Friday, May 19, 2017

Why people prefer unequal societies

A friend points out that this paper is related to some themes I have written about.  The abstract (emphasis added):
There is immense concern about economic inequality, both among the scholarly community and in the general public, and many insist that equality is an important social goal. However, when people are asked about the ideal distribution of wealth in their country, they actually prefer unequal societies. We suggest that these two phenomena can be reconciled by noticing that, despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality. Both psychological research and decisions by policymakers would benefit from more clearly distinguishing inequality from unfairness.

Saturday, May 13, 2017

Adverse Selection in Practice

This article about genetic testing presents a great example of adverse selection:
Pat Reilly had good reason to worry about Alzheimer’s disease: Her mother had it, and she saw firsthand the havoc it could wreak on a family, much of it financial. 
So Ms. Reilly, 77, a retired social worker in Ann Arbor, Mich., applied for a long-term care insurance policy. Wary of enrolling people at risk for dementia, the insurance company tested her memory three times before issuing the policy. 
But Ms. Reilly knew something the insurer did not: She has inherited the ApoE4 gene, which increases the lifetime risk of developing Alzheimer’s. “I decided I’d best get long-term care insurance,” she said.