My friend Andrew Norton politely takes me to task for suggesting that social norms about inequality can themselves affect inequality. He argues that the shifts in attitudes have been minimal, and then goes on to argue that:
The larger reason why social norms are unlikely to be a major factor is that the level of inequality in society is the result of millions of decisions, almost none of which would factor in the consequences on overall income distribution.
I’m not convinced that social norms are irrelevant to market inequality, but I accept that they have probably played only a small part. But there is another way that norms can affect inequality: through the electoral process.
In this, as in many things, the best evidence comes from the US. Princeton’s Larry Bartels has shown that since WWII, inequality has risen under almost every Republican President, and fallen under almost every Democratic President (President Carter is the only exception). Henry at Crooked Timber reprints this graph from his paper, with the solid line showing income growth by decile under Democrats, and the dashed line showing the equivalent under Republicans. I’m not aware of a similar exercise having been performed in Australia (indeed, I suspect the data would be too weak to allow it), but it does indicate that social norms – mediated through the ballot box – can affect inequality.