The Unassuming Economist

Policymaking and research on perhaps some of the most pressing social issues in the contemporary world today, like poverty, inequality, access to resources, and related matters, is both blessed and plagued with the idea that additional evidence on people’s identities and information sets can radically transform the rate of success or failure of policies. 

Among other things, one such question has also been the irony of demand for redistributive and poverty alleviation programs not rising commensurately or even remotely as much with the ever-rising level of inequalities in the world. Many studies have attempted to explain this phenomenon by presenting the idea that poor people often have only limited knowledge about their relative deprivation viz other people in the economy. They also believe their income levels to approximately coincide with the average income level of the country, thus convincing themselves of the non-usefulness of any redistribution programs. 

This study, by Hoy and Mager, empirically tests some of these theories using randomized surveys and churns out some insightful observations. It redefines the idea of ‘benchmarking’ incomes for designing redistribution programs and explains the importance of information sets in shaping poor people’s preferences for accepting aid. 

Click here to read more.