Inequality & Decision Making

In recent years inequality in the distribution of income has reached heights not seen since the Great Depression. Many observers, from scholars to journalists to activists, share a fear that this rise in inequality might pose significant threats to American democracy. However, despite the large amount of time and resources devoted to the study of inequality, understanding of how inequality alters the democracy or affects the economy has proven elusive. 

Having explored ways in to this question for the better part of two years, the Tobin Project has launched a strategic inquiry which is well-positioned to shed new light on the consequences of inequality. The inquiry asks: How does inequality influence individuals’ behavior and decision making, and how might such influences affect the broader society?  

In many ways, the political and economic health of society turns on the decisions people make - at work, at home, and in the voting booth. Still, we know very little about how changes in inequality might affect individuals' decision making. If it were shown that increasing inequality itself leads to changes in the choices people make – perhaps by changing risk tolerance, social affinities, or willingness to invest in public goods – then we would be better-positioned to answer the critical question of how inequality affects the democracy and the economy more broadly.*

As part of this inquiry, the Tobin Project is now catalyzing research to look for possible effects of inequality on individual decision making. Over the past four years, the Tobin Project has built a group of scholars, including economists and psychologists from Princeton, Boston University, Harvard, and UCSF, and moved forward with several research projects. 

* See Moss, David, Anant Thaker, and Howard Rudnick. "Inequality and Decision Making: Imagining a New Line of Inquiry." Harvard Business School Working Paper, No. 13-099, June 2013.