Since Aristotle, a vast literature has suggested that economic inequality has important political consequences. Higher inequality is thought to increase demand for government income redistribution in democracies and to discourage democratization and promote class conflict and revolution in dictatorships. Most such arguments crucially assume that ordinary people know how high inequality is, how it has been changing, and where they fit in the income distribution. Using a variety of large, cross-national surveys, we show that, in recent years, ordinary people have had little idea about such things. What they think they know is often wrong. Widespread ignorance and misperceptions of inequality emerge robustly, regardless of the data source, operationalization, and method of measurement. Moreover, we show that the perceived level of inequality—and not the actual level—correlates strongly with demand for redistribution and reported conflict between rich and poor. We suggest that most theories about political effects of inequality need to be either abandoned or reframed as theories about the effects of perceived inequality.There's nothing in day-to-day life that would give the common-man any information about income distribution. Especially since their acquaintances are not representative of the whole country. What's left? Their news intake? Since when has the news communicated serious economics well? Needless to say, I'm not surprised to see that their utterly loud opinions on inequality or lack-thereof is misinformed.
The whole thing is locked without paying, but Bryan Caplan posts highlights for free, And who better? Bryan Caplan is master of criticizing public inanity.
Some more of the paper from Bryan,
The implications of this point for theories of redistribution, revolution, and democratization, are far reaching. If these are to be retained at all, they need to be reformulated as theories not about actual inequality but about the consequences of beliefs about it, with no assumption that the two coincide. We show that, although actual levels of inequality--as captured by the best current estimates--are not related to preferences for redistribution, perceivedlevels of inequality are... The actual poverty rate correlates only weakly with the reported degree of tension between rich and poor; but the perceived poverty rate is a strong predictor of such inter-class conflict.Matthew Yglesias at Vox also has a blog post on income inequality, and says to stop using it (and pay attention to life cycle effects and net worth instead).
