“The rich are different from you and me..” - the psychology of inequality

In the mythical exchange between F. Scott Fitzgerald and Ernest Hemingway, Hemingway responds “Yes, they have more money.” Who are ‘they’? … presumably those who can be unconcerned about the stock market ‘correction’ over the past week. (Cohen brings some perspective the market drop by noting that 84% of all stocks owned by Americans - including all retirement and savings assets - belong to the wealthiest 10 percent of households, for whom a market drop of 10% would bring only a 1-2% change in their wealth holdings.)

In this vein, I would like to point to Elizabeth Kolbert's fascinating essay on the differences between being on the lower rather than the upper part of the economic ladder. She cites psychological studies showing that much of the damage done by being poor comes from feeling poor (as, for example when people find they are making less than their peers), not from actual material deprivations. "In a world where people measure themselves against their neighbors, it possible to earn good money and still feel deprived...thanks to the growing gap between the one percent and everyone else, the subjective effect is of widespread impoverishment...inequality mimics poverty in our minds.

Studies show that feeling disadvantaged leads people to do more risk taking, amplify perception of racial differences, be more susceptible to conspiracy theories, and be more likely to have medical problems.

If feeling poor goes with feeling bad about it, it would seem reasonable to suppose that rich people feel good about being rich. Work by Rachel Sherman shows that this is not the case. The few rich people who were willing to be interviewed by her didn't want their wealth to be known and preferred not to think of themselves as privileged, citing friends who even more wealthy. "If affluence is in the eye of the beholder, then even the super-rich, when they compare their situation with that of the ultra-rich, can feel sorry for themselves." Also, they also feel moral conflicts about having privilege in general.

Preschoolers, brown capuchin monkeys, California state workers, college students recruited for psychological experiments—everyone, it seems, resents inequity. This is true even though what counts as being disadvantaged varies from place to place and from year to year...Thomas Jefferson, living at Monticello without hot water or overhead lighting, would, by the standards of contemporary America, be considered “poorer than the poor.” No doubt inequity, which, by many accounts, is a precondition for civilization, has been a driving force behind the kinds of innovations that have made indoor plumbing and electricity, not to mention refrigeration, central heating, and Wi-Fi, come, in the intervening centuries, to seem necessities in the U.S.

Still, there are choices to be made. The tax bill recently approved by Congress directs, in ways both big and small, even more gains to the country’s plutocrats. Supporters insist that the measure will generate so much prosperity that the poor and the middle class will also end up benefitting. But even if this proves true—and all evidence suggests that it will not—the measure doesn’t address the real problem. It’s not greater wealth but greater equity that will make us all feel richer.