Our decision-making behaviors toward public policy depend on our perception of society. Preferences for policies that address inequality and poverty rely on how we perceive inequality. Thus, it follows that our preferences could depend on our cognitive capacity to perceive facts. If our capacity is large enough compared to the presented measurement units used to describe society, then such measurement units are irrelevant to our decisions regarding public policy. However, if our cognitive capacity is bounded across the measurement units used to describe society, then our political decision-making in fact begins with the choice of measurement unit used to describe reality prior to making decisions that are recognized to be sensitive to partisanship.
Thus, whether measurement units based on the same fact affect our perceptions or impressions of reality is critical to examine further, i.e., beyond behavioral and experimental economics and extending toward social sciences in general and policy-making.
Income inequality is a keen issue in both developed economies and relatively wealthy emerging economies. We need to address this issue. Thus, understanding how people feel about inequality from different measurement units based on the same fact is critical to policy-making in order to address the issue. To investigate how we perceive income inequality, we compare two measures of inequality, namely, the stratification index (Zhou 2012) and percentiles.
We use data on income distribution in Japan from 1985 and 2018, which were obtained from the National Livelihood Survey conducted by the Ministry of Health, Labour and Welfare of the government of Japan. Using this data, we calculate percentile proportions and the stratification index.
Then, we implement a randomized conjoint experiment on the internet. We show the household income distribution of households with children and households of elderly people of two "societies"; one's income distribution from 1985 to 2018 is described according to percentile proportions and the other one's income distribution from 1985 to 2018 is described according to the stratification index. Both measures actually describe the same Japanese society in 1985 and 2018. Then we ask respondents which society seems to have become more unequal between 1985 and 2018.
If we find different evaluations between two descriptions according to income percentiles and stratification index, that means that our perception of inequality is susceptible to the presentation of statistics of the very same distribution. Otherwise, we would conclude that the human recognition of inequality does not show a significant difference between the percentile measure and stratification index presentations and that we need more trials to investigate whether the irrelevance of measurement units applies to a broader range of measures of inequality.
A policy implication of this study is that if the former result is obtained, then it can be seen that we essentially begin to decide a public policy choice when we calculate a measurement of inequality and present this measurement to the public, which occurs far before citizens and their representatives begin to discuss such policies consciously. Otherwise, citizens who are exposed to different measurements are more likely to achieve a consistent perception of a certain issue and share their recognition of the facts, which sets a better ground for policy-making.
Zhou, Xiang (2012) "A nonparametric index of stratification," Sociological Methodology, 42, 365-389. https://doi.org/10.1177/0081175012452207