income inequality in the united states fuels pessimism and threatens social cohesion

7/30/2019 Income Inequality in the United States Fuels Pessimism and Threatens Social Cohesion

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1 Introduction and summary

4 The dream and the reality o inequality

10 Summary o indings

13 Inequality and pessimism: detailed results

22 Conclusion

24 Appendix

33 About the author and acknowledgements

34 Endnotes

Contents


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1 Income Inequality in the United States Fuels Pessimism and Threatens Social Cohesion

Introduction and summary

Rising inequaliy over he pas decades led Americans o lose aih in some key

aspecs o he American Dream o a uure ha will ineviably be beter han

he pas. We are less likely o believe ha we have much in common wih people

who are no like ourselves and also ha he people in power lisen o or care wha

ordinary Americans hink. Inequaliy makes people less likely o believe ha wha

aecs me aecs youand ha ordinary people have he power o conrol he

uure or heir poliical leaders.

I use daa rom he American Naional Elecion Sudies surveys beween he

years 1966 and 2008, he General Social Survey (1972-2010), and he Pew Values

Surveys (1987-2009) o examine he eecs o rising inequaliy on indicaors o

opimism and pessimism, social cohesion, condence in insiuions, and personal

expecaions or he uure. Key ndings include:

FIGURE 1

Americans' trust in government is in declineShare of respondants who have trust in government

0%

10%

20%

30%

40%

50%

60%

70%

80%

1964 2008

Source: American National Election Studies

FIGURE 2

Americans are now less optimistic abouteconomic growth

Percentage of respondants who believe there

is no real limit to growth

0%

10%

20%

30%

40%

50%

60%

70%

80%

1987 2012

Source: Pew Values Survey

FIGURE 3

Americans are more pessimistic abou

condition of the average person

Percentage of respondants who believe the lo

average person is getting worse

0%

10%

20%

30%

40%

50%

60%

70%

80%

1973 1994

Source: General Social Survey


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Americans have become more pessimisic and less rusing

as inequaliy has increased in recen decadesespecially as

he income share o he op 20 percen rose while he share

o he botom 80 percen declined.

Beween 1973 and 1994 (he rs and las imes hese ques-ions were asked in a major naional survey) he share o

Americans who believed ha he lo o he average person

is geting worse rose rom 56 percen o 69 percen and

all o his rise is atribuable o increasing inequaliy.

Beween 1968 and 2006 he share o Americans who

believed ha mos people can be rused ell rom 56

percen o 34 percen. Almos all o his drop is atribuable

o increasing inequaliy.

In 1968, 63 percen o Americans believed ha he govern-

men in Washingon could be rused o do he righ hing,

bu only 14 percen agreed in 2008. Approximaely a hird

o his drop can be atribued o increasing inequaliy.

Beween 1975 and 2010, he share o Americans who

believe ha ocials don care wha people like me hink

rose rom 56 percen o 71 percen. Tis decline clearly

racks increasing inequaliy.

Rising inequaliy leads people o become less opimisic

abou he uure o our counry and more skepical o

boh heir ellow ciizens and heir leaders. Bu i does not

make hem more pessimisic abou heir own prospecs or

success.

Such overarching pessimismnowihsanding he nd-

ing ha Americans remain individually opimisic abou

heir individual uuresleads o less social cohesion and ogreaer polarizaion. Tis makes nding common ground on

policy issues more dicul.

FIGURE 4

Americans have become less trustingof other people

Percentage of respondants who answered most

people can be trusted

0%

10%

20%

30%

40%

50%

60%

70%

80%

1960 2006


FIGURE 5

Americans have become more distrustingof public officials

Percentage of respondants who believe public

officials don't care about people like them

0%

10%

20%

30%

40%

50%

60%

70%

80%

1973 2011



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The dream and the reality of inequality

Pessimism is notpar o he American mindse. Te progressive heoris Herber

Croly summarized he American Dream as he belie ha he uure will have

somehing beter in sore or hem individually and collecively han has he pas

or he presen. Te hisorian Henry Seele Commager argued, Nohing in all his-

ory had succeeded like America, and every American knew i. Tis creed guided

immigrans o come o a land where srees were paved wih gold, o join a people

o pleny, in hisorian David Poters words.1

No only were Americans opimisic abou he uure, bu hey also believed

ha hey had he power o make he American Dream come rue. Te Economist

expressed his ideal well in 1987: Opimism, no necessiy, has always been he

moher o invenion in America. o every problemwheher racial bigory or pu-

ing a man on he moonhere has always been a soluion, i only ingenuiy and

money were commited o i. People are opimisic in par because hey believe

ha hey can make hings beter.2

Bu as inequaliy arose over he pas 50 years, Americans became less opimisic.

Tey are less likely o believe ha omorrow will be beter han oday and ha

hey can make i happen. As hey become pessimisic, hey are less likely o believe

ha wha happens o me aecs you, especially i you are no jus like me. Te

poor don see a common desiny wih he rich, whies don see a linked ae wih

minoriies, and we are less likely o rus people o dieren backgrounds. Te

growing income gap makes us less conden ha we all have common ineress,

especially when we perceive ha somehose a he ophave ar more conrol

over our economic and poliical lie.

Rising inequaliy leads o pessimism and rayed social and poliical ies. Equaliyis cenral o he American Dream, as noed by Lord Bryce, a Briish visior o

he Unied Saes. wroe in he lae 19h cenury: Tere is no rank in America,

no exernal and recognized samp, marking one man as eniled o any social

privileges, or o deerence and respec rom ohers. Ye, as economiss Chrisian


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Bjornskov, Benno orgler, and heir co-auhors argued in 2006, high levels o

inequaliy are linked wih rusraion and percepions o unairness in many

socieies.3 Equaliy is hus he social glue underlying he American Dreamand

growing inequiies lead o boh pessimism and a weakened sense o communiy.

As he level o economic inequaliy has grown over ime, Americans have becomemore pessimisic abou heir uures, less conneced o people o dieren back-

grounds, and more convinced ha poliical leaders only respond o he wealhy

and hese eecs are more pronounced or hose who see hemselves a he

botom o he economic ladder.

Ye, increasing dispariies in wealh do no make Americans less opimisic abou

heir own economic ae. Even as growing inequaliy leads people o become more

pessimisic abou he counrys uure, o become more wary o people who are

dieren rom hemselves, and o have less condence in governmen and he

responsiveness o public ocials, hey sill remain opimisic abou heir personaleconomic opporuniies.

Te Occupy Wall Sree proess pited he vas bulk o he American populaion

agains he op 1 percen. Is ha really he aul line in American lie? When

eiher scholars or popular commenaors discuss he growing economic divide in

American sociey, hey ocus on a single measure, such as he Gini index or wha

share o naional wealh he very riches have. Te Gini index is he mos com-

monly used measure: I ranges beween zero (perec equaliy) and one (perec

inequaliy) and has risen rom 0.397 in 1966, already relaively unequal, o 0.468

in 2009 (he highes o any Wesern counry).4

Ye he Gini index doesn ell us anyhing abou where he aul lines o inequaliy

are. So I also use measures o he income shares o each 20 percen o American

sociey and he op 5 perceno see where dierences in income mater mos

My ndings come rom hree analyses. I use he major academic and media sur-

veys ha have been conduced over ime and are publicly available:

Te American Naional Elecion Sudies, incorporaing daa rom 1966 o 2008

Te General Social Survey, wih daa rom 1972 o 2010 Te Pew Values Surveys, wih daa rom 1987 o 2009

I examine 28 measures o overall opimism and pessimism; social cohesion; con-

dence in governmen; and expecaions or ones personal well-being ha have


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been asked in a leas eigh surveys wihin hese hree sources o daa over ime.

Based upon saisical models, I examine how much more likely people are o hold

ono he American Dream and oher measures o social and poliical cohesion as

income inequaliy rose over he pas ve decades. (see he Mehodology box on

page 8)

I hen urn o some economic consequences o pessimism. My second se o

analyses is based upon aggregae daa on housing purchases and business sars

and ailures rom Census Bureau daa Does pessimism make people less likely o

buy houses? Are he raes o business sars and ailures linked o less avorable

oulooks or he uure? Finally (hird), I examine wheher pessimism makes

invesors less likely o heir plans or invesmens and heir reiremen goals wih

daa rom a 1998 Gallup/UBS survey o people wih savings and invesmens

worh a leas $10,000 and wheher he larger public is more likely o buy homes

or sock in a 2009 survey o he Pew Economic Mobiliy Projec

Americans became more pessimisic as he income shares o he botom our

groups ell and hose o he op 20 percen and op 5 percen rose. Te social

chasm isn jus beween hose a he very op and everyone elsebu beween 80

percen o Americans and he oher 20 percen. Moreover, growing inequaliy led

o increased pessimism or lower- and /working and middle-income Americans

classes, bu no or hose a he op o he economic scale. As he rich go richer,

hey did no become more opimisic. Bu he general pessimism aecing mos

oher Americans did no exend o hem.

I inequaliy generally leads o greaer pessimism, is here a spillover rom pessi-

mism o economic aciviy? We migh expec o nd ha when people ear or he

uure, hey would be less likely o inves in he sock marke and o spend more

on big-icke iems such as new homes. Ye, I nd only modes evidence ha his is

he case eiher rom survey or aggregae daa.

Some o hese mixed resuls may reec he available daa, which are sparse. Ye, mos

invesmens (especially in socks) are made by people a he op o he economic

ladder. Teir income shares have notallenindeed, hey have risen.over ime.

And hey have no become as pessimisic as oher Americans. So he link beweenpessimism and economic aciviy may be more nuanced han we migh expec.


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The average persons lot is worse, but people see their own

future positively

People are approximaely 30 percen more likely o believe ha he lo o he

average person is geting worse as he income share o he botom 20 percen o

income earners alls rom is maximum value o 4 percen when he quesion wasrs asked in he General Social Survey in 1972 o 3.6 percen in 1994, he las

ime he quesion was asked. While he shif in income share may no seem very

srong, even his modes shif has a very srong eec on peoples pessimism. I

barely maters which measure o inequaliy I use: Inequaliy leads o a 25-o-30

percen increase in he belie ha he average person is worse o wheher i is

measured by he botom, second, hird, or ourh quinile in he income disribu-

ionor by he Gini index.

Tere also is a 25 percen increase in pessimism as he rich ge richer (he income

shares o he op 20 percen and op 5 percen rise). As he rich ge richer and hepoor (or even he upper middle class) ge poorer, people become more pessimis-

ic.Bu measures o personal opimism, such as wheher hard work is he key o

geting ahead, admiring hard work or saisacion wih ones personal economic

siuaion, are eiher unrelaed or weakly ied o levels o inequaliy.

Social cohesion is lower

Tere are similar ndings or he mos commonly used measure o social cohe-

sion, generalized rus, or he belie ha mos people can be rused.As he

income share o he botom 20 percen o income earners ell rom 4.2 percen

in 1968 o hree percen in 2010, he likelihood ha someone would agree ha

mos people can be rused ell by 20 percenregardless o which measure o

inequaliy I useor wheher I examine daa rom he American Naional Elecion

Sudies surveys or he General Social Survey. Americans have become less likely

o rus he governmen in Washingon o do he righ hing by abou 20-o-25

percen as inequaliy has increased rom 1968 o 2010. Ye measures o personal

opimism such as wheher hard work is he key o geting ahead, admiring hard

work or saisacion wih ones personal economic siuaion are eiher unrelaed orweakly ied o levels o inequaliy.


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Statistical methods

I estimate statistical models to derive estimates o the eects o the

measures o inequality (income shares o each quintile, the propor-

tion o national income received by the top 5 percent o Americans,

and the Gini index) on the 28 measures o overall optimism/pes-

simism, social cohesion, condence in government, and expecta-

tions or ones personal well-being that have asked in at least eight

surveys over time. The measures I chose are all standard indicators o

optimism, social cohesion, condence in institutions, and personal

expectations or the uture in the academic (and popular) literature.

(see the next box or list o survey questions).

The eects I estimate (see the Appendix or a technical discussion)

are the changes in probability o an outcome as inequality (or any

other variable) increases rom its minimum to its maximum value:

How much less likely is someone to be an optimist, or example, as

inequality increases over time? I estimate the impact o each measure

o inequality separately (since they are all highly correlated)

tical models that control or key demographics (education, in

race, and class) and national economic conditions such as un

ment, ination, and growth in gross domestic product.

I estimate the eect o economic inequality on pessimism, so

cohesion and government controlling or other actors that a

to impact these variables.

Measures o economic ault lines:

The U.S. Census Bureau has data on the income shares by qu

rom 1967 to 2010measuring how much o the national inwent to the bottom th, the second th, etc.as well as to

5 percent. The bottom our quintiles all lost ground over this

period. The income share o the upper middle class ell as th

percent (and top 5 percent) prospered. These measures let u

better idea o where the ault lines are.

Survey questions used in this analysis


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Measuring optimism versus pessimism

In spite o what some people say, the lot (situation/condition) o the

average man is getting worseagree or disagree (GSS)*

It is hardly air to bring a child into the world with the way things look

or the utureagree or disagree (GSS)

Success in lie is pretty much determined by orces outside our con-

trolagree or disagree (Pew)*

I dont believe that there are any real limits to growth in this country

agree or disagree (Pew)

As Americans we can always nd a way to solve our problems and get

what we wantagree or disagree (Pew)

Social cohesion

Generally speaking do you believe that most people can be trusted, or

cant you be too careul in dealing with people? (GSS, ANES)*

We have gone too ar in pushing equal rights in this countryagree or

disagree (Pew)

I dont have much in common with people o other races agree or

disagree (Pew)

Today its really true that the rich just get richer while the poor get

pooreragree or disagree (Pew)

Institutional confdence

How much o the time do you trust the government in Washington to

do the right thing? (ANES)

Public ofcials dont care much what people like me thinkagree or

disagree (ANES, GSS, Pew)

Over the years, how much attention do you eel the government pays

to what the people think when it decides what to doa good deal,some, or not much? (ANES)

The government is really run or the benet o all the peopleagree or

disagree (Pew)

The strength o this country today is mostly based on the succ

American business agree or disagree (Pew)

Generally speaking, elected ofcials in Washington lose touch

people pretty quicklyagree or disagree (Pew)

People like me dont have any say about what the governmen

agree or disagree (Pew)

Voting gives people like me some say about how government

thingsagree or disagree (Pew)

Personal Optimism and Pessimism

Some people eel they can run their lives pretty much the way

want to; others eel the problems o lie are sometimes too big

them. Which one are you most like? (ANES)

When you do make plans ahead, do you usually get to carry ou

the way you expected, or do things usually come up to make y

change your plans? (ANES)

Some people say that people get ahead by their own hard wo

say that lucky breaks or help rom other people are more impo

Which do you think is most important? (GSS)

I admire people who get rich by working hard agree or disa

(Pew)

Hard work oers little guarantee o success agree or disagre

Many people today think they can get ahead without working

making sacrices agree or disagree (Pew)

Im pretty well satised with the way things are going or me

ciallyagree or disagree (Pew)

I oten dont have enough money to make ends meetagree

disagree (Pew)

*Key to survey organizations:ANES: American National Election Studies (www.electionstudies.org)

GSS: General Social Survey (http://www3.norc.org/gss+website/)

Pew: Pew Research Center or The People & The Press (http://www.people-press.org/)

Survey questions used in this analysis
http://www.electionstudies.org/http://www3.norc.org/gss+website/http://www.people-press.org/http://www.people-press.org/http://www3.norc.org/gss+website/http://www.electionstudies.org/


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10 Income Inequality in t he United States Fuels Pessimism and Threatens Social Cohesion

Summary of findings

When we pu all o he ndings ogeher, we see remarkably similar resuls across

he domains. When he income shares o he rs, second, hird, and ourh

quiniles are highes (in he lae 1960s or early 1970s in mos o he ime series),

Americans are more opimisic overall, have he greaes sense o social cohesion,

and he highes levels o condence in heir leaders and he represenaiveness o

he poliical sysem more generallymosly by abou 15-o 20 percen margins

When overall inequaliy is highes and when he people a he op o he economicladder are he bes, we become more pessimisicoverall, abou our social ies,

and abou our poliical sysem (by abou 10 percen). Ye inequaliy seems o

have inconsisen, insignican, and mosly rivial eecs on how we view our own

prospecs. Inequaliy bohers Americans, bu we remain a people commited o

individual eorand we coninue o believe ha each o us can are well regard-

less o wheher he sysem is sacked agains us.

Are fraying ties universal?

Are he rends I have described universal? Or is he loss o aih in he American

Dream and raying social and poliical ies concenraed on hose who have los

ou as inequaliy has increased? wo o he hree major surveys I used in my

analysis, he American Naional Elecion Sudies surveys and he General Social

Survey, bu no he Pew Values surveys, ask people which class hey belong o.

Tese are no objective measures o economic saus, bu hey give us a good idea

o where people believe ha hey ino American sociey. I would seem reason-

able ha people who see hemselves as less well o would be more pessimisic as

heir objecive siuaions go worse as inequaliy increases. Ye he suppor or hisargumen is limied. Overall, inequaliy seems o have made mos people more

pessimisic and less rusing.


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I consider (when here are sucien cases or analysis) he same models by peo-

ples perceived social class ha I esimaed or all respondens. Here we donsee

big dierences by perceived social class. Te General Social Survey asked people

i hey belonged o he upper, middle, working, or lower class. Te American

Naional Elecion Sudies surveys did no include lower class as an opion.

Tere is ar more agreemen across (subjecive) classes han disagreemen abou

wheher he lo o he average person is geting worse. Te op hree classes in

he General Social Survey were all abou 30 percen more likely o agree wih his

pessimisic world view. Lower-class respondens were less likely o be more pessi-

misic (by a 10 percen o 15 percen margin across inequaliy measures)largely

because hey sared ou as more convinced ha he economic sysem was sacked

agains hem.

rus in oher people declined by similar levels (abou 20 percen) or each class

or he American Naional Elecion Sudies daa. rus ell a somewha lowerlevels han in he General Social Survey daa or mos people, bu barely a all or

upper-class respondens.

Te upper and middle classes have become less rusing in governmen by abou

30-o-35 percen in he American Naional Elecion Sudies surveys rom 1968

unil 2008, wih he bigges decline as inequaliy grows regisered among he

upper and middle classes (30-o-35 percen), compared o 20 percen or he

working class. Te upper and lower classes, bu nothe middle and working

classes, have become less likely o agree (by 20-o-30 percen) ha hard work is

he pah o success as inequaliy has grown rom 1973 o 2010.

Tese resuls are based upon analyses o survey daa or individual respondens

ha also include measures o inequaliy or each year o each o he surveys. An

alernaive mehod o analysis is o derive esimaes o pessimism and cohesion or

each class or each year o he surveysand hen o see wheher hese aggregae

measures go up or down as inequaliy rises. Tis analysis (see Mehodology Box 2

on page 9) provides somewha sronger suppor or he argumen ha people who

ideniy wih he working and lower classes have become less rusing o ohers,

less convinced ha hard work leads o success, and ha public ocials don carewha he average person hinks.

Bu here is no suppor ha he links beween inequaliy and wheher he lo o

he average person is geting worse or rus in governmen vary by perceived class.


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Tere is limied evidence ha people who see hemselves as working or lower

class have become more pessimisic as inequaliy increased compared o middle

and upper-class Americans. Rising inequaliy is a ax on opimism across he

board. Tose who ideniy wih he working or lower class become more pessimis-

ic, bu so do members o he middle and even upper classes.

Pessimism and economic activity

Finally, I urn o he eecs o pessimism on indicaors o economic aciviy. I nd

only modes (simple) correlaions beween inequaliy and aggregae measures o

houses sold and business sars and ailures. I hen examine surveys o invesors in

1989 and o he ull public in 2009 and esimae he impac o opimism in saisi-

cal models similar o hose described above. Invesors are only slighly more likely

o make reiremen plans or o sar businesses when hey are opimisic abou he

uureperhaps because invesors are a sel-seleced group o begin wih.

Te 2009 survey shows greaer impacs or opimism on invesing in socks and

especially in plans o buy a house. Since more average people buy homes han

inves in he sock marke, he greaer impac o opimism on house purchases

makes sense. Americans who are opimisic abou he uure are more likely o say

hey own heir homes, bu here is, perhaps surprisingly, no impac o any measure

o opimism on home ownership.

Te available measures o economic aciviy are sparse so we should no con-

clude ha pessimism does no aec how we behave. Ye, he negaive impacs o

inequaliy on opimism, social cohesion, and insiuional rusand he srong

link beween inequaliy and social cohesion5mean ha boh inequaliy and pes-

simism mater more or social han or economic lie.


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Inequality and pessimism: detailed results

I urn now o a more deailed explicaion o he resuls summarized above. Tis is

no a echnical discussionbu I do provide more specics abou he esimaes I

briey described above.

Te class divisions enhanced by growing inequaliy may no sap Americans aih

in heir own individual eors, bu hey do lead o a greaer pessimism or he

uure, especially or he long-erm and o eelings o helplessness. Opimism and

conrol, I argue, are he key o generalized rusrus in srangers, who are likelyo be dieren rom yoursel: Pessimiss wihdraw ino heir own communiies.

Tey see ohers as malevolen...Jus as opimiss believe ha hey have he power

o change he world, pessimiss see a dark uure beyond heir conrol.6

And hus rusing hose whose ineress are opposed o yours seems like a bad

be. Growing inequaliy leads o less opimism and weaker eelings o conrol over

our livesand, hence, o less rus. Inequaliy makes us less likely o believe ha

wha aecs you also aecs me. And he belie ha inequaliy sems rom unair-

ness leads us o be boh more pessimisic and less conneced o hose who have

beneed rom he sacked sysem.7

As inequaliy has risen, Americans have become more pessimisic abou he

uure. Te sharpes eecs are or he belies ha he lo o he average person

has goten worse and ha i is no air o bring a child ino he world anymore,

according o he General Social Survey. Boh o hese measures alls by 30 percen

as inequaliy has risen rom 1972 o 1994. Tese resuls hold no mater which

measure o inequaliy I use: he rising Gini index, he alling shares o income or

he botom our quiniles and he increasing porions o naional income or he

op 20 percen and op 5 percen.

Te eecs are somewha smaller or hree oher measures: Rising inequaliy has

led o drops o 10 percen in he belie ha ha here are no limis o growh in

he Unied Saes and o ve percen in he argumens ha Americans can solve


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all o heir problems i hey se heir minds o i and o disagreemen ha success

in lie is ouside our conrol. Tese are core elemens o he American sense o

opimismand, while Americans sill adhere o mos o hem, hey are no as

opimisic as hey once were.

Some o he drop in he later hree measures may reec he ime rames o hesurveys: Te lo o he average person and no air o bring a child quesions

are rom he General Social Survey and were asked rom 1972 o 1994; he oher

hree quesions were asked by Pew rom 1987 o 2009. Tere was a slighly larger

rae o increase in inequaliy in he ormer period compared o he later.8

Class doesn seem o mater much in shaping he impac o inequaliy on opimism.

Rising income gaps have similar eecs on wheher i is air o bring a child ino he

world. Beween 25-and 30 percen o upper, middle, and working class people are

more likely o say ha i is unair o bring a child ino he world in 1994 compared o

1973, while he drop is only abou 20 percen or people who ideniy wih he lowerclass Te only measure o opimism or which I could esimae class dierences over

ime is he lo o he average person (discussed above): I ound only modes correla-

ions or his measure wih inequaliy or he middle class and working classes, and

weaker eecs or he upper and lower classes. Te smaller impacs reec he greaer

opimism o he upper class (only 55 percen are pessimisic) and he srong pes-

simism o lower class respondens, where beween 73 and 86 percen agreed ha he

lo o he average person is geting worse. Inequaliy makes people less opimisic

abou he uure, regardless o class.

Opimism is a he roo o social cohesion. I leads us o look a people who are

dieren rom ourselves as par o our moral communiy raher han as hreas

o our culure and wellbeing. Rising inequaliy leads o social ragmenaion, boh

hrough increased pessimism and by raying he bonds ha reach across class

lines. Growing income gaps, I argued above, leads o declines in generalized rus

o more han 20 percen. As inequaliy has risen by each measure, we are abou

10 percen less likely in 2009 han in 1987 o say ha we have a lo in common

wih people o oher races and are more likely o agree ha we have gone oo ar in

graning equal righsand ha he rich have goten richer as he poor have goten

poorer. Since hese quesions come rom Pew surveys, I canno esimae percep-ions by class.


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Distrusting institutions

Americans have always disrused auhoriy, so disrus in governmen is no sur-

prising. As inequaliy has increased, so have belies ha he views o ordinary cii-

zens don mater, rising rom a hird o he public in he 1960s o over 70 percen

in 2008. rus in governmen has also allen, rom hree-quarers o Americans in1958 o 22 percen in 2010, alhough he decline in condence in Washingon is

less uniorm rom he American Naional Elecion.9

More han 50 years ago he poliical scienis E.E. Schatschneider bemoaned he

lack o inuence o ordinary Americans: Te aw in he pluralis heaven is ha

he heavenly chorus sings wih a srong upper-class accen. Probably abou 90

percen o Americans canno ge ino he pressure sysem...Te sysem is skewed,

loaded, and unbalanced in avor o a racion o a minoriy.10 And here is evi-

dence ha Schatschneider was correc: Te wealhy paricipae much more in

poliical lie han do hose wih ewer nancial resources and communicaionsskills.11 Policy makers respond o he opinions o upper-income consiuens, no

o hose wih ewer resources.12

Te views o upper-income Americans are ar more conservaive han hose in he

middle and lower classes , so here is litle suppor or programs ha would reduce

inequaliy. As gaps in income increase, public opinion moves in a more conserva-

ive direcion, oward even less suppor or redisribuioneven hough here is

a bes mixed evidence ha greaer inequaliy leads o lower paricipaion by he

poor and greaer aciviy by he rich, wih he mos sophisicaed analyses showing

no suppor or his hesis.13

Poliical leaders respond o he upper classes no simply because hese ciizens

paricipae more or are more likely o communicae heir views. Tey also give

money o candidaes. Presidenial and congressional elecion campaigns may cos

up o or even more han$3 billion in 2012. While a quarer o (sel-idenied)

members o he upper class say ha hey have donaed o a campaign, only 11 per-

cen o he middle class and 6 percen o he working class say ha hey have given

money o candidaes or paries, according o daa are rom he American Naional

Elecion Sudies.

I is no surprise ha many Americans migh agree wih he ongue-in-cheek skepi-

cism o Rep. Barney Frank (D, MA) who said ha poliicians are he only people I

know who are expeced o ake large amouns o money rom perec srangers and


18/38


have i have no eec on our behavior.14 While he share o working class ciizens

who have conribued o campaigns has ucuaed around six percen over ime, he

percenage o upper class survey respondens saying ha hey have made donaions

increased rom 20 percen o 31 percen beween 1956 and 2008.

I presened resuls above ha rising inequaliy leads o less rus in governmen. Tegrowh in he income gap beween 1968 and 2008 led o declines in condence

by 30 percen o -40 percen. Inequaliy had insignican eecs (or he survey

daa) on rus in governmen or he upper class, bu led o drops in condence

or he oher hree classes. Te ANES, he GSS, and Pew all asked i people agreed

ha public ocials don care wha he average person hinks. For he American

Naional Elecion Sudies daa, as inequaliy rose Americans became 35 percen o

40 percen more likely o believe ha ocials don care. Te resuls were somewha

smaller (20 percen o 25 percen) or he General Social Survey daa, and even

lower or he Pew Values Surveys daa (abou 5 percen o 10 percen).

Te dierences arise rom he longer ime series o he American Naional

Elecion Sudies surveys, rom 1968 o 2008, compared o he General Social

Survey (1973-1994) and Pew Values Surveys (1987-2008). Inequaliy maters or

all classes or he ANES series, especially or he middle class, where he change in

income gap led o a decline in percepions o responsiveness o up o 40 percen.

Te shorer General Social Survey ime series leads o smaller changes, abou 20

percen o 25 percen or he middle, working, and lower classes bu only o insig-

nican drops or he upper class.

Oher measures o insiuional condence show more mixed resuls in he Pew

Values Survey rom 1987 o 2009. When asked i members o Congress pay

atenion o heir consiuens, Americans are abou 10 percen o 15 percen less

likely o see responsiveness by mos measures. Te excepion is or he income

share o he upper middle class (he ourh quinile), where he esimaed eec is

esimaed a 70 percen.15 Americans are beween ve and 10 percen less likely o

say ha governmen benes everyone and ha voing gives you a say in poliics as

inequaliy has risen. Bu he rising income gap has had minimal eecs on wheher

Americans believe hey have no say in poliics more generally, wheher ocials

lose ouch wih people, and wheher he srengh o he Unied Saes lies in busi-ness. Te small eecs or hese las hree measures reec he high condence

Americans have o heir own ecacy ha has no waned even as hey believe ha

he sysem has become less responsive.


19/38


Over 70 percen o Americans sill believed (in 2009) ha voing gives hem a say,

down rom more han 80 percen in 1987, bu sill very high. In 1968, 41 percen

o Americans held ha hey had no say in poliics, rising only o 45 percen in

1996. And while 81 percen o respondens said ha ocials los ouch in 2009,

76 percen held his view a he sar o he ime series in 1987. Tere is only a

one percen change (rom 80 percen o 79 percen, clearly no signican) in heshare o Americans who say ha he srengh o he counry lies in business. So

where we nd small eecs or inequaliy, we nd small changes overall. When

Americans have become more pessimisic abou he responsiveness o heir insi-

uions, he eecs o inequaliy are sronger

Yet Americans still expect a better future for themselves

Americans have a disincive view o equaliy. Tey accep inequaliy o resuls as

long as here is equaliy o opporuniy. Poliical scienis Jennier Hochschild con-duced in-deph inerviews on airness and ound ha mos respondens, rich and

poor, endorse diereniaion in he economic domain...[and] insis ha produciv-

iy should dominae in decisions on wages. In a 1975-77 survey, poliical scieniss

Herber McCloskey and John Zaller ound ha more han wo-hirds o Americans

believed ha laziness is almos like a sin: Americans hold ha everyone should be

able o advance on his or her own meris. Poliical scieniss Benjamin I. Page and

Lawrence R. Jacobs repor ha 58 percen o Americans in heir naional survey

hree decades laer believe ha large dierences in pay are necessary.16

Americans sill believe in he value o individual eor. Tey suppor individual-

ism and believe ha one can sill achieve he American Dream despie growing

economic inequaliy. Tese resuls sand ou even as Americans increasingly

say ha hey are nding i dicul o make ends mee and ha hard work is no

longer a guaranee o success. Economic mobiliy seems ou o reach or many

Americanslargely because i really has become more dicul o move up he

economic ladder.17 Americans atiudes oward inequaliy do no ollow a simple

patern: While mos Americans believe ha inequaliies are oo large and should

be reduced, hey are now and have long been skepical o governmens abiliy o

make he appropriae correcions.18


20/38


Je Faux o he Economic Policy Insiue argues:

People are worried about their jobs and income, and majorities think that the

next generation will be worse of than this one. Yet polls show that they have

aith that they, personally, and their kids will be OK, which reinorces the belie

that government is irrelevant to the uture.19

Lower-income people are subsanially less likely o believe ha hey conrol

heir own uure, bu a majoriy o hose a he botom are sill relaively opi-

misicand no less so oday han 25 years ago.20 While such views may seem

indeed, areunrealisic, hey have persised over long periods o ime even as

Americans have los aih in he counrys economic uure, have become less

conneced o heir ellow ciizens, and see heir poliical leaders as no paying

heed o wha people wan.

Inequaliy largely doesn mater (is no saisically signican) or believing hahard work is admirable, ha many people won work hard, ha you can run your

lie he way you wish, ha you can make ends mee, ha you can carry ou lie

plans, and ha you are saised wih your nancial siuaion.21 Te only measure

o personal opimism ha are shaped by inequaliy are he percepion ha hard

work leads o success.

Ye inequaliy maters or wheher hard work leads o success or he upper and

lower classes. For mos Americanshe middle and working classesand or

he ull sample, inequaliy does no lead o a more jaundiced view o he benes

o hard work. Bu or he working and lower classes, here is a srong negaive

correlaion beween he perceived benes o hard work and rising inequaliy. Ye,

inequaliy doesn aec jus he working and lower classes. As he income shares

o he middleand even he upper-middleclasses declined, opimism or he

naions uure, social cohesion, and condence in our insiuions have all allen.

As epidemiologiss Richard Wilkinson and Kae Picket argue, a plunging ide

sinks mos (i no) all boas.22

Ye, his is no a collecive sense o despair, a belie ha we are all in his ogeher,

as in he Grea Depression. Quie he conrary. We are moving oward a morezero-sum sociey, which is reeced in he growing polarizaion in American

poliical and social lie. As we remain opimisic abou our own personal lie, we

deec accounabiliy away rom ourselves and oward oherspeople who are

dieren rom ourselves and our poliical sysem. Te social and poliical polariza-


21/38


ion makes i dicul o nd common ground, eiher beween poliical paries

or wih our ellow Americans, on howor even whehero ackle inequaliy.

Unless we do, our social abric may become even more ragile.

Pessimism and investment

When hings don look so brigh, do people limi heir economic aciviy? Clearly,

i incomes all, even relaively, people migh become more wary o making large

invesmens. Opimiss should be more likely o ake he risks involved in inves-

men. Pessimiss should seek o preserve heir resourcesand are likely o believe

ha he value o heir invesmens may be as likely (or more so) o go down as o

increase. Economiss Manju Puri and David . Robinson repor survey resuls

indicaing ha more opimisic people pu greaer eor ino heir work and inves

and save more.23 Economiss Chrisopher D. Carroll, Jerey C. Fuhrer, and David

W. Wilcox, Daron Acemoglu and Andrew Scot, and Sephanie Dees and Pedro S.Brinca all show ha people are more likely o consume more when hey have opi-

misic views o he economy.24 People are also more likely o make invesmens i

hey are sanguine abou he economic uure.25

Does opimism lead o invesmens in housing or socks I invesigae hese is links

using available aggregae daa, sparse hough i is, on business ormed per capia,

business ailures per capia, houses sold per capia, and consumer senimen on

he economy. I also examine wo surveys, a Gallup/UBS poll o people wih sav-

ings and invesmens worh a leas $10,000 in 1998, and o he larger public in he

Pew Economic Mobiliy Sudy o 2009.26

Te aggregae measures provide litle suppor or he argumen ha increasing

pessimism leads people o rerain rom invesing. People are more likely o buy

new houses when consumer senimen is srong, bu new businesses are less likely

o be ormed when he public is upbeaand exising businesses seem srangely

more likely o ail. Consumer senimen is modesly relaed o he belies ha you

can ge ahead by hard work and ha he lo o he average person geting worse.

New businesses are more likely o be sared when rus is low and when people

believe ha ocials don care and when governmen is run by a ew big iner-essbu businesses are also more likely o ail under he same condiions.

Houses sold per capia are higher when rus is low, which is counerinuiive. A

more reasonable conclusion is ha opimism and pessimism may no drive busi-


22/38


ness sars or ailures or housing soldor even consumer senimen. Insead,

each o hese economic indicaors reecs real economic condiions. Business

ailures and sars are almos perecly correlaed. Business sars are more likely

when gross domesic produc (in real dollars) is highes, bu so are ailures.

Houses are also more likely o be sold when income is sronges. And consumer

senimen is sronges when he change in gross domesic produc rom heprevious year is highes.

Te aggregae daa do no sugges a srong link beween pessimism and inves-

men decisions; he survey daa ell a more nuanced sory. Te Gallup/UBS

survey o invesors asked abou wheher respondens would sar businesses when

hey reire, wheher hey have goals or reiremen and i hose goals are writen,

and wheher respondens inend o sar a business.

Tere are our measures o opimism and hey have mixed eecs on invesmen

plans. Invesors who are opimisic abou heir own income are more likely o havereiremen plans and o sar new businesses in he near uure. Seeing a brigh

immediae uure or yoursel, doesn lead o longer erm plans or saring a busi-

ness or having writen goals. No oher indicaor o opimism maters or any o he

our invesmen measuresno overall opimism or he economy or expecaions

abou he sock marke or ones own porolio.

Since his is a survey o invesors, we should no regard hese resuls as conclu-

sive. Te bes predicor o invesmen plans is no opimism, educaion, or even

income. I is age: Older invenors are more likely o say ha hey will sar a busi-

ness eiher soon or when hey reire and o have writen goalsbu are less likely

o have a reiremen goal overall.

Te Pew Economic Mobiliy Survey o 2009 asked a cross-secion o Americans

i hey own sock or own a home. And here we see srong evidence o opimism.

People who are opimisic abou heir own economic siuaion are subsanially

more likely o own boh socks and heir own home. Believing ha i has been

easier or you o achieve he American Dream han i was or your parens also

leads o boh more invesmens and home ownership.

Ye Americans seem o compare he presen wih he pas more han wih he

uure. I you believe ha your children will have a beter lie han you do, you

will be more likely o own a home, bu no necessari ly o own socks. Believing

ha your children will earn more han you do doesn mater or eiher inves-


23/38


men decision. In one imporan sense, Americans champion he idea o eco-

nomic opporuniy i you pu ou enough eor: You don need o believe ha

you mus be born ino a wealhy amily o inves in eiher socks or real esae.

Ye ambiion maters, a leas or owning a home. For real esae invesmen,

however, boh he belie ha you mus be ambiious and ha your children will

have a beter lie mater.27

Opimism seems o mater more or home ownership, where our o he mea-

sures are signican, han or holding socks, where only he ease o he American

Dream maters. Owning a home seems o be he ulllmen o he American

Dream. Some core elemens o opimism play a key role in home ownership:

belie ha he dream has been easier or you han or your parens, ha lie will be

beter or he nex generaion, ha ambiion maters or economic mobiliy bu

ha inheried saus doesn. Te Pew survey doesn have a quesion on income,

bu educaion is a leas in par a surrogae or economic sausand i maters

a lo more or owning sock han or home ownership. Ones personal economicsiuaion maters wice as much or socks as i does or homesso home owner-

ship is ar more aspiraional han are marke invesmens.

Aggregae rends in home ownership don seem srongly based on opimism.

Invesors do no concern hemselves wih aspiraions since people wih marke

sakes have already achieved a leas par o he American Dream. Bu home owner-

ship has long been linked wih he Dream and is a key par o he hopes o Middle

America.28 Hisorically, he level o home ownership in he Unied Saes has

increased dramaically over imerom under hal o he populaion a he urn o

he 20h cenury o wo-hirds o Americans by 2000. Ye only a quarer o people

who moved rom one residence o anoher in 2009 were new homeowners, com-

pared o 35 percen a decade earlier, revealing ha he dream o owning your own

home has become less atainable. While he American Dream o owning your own

residence is slipping away, 84 percen o Americans sill aspire o buying a home. 29

While he American Dream may be more elusive han in he pas, i is dicul o

race eiher home ownershipor especially he desire o buy your own resi-

denceo rising income inequaliy. Home ownership raes coninued o rise even

as pessimism (and inequaliy) grew.

Pessimism does no seem o dampen he ormaion o new businesses. Opimiss

may buy more houses, bu his endency seems likely o hold in good imes and bad.


24/38


Conclusion

Why, hen, should we care abou pessimism and inequaliy? Increasing pessimism

may have negaive eecs on oher oucomes ha I have no covered. Ye inequal-

iy and pessimism have oher deleerious eecs.

Firs, growing dispariies in income lead o more pessimism, less aih in our

insiuions, and less social cohesion. Greaer inequaliyand he belie ha

some people have oo much power, ha hey exercise i unairly, and ha ordinary

olks have no say in our poliical liedoes no demobilize Americans. Raes oparicipaion are no uniormly downurnou increased in he 2008 presidenial

elecion compared o oher recen coness. Nor do raes o poliical aciviy rack

rends in eiher inequaliy or pessimism.

Pessimism and inequaliy are roublesome because hey lead o less social cohe-

sion, especially o less rus in ohers who are dieren rom ourselves, even more

han hey lead o negaive economic consequences. In our social and poliical lie

his leads o more conic, especially more polarizaion. American poliical and

social lie has become more polarized on muliple dimensionsparisan, reli-

gious, and social and his is largely atribuable o rising inequaliy.30

Increasing polarizaion makes i dicul o make public policy.31 People on oppo-

sie sides o issues see each oher as evil. Conservaive blogger Michelle Malkin

has rebuked Republican Presidenial nominee Mit Romney or a disasrous,

bend-over biparisanship when he reuses o say ha Presiden Obama is no a

nice man.

Te polarizaion ha sems rom high inequaliy and low rus in people o di-

eren backgrounds or even poliical views makes i close o impossible o doanyhing abou he economic and social consequences o inequaliyas Cener

or American Progress economiss Heaher Boushey and Adam S. Hersh,32 and

Wilkinson and Picket, among ohers, have deailed.


25/38


Inequaliy eeds pessimism. We are wice as likely o say ha our leaders don care

wha we hink compared o 50 years ago, and we have increasing evidence ha

hey pay more heed o hose wih greaer resources. As he gap beween he rich

and he poor increasesand he rich pu addiional resources o ensure ha hey

prevail, pessimism becomes more raional. Te ineviable resul is even greaer

social ensions and o more inequaliy.

A disjuncion rises beween he American can-do spiri ha individual eor will

lead o a prosperous lie or you and your children and he realiy ha economic

mobiliy is declining. Can Americans mainain heir persisen opimism abou

heir own success? I no, he developmen o a permanen underclass migh lead

o even greaer social conic.


26/38


Appendix

The measures of income inequality

Te income disribuion daa poin o a sharp increase over ime in income

inequaliy. Te mos elling par o he sory is ha he Gini index and he income

shares are almos perecly correlaed wih each oher, eiher negaively (or he

rs our quiniles) or posiively (or he op ve percen and he op quinile,

which is correlaed wih he Gini index a r = 0.9997). Only income shares or

he ourh quinile depar a all rom a simple linear downward rend, bu no bymuch. Income shares have allen or each group excep or he op quinile and he

op ve percen.

Now mos people, even hose who pay considerable atenion o public aairs

don ollow economic rend daa. So is i reasonable o use such indicaors as a

predicor o pessimism, social cohesion, and condence in governmen? Poliical

scieniss Nahan J. Kelly and Peer K. Enns repor ha he public undersands

increasing inequaliy quie well,33 so economic daa are a good proxy or how

people perceive economic dispariies.

Data selection and analysis

I use survey daa rom he American Naional Elecion Sudies and he General

Social Surveys,he wo main academic surveys in he Unied Saes, as well as he

Pew Values Survey rom he Pew Research Cener or Te People and Te Press.

Pews surveys are widely respeced and used in he academic communiy and he

chie researchers are all widely respeced poliical scieniss. Te ANES surveys

began in 1948 bu since he inequaliy daa sarbeing colleced in 1967, I can onlyuse surveys rom 1968. Te surveys are conduced biennially bu here was no

survey in 2006. Te ANES cumulaive le exends o 2008. However, no all ques-

ions have been asked during he enire period Te generalized rus quesion, or

example, was asked in 1968, 1972, 1974, and 1976 and hen no again unil 1992;


27/38


i has been asked every wo years since. Te GSS began in 1972 and was con-

duced annually hrough 1994 (excep in 1979 and 1981), afer which i has been

conduced biennially.

Te GSS cumulaive le exends hrough 20120. No every quesion was asked

each year; he wo key measures o pessimism were only asked rom 1972 o1994. Tey are In spie o wha some people say, he lo (siuaion/condiion)

o he average man is geting worse and I is hardly air o bring a child ino he

world wih he way hings look or he uure. In Te Moral Foundations o rust,

I showed ha hese are good measures o long-erm opimism and ha hey are

srongly relaed o generalized rus (social cohesion).34

Te Pew Values Survey began in 1987 and has been conduced annually o he

presen. Bu he cumulaive le publicly available a his ime exends only o

2009. Again, no every quesion is asked every year, bu he coninuiy is greaer

or his survey han ohers. Neverheless, he Pew surveys began afer inequaliyhad begun is seep rise in he Unied Saes so he esimaed eecs (see below)

are generally smaller han hose or he ANES and GSS. Many o he measures

are dichoomies; I recoded oher variables ino dichoomies o derive comparable

eecs (see below)

I analyze hese survey daa hrough probi analysis, which is appropriae or

binary daa. Probi coeciens are no linear, so hey have no clear inerprea-

ion as regression coeciens do. Te sandard approach in poliical science and

sociology is o esimae wha poliical scieniss Seven J. Rosensone and J. Mark

Hansen call eecs.35 Probi esimaes can be readily convered ino he prob-

abiliy o a posiive oucome (rusing ohers, being opimisic). o deermine he

eec o a variable, we recode each case o is minimum value (or anoher value

o ineres) and hen esimae he probabiliy leting each o he oher variables

ake heir original values. We hen recode he predicor o is maximum value and

obain he probabiliy, again seting he oher variables a heir original values. Te

dierence in probabiliies beween he second and he rs esimaes is he eec.

In simpler language, consider he Gini index as he predicor o ineres and rus

as he dependen variable. For he ANES daa, he minimum Gini index in hedaabase is 0.391 in 1971 and he maximum is 0.466 in 2004 and 2008. A simple

bivariae probi predicing rus rom he Gini index gives an eec o -0.087, indi-

caing ha as he Gini rose rom 0.391 o 0.466, rus ell by 8.7 percen. During

he period covered by he ANES daa, rus ell rom 56 percen (1968) o 30


28/38


percen (2008), so he inequaliy-induced decline o 8.7 percen is a hird o he

oal all in rus. Tese change in probabiliies (here i would be writen as -0.087)

are direcly comparable across variables and are easy o undersand. I esimaed

he eecs hrough a Saa program I wroe ha is available upon requesI presen

a sample probi in able 1 . A ull lising o all he eecs can be ound in able 2.

TABLE 1

Probit o trust (General Social Survey)

Change in Pessimism Due to Increase in . .

Variable Coeicient Std. Error MLE/SE Eect

Gini index -.745**** 0.484 -15.35 -0.192

Education .112**** 0.003 33.19 0.636

Income .038**** 0.037 10.27 0.14

Black -.635**** 0.031 -20.67 -0.205

Lower class -.163** 0.066 -2.48 -0.056

Working class -0.027 0.052 -0.51 -0.009Middle class .088** 0.051 0.052 0.031

Age+ 0.011 0.001 19.14 0.211

Unemployment rate 0.098 0.019 4.96++ 0.01

Ination rate 0.002 0.004 0.56 0.034

Constant .427* 0.253 1.68 N/A

* p < .10 ** p < .05 *** p < .01 **** p < .0001 (all tests one-tailed)

+ Eect estimated at 18 and 75 years old; ++ Coecient in the wrong direction

Estimated R2 = .256 -2*Log Likelihood Ratio = 28209.18 N = 24066

Percent predicted correctly: 66.7 (model) 59.5 (null)

TABLE 2

How changes in dierent income inequality measures aect pessimism

Poll Question Gini Coeicient

Share o In-

come Going to

Bottom Fith

Share o In-

come Going to

Second Fith

Share o Income

Going to Middle

Fith

Share o Income

Going to Fourth

Fith

Share o

Income Going

to Top Fith

Share

Goin

P

Belie that Next Generation's Lie Will

Be Better

49.8% -14.80% -25.50% -46.20% -45.10% 51.60%

Lot o the Average Person Will Be

Worse

29.2% -29.90% -33.30% -27.50% -26.30% 29.00%

It's Not Fair to Bring a Child into the

World

25.2% -26.60% -30.60% -24.00% -19.60% 24.90%

There are No Real Limits to Growth -8.8% 7.80% 10.80% 8.60% 4.40% -8.40%

Success is Outside My Control -5.9% 6.40% 6.30% 5.80% 4.50% -5.90%

Americans Can Solve Our Problems -5.7% 5.20% 7.30% 5.10% 2.20% -5.20%

Trust in Other People -17.0% 22.40% 21.90% 19.20% 20.00% -19.00% -

Trust in Other People -19.2% 23.30% 22.80% 18.60% 15.60% -18.80% -

The Rich Are Not Getting Richer -8.4% 8.80% 8.90% 8.10% 6.00% -8.30%


29/38


Poll Question Gini Coeicient

Share o In-

come Going to

Bottom Fith

Share o In-

come Going to

Second Fith

Share o Income

Going to Middle

Fith

Share o Income

Going to Fourth

Fith

Share o

Income Going

to Top Fith

Share

Goin

P

Equal Rights Have No Gone Too Far -6.0% -5.40% -6.00% -6.00% -5.80% 6.10%

Have Something in Common with

Other Races

-9.2% 7.30% 9.90% 8.70% 8.00% -9.00%

The Government Benets All -8.7% 5.60% 10.70% 9.30% 4.90% -8.50%

Voting Gives You a Say in the Govern-ment

-8.2% 4.10% 7.90% 9.00% 9.30% -8.70%

Strength o US Business Disagree -3.6% 4.10% 3.90% 3.50% 1.90% -3.50%

Americans Do Have a Say in Govern-

ment

-2.8% 4.00% 3.40% 2.40% 0.50% -2.60%

Trust in Government -15.5% 24.70% 30.30% 26.10% 23.50% -25.40% -

Ofcials Pay Attention to Average

Person

-32.6% -10.60% 15.00% 17.10% -67.10% -13.20% -

Ofcials Care About Average Person

(1)

-31.2% -34.40% -37.70% -33.20% -33.10% 33.20%

Ofcials Care About Average Person -21.6% -22.40% -25.10% -20.80% -17.30% 21.30%

Ofcials Care About Average Person -9.3% -7.10% -11.10% -10.00% -5.10% 9.10%

Ofcials Don't Lose Touch -2.4% -1.00% -3.00% -3.00% -0.80% 2.30%

Hard Work Will Get A Person Ahead 6.5% -7.90% -7.30% -6.50% -5.50% 6.40%

Hard Work Will Get A Person Ahead 1.6% 0.02% -1.00% 2.90% -2.00% 1.90%

Many People Won't Work Hard 4.2% 11.00% -4.70% -7.50% -5.90% 5.30%

I Admire Hard Work -1.3% -0.30% 1.00% 1.90% 1.90% -1.60%

I Can't Make Ends Meet -3.7% 5.70% 3.40% 3.10% 3.80% -3.70%

Satisied with Personal Finances -1.8% 1.50% 2.50% 1.90% -0.40% -1.60%

Can Run Lie as Wished 1.9% 1.90% 0.50% -0.01% 4.90% -1.50%

Can Carry Out Plans in Lie -5.6% 15.40% -13.10% -17.50% -4.10% 4.40%

Source: Authors calculations

Te probi in able 1 is or generalized rus rom he General Social Survey. Te

able shows he probi coecien, is sandard error, he MLE/SE (maximum

likelihood raio/sandard error, which is approximaely a z raio), and he eec.

Te model includes he Gini Index; educaion; income; race (black) class ideni-

caion or he lower, working, and middle classes (he upper class is omited o

preven perec collineariy); age; and he inaionand unemploymen raes asconexual acors o ensure ha he eecs o inequaliy are no overesimaed.

Inequaliy (as here measured by he Gini index) srongly aecs rus. As he

Gini index rose rom 0.401 in 1972 (he rs year o he GSS) o 0.466 in 2008,I esimae ha he likelihood ha a responden would agree ha mos people

can be rused ell by 19 percen. rus ell by 23 percen (rom 56 percen o 33

percen over hese years), so inequaliy alone can accoun or over 80 percen o

he decline o aih in oher people.


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O course, his is no a uni-causal world, and rus is shaped by oher acors.

Mos imporan is educaion, which elsewhere I showed o be he mos impor-

an socio-demographic acor underlying rus.36 A responden wih a graduae

educaion is 64 percen more likely o rus people han one wih jus a grade

school educaion. Arican Americans are 21 percen less likely o have aih in

ohers. Tere is a modes eec or income wih people becoming more rusingas income rises (no always reeced in oher research), abou 14 percen, while

class maters much less: Working class people are six percen less likely o rus

ohers, middle class respondens hree percen more likely, and here is no eec

or working class people. Older respondens (75 years old) are 21 percen more

likely o be rusing compared o 18 year olds. Te coecien on unemploymen

is insignican, while ha or inaion is incorrecly signed. Tese resuls conrm

he argumen I made in Te Moral Foundations o rust, in which I argued ha

long-erm opimism, no shor-erm economic rends, shapes rus. Overall, his

analysis shows he srong impac o inequaliy on rusmore powerul han any

acor oher han educaion and almos equal o ha o race.37

I repea he analyses or seleced measures by classo es wheher inequaliy

maters more or he working class or he lower class han i does or he middle

and upper classes. I do his in wo ways. Firs, I run he same probis or each class.

Te ANES and he GSS include sel-idenied social class quesions. Te Pew

daa se does no have a quesion abou subjecive social class. Te ANES and

GSS subjecive class caegories did no overlap srongly enough o use income as

a surrogae so I excluded he Pew surveys rom my analyses using social sraa.38

Second, or ve measures ha have quesions asked repeaedly over ime, I derive

aggregae measures o opimism, social cohesion, insiuional condence, and

personal expecaions or each class.

I could do his only or ve survey quesions: he lo o he average person,

generalized rus, condence in governmen (How much o he ime do you

rus he governmen in Washingon o do he righ hing? and Do ocials care

wha people like you hink?), and wheher mos people ge ahead in lie hrough

hard work. Some o he measures or he upper class in he surveys mus be aken

cauiously since he sample sizes or each year are very small. I hen employ he

aggregae measures or each class in a simple correlaion analysis (repored in heex). However, I also veried ha he resuls are somewha robus by esima-

ing regressions including unemploymen and inaion raes. Since he number

o cases in he ime seriesare ofen very small, including any addiional variables

would be hazardous. I presen he correlaions in able 3.


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TABLE 3

Correlations o aggregate optimism/pessimism and social cohesion

measures with inequality

Variable (number o cases, Gini/

income shares)Gini Bottom 5th 2nd Qunitle 3rd Quintile 4th Quintile Top 5th

Trust (28, 29) -0.776 0.721 0.82 0.788 0.656 -0.77

Trust in Government (39, 38) -0.479 0.382 0.499 0.467 0.401 -0.454Lie Better or Next Generation (19 , 20) -0.178 0.201 0.164 0.18 0.155 -0.167

People get ahead by hard work (21, 23) 0.546 -0.603 -0.601 -0.591 -0.542 0.58

Lot o the average person getting worse

(15)

0.375 -0.288 -0.362 -0.349 -0.373 0.372

Not air to bring a child into the world

(15)

0.175 -0.036 -0.205 -0.142 -0.137 0.161

Success determined by actors outside

our control (14)

0.603 -0.588 -0.586 -0.597 -0.567 0.602

Success determined by hard work (22,

13)

-0.546 0.459 0.51 0.468 0.453 -0.493

No limits to growth (16) -0.679 0.679 0.708 0.664 0.585 -0.668

Americans can solve problems (14) 0.041 0.084 -0.012 -0.058 -0.142 0.058

Gone too ar with equal rights (14) 0.361 -0.285 -0.338 -0.381 -0.477 0.373

Have much in common with other

races (9)

-0.943 0.82 0.935 0.929 0.941 -0.938

Can't make ends meet (14) 0.685 -0.638 -0.669 -0.684 -0.728 0.692

Satised with nances (14) -0.154 0.063 0.128 0.157 0.288 -0.159

Strength o U/S. is in business (13) -0.73 0.796 0.738 0.712 0.59 -0.713

Government benets all (13) -0.406 0.346 0.43 0.41 0.343 -0.401

Ofcials don't care about average

person (36)

0.445 -0.383 -0.479 -0.45 -0.359 0.428

Ofcials lose touch (14) 0.116 -0.116 -0.09 -0.09 -0.196 0.12

Voting gives you a say in politics (12) -0.605 0.467 0.594 0.609 0.672 -0.612

Have no say in politics (14) 0.509 -0.43 -0.491 -0.486 -0.457 0.5

Numbers in parentheses are numbers o cases or Ginis and income shares, respectively. Only one entry indicates same values or each.

Pessimism and investment

Tis is a more echnical discussion o he linkage beween pessimism and inves-

men. When hings don look so brigh, do people limi heir economic aciviy?

Clearly, i incomes all, even relaively, people migh become more wary o mak-

ing large invesmens. I invesigae his link using available aggregae daa, sparsehough i is, on business ormed per capia, business ailures per capia, houses sold

per capia, and consumer senimen on he economy. I also examine wo surveys, a

Gallup/UBS poll o people wih savings and invesmens worh a leas $10,000 in

1998 and o he larger public in he Pew Economic Mobiliy Sudy o 2009.


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Te aggregae measures provide litle suppor or he argumen ha increasing

pessimism leads people o rerain rom invesing. People are more likely o buy

new houses when consumer senimen is srong (r = 0.5), bu new businesses

are less likely o be ormed when he public is upbeaand exising businesses

seem srangely more likely o ail (r = 0.289). Consumer senimen is modesly

relaed o he belies ha you can ge ahead by hard work and ha he lo o heaverage person geting worse (r = 0.35 and -0.35). New businesses are more likely

o be sared when rus is low and when people believe ha ocials don care

and when governmen is run by a ew big ineressbu businesses are also more

likely o ail under he same condiions.

Houses sold per capia are higher when rus is low (r = -0.5). A more reason-

able conclusion is ha opimism and pessimism may no drive business sars

or ailures or housing soldor even consumer senimen. Insead, each o hese

economic indicaors reec real economic condiions. Business ailures and sars

are almos perecly correlaed (r = 0.992): Business sars are more likely whengross domesic produc (in real dollars) is highes, bu so are ailures (r = 0.917,

0.853).39 Houses are also more likely o be sold when income is sronges (r =

0.5). And consumer senimen is sronges when he change in GDP rom he

previous year is highes. Te aggregae daa do no sugges a srong link beween

pessimism and invesmen decisions.

Te survey daa ell a more nuanced sory. Te Gallup/UBS survey o invesors

asked abou wheher respondens would sar businesses when hey reire, wheher

hey have goals or reiremen and i hose goals are writen, and wheher respon-

dens inend o sar a business. Tere are our measures o opimism and hey have

mixed eecs on invesmen plans. Invesors who are opimisic abou heir own

income are more likely (by 25 percen) o have reiremen plans and (by 32 percen)

o sar new businesses in he near uure. (see able 3). Seeing a brigh immediae

uure or yoursel doesn lead o longer erm plans or saring a business or having

writen goals. No oher indicaor o opimism maters or any o he our inves-

men measuresno overall opimism or he economy or expecaions abou he

sock marke or ones own porolio. Since his is a survey o invesors, we should

no regard hese resuls as conclusive. Te bes predicor o invesmen plans is no

opimism, educaion, or even income. I is age: Older invenors are more likely osay ha hey will sar a business eiher soon or when hey reire and o have writen

goalsbu are less likely o have a reiremen goal overall.


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TABLE 4

Eects o measures o optimism and pessimism on investments

Gallup UBS Wealth Management Research Survey o Investors 1998

VariableStart Business

When Retire

Have Goal or

Retirement

Have Written Goal

or Retirement

Plan to Start

Business

Optimistic about economy next 12 months .064* -.026* .014* .208*Optimistic own income next 12 months .113* 0.25 .121* 0.317

Optimistic stock market next 12 months .002* .080* .171* -.136*

Expected rate o return on portolio next

12 months

-.148* -.152* .099* .451*

Education .081* 0.161 .002* .148*

Income .044* -0.008 0.167 .055*

Age 0.243 -0.427 0.202 0.234

* Not statistically signifcant at p < .05 (one-tailed test)

Te Pew Economic Mobiliy Survey o 2009 asked a cross-secion o Americans ihey own sock or own a home. (see able 4) And here we see srong evidence o

opimism. People who are opimisic abou heir own economic siuaion are sub-

sanially more likely o own boh socks and heir own home. Personal opimism

maters more or owning sock han or owning a home (28 percen compared o

16 percen), bu his may be because oher aspecs o opimism shape homeown-

ership bu notinvesmen decisions. Believing ha i has been easier or you o

achieve he American Dream han i was or your parens also leads o boh more

invesmens and home ownership (by 16 percen and 12 percen. Believing ha

is imporan o be born rich o move up he economic ladder doesn make one

more likely o own sock or o own a home. Saying ha ambiion leads o more

mobiliy does no lead people o own sock, bu i does boos home ownership by

18 percen.

Ye Americans seem o compare he presen wih he pas more han wih he uure.

I you believe ha your children will have a beter lie han you do, you will be more

likely o own a home (by 21 percen), bu no necessarily o own socks. Believing

ha your children will earn more han you do doesn mater or eiher invesmen

decision. For real esae invesmen, however, believing ha you mus be ambiious

is associaed wih an 18 percen greaer likelihood o owning your home.


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TABLE 5

Eects o measures o optimism and pessimism on investments

Pew Economic Mobility Study 2009

Variable Own Stock Own a Home

Personal economic situation evaluation 0.283 0.158

Easier or you to achieve American Dream than it was or your parents 0.162 0.117

How important to be born rich or mobility .069* -0.019*

How important to be ambitious or mobility .041* 0.18

Lie better or next generation ** .064* 0.207

One's own children will earn more ** .173* .133*

Education 0.463 0.261

Age 0.219 0.671

* Not statistically signifcant at p < .05 (one-tailed test)

** Estimated in separate equations with 219 cases or owning stock and 218 cases or owning a home. All other variables in this table

estimated in models with 1251 cases or owning stock and 1256 cases or owning a home. Other variables in the model are income, race(Arican-American), and Hispanic ethnicity.

Opimism seems o mater more or home ownership, where our o he mea-sures are signican, han or holding socks, where only he ease o he American

Dream maters. Owning a home seems o be he ulllmen o he Dream. Some

core elemens o opimism play a key role in home ownership: belie ha he

dream has been easier or you han or your parens, ha lie will be beter or he

nex generaion, ha ambiion maters or economic mobiliy bu ha inheried

saus doesn. Te Pew survey doesn have a quesion on income, bu educa-

ion is a leas in par a surrogae or economic sausand i maters a lo more

or owning sock han or home ownership. Ones personal economic siuaion

maters wice as much or socks as i does or homesso home ownership is ar

more aspiraional han are marke invesmens.


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About the author

Eric M. Uslaner is a proessor o Governmen and Poliics a he Deparmen o

Governmen and Poliics, Universiy o MarylandCollege Park, and a Senior

Research Fellow, Cener or American Law and Poliical Science a he SouhwesUniversiy o Poliical Science and Law, Chongqing, China. Proessor Uslaner is

also an Honorary Proessor o Poliical Science, Universiy o Aarhus (Denmark)

Acknowledgements

I am graeul or he many commens rom David Madland and he research sup-

por rom he Cener or American Progress, especially rom Mat Separa. I am

also graeul o he insiuional suppor o he Universiy o MarylandCollege

Park, especially rom he Graduae School or a Research and Scholarship Award.


36/38


Endnotes

1 Herbert Croly, The Promise of American Life. Ed. by Ar-thur M. Schlesinger, Jr. (Cambridge, MA: Belknap, 1965);Henry Steele Commager, The American Mind(NewHaven: Yale University Press, 1950); David Potter, Peopleof Plenty(Chicago: University o Chicago Press, 1954).

2 AUTHOR, Whatever Happened?, The Economist,September 12, 1987, p. 11-12; Adam B. Seligman, TheProblem of Trust(Princeton: Princeton University Press,2000).

3 Justina Fischer and Benno Torgler, Social Capitaland Relative Income Concerns: Evidence rom 26Countries. Research Paper Series No. 38 ( ThurgauInstitute o Economics and Department o Econom-ics, University o Konstanz: October 2006), availableat http://kops.ub.uni-konstanz.de/bitstream/handle/urn:nbn:de:bsz:352-opus-74683/60_No38_08_10_TWI_RPS_Fischer_Torgler.pd?sequence=1.; and ChristianBjornskov and others, On the Relation BetweenIncome Inequality and Happiness: Do Fairness Percep-tions Matter? (Center or European Development andEconomic Development Research: 2009), available athttp://www.ko.ethz.ch/en/publications/p/ko-working-papers/245/.

4 The data or the United States come rom http://www.census.gov/hhes/www/income/histinc/ineqtoc.html(last accessed November 2012). The cross-nationaldata come rom the World Income Inequality Databasev.20c, United Nations University World Institute orDevelopment Economic Research, available at http://www.wider.unu.edu/research/Database/en_GB/data-base/ (last accessed November 2012).

5 Eric M. Uslaner, The Moral Foundations of Trust(NewYork: Cambridge University Press, 2002), chs. 2, 4, 6, 8.

6 Eric M. Uslaner, The Moral Foundations of Trust(NewYork: Cambridge University Press, 2002).

7 Uslaner, The Moral Foundations of Trust.; Christian Bjorn-skov, The Determinants o Trust, School o Business,Aarhus University, available at http://www.ratio.se/pd/

wp/cb_trust.pd, March 22, 2005.

8 The Gini index rose rom .401 to .456 rom 1972 to 1994and rom .426 to .468 rom 1987 to 2009. The incomeshare o the top 20 percent rose rom 43.9 percent to49.1 percent across the GSS time rame and rom 46.2percent to 50.2 or the Pew time period.

9 Data are rom the 1948-2008 cumulative les o theAmerican National Election Studies: Data Center,available at www.electionstudies.org(last accessedNovember 2012).

10 E.E. Schattschneider, The Semisovereign People (NewYork: Holt, Rinehart, and Winston, 1960)..

11 Sidney Verba, Kay Lehman Schlozman, and Henry E.Brady, Voice and Equality: Civic Voluntarism in AmericanPolitics (Cambridge, MA: Harvard University Press,

1995).

12 Larry M. Bartels, Unequal Democracy(Princeton, NJ:Princeton University Press, 2008).; and Martin Gilens,Inequality and Democratic Responsiveness, PublicOpinion Quarterly69 (5) (2005): 778-96. Bartels ndsthat policy also reects middle class opinions, whileGilens nds no impact o the views o these citizens.

13 Verba, Schlozman, and Brady, Voice and Equality.;Nathan J. Kelly and Peter K. Enns, Inequality and theDynamics o Public Opinion: The Sel-Reinorcing LinkBetween Economic Inequality and Mass Preerences,American Journal of Political Science 54 (4) (2010): 869.On the lack o a connection between participation

rates and inequality, see Henry E. Brady, An AnalyticalPerspective on Participatory Inequality and IncomeInequality. In Kathryn M. Neckerman, ed., Social In-equality(New York: Russell Sage Foundation, 2004), andJan E. Leighley and Jonathan Nagler, Who Votes Now?Unpublished manuscript, American University, 2012.For an alternative argument, see, James K. Galbraith, In-equality and Instability. (Oxord: Oxord University Press,2012), 160, and James C. Garand and N. Kim Nguyen,The Eects o Income Inequality on Political Attitudesand Behavior, presented at the 2007 Annual Meetingo the Midwest Political Science Association, Chicago,April.

14 Quoted on Franks website, available at http://barney-rank.ngpvanhost.com/quotes(last accessed May 24,2012).

15 This estimate is too high to be taken as accurate, since

its rst measurement in 1968 (when income shares arealso available) was 34 percent, and it ell to 17 percentin 1980, the last survey in which the question wasasked.

16 Jennier Hochschild, Whats Fair: American Beliefs AboutDistributive Justice (Cambridge, MA: Harvard UniversityPress, 1981).; Herbert McCloskey and John Zaller, TheAmerican Ethos (Cambridge, MA: Harvard UniversityPress, 1984).; Benjamin I. Page and Lawrence R. Jacobs,Class War? What Americans Really Think about EconomicInequality(Chicago: University o Chicago Press).

17 Katharine Bradbury, Trends in U.S. Family IncomeMobility, 19692006. Working Paper 11-10 ( FederalReserve Bank o Boston, 2011), available at http://www.bostoned.org/economic/wp/wp2011/wp1110.pd..

18 Page and Shapiro, Class War?.

19 Je Faux, Who will save the middle class?, EconomicPolicy Institute, May 30, 2012, available at http://www.epi.org/publication/who-will-save-middle-class/.

20 Andrew Kohut and others, Partisan Polarization Surgesin Bush, Obama Years: Trends in Values: 1987-2012.(Washington: The Pew Research Center For The Peopleand The Press, 2012), available at http://www.people-press.org/values/.

21 There are sporadic signicant coefcients acrossmeasures o inequality and class, but they ollow noclear pattern. While some o the eects or carryingout plans may seem stronger, they are not consistentlysigned and they are not statistically signicant.

22 Richard Wilkinson and Kate Pickett, The Spirit Level: WhyEquality is Better for Everyone (London: Penguin, 2010).

23 Manju Puri and David T. Robinson, Optimism andEconomic Choice,Journal of Financial Economics 86 (1)(2007): 71-99.

24 Daron Acemoglu and Andrew Scott, Consumer Con-dence and Rational Expectations: Are Agents BeliesConsistent with the Theory?,Economic Journal104(NO.) (1994): 1-19, available at http://www.jstor.org/disc
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25 Bruce D. Grundy and Li Hui. Investor Sentiment, Execu-ti

income inequality in the united states fuels pessimism and threatens social cohesion

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