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Inequality and Decision Making: Imagining a New Line of Inquiry

37 Pages Posted: 26 Jun 2013  

David A. Moss

Harvard Business School - Business, Government and the International Economy Unit

Anant Thaker

Harvard Business School

Howard Rudnick

The Tobin Project

Date Written: June 14, 2013

Abstract

The substantial increase in inequality in the United States over the past three decades has provoked considerable debate, with some analysts characterizing rising inequality as among the greatest threats facing the nation and others dismissing it as little more than a hiccup – or even celebrating it as a favorable development – in the progress of American capitalism. Despite numerous claims in popular venues that high inequality has slowed growth, precipitated financial instability, and profoundly distorted the nation’s political system, our review of the literature finds no academic consensus on the consequences of inequality for the health of the economy or the democracy, or for nearly any other macro-level outcome. With the academic community reaching inconclusive and conflicting findings, we suggest that careful empirical study of possible mechanisms by which income inequality may exert macro-level effects is warranted. We suggest further that that one potential mechanism that may be especially worthy of investigation relates to possible effects of high or rising inequality on individual decision making. Drawing on nascent research, we examine a handful of pathways through which inequality may plausibly influence individual decisions. Finally, we propose ways that these and other pathways might be productively explored and assessed through behavioral experiments. By bringing together what are today two separate areas of research – decision making and inequality (or social disparity) – this new line of inquiry could help to break the stalemate that has, until now, characterized the study of inequality and its consequences.

Suggested Citation

Moss, David A. and Thaker, Anant and Rudnick, Howard, Inequality and Decision Making: Imagining a New Line of Inquiry (June 14, 2013). Harvard Business School BGIE Unit Working Paper No. 13-099. Available at SSRN: https://ssrn.com/abstract=2284341 or http://dx.doi.org/10.2139/ssrn.2284341

David A. Moss (Contact Author)

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States

Anant Thaker

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Howard Rudnick

The Tobin Project ( email )

1 Mifflin Place
Suite 240
Cambridge, MA 02138
United States

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