Inequality, well-being, and the problem of the unknown reporting function

Abstract:

Every politician, in every nation and in every era of history, eventually has to face a complex and emotive question. Should I try to redistribute money from my richer citizens to my poorer citizens? If so, by how much? This is a timeless issue. The appropriate answer to the question turns crucially on a claim that goes back hundreds of years to, for example, the philosopher Jeremy Bentham: “All inequality is a source of evil—the inferior loses more in the account of happiness than by the superior is gained.” In an ideal world, a hypothesis of this sort would be tested in a giant randomized controlled trial (RCT), perhaps funded by a body such as the National Science Foundation of the United States. However, no funding body is likely to provide the necessary millions of dollars to run that experiment-until now. In a remarkable and important contribution to conceptual science and practical public policy, Ryan Dwyer and Elizabeth Dunn have—with the help of millionaire donors—run an RCT that comes close to that ideal.