New research in the field of psychology casts economic inequality in a different, unsettling light.
Is economic inequality really a problem? The question is a little more complicated than it sounds. Most people—even dyed-in-the-wool right-wingers—would agree that poverty is bad. No one should starve, and if the bottom ten percent of Americans are starving, that's terrible news. But inequality isn't about just the bottom ten percent; it's also about the top ten percent, and everyone in between. Another way to frame the question about inequality, then, would be: is it only the living conditions of the poor that matter, or does the economic distance between the rich and the poor matter as well?
A lot of conservatives, and even some liberals, would argue that the answer is no. Libertarian economist Tyler Cowen offered up a typical rejoinder when he told NPR, "I think mobility is the problem. The problem is not that someone else has more, but that someone is not moving up the ladder." In other words, a huge gap between the rich and the poor is benign just so long as it's possible for the poor to eventually become rich (and vice versa).
That account sounds plausible, or at least reasonable. But if some recent work in the field of psychology is accurate, then we may be ignoring a crucial factor: how being richer than everyone else affects your moral compass.
Wednesday's The Cycle featured a segment with journalist Lisa Miller, who wrote about this new psychological research in a New York article called "The Money-Empathy Gap." The takeaway, according to psychologist Paul Piff, is that "the rich are way more likely to prioritize their own self-interests above the interests of other people." From the article [emphasis added]:
This research is not intended to prosecute the one percent, those families with an average net worth of $14 million. Nor does it attempt to apply its conclusions about the selfishness and solipsism of a broad social stratum to every member within it: Gateses and Carnegies have obviously saved lives and edified generations, and one of the biggest predictors of a person’s inclination to donate to charity is how much money he has. But when the top fifth of American families have seen their incomes rise by 45 percent since 1979, whereas the bottom fifth has seen a decline of almost 11 percent, these researchers want to explore a timely question: How does living in an environment defined by individual achievement—measured by money, privilege, and status—alter a person’s mental machinery to the point where he begins to see the people around him only as aids or obstacles to his own ambitions? Piff won’t name a tipping point after which the personality transformation kicks in, only that his studies of ethical behavior indicate a strong correlation between high socioeconomic status and interpersonal disregard. It’s an “additive” effect; the fever line points straight up. “People higher up on the socioeconomic ladder are about three times more likely to cheat than people on the lower rungs,” he says.
To understand why that should concern us, consider another defining trait of rich people: they have the power to influence a lot of other peoples' lives. They run companies whose products we buy en masse, and which employ millions of people. They can determine what runs in our newspapers and what airs on TV. And thanks to the Supreme Court's Citizens United ruling, they can now even sway elections with billions of dollars in untraceable cash. For anyone to have that power is unnerving enough—but what should unnerve us even more is the extent to which it seemingly correlates with unethical and antisocial behavior.
If you want some anecdotal evidence from this month's news, consider the LIBOR scandal now shaking up London's financial sector. The details of that scandal are extremely complicated, but here's the gist of it: LIBOR, or the London inter-bank offered rate, is a pricing model used to determine how much interest London banks should pay each other for borrowing funds. As Dylan Matthews of Wonkblog writes, "$360 trillion in assets worldwide are indexed to LIBOR, and much of those assets are consumer debt instruments like mortgages, car loans and credit card loans." He goes on:
That means that when LIBOR rises, so do the prices ordinary consumers pay to, say, get a mortgage. Which means a bank that mucks with the LIBOR rate isn’t just playing around with esoteric derivatives that will only affect other traders: They’re playing with the real economy that most of us participate in every day.
Of course, muck they did. Over the past couple of weeks, we've gradually learned that traders at numerous major banks in London have been manipulating LIBOR at the expense of the rest of the world. And as if that's not remarkable enough, they carried off this historic act of malfeasance with a cavalier attitude more befitting of high school pranks. The Economist reports:
In the rapidly spreading scandal of LIBOR (the London inter-bank offered rate) it is the very everydayness with which bank traders set about manipulating the most important figure in finance. They joked, or offered small favours. “Coffees will be coming your way,” promised one trader in exchange for a fiddled number. “Dude. I owe you big time!… I’m opening a bottle of Bollinger,” wrote another. One trader posted diary notes to himself so that he wouldn’t forget to fiddle the numbers the next week. “Ask for High 6M Fix,” he entered in his calendar, as he might have put “Buy milk”.
Through the LIBOR scandal, we can see how the antisocial behavior Piff studies can have global implications. And that, in turns, casts the entire conversation about inequality in a new light. Maybe the problem isn't just one of mobility; maybe the top one percent have too much money, period.