Behavioral Sciences Workshop: Michael Norton (Harvard Business School), “Voting and Paying for Greater Economic Equality”
“Voting and Paying for Greater Economic Equality”
Michael I. Norton, Harold M. Brierley Professor of Business Administration, Harvard Business School
Abstract: Economic inequality in the United States has been rising for decades, yet only recently have behavioral scientists explored a central question surrounding the optimal level of inequality: what do citizens believe the “ideal” level of inequality should be? Citizens’ preferences inform the likely effects (and likely voter acceptance) of policies that affect inequality, from taxation to spending on education and health care. Our research reveals that people all over the world, and from all walks of life – rich and poor, liberal and conservative – endorse unequal outcomes (rich people have more than poor people) but far less inequality than the current state of affairs. For example, the actual pay ratio of CEOs to unskilled workers in the United States is more than 300:1, but Americans report an ideal ratio of 7:1 – unequal, but more equal. Moreover, we also show that the disclosure of a retailer’s high pay ratio (e.g., 1000 to 1) reduces purchase intention relative to firms with lower ratios (e.g., 60 to 1). In short, both citizens and consumers feel that current levels of inequality are too high – and may be willing to voice that view with their purchasing power.
