Tolerance for Inequality
Tolerance for inequality is the extent to which a society will accept income inequality among different classes, sectors, and regions.
Wannaphong Durongkaveroj (2018) summarizes the the “tunnel effect” theory set out in a famous 1973 paper by O.A. Hirschman:
“The process of economic development creates both winners and losers. In a seminal paper published in 1973, Hirschman discusses, in the early stage of development, the tendency of income inequality among the different classes, sectors, and regions rise, and why society continues to tolerate inequality (Hirschman, 1973). …
“The key proposition of Hirschman’s paper is that people become tolerant of income inequality provided they anticipate that the income gap will fall later, and otherwise will no longer stand for such inequality. Hirschman uses the analogy of a traffic jam in a two-lane tunnel to explain how people respond to inequality. Suppose, in a traffic jam, people are stuck in the left-lane and realize that no one cannot move for a while. Soon, they see that a car in the right lane start to move gradually. Although they cannot move now, they feel better off because of the positive attitude towards future movement in the right lane. This initial gratification is known as the ‘tunnel effect’. However, at the end, if it is only the cars in the right lane that can move, people in the right lane feel discontent. They start being frustrated and think that it is unfair, and they want to do something to correct this injustice. Applying this illustration to an unequal society, it can lead to a social movement or protest. The government may need to use its coercive powers to restrict participation of social movement in such case and cease this social upheaval.
“Hirschman describes several factors affecting the tunnel effect. He states that the tunnel effect will be strong if the group that does not advance (e.g., the group in the left-lane) can empathize with (i.e., understand the situation well of) the group that advances. Thus, two groups (people in the left-lane cars and right-lane cars) must not be divided by impassable barriers. In this case, class matters. If several different classes get involved in the same growth process, the tunnel effect will still operate despite uneven economic growth. In a segmented society, economic advance for one particular ethnic or language group, or one member of a particular religion, is not likely to bring the tunnel effect to those who are left behind. Stagnant people will be convinced at the beginning that this growth is unfair, and some groups of people will exploit them. They expect to get worse off, since the beginning, in terms of relative income. Consequently, a high degree of coercion in order to control political instability is relatively high in this case, compared to that in a fairly unitary society. In a homogeneous society where resources are owned domestically, tolerance for income inequality tends to be large because there is no language, ethnic, or other systematic barrier that can keep people experiencing stagnant growth from understanding the situation of better-off people. However, Hirschman suggests that this leads to a difficult result: “The greater the tolerance, the greater is the scope for the reversal that comes once the tunnel effect wears off” if inequality does not fall in time.
“Lastly, Hirschman comments that in a society without the experience of sustained growth, when one group advances while another group remains constant, there are two possible results. If available resources have not increased, group A will suffer as group B rises. If some windfall gains have expanded the total resources, group A will get a more equal share of this windfall soon. Thus, the results of the utility among people also depend on how resources grow and are distributed.”
Atlas topic, subject, and course
Wannaphong Durongkaveroj (2018), Tolerance for Inequality: Hirschman’s Tunnel Effect Revisited, Working Paper No. 2018/23, October 2018, at https://crawford.anu.edu.au/sites/default/files/publication/crawford01_cap_anu_edu_au/2018-10/final_2018_-_23.pdf, accessed 12 December 2018..
Page created by: Alec Wreford and Ian Clark, last modified on 12 December 2018.
Image: Wikipedia, Gini coefficient, at https://en.wikipedia.org/wiki/Gini_coefficient, accessed 12 December 2018.