Question

1. Write a three-paragraph, one-page essay summarizing and analyzing what economist Dan Ariely says about inequality.
2. Include the following reference at the end of your essay:
   • Ariely, D. (2015, March). How equal do we want the world to be?

Answer 1

Americans want to live in a much more equal country (they just don't realise it)". So says Dan Ariely, who, along with Mike Norton, found that Americans ridiculously underestimate the amount of inequality in their country. In reality, American society is staggeringly unequal: the top 20% hold 84% of the wealth, while the bottom 40% have just 0.3%. But according to Mr Ariely, Americans, whether liberal or conservative, rich or poor, prefer a wealth distribution that is more egalitarian than Sweden’s.

Mr Ariely’s data may seem to hold out hope for the egalitarian cause. Once you enlighten Americans with the facts about inequality in their society, the argument goes, they will be outraged and demand redistributive policies that reduce the wealth and income gaps. But Mr Ariely's approach is deeply flawed: he misinterprets his survey results and misunderstands the political philosophy of John Rawls, the theorist who inspired his inquiry.

For thousands of years, we've seen ourselves as inherently selfish creatures, driven by our genes to maximize pleasure. This is our original sin: We care about ourselves first and foremost, which is why we despise taxes, turn a blind eye to the suffering of others, and, in general, struggle to live a just life. But these pessimistic assumptions are mostly wrong, or at least woefully incomplete. In recent years, psychologists and neuroscientists have begun dismantling this view of human behavior. We may not be altruistic angels, but neither are we depraved hominids. For instance, it turns out that people have a natural aversion to inequality. As the Norton/Ariely survey demonstrates, we tend to prefer a world in which wealth is more evenly distributed, even if it means we have to get by with less.

The scientists speculate that people have a natural dislike of inequality. In fact, our desire for equal outcomes is often more powerful (at least in the brain) then our desire for a little extra cash. It's not that money doesn't make us feel good—it's that sharing the wealth can make us feel even better. "What this experiment demonstrates is that context matters," says Elizabeth Tricomi, the lead author on the paper. "You can completely flip the response of the brain by putting a person in a state of wealth, even if that state is determined by a ping-pong ball."

In reality, of course, we're not nearly as egalitarian as this experiment suggests. After all, the top 1% of earners aren't exactly lobbying for higher taxes or for large lump-sum payments to those on welfare. (Bill Gates is a rare exception. He recently joined his father in endorsing a new income tax on the wealthiest residents of Washington State.)

This is probably because the rich believe they deserve their riches. Unlike the subjects in the study, whose wealth was randomly determined, the top earners in America tend to feel that their salaries are just compensation for talent and hard work. Previous experiments, for instance, have demonstrated that making people compete for the initial payout can dramatically diminish their desire for equal outcomes. The end result is that our basic aversion to inequality—the guilt we might feel over having more—is explained away.

Dan Ariely discusses inequality and social justice and how we as a society share different views on these topics, especially concerning wealth distribution and fairness. Ariely gives us a visual representation of both the perceived and actual distribution of wealth within the United States. What most people believed was that the majority of wealth was spread out over the middle-upper class (about 60% of citizens) whereas in reality 84.4% of total wealth in the U.S. is held by the richest 20% of citizens. The knowledge gap is huge! But what do people want? What do people think is a fair amount of inequality? These are questions that Ariely poses to the audience. Based on surveys done in the U.S. the majority of people want a more even share of wealth whereby those at the top of the wealth chain are not as excessively wealthy so that there is a gradual progression of wealth, instead of the current gross disproportion.

Ariely also highlights other social issues that should be considered such as poverty, life expectancy and education. He relates wealth as a direct influence on these factors and how people are more concerned about wealth inequality, when really health inequality is of much higher significance. Ariely discusses the different between the knowledge gap and the desirability gap. He wants people to become less selfish and instead become more sympathetic and considerate of those less fortunate, especially babies and children who are not in control of their circumstances.