Last Straw

The Eco­nom­ist:

A new NBER paper finds evid­ence for an even more intriguing and pro­voc­at­ive hypo­thesis. Its authors note that those near but not at the bot­tom of the income dis­tri­bu­tion are often deeply ambi­val­ent about greater redistribution.

Instead of oppos­ing redis­tri­bu­tion because people expect to make it to the top of the eco­nomic lad­der, the authors of the new paper argue that people don’t like to be at the bot­tom. One para­dox­ical con­sequence of this “last-place aver­sion” is that some poor people may be voci­fer­ously opposed to the kinds of policies that would actu­ally raise their own income a bit but that might also push those who are poorer than them into com­par­able or higher pos­i­tions. The authors ran a series of exper­i­ments where stu­dents were ran­domly allot­ted sums of money, sep­ar­ated by $1, and informed about the “income dis­tri­bu­tion” that res­ul­ted. They were then given another $2, which they could give either to the per­son dir­ectly above or below them in the distribution.

In keep­ing with the notion of “last-place aver­sion”, the people who were a spot away from the bot­tom were the most likely to give the money to the per­son above them: reward­ing the “rich” but ensur­ing that someone remained poorer than themselves.

Which might go some way toward explain­ing why some of the rel­at­ively poor in Amer­ica often oppose rais­ing taxes on the rich.