As a whole, the population of the United States is wealthier today than it has ever been. But, as has often been reported, the relative increases haven’t been uniform. In 1970, the top ten per cent of the population earned a third of the total national income. By 2012, it earned half. According to estimates by Emmanuel Saez, an economist at the University of California, Berkeley, income inequality has grown by record amounts since the 2008 recession: between 2009 and 2012, incomes for the top one per cent of the population rose by more than thirty per cent, while those for the rest of the country—the bottom ninety-nine per cent—increased by less than half of one per cent.
But there’s one thing that hasn’t changed all that much: social discontent stemming from rising inequality. This might be somewhat surprising. According to social-science research, self-reported happiness traditionally correlates roughly with income inequality: in years when inequality lessens, people report greater life satisfaction. It’s not so much a question of absolute income as one of how unequal the distribution of incomes is. Justin Wolfers, an economist at the University of Michigan who studies income and happiness, told me that one way to understand it is to imagine him taking a dollar from Bill Gates and giving it to me. “Each extra dollar buys less happiness,” he says, noting that I would get more happiness from that dollar than Gates did. “It’s the basic marginal benefit of each extra dollar. Inequality reduces happiness—every social scientist has a strong presumption of this.”
So one might expect to see a rising wave of discontent during the past several years, as inequality has increased sharply. But here’s the strange thing: in polls that have sought to capture that rise directly, not much has changed. That is, people say they’d be happier if there were a more equitable distribution of wealth, but they’ve actually remained just about as happy, even as inequality has gone up. A huge sense of national frustration did, of course, contribute deeply to the election of Donald Trump; but, as has been widely noted, his tax policy, for example, seems highly likely to make the problem of inequality worse. What’s going on?
To begin with, we have to take into account the fact that, on the whole, we are all far better off now than we were a century ago, or even a few decades ago. People at the lowest levels of society today have life styles that are much better than those of the higher classes in generations past. As Louis C.K. puts it, we’re a generation of “spoiled idiots”—“everything is amazing right now, and nobody’s happy” is his way of putting it. We take for granted things that would be considered miracles by our great-grandparents, or even by our parents—running water, flat-screen TVs, pre-food-poisoning Chipotle, smartphones. (Louis C.K. is especially impressed by those, reminiscing about the rotary phone he had as a child.)
That can’t explain everything, however, since psychologists have long known that relative social standing also makes a huge difference in reported happiness. It’s not just how much you have; it’s also how much you have relative to others. Even if you’re perfectly comfortable, you might start feeling like you’re not that well off if the Joneses—and the Smiths and the Doyles—have more. Back in the eighteenth century, Adam Smith quipped that women in England required better shoes than women in Scotland: relative standards were higher, and it would be shameful for women of a certain social standing in England to have inferior shoes. The absolute quality of the shoes didn’t change, but the relative quality did. “Relative is what matters,” Shai Davidai, a psychologist at the New School whose research is devoted to social inequality, told me recently.
It’s a phenomenon that isn’t relegated to social status. It permeates how we see just about everything in life. If your children go to a good school, but there are better schools nearby, are you placing them at a disadvantage? On an absolute level, their education might be just fine—even better than just fine. Relatively, it’s worse than what they could theoretically be getting, and what the kid next door might be getting. Our lives don’t make sense in abstraction, only when compared with the lives of others. Why, then, Davidai asked himself, can places like the United States have such stark inequality and still remain relatively socially stable?
The answer, it turns out, has two elements above and beyond the fact that we are all better off than before. First, Americans tend not to realize just how much inequality exists. “Across the population, people underestimate wealth inequality,” Davidai says. Ideally, people think that wealth inequality should be relatively low. “When we ask one question—how much should we have?—we find that most people don’t actually want egalitarianism. But, in their ideal world, they underestimate the true extent of inequality and want much less than actually exists. They aren’t riled up, because they don’t understand the extent.” In a nationally representative survey, from 2011, the psychologists Michael Norton and Dan Ariely found that people routinely underestimated existing wealth inequality. For instance, they believed that the top quintile held fifty-nine per cent of the wealth; in reality, it held eighty-four per cent. The U.S. has some of the most significant income inequality in the developed world, yet people seem routinely to underestimate that fact.
Furthermore, it turns out that people are fine with large relative disadvantages, as long as they think that the borders between groups are reasonably fluid. That is the essence of the American Dream. As long as you think that you, personally, can make it someday, you don’t mind so much if you’re not making it right now. As the writer William Dean Howells put it back in 1894, “Inequality is as dear to the American heart as liberty itself.”
To test that notion directly, Davidai and Thomas Gilovich recently asked just over three thousand people from a nationally representative sample one big question: What is the likelihood that a “randomly selected” American born in either the richest or the poorest quintile of the population would move to one of the other quintiles as an adult? They found a consistent pattern: people overestimated the extent to which it was possible to move up social brackets, but vastly underestimated how likely it was to suffer downward mobility. If someone was born in the bottom quintile, the respondents thought that person had a forty-three-per-cent chance of moving to the middle quintile or farther up; in reality, the likelihood is closer to thirty per cent. Meanwhile, they thought that someone born at the top had only a thirty-three-per-cent chance of making a comparable drop, which is a bit less than the percentage of people who actually experience that fall. In our minds, the American Dream seems to work primarily in one direction—up. “The poor can become rich, but the rich don’t have to clear their spots to make room,” Davidai says.
Why is this the case? Why do we see upward mobility as relatively attainable but downward movement as far less likely? Here’s one possibility: there is a basic human tendency to overestimate our relative standing regarding almost anything positive. We think we are smarter, nicer, and generally better than average at all good things. And we overestimate our ability to reach goals we set for ourselves; we don’t account enough for the role of external circumstances and put too much value on our own internal drive and ability. In that sense, all over the world, dissatisfaction with inequality should be somewhat mitigated by our inherent optimism.
In a classic 1935 study, participants predicted their future success based on how well they wanted to do—not how they had done in the past. The Harvard psychologist Jerome Frank asked people to play a game of quoits—you throw rings onto a stick, as in an amusement-park test of skill. It should be easy to figure out if your hand-eye coördination and general fairground dexterity are good. The rings will go onto the stick and not land somewhere else. But Frank found something curious. When people did poorly, they still predicted that they would do much better in the future—if, that is, they wanted to do well. And they made up excuses for their past failures that had nothing to do with innate ability. “If I were up against competition, I could do much better,” one person said. It’s not that I suck at throwing rings onto sticks; it’s that you set me up in the wrong environment.
But, Davidai argues, perhaps a more pertinent explanation, at least in the United States, is one that is distinctly rooted in Western culture: our obsession with the underdog. “You have Rocky fighting the champion, the Little Engine That Could. You have stories of successful businessmen rising from nothing—Martha Stewart, Steve Jobs. You root for underdog teams in sports,” he says. (When he says “you,” he means Americans; Davidai is from Israel, and does not see the same phenomenon there to the same extent.) From an early age, a sort of pro-underdog mentality permeates American culture, from our books to our films to our athletic traditions. Think of all the love that the Cubs got for just this reason.
Our underdog-loving culture, Davidai posits, may account for much of the reason that we overestimate upward mobility. His lab is currently developing studies to test this hypothesis, by, for instance, having people take an underdog perspective and seeing if that influences beliefs in mobility: if you watch “Rocky,” say, will you be more likely to think that mobility is possible? But thus far Davidai has been stymied in his attempts to create the perfect experimental design, for one simple reason: lack of material. “It’s almost impossible to find sports stories not about underdogs, for example,” he says.
When was the last children’s book you read about the popular, attractive kid who does well? Somehow, I don’t think George Lucas would be among the most successful filmmakers of all time if he crafted a tale of the popular, disciplined kid with the stable family and the perfect role model of a father who—miracle of all miracles—ended up following in the family tradition of becoming a talented warrior. So rooted is the rags-to-riches approach in our culture, so deeply does it permeate our storytelling, that it can be tough to find a balanced approach.
But Davidai is starting where he can—at home, with an experimental sample size of one. He is doing everything he can to make sure his child is not exposed to the traditional underdog narratives. One book he won’t be reading to his infant: “The Little Engine That Could.” “I have always hated that book,” he told me. “Some engines can’t, and it’s not their fault.”