Why does inequality trigger such negative feelings? UBS Center Director Ernst Fehr researches the human desire for fairness. He divides people into three categories. The following interview was conducted by Swiss daily NZZ.

This interview by Albert Steck was originally published in German in NZZ on 20.6.2024. Translated and edited for layout and context purposes by the UBS Center.

Mr. Fehr, when it comes to social justice, people react very emotionally. A current example is the debate about old-age pensions. Why are fairness and equality so important to us?

This has to do with our evolutionary history. For thousands of years, humans lived as hunter-gatherers in small groups. This structure was extremely egalitarian. Food was practically always shared. Even then, there was something like informal health insurance. While the animals left an injured individual behind, the humans also fed it.

But then man became sedentary, and inequality increased dramatically.

Yes, with the emergence of agriculture, it was possible to own land, crops, or animals. Since then, we have lived in a field of tension between our egalitarian heritage and the existence of private property rights, which leads to inequality. Whether someone becomes rich or poor depends on his or her hard work and talent. At the same time, however, luck also plays an important role.

Your research shows that the need for equality is still strongly anchored in people today. How did you come to this realization?

We didn't want to simply ask people what they think. Instead, we measured their social motives based on actual behavior. We gave them amounts of money, which they could then divide up according to their ideas: are they willing to share, or do they keep everything for themselves? We were able to classify people based on these patterns. We were also able to check whether their attitudes influence their behavior in referendums, which are precisely about such distribution issues.

With what result?

With many referendums, it is difficult to explain people's voting behavior solely in terms of short-term self-interest. Take the initiative for a reduction in working hours to 40 hours or the initiative for six weeks' vacation. Both were clearly rejected, although prima vista a majority would have benefited from them. But these results show us that many people put arguments such as the common good and the long-term development of the country above their own short-term benefits.

Self-interest influences people much less than you might expect?

In fact, it was surprising for our team to discover that strong social motives limit self-interest in a large proportion of the Swiss population. Specifically, our representative study showed that people can be divided into three different groups based on their social preferences.

Namely?

First of all, there are the altruists, who make up around 35% of our sample. An altruistic person is prepared to use their own resources to help others who are worse off. This support can be of a financial nature, for example through higher taxes, or through the use of their own time.

What does the second group stand for?

This group is characterized by aversion to inequality and makes up around 45% of our sample. As with the altruists, these people have a desire to help the disadvantaged. However, there is a second component here: This is the willingness to forego their own prosperity in order to reduce the income advantages of those who are richer. In other words, they are willing to accept certain macroeconomic losses, such as lower growth, if it means they can achieve greater equality.

And the third group consists of the egoists?

You have to be very precise: We humans all have a selfish trait: Virtually everyone prefers earning more rather than less. The difference is that in this group, which comprises around 20 to 25 percent of the people, we can hardly identify any social motives such as altruism or aversion to inequality that limit selfish behavior.

Is the image that most people primarily maximize their own advantage thus wrong, and only applies to a minority?

Yes, according to our data, the group of people who act according to purely selfish principles makes up no more than a quarter of the populace. We also describe this group as primarily selfish. It is therefore fair to say that people's selfishness is generally overestimated. We also see that voting behavior in Switzerland is characterized by a sense of responsibility. Most people care about the community and want to prevent the governmental finances from getting out of balance, for example.

Why are some people primarily selfish while others are not?

We still know relatively little from research about why a person is driven more by social or selfish motives. Presumably this has a lot to do with the upbringing and attention a person receives. It could also be that school grades play a role: Those who systematically get poor grades have to fear being less successful later in life and are therefore more inclined to be averse to inequality.

Egotist sounds very negative. Is someone with such motives a worse person?

Of course, selfish people are not worse per se. The decisive factor is the consequences of their own behavior on others. If someone is an egoist, but at the same time a successful entrepreneur who creates many jobs, they can be of great benefit to society. Take Bill Gates and Steve Jobs, for example: unlike Gates, Jobs was not known for donating his fortune to charitable causes. Nevertheless, his work was very valuable for the general public.

Let's come back to the voting behavior: Many voters probably approved the 13th AHV pension for selfish reasons, to get more money. Doesn't that contradict your analysis that only a minority are looking out for their own advantage?

First of all, it must be said that the initiative for a 13th pension was very cleverly conceived - economists call this "framing": we have become accustomed to receiving 13 monthly salaries. It thus makes sense to pay pensioners 13 salaries as well. It was also a clever move that the initiative left the financing completely open.

In 2016, voters rejected a similar initiative for higher pensions. Has there been a change in mentality?

I don't think you can draw such conclusions on the basis of one vote. It also seems important to me that the parliament did not draw up a counterproposal to the initiative for a 13th AHV pension. In retrospect, this was probably a mistake from a conservative perspective. I think a watered-down version with less expenditure that focused on need-based payments would have had a good chance with the electorate.

If, according to your research, people have a strong aversion to inequality: How do you explain the fact that numerous proposals calling for more redistribution still fail at the ballot box?

A good example is the 1:12 initiative, which wanted to limit executive salaries to twelve times the minimum wage in a company: This received little support. People generally rate equality positively. But the question is: how high are the associated costs? If the Swiss economy suffers as a result, this also harms the general public. The higher the overall economic costs of redistribution, the lower the level of approval will generally be.

This preference of people for fairness: in which other areas can it be observed?

There are many areas of life: for example, it influences the willingness to do something about climate change. The distribution of income in a company also influences employees' willingness to cooperate. We know that unequal pay for similar work triggers extreme feelings of injustice. Fair pay compared to colleagues in the team has a greater influence on satisfaction than the absolute level of pay.

Is there such a thing as an optimal level of equality?

This varies greatly from society to society. In the USA, for example, the political system tolerates much more inequality than it does in Switzerland. In my opinion, this also has to do with direct democracy, which functions as a corrective here. Citizens' preferences can be better asserted in this way.

There is growing dissatisfaction with the political system in Western countries. Do you see a danger that individual societies are heading towards a tipping point and losing their sense of the common good?

The rise of Donald Trump has a lot to do with the fact that a large proportion of the population no longer feels that politicians take them seriously. One reason for this is the dismantling of trade barriers with China, which has led to the loss of many jobs. Many people voted for Trump because of the widespread fear of social decline. These liberalization steps should therefore be cushioned socially so that those affected have enough time to adapt.

Politicians with autocratic solutions are also gaining popularity in Europe. They promise voters that they can impose more fairness and equality from above.

I think this is a dangerous anti-democratic tendency. In my opinion, a good response to this is a greater degree of direct democracy. This would be difficult to achieve at national level in a large country like the USA with its 300 million inhabitants. But I see a lot of potential for this in the individual states. The system forces the parties to come up with sensible political proposals that are capable of winning a majority. When you see how vividly and successfully this works in Switzerland, you inevitably become a fan of direct democracy.