in myriad ways. One of those is an aversion to low status — or what the researchers, Ilyana Kuziemko of Princeton University and Michael Norton of Harvard Business School, call “last place aversion.” This aversion to ranking at the bottom of a social group, Kuziemko and Norton write in a paper featured Wednesday in Scientific American, explains why human beings often object to policies that would boost their economic standing by redistributing wealth: They don’t want to be leap-frogged by those who rank below them.

“Last-place aversion suggests that low-income individuals might oppose redistribution because it could differentially help the group just beneath them,” Kuziemko and Norton write in the paper. They use the minimum wage as an example. The poor are generally in favor of increasing the minimum wage because they stand, of course, to benefit directly from such a change. Even the wealthy generally have no objection to modest increases in the minimum wage. But the fiercest opposition, it turns out, comes most consistently from the group of people who make just above the minimum wage. Those people, it turns out, don’t want to end up in “last place” themselves.

The researchers found evidence for this “last place aversion” in both self-reported surveys and controlled lab experiments. When they asked participants whether they supported raising the federal minimum wage above its current level of $7.25 an hour, for example, the most consistent opposition came not from the wealthiest participants in the room but from those who made between $7.26 and $8.25 an hour. And when they gave sums of money to lab participants, ranked those participants based on “wealth” and asked them to redistribute the money they were given, those who were ranked second-to-last actually chose to give their money to wealthier participants instead of those who needed the money the most.

The effect of this “last place aversion” on social movements can be crippling. Solidarity among poor and working Americans is crucial in order to generate sufficient political support for major policy changes, like fair taxation, limits on risky lending, workplace protections and so forth. Infighting and discord between different classes of working Americans can only impede progress toward their political goals, just like intra-party squabbles between Republicans have hurt their ability to win elections and advance bills in Congress on issues like spending, foreign policy and the debt ceiling, to name just a few.

 
Our fairness instincts are so strong, in fact, that human beings often incur considerable personal costs just to enforce notions of fairness.
 

Fortunately, the mind is not a monolith, and there are other mechanisms that kick in during the process of moral and political decision-making. For one, there’s empathy — a feeling of compassion for those less well-off than us. In the surveys and lab experiments conducted by Kuziemko and Norton, the poorest participants were merely numbers or abstractions. Studies show that, when presented with the face of a person in need or a vivid story of hardship, we’re more likely to step in and help, or to support policies that alleviate struggling.

Empathy, however, is perhaps less powerful than another, even more fundamental motivator of human behavior: our “fairness” alarms. A strong sense of what’s “fair” and what’s not is embedded deep within the human psyche, shaped over thousands of years of evolution and hardwired by social-group interactions from our earliest days as hunter-gatherers, when cooperation was key to survival. Studies show that, even today, “fair” results in monetary transactions or social exchanges stimulate our brain’s rewards centers — even when we’re not the ones benefiting.

Our fairness instincts are so strong, in fact, that human beings often incur considerable personal costs just to enforce notions of fairness. In one classic experimental study called the “ultimatum game,” participants were separated into pairs. One participant was given $10, another nothing. The participant with the money could offer any amount to the receiver, and if the receiver accepted, both participants would keep their share. If the receiver rejected, neither participant would get any money, and they’d both go home empty-handed.

If human beings were motivated purely by narrow self-interest, the receivers in this experiment would take whatever amount was offered to them — after all, they walked into the lab with nothing, and they’d leave with something. Except, as it turns out, participants will reject offers perceived as “unfair,” even though it means they won’t receive any money. And not only that — when we enforce our ideas of fairness, and when sums of money that are perceived as “fair” are offered to other participants, the parts of our brains associated with rewards will light up, brain scans show. For humans, fairness itself is a reward.

That explains, in part, why politicians on both sides of the aisle talk so much about wealthy Americans “paying their fair share” or working Americans “getting a fair shake.” Talk of fairness pushes a psychological button, a button closely associated with pleasure. Conversely, “un-fairness” is closely associated with feelings of disgust. These emotions are powerful motivators of human behavior and decision-making, in both moral and political contexts.

Which might explain the visceral displays of anger, resentment and disgust in populist movements like Occupy Wall Street and the tea party. Human beings are, of course, self-interested creatures, but that self-interest isn’t always so narrow. “Last place aversion” may well play a deleterious role in political decision-making, but human beings have very real, emotional investments in concepts of compassion and fairness. Those concepts are bred into us by thousands of years of evolution. And they’re playing out now in the streets of major cities across the country.

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