It would be nice to be objective in life, in many ways. The problem is that we have these color-tinted glasses as we look at all kinds of situations. For example, think about something as simple as beer. If I gave you a few beers to taste and I asked you to rate them on intensity and bitterness, different beers would occupy different space. But what if we tried to be objective about it? In the case of beer, it would be very simple. What if we did a blind taste? Well, if we did the same thing, you tasted the same beer, now in the blind taste, things would look slightly different. Most of the beers will go into one place. You will basically not be able to distinguish them, and the exception, of course, will be Guinness. (Laughter)
Similarly, we can think about physiology. What happens when people expect something from their physiology? For example, we sold people pain medications. Some people, we told them the medications were expensive. Some people, we told them it was cheap. And the expensive pain medication worked better. It relieved more pain from people, because expectations do change our physiology. And of course, we all know that in sports, if you are a fan of a particular team, you can't help but see the game develop from the perspective of your team.
So all of those are cases in which our preconceived notions and our expectations color our world. But what happened in more important questions? What happened with questions that had to do with social justice? So we wanted to think about what is the blind tasting version for thinking about inequality? So we started looking at inequality, and we did some large-scale surveys around the U.S. and other countries. So we asked two questions: Do people know what kind of level of inequality we have? And then, what level of inequality do we want to have? So let's think about the first question. Imagine I took all the people in the U.S. and I sorted them from the poorest on the right to the richest on the left, and then I divided them into five buckets: the poorest 20 percent, the next 20 percent, the next, the next, and the richest 20 percent. And then I asked you to tell me how much wealth do you think is concentrated in each of those buckets. So to make it simpler, imagine I ask you to tell me, how much wealth do you think is concentrated in the bottom two buckets, the bottom 40 percent? Take a second. Think about it and have a number. Usually we don't think. Think for a second, have a real number in your mind. You have it?
Okay, here's what lots of Americans tell us. They think that the bottom 20 percent has about 2.9 percent of the wealth, the next group has 6.4, so together it's slightly more than nine. The next group, they say, has 12 percent, 20 percent, and the richest 20 percent, people think has 58 percent of the wealth. You can see how this relates to what you thought.
Now, what's reality? Reality is slightly different. The bottom 20 percent has 0.1 percent of the wealth. The next 20 percent has 0.2 percent of the wealth. Together, it's 0.3. The next group has 3.9, 11.3, and the richest group has 84-85 percent of the wealth. So what we actually have and what we think we have are very different.
What about what we want? How do we even figure this out? So to look at this, to look at what we really want, we thought about the philosopher John Rawls. If you remember John Rawls, he had this notion of what's a just society. He said a just society is a society that if you knew everything about it, you would be willing to enter it in a random place. And it's a beautiful definition, because if you're wealthy, you might want the wealthy to have more money, the poor to have less. If you're poor, you might want more equality. But if you're going to go into that society in every possible situation, and you don't know, you have to consider all the aspects. It's a little bit like blind tasting in which you don't know what the outcome will be when you make a decision, and Rawls called this the "veil of ignorance."
So, we took another group, a large group of Americans, and we asked them the question in the veil of ignorance. What are the characteristics of a country that would make you want to join it, knowing that you could end randomly at any place? And here is what we got. What did people want to give to the first group, the bottom 20 percent? They wanted to give them about 10 percent of the wealth. The next group, 14 percent of the wealth, 21, 22 and 32.
Now, nobody in our sample wanted full equality. Nobody thought that socialism is a fantastic idea in our sample. But what does it mean? It means that we have this knowledge gap between what we have and what we think we have, but we have at least as big a gap between what we think is right to what we think we have.
Now, we can ask these questions, by the way, not just about wealth. We can ask it about other things as well. So for example, we asked people from different parts of the world about this question, people who are liberals and conservatives, and they gave us basically the same answer. We asked rich and poor, they gave us the same answer, men and women, NPR listeners and Forbes readers. We asked people in England, Australia, the U.S. — very similar answers. We even asked different departments of a university. We went to Harvard and we checked almost every department, and in fact, from Harvard Business School, where a few people wanted the wealthy to have more and the [poor] to have less, the similarity was astonishing. I know some of you went to Harvard Business School.
We also asked this question about something else. We asked, what about the ratio of CEO pay to unskilled workers? So you can see what people think is the ratio, and then we can ask the question, what do they think should be the ratio? And then we can ask, what is reality? What is reality? And you could say, well, it's not that bad, right? The red and the yellow are not that different. But the fact is, it's because I didn't draw them on the same scale. It's hard to see, there's yellow and blue in there.
So what about other outcomes of wealth? Wealth is not just about wealth. We asked, what about things like health? What about availability of prescription medication? What about life expectancy? What about life expectancy of infants? How do we want this to be distributed? What about education for young people? And for older people? And across all of those things, what we learned was that people don't like inequality of wealth, but there's other things where inequality, which is an outcome of wealth, is even more aversive to them: for example, inequality in health or education. We also learned that people are particularly open to changes in equality when it comes to people who have less agency — basically, young kids and babies, because we don't think of them as responsible for their situation.
So what are some lessons from this? We have two gaps: We have a knowledge gap and we have a desirability gap And the knowledge gap is something that we think about, how do we educate people? How do we get people to think differently about inequality and the consequences of inequality in terms of health, education, jealousy, crime rate, and so on?
Then we have the desirability gap. How do we get people to think differently about what we really want? You see, the Rawls definition, the Rawls way of looking at the world, the blind tasting approach, takes our selfish motivation out of the picture. How do we implement that to a higher degree on a more extensive scale?
And finally, we also have an action gap. How do we take these things and actually do something about it? I think part of the answer is to think about people like young kids and babies that don't have much agency, because people seem to be more willing to do this.
To summarize, I would say, next time you go to drink beer or wine, first of all, think about, what is it in your experience that is real, and what is it in your experience that is a placebo effect coming from expectations? And then think about what it also means for other decisions in your life, and hopefully also for policy questions that affect all of us.
Thanks a lot.