STUDY: Just knowing how much your neighbor earns makes inequality worse

Keeping up with the Joneses could be tearing America apart, according to a new Yale University study.

During the study, researchers in the school’s Institute for Network Science placed 1,462 test subjects into “societies” with three levels of economic inequality. They were given an initial endowment, and played 10 rounds of a game in which they could choose whether to “cooperate” or “defect.” Cooperators opted to reduce their own wealth to increase the wealth of all neighbors. Defectors decided to pay no cost and provide no benefits to others.

When people didn’t know their neighbors’ financial statuses, they cooperated and interacted much better with each other, the researchers found. When they were aware of neighbors’ wealth, cooperation halted and inequality increased.

Dave Rand, a co-author of the study, which was published in the journal Nature, told me he was surprised at how much behavior changed when wealth became visible.

“You couldn’t do that much to punish the rich for not cooperating,” he explained, “so seeing others making more than you makes you disgruntled, because there’s nothing you can really do about it.”

Here’s the chart that helps explain the results. All the dashed lines, representing “invisible” wealth, trend lower than the full lines, which show “visible” wealth. The data are charted using the Gini coefficient, a common yardstick for inequality.

The visible gaps in wealth could be setting off neurological and psychological processes that undercut social cooperation, the study suggested, as people may begin to perceive their financial status as a competition.

“These are complicated interactions,” Akihiro Nishi, an associate research scientist at Yale, said in a press release. “I would say, ‘If you are watching others’ wealth, watch out.”

Rob covers business, economics and the environment for Fusion. He previously worked at Business Insider. He grew up in Chicago.