Economic inequality increases risk taking
Edited by Michael W. Kraus, Yale University, New Haven, CT, and accepted by Editorial Board Member Mary C. Waters March 17, 2017 (received for review October 7, 2016)
Significance
Income inequality is rising around the world. Increased income inequality has been linked with higher rates of crime, greater debt, and poorer health, but the mechanisms linking inequality to poor outcomes among individuals are poorly understood. This research tested a behavioral account linking inequality to individual decision making. The account suggests that more unequal outcomes lead people to perceive that they need more resources to be satisfied. Higher perceived needs, in turn, motivate greater risk taking to meet those needs. Results of three experiments and an analysis of large-scale internet search data supported the proposed account. Results suggest that inequality may promote a range of poor outcomes, in part, by increasing risky behavior.
Abstract
Rising income inequality is a global trend. Increased income inequality has been associated with higher rates of crime, greater consumer debt, and poorer health outcomes. The mechanisms linking inequality to poor outcomes among individuals are poorly understood. This research tested a behavioral account linking inequality to individual decision making. In three experiments (n = 811), we found that higher inequality in the outcomes of an economic game led participants to take greater risks to try to achieve higher outcomes. This effect of unequal distributions on risk taking was driven by upward social comparisons. Next, we estimated economic risk taking in daily life using large-scale data from internet searches. Risk taking was higher in states with greater income inequality, an effect driven by inequality at the upper end of the income distribution. Results suggest that inequality may promote poor outcomes, in part, by increasing risky behavior.
Acknowledgments
We thank E. C. Truesdale and J. L. Herrera for sharing data for the 90/50 and 50/10 ratios. This research was funded by a Spencer Foundation grant (to B.K.P.).
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Information & Authors
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Published in
Cover image: Pictured is a coral reef off the coast of Mo'orea, French Polynesia. Michael A. Gil and Andrew M. Hein conducted behavioral studies on coral reef fish and found that the fish base their decisions to feed on algae or flee from predators on the density and actions of other fish in the area, a behavior that influenced the amount of algae the fish consumed. The findings suggest that social interactions among consumers can alter the flow of energy and material through ecosystems. See the article by Gil and Hein on pages 4703–4708. Image courtesy of Stella A. Hein (University of California, Santa Cruz, CA).
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Submission history
Published online: April 17, 2017
Published in issue: May 2, 2017
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Acknowledgments
We thank E. C. Truesdale and J. L. Herrera for sharing data for the 90/50 and 50/10 ratios. This research was funded by a Spencer Foundation grant (to B.K.P.).
Notes
This article is a PNAS Direct Submission. M.W.K. is a guest editor invited by the Editorial Board.
Authors
Competing Interests
Conflict of interest statement: The authors acknowledge funding from the Spencer Foundation.
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