The Dangers of Visible Inequality

A new study shows that the wealthy are less benevolent when they know just how poor their neighbors are.

Jim MacMillan / AP

Many commentators have pointed to disturbances in Ferguson and elsewhere over the past year as proof that economic inequality leads to tensions and even violence. But new research out from Yale University suggests that it’s not the presence of inequality that causes problems, but rather the visibility of that inequality.

“Making wealth visible was a very corrosive force. It resulted in the rich exploiting the poor,” said Nicholas A. Christakis, the co-director of Yale Institute for Network Science and one of the senior authors of the study. When wealthy people find out that their neighbors don’t have the resources they do, researchers find, they’re less likely to help them, or anyone else.

The study provided a deep dive into human behavior and wealth via software that allowed researchers to create virtual temporary societies over which they had “God-like” control, Christakis told me. The societies consist of real people, playing for real stakes.

In this instance, researchers grouped together subjects and assigned them arbitrary units of wealth. They were then asked to either cooperate with their neighbors by reducing their own wealth by 50 units in order to increase the wealth of all neighbors by 100 units, or to defect—paying no cost at all and reaping no benefits. After they made that choice, they were allowed to decide whether to stay connected to their same neighbors or not for the next round.

Researchers found that when rich subjects knew that their neighbors were less wealthy than they were, they became less likely to cooperate with them. The poor, however, chose to keep cooperating. This leads to what researchers call an exploitation scenario, in which the poor keep lowering their own wealth to invest in their local network, “making them worse off relative to their neighbors and allowing the rich to get richer,” the researchers write.

When rich subjects don’t know the wealth of their neighbors, though, they are more likely to cooperate than are poorer subjects. This leads to what researchers call a “fairness” scenario, in which the rich invest their wealth into a local network, which then grows richer as a whole.

Overall, visible poverty reduces overall cooperation, interconnectedness, and wealth. But inequality itself has “relatively little” impact on cooperation or interconnectedness. “Most people thinking about inequality today may be confusing two distinct phenomenon,” Christakis told me.

Back in the days of the Gilded Age, when inequality was as pervasive as it is today, these gaps were not as visible, Christakis said. The wealthy were sequestered behind gates in mansions while the poor lived in squalor elsewhere. Now, with the Internet and social media, disparities in wealth are much more obvious.

Applying these findings to the outside world could be a challenge. Christakis said the results could be useful for companies that are deciding whether or not to make employees’ salaries public. Companies where wages are unequal may be better off not making those figures available, while places where wages are nearly equal could gain some goodwill by making those public, he said.

The researchers suggest that concealing personal-wealth information might lead to lower income inequality. But it seems that allowing the rich to hide their wealth wouldn’t be effective unless the rich also had no way of knowing how poor others are. That’s unlikely since wealth and poverty marks everyone, in the clothes they wear, in the places they live, and how they get around. Short of requiring everyone to wear brown-paper sacks, live side-by-side in similar houses, and drive around in similar cars, there’s likely no way to disguise wealth and poverty in America today. The visibility of inequality may matter more than inequality itself, but no matter where you go, the discrepancy has a way of making itself known.