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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Comments

  • F8lee

    While the “last place aversion” concept seems quite interesting, it seems to me the folks occupying ‘wherever’ are playing out their diffuse frustrations with everything they perceive to be unfair, with no real concrete thoughts as to how they would like to see things become. This is not unlike what’s been going on in Egypt and Libya, writ small – the throngs protest and oust the horrible leadership, but then what? Is everyone in Egypt suddenly employed, or better educated? Besides burning down churches, what has anyone been up to there? When the Libyan rebels hoist Moammar’s head on a petard, what is their plan?

    Likewise, other than the Woodstock-y nature of the Los Angeles camp-fest (where I live) it doesn’t seem as if anyone has any rational thoughts as to what to actually do. Like 5 year-old children who want it to “be better” they are demanding that the great governmental parental unit “make it better”. But offer nothing cogent along those lines, so far as I have seen.

    Two thoughts about the unfairly low taxes on rich folk (damn them rich folk!) – the incentive plan that makes someone start a business and grow it is to have ownership in that enterprise – so his wealth (as measured by the value of the stock) isn’t taxed the way my simple income is. He takes a bigger risk than I – and that seems fair to me. But the blindly ignorant rantings of “he’s worth millions and doesn’t pay his fair share!” seems to ignore that little factoid.

    I am also amused by the resounding silence of the left-leaning rich folk here in SoCal – from movie moguls to sports stars, with their zillion-dollar incomes a dime a dozen around here, it seems odd that none of these fair-minded folks have jumped on the Warren Buffet bandwagon. Barbara, Stephen, Jeffery, Kobi – where are you folks? C’mon, tell us how you are ready and willing to take a higher percentage of your income to the IRS!

  • jan

     ” 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.” 

    Wouldn’t it be accurate to say that all the energy among politicians 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 real problem is that the politicians have ignored people for a very long time now and listened to Wall Street and the CEOs.  Think about the fact that you need look no further than the Obama administration if you want to find a plethora of former CEOs to see how powerful corporations have become. 

    The limousine crowd owns this country.  The rest of us?  We’ve become unnecessary “filler”. 

  • John Ross

    So, I suppose, according to that research, the equal sharing of income and labor would be unacceptable; but is the accumulation of wealth so deeply ingrained in everyone’s instincts? Not in mine. If I legally received a large sum of money I would immediately share it with those in serious need. That’s how I was raised. I would feel guilty to be rich.

  • Tfmccoy

    The GOP has rewritten the Tax laws since Don Regan, just under the radar. They continue to push the average guy down and manipulate the Congress for the redistribution of wealth to the top 1%. If they can redistribute the wealth of this country for years to top Top 1%  I believe, “We The People” should do the same just to even the balance. Now, when they hold all the assets is not a good time to call a truce. It’s like dealing with the last century’s Robber Barons all over again. They’re traitors to the American sense of fairness.

  • Anonymous

    I think that part of the reason that this movement has been successful up and until this point is that it is inclusive and not narrowly politcally driven. Unlike other political movements with a narrow focus, the Occupy Movement has economic, environmental, geo-political and social strata attached to it.

    There is something for everyone!

    I also think that the movement (so far) lends credence from the social movements of th 20th century which brought about needed social change, against all odds: http://michaelmaczesty.blogspot.com/2011/10/house-always-wins.html

  • Sayeed O.Salahdeen

     Correct Re-Distribution of Taxpayers’ Wealth is the “Occupy Wall Street” DemandThe Treasury of the American Taxpayer continues to be looted by the rich and powerful corporations in America and Europe. The U.S. Taxpayers are dissatisfied with the Democratic and Republican Parties. The rich elite have short historical memories in understanding that power is psychological with no concrete pillars…. When the masses are upset and lose faith in the rule of exploitative law, all systems have the potential to fail. The main culprits is the news media and both political parties. They mock the term “Redistribution of Wealth” as though the Taxpayers are talking about personal or corporate wealth. Hell No! Occupation Wall Street is demonstrating about Proper Distribution of the American Taxpayers’ Wealth ! Correct distribution of Taxpayers Wealth ! American Citizens pay Taxes and the Political Establishment re-distributes Taxpayers wealth to the rich and powerful and neglects the Upper and Lower Middle Classes, the Upper and Lower Poor, and the Unemployed? Remember carefully: “In God We Trust” on the Dollar means if you trust in the Dollar like you trust in God the dollar will bless you. The American financial dollar system is built upon “Faith” and “Trust”; when Citizens of any nation lose faith and trust with those entrusted to maintain the system’s (political & financial) integrity it can collapse overnight. Bernard Bernacke chairs (cheers) the Capital @ the Reserve Bank; and, Barack Hussein Obama chief (chefs) @ the Capitol. This is the reason why the United States Constitution and its Constitutional Laws are now threatened by the rich & powerful with draconian modifications. The United States Constitution is the only set of Laws available to retrieve the Trillions of Dollars of United States Taxpayers Treasury.The U.S. Congress, only as a Constitutional Democracy, is the only corrective institution that can demand Taxpayer’s Reparations, and, checkmate the Federal Reserve Bank and White House executorships.

  • Hlouisnini

    Now this is an example of the hogwash that today passes off as science – here’s an experiment give these two bozos an opportunity to work for the same salary but at a job that produces a good or a service instead of whiling away the hours in their ivory tower and see which one accepts 

  • Jakeandfatty

    no faith, recycle

  • Jakeandfatty

    didnt get it, sayeed, symbols on the money bad, i agree, but still not sure what ur saying? i dont know if I want more gov power…

  • Jakeandfatty

    right on dude, time for a 3rd party would you say, 18% dem-minorities, 12% rep-ultra rich/zealots, 50% hardworking-christian families.   What should we call it?

  • Jakeandfatty

    mabye bullshit i think….

  • Jakeandfatty

    Some of my comments may be a bit crude, but the psychological study seems sound.  Still i agree with the idea that the 99% have, that is somethings not right.  Your company fails,n u get a bonus for that? That is not fair right… The republicans congressmen all vote along the same party line, didn’t we elect them to be leaders, not one of them thought differently from the rest? really…That’s not right.  Their approval rating negative 82% n they do nothing to help us?

  • Bill P

    Opposition to redistribution of wealth by the “non-rich” may be greatly motivated by self interest and a sense of fairness.  Self interest because of an opposition to socialism and centralized control of the economy as history teaches that socialism will bring its own set of horrors. That is self interest.  Opposition may be guided by a sense of “fairness” in that people may support the proposition that one may keep that which they earn. What right has the US government to limit the extent of acquisition of wealth or property and by whose standards will that be accomplished?  

  • http://pulse.yahoo.com/_D52CO6FEFPMA5SRI2N6BP6LQRI Denise C

    This study is such Bull!  The main reason we with lower income don’t favor redistribution and as they put it, vote against our self interest, is that if you didn’t earn something, why do you deserve it?  I had the same opportunity to work hard and stay in school to better myself, but if I dropped out or am just too lazy to work hard to better myself, I know in my heart I don’t deserve other people’s money!  If I wanted to be better off, then I would have educated myself better to be able to get a better income.  Take our current welfare state??  We reward laziness of high school dropouts or such by making them a victim!  Then they grow older and complain they can’t make it on minimum wage and act like the rest of us owe them our earnings to make up for their laziness.  They march through the streets like that retrobate racist Al Sharpton and demand economic justice when they know deep down they were the ones who made the decision to not take advantage of the opportunities offered to everyone in this country!  Like not even finishing high school, but now expect the rest of us to support them?  Bull!  I grew up in a neighborhood of extreme poverty and until I was in my teens I thought as the only white child in the area, that this was what the whole world looked like.  My school was 20% white, 30% American Indian and 50% black.  All of us had the same opportunity to stay in school and I did.  The ones who did not are the same ones whining now that the rest of us owe them something they did not work for!  I may only make around $40,000 a year now, but I sure don’t feel any rich person should give me even a dollar of their earnings!  If I need more, then it is personal responsibility that will result in bettering myself!  Not stealing it from someone who earned it!  This used to be an American value, but greed from the bottom of the income scale is a problem!  They actually believe they deserve to steal from others!

  • Prosperitybg

    What about corporate welfare? 
    Are you just as upset about rich people being bailed out with tax payer dollars as you are about drop outs receiving welfare? 
    If you’re not, then you’ve just proven that this study is true…

  • Prosperitybg

    In 1995 the tax rate for millionaires was 30.4% 

    and the unemployment rate was 5.6%.

    In 2009 the tax rate for the millionaires was 22.4% 

    and the unemployment rate was 9.3%.

    If lower tax rates help job-makers make jobs – why do we have less jobs now that they have lower tax rates?

  • JustPassingBy

    Not bullshit! Some people feel better about themselves when giving opposed to pampering themselves by buying a 200k luxury car knowing there are others, they know personally, in need.

  • J.V. Hodgson

    Some of these professorial comments are arrant rubbish. Like objections to minimum wage by those just above. C’mon just aboves our wages will still have to be minimum or above. The extremes of one side having money and the other none bring out extreme behaviour patterns not results that are viable generalisations.
    However peoples peception of fairness is valid and what is an unfair statement is the sound bite of ” WEALTH RE-DISTRIBUTION”
    There are two well known sayings I’d like to preface with what follows:-
    You can fool all of the people some of the time, and some of the people all of the time, but not all of the people all of the time.
    Now substitute taxes on all forms of income, dividends, interest and gains by substituting “Tax” for “fool”
    So then you can have reasonable/fair flat taxes in strata
    1) Poverty level or up to minimum wage earners no tax.
    2) Average wage earners say 5% tax ( up to say $36,000)
    3) Mid level say 10% tax  up to $75,000.
    4) High earners say 15% tax $75,000 to $250,000.
    Those rates 1-4) apply to salary and bonus income and any form of dividend, interest, or capital gains.
    5) After that  the rate is 20% on salary income and 30 % on bonus income  and 20% on dividend or interest income and 25% on capital gains. This latter is 5% less than all other major Western economies.
    Inheritance tax rates are the same is income tax rates.
    On payroll taxes the employee and employer pay the same percentage for social security on all salary income i.e. no cap.
    Thats fair, and passes tests referred to above.
    You could extend it it Medicare and Medicaid as national premiums for emergency care only the rest you pay via private insurance.
    The rich still win here as they can afford premium style services and policies with low co pays and also for age related care services.
    Regards,
    Hodgson

     

  • http://pulse.yahoo.com/_D52CO6FEFPMA5SRI2N6BP6LQRI Denise C

    We made 14 Billion in interest on the original TARP and all the banks who received it have paid the entire amount back.  Except by AIG, Auto Companies, and GMAC, which Obama gave even more to.  Then Obama and Tim Geitner used the entire amount paid back as a welfare slush fund fund for their political connected buddies!  I’m interested to know when the welfare repayments will be starting??