Something new and special, since the time of Milgram, recent experiments by Jeffrey Butler.
Does inequality feed on itself, asks Jeffrey Butler.
the answer is: yes.
Inequality undermines the confidence of the disadvantaged and boosts the confi dence of the advantaged.
Jeffrey V. Butler has documented causal connections causing inequality persistence. In a sequence of experiments it is shown that
1) individuals respond to salient (earnings) inequality by adjusting their performance beliefs to justify the inequality;
2) it is beliefs about relative ability – an ostensibly stable trait – rather than effort provision that are affected; and
3) unequal pay on an initial task affects willingness to compete on a subsequent task.
Experiment 1 was conducted in the XLab facilities at the University of California, Berkeleyusing the software z-tree (Fischbacher, 2007). Participants were recruited among studentsand staff of the University.
Three separate treatments were conducted. Each participanttook part in exactly one of the three treatments. All three treatments shared a commonstructure: first, participants earned money by completing ten rounds of a task that re-quired analytical ability.
After all rounds of the analytical ability taskwere completed, participants answered incentive-compatible questions about how well theythought they performed relative to other participants. Participants learned about the belief-elicitation stage only after having completed the analytical ability task.
Taken together, the results provide evidence for a novel mechanism perpetuating inequality: initial inequality colors beliefs about one’s own ability relative to others, lowering the ex-ante expected return to courses of action which require, at some point, ability-based competition. As the latter is a feature of many paths to upward mobility, initial inequality may become persistent inequality.
Buler got subjects to play an urn-guessing game. They were presented with two urns, one with with mostly red balls and another with mostly white, and were asked to guess which of two urns the experimenter was using, based upon seeing one ball drawn.
Subjects were split randomly into two groups, one being better paid than the other.
Each participant earned one additional dollar for a correct answer to this question, and no additional money for an incorrect response.
Both the low-paid and high-paid groups got roughly the same amount of guesses right.However, when they were asked: are you a better or worse than average guesser? things changed. Whereas 85% of the high-paid group said they were better than average, only 60% of the low-paid group did. Butler says:
Relative performance beliefs. Inequality and relative ability beliefs by J. Butler. |
In other experiments, Butler found that more confident subjects were more likely to choose to enter winner-take-all tournaments, thus increasing their chances of big payoffs later.
This implies that initially arbitrary inequality can become persistent, because it reduces the desire of the worst-off to compete.
Disclaimer: This is, of course, only one of several routes in which this can happen.
We know from research in personal finance that preferences for risk are partly endogenous; people who have experienced recession or the death of a child are more risk averse than others. Wouldn't it be remarkable if risk appetite was the only endogenous preference? If ambition and appetite for work are also endogenous, then a moralistic defence of inequality becomes less tenable.
It's easy to see that this might have real-world applications. It's consistent with some of the latin boys doing poorly at US-school; with working class kids being loath to apply to Oxbridge; and with women not applying for top jobs. It's also consistent with some of the unemployed not wanting to work: why apply for jobs if you'll only be knocked back?
This implies that a popular explanation for inequality might be no explanation at all. It's sometimes claimed that the successful are successful because they worked hard and the unemployed are unemployed because they are lazy. But this research suggests the causality might be reversed. Maybe successful people work hard because prior good luck has led them to think that work pays, whilst others are lazy because bad luck has reduced their confidence. In other words, it could be that the preferences which rightists believe to be the cause of inequality are in fact the effect of it.
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