The first neuroimaging study designed to examine how the brain responds to the distribution of income in different situations has been completed by Cappelen et al. (2014). As such, it’s the first study to examine the neuronal basis for equity theory.
The present paper reports results from, to our knowledge, the first study designed to examine the neuronal responses to income inequality in situations in which individuals have made different contributions in terms of work effort. We conducted an experiment that included a prescanning phase in which the participants earned money by working, and a neuronal scanning phase in which we examined how the brain responded when the participants evaluated different distributions of their earnings. We provide causal evidence for the relative contribution of work effort being crucial for understanding the hemodynamic response in the brain to inequality. We found a significant hemodynamic response in the striatum to deviations from the distribution of income that was proportional to work effort, but found no effect of deviations from the equal distribution of income. We also observed a striking correlation between the hemodynamic response in the striatum and the self-reported evaluation of the income distributions. Our results provide, to our knowledge, the first set of neuronal evidence for equity theory and suggest that people distinguish between fair and unfair inequalities.
Cappelen, Alexander W. et al. (2014). Equity theory and fair inequality: A neuroeconomic study. Proceedings of the National Academy of Sciences.
On the Ebola crisis: NIH purchasing power is down 23 percent from what it was a decade ago, and its budget has remained almost static . Scientists at NIH say they would be a lot closer to a vaccine if not for cuts and government shutdowns.
Via National Bureau of Economic Research Digest
John Bound, Murat Demirci, Gaurav Khanna, and Sarah Turner examine the role that U.S. higher education and immigration policy play in the doubling of foreign-born Information Technology workers between 1993 and 2010. They find that foreign-born workers who obtain a degree from a U.S. college or university are particularly likely to remain in the country. Continue reading–>
“Contrary to what you’ve heard, spending isn’t out of control in public colleges. Spending per student has barely changed, in inflation-adjusted terms, since the late 1980s. We spent $11,100 per student in 1987, and we spent $11,100 per student in 2012.”
Two graphs from Crooks and Liars depict Scott Walker’s failed jobs record in Wisconsin. They are self explanatory.
Carter Price and Heather Boushey summarize their findings on the adverse effects of inequality on economic growth in Economist’s View:
In this paper, we review the recent empirical economic literature that specifically examines the effect inequality has on economic growth, wellbeing, or stability. This newly available research looks across developing and advanced countries and within the United States. Most research shows that, in the long term, inequality is negatively related to economic growth and that countries with less disparity and a larger middle class boast stronger and more stable growth. Some studies do suggest that in the short run, inequality may spur growth before hindering it over the longer term, but overall there is growing evidence that, in the long run, more equitable societies are associated with higher rates of growth.
Does inequality have differential impacts on income growth for the rich and poor. Some argue that trickle-down economics (aka supply-side economics) raises all boats. A new study by van der Weide & Milanovic (2014) finds “it is mostly top inequality that is holding back growth at the bottom.”
The paper assesses the impact of overall inequality, as well as inequality among the poor and among the rich, on the growth rates along various percentiles of the income distribution. The analysis uses micro-census data from U.S. states covering the period from 1960 to 2010. The paper finds evidence that high levels of inequality reduce the income growth of the poor and, if anything, help the growth of the rich. When inequality is deconstructed into bottom and top inequality, the analysis finds that it is mostly top inequality that is holding back growth at the bottom.
van der Weide, Roy & Milanovic, Branko. (2014) . “Inequality is bad for growth of the poor (but not for that of the rich). ” Policy Research Working Paper Series 6963. The World Bank.
An analysis of IRS data by the Chronicle of Philanthropy shows rich Americans donating less to charity the while middle-class is giving more.
Americans earning at least $200,000 a year cut their charitable donations by 4.6% between 2006 and 2012. Meanwhile, middle-class taxpayers earning less than $100,000 annually bumped up giving to good causes by 4.5% during the same six-year span that encompassed the height of the economic recession