Misperceiving Inequality

https://www.cato.org/publications/research-briefs-economic-policy/misperceiving-inequality

Our research shows that such uncertainty and misperception are ubiquitous. We present evidence from a number of large‐​scale, cross‐​national surveys that show in recent years that ordinary people have known little about the extent of income inequality in their societies, its rate and direction of change, and where they personally fit into the distribution. What they think they know is often wrong. This finding is robust to data sources, definitions, and measurement instruments. For instance, perceptions are no more accurate if we reinterpret them as being about wealth rather than income. We do find, however, that the perceived level of inequality—and not the actual level—correlates strongly with demand for redistribution and reported conflict between rich and poor.

The implications of these results for theories of redistribution, revolution, and democratization are far‐​reaching. If these are to be retained at all, they need to be reformulated as theories not about actual inequality but about the consequences of beliefs about it, with no assumption that the two coincide.

Showing that perceptions of inequality are a better predictor of political preferences than is the actual level, we do not argue that the latter is measured correctly. Indeed,there are many reasons why inequality is difficult to measure. But that does not invalidate our main point: it makes it in another way. If the experts cannot assess inequality accurately, it strains credulity to suppose the man in the street can gauge it intuitively. And the difficulty of measuring the actual income distribution does not affect our second point: that perceptions of inequality—whether or not they are accurate—do correlate with political preferences.

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