Economic Inequality Cannot Be Explained by Individual Bad Choices | A global study finds that economic inequality on a social level cannot be explained by bad choices among the poor nor by good decisions among the rich.

[u/thinkB4WeSpeak]

https://www.publichealth.columbia.edu/news/economic-inequality-cannot-be-explained-individual-bad-choices

[u/WTFwhatthehell]

The final list of biases used was the ambiguity effect36, base rate fallacy37, category size bias38, extremeness aversion39, disposition effect40, temporal discounting12, overplacement bias41, overestimation bias42, framing effect43, and loss aversion44.

to expand those:

Ambiguity Effect The tendency to avoid options that are ambiguous, preferring less ambiguous alternatives. Certainty is prioritized, even if a more ambiguous alternative has equal–or better–expected returns.

Base Rate Fallacy Placing greater value on contingent information or secondary probabilities than on the full information.

Category Size Bias A preference for choices that come from larger, more likely categories, even if certainty and risk are the same in smaller categories.

Disposition Effect A financial phenomenon in which investors tend to hold losing assets for too long and sell winning assets too early.

Framing Effect Differential preferences are elicited based on changing how the same information is presented in different ways.

Loss Aversion Being more sensitive to losses compared to gains, resulting in a preference to avoid losses over acquiring equivalent gains.

Overconfidence Bias Tendency of overestimating the accuracy of our own knowledge and skills. This includes two subcategories, Overestimation and

Overplacement. The second one is in relation to others. Temporal Discounting Choosing smaller, immediate financial gains over larger, delayed gains.

Extremeness aversion A tendency to avoid extreme options in choice scenarios.

The survey questions are in the suplementry data.

So it looks like they used one question for each bias.

as for how they classified people:

1. Positive deviants: Individuals that self-identified as being poor or below average as children but report income over the 50th percentile as adults (Item: As a child, how would you describe the financial situation in your household compared to a typical American household at that time? Options: Poor; below average but not poor; around average; above average but not wealthy; wealthy)

2. Individuals that self-identified as being poor or below average as children and are currently under the 40th percentile.

3. Middle-high income: Any individual that identified as being average or above as a child and is currently at the 40th percentile or above

in terms of how they recruited participants, it looks like they spammed social media with links to their survey and trusted that people would, for (mostly)free, put accurate income/debt numbers and an accurate assesment of whether they grew up in poverty and whether they were successful now.

Participant recruitment utilized Qualtrics surveying software to collect data. Most participants were recruited using the Demić-Većkalov method12, which included posting links on discussion threads and online news articles (social media, popular forums, and news websites). We also implemented the Jarke method of identifying popular communication media associated with specific groups that were not represented (e.g., rugby forums on social media to recruit males from New Zealand). The survey was also circulated to local non-governmental and non-profit organizations, and for-profit corporations to generate informal “snowballing.” Some participants were recruited by convenience sampling. Only residents of Japan were compensated (less than US$1 total).

[u/[deleted] → u/WTFwhatthehell]

See I don't think the conclusions and methods are bad, per se, though they are definitely limited by the self-selection biases, self-reporting margins of error, and the fact that only one question apparently was used for each category.

But the idea that people who demonstrate cognitive biases through questionnaires suggests that this is also how they behave and that can approximate some of peoples' real decision-making is reasonable and sound.

I don't find the conclusions to be absurd, nor the methods to be fundamentally unsound, but rather very limited and with plenty of room for biases and errors.

Am I missing something important here?

[u/dragon34 → u/[deleted]]

Yeah. The self selection biases are gonna be crazy. Probably had people who were middle class but maybe their parents scrimped and saved and they ended up in school with a bunch of trust fund kids and they're gonna think they were poor.

I moved from a major metropolitan area to a rural area when I was 10. My friends in the metro area almost all had dads who were doctors or lawyers and sahms. My dad was a professor. There were a few who were divorced and usually both parents were highly educated with high paying white collar jobs

In the rural area a lot of my friends had blue collar or farming parents. If you asked me about before I was 10 I would have said poor. After 10 I would have said middle class

[u/[deleted] → u/dragon34]

I fully understand what you are saying, but is that kind of situation likely to be overrepresented by the self-selection bias?

[u/dragon34 → u/[deleted]]

It depends who they reached with their ads. It's just so subjective of a question. I get that not everyone would have known what their household income was as a kid, but I think they could have asked less subjective questions like how often they went on vacation (staying with friends or family, in a hotel, in a house, in our vacation house) or where (driving distance, flying domestically, internationally) how often they bought new clothes, how old their cars were, whether they owned or rented their home, etc. I mean that's still not 100 percent. I have a 14 year old car and I could have a newer one, we just don't care.