Thursday, February 17, 2011
The politics of economic crises bring distributive economic conflict to the fore of national political debates. How economic activity is to be regulated and how policy should be used to transfer resources between citizens become central political questions and the answers chosen often influence the trajectory of policy for a generation or at least until the next crisis. This paper investigates how social preferences, specifically envy and altruism, influence individual policy opinions in these debates. I argue that social preferences have a powerful influence on support for policy alternatives which in turn shape the incentives faced by politicians in setting policy. I conduct original survey experiments in France and the United States and provide strong evidence that individuals care both about how economic policy alternatives affect their own interests and how they influence the welfare of others. Their concern about the welfare of others is consistent with inequality aversion -- both envy and altruism. The analysis focuses on key policy areas in the response to the current international economic crisis: trade policy, financial sector regulation, and tax policy. This preliminary draft presents the results from the United States only as the French survey is in the field.
Update: Dan Shaviro blogs the workshop here.