Cognitive factors in inequality perception

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Economic inequality has many detrimental effects for societies and individuals. There is, however, growing evidence that a substantial part of these effects is not directly caused by objective inequality, but rather driven by subjective perceptions of inequality. If subjective perceptions of inequality are so consequential, it is crucial to understand how such perceptions are formed. Evidence suggests that subjective perceptions of economic inequality often significantly diverge from reality. Crucially, both over- and underestimation has been observed in earlier studies. Such biases may cause problematic psychological reactions. For example, overestimating inequality might cause dissatisfaction to a degree that is not warranted by the objective state of society. Underestimating inequality might cause acceptance of societal conditions that, if they were perceived correctly, would cause protest. As of today, the psychological mechanisms and situational moderators that cause these biases are poorly understood. To overcome this shortage, the present project will study psychological processes underlying the perception of economic inequality as well as motivational consequences of perceptual biases.The project will focus on the phenomenon that people's perceptions of income distributions typically underestimate the skew of such distributions. In most societies, income distributions are right-skewed (i.e., more people with low than with high incomes). Underestimating the skew results in characteristic biases in inequality perception. For example, evidence suggests that this causes overestimation of the income of people belonging to upper income quartiles. Why do people misperceive skew? The first set of experiments, based on preliminary evidence and an experimental laboratory paradigm, tests the operation of three different potentially underlying psychological mechanisms related to learning, memory, and heuristic thinking. Results will help to better understand, predict, and perhaps change misperceptions of economic inequality. The second line of experiments focuses on the motivational consequences of biased perceptions of economic inequality. We will test hypotheses about how misperceiving the skew of income distributions will determine (a) satisfaction with one's own position in an income distribution as well as intentions to change one's situation, (b) perceptions of (un-)fairness of one's own income relative to one's performance, and (c) one's income aspirations in the case of economic ascent. We also test how socio-political attitudes affect perceptions of income inequality. We will finally test the generality of select laboratory findings by drawing on general population samples in two studies. The project contributes to further developing the Inequality Cycle Framework of RU 2847 by expanding knowledge about how objective inequality translates into subjective representations of inequality, which are the basis for all further processing steps.