My UNDER THE INFLUENCE: PUTTING PEER PRESSURE TO WORK will be published on January 28 by Princeton University Press. In this thread, I’ll describe a false belief that might reasonably be called THE MOTHER OF ALL COGNITIVE ILLJUSIONS. 1/
@PrincetonUPress @a_f13nd
@PrincetonUPress @a_f13nd
In a previous thread, I noted that the wealthy in a high-tax world in which all drove $150,000 Porsches on well-maintained roads would be happier than the wealthy in a low-tax world in which all drove $330,000 Ferraris on roads riddled with foot-deep potholes. 2/
Why, then, don’t the wealthy elect leaders who will deliver the former option? Here I’ll consider the possibility that voter hostility to higher taxes may be rooted in a simple cognitive illusion. 3/
First, a few general observations about the nature of cognitive illusions. Because we are bombarded by terabytes of information each day, our nervous systems employ heuristics, or rules of thumb, for evaluating it. These work well most of the time. But not always. 4/
In the diagram below, which square is darker, A or B? If you think A looks darker, your eyes and brain are functioning normally. Yet your judgment is incorrect. In what's called the checker-shadow illusion, square A is exactly the same shade of gray as square B. 5/
Look at the figure again carefully. If your reaction is typical, you might be thinking, "That can't be true!" And yet it is. The psychologist Richard Wiseman offers this explanation: 6/
“Your eyes and brain see that the two squares are the same shade of gray, but then think, 'Hold on—if a square in a shadow reflects the same amount of light as a square outside of the shadow, then in reality [square B] must be a much lighter shade of gray.'”7/
Wiseman continues: “As a result, your brain alters your perception of the image so that you see what it thinks is out there in the real world.” This is an adaptive response, something we'd want our brains to do. 8/
Now study the amended image below, and note the complete lack of contrast between squares A and B and the added strip that joins them. Only upon seeing this second image are many people even able to consider the possibility that A and B might be the same shade of gray. 9/
As the checker-shadow illusion dramatically illustrates, a statement that seems incontrovertibly true (“Square A is darker than square B.”) may in fact be false. Might the same be true of self-evidently true beliefs about the effect of higher taxes? 10/
When someone asks, "How will a tax increase affect me?" the natural first step is to try to recall the effects of tax increases in the past. But that strategy doesn’t work now, since top marginal tax rates have fallen steadily since the 1940s 11/
In WWII, the top marginal tax rate in the US was 92%. In 1966, it was 70%, and in 1982, just 50%. Currently it is 37%. Apart from brief and isolated increases almost too small to notice, top marginal tax rates have declined steadily for Americans alive today. 12/
When Plan A fails, we go to Plan B. Because paying higher taxes means having less money to spend on other things, a plausible alternative cognitive strategy is to estimate the effect of tax hikes by recalling earlier events that resulted in lower disposable income. 13/
That could happen from a business reverse, for example, or a losing lawsuit, or a divorce, or a house fire, maybe even a health crisis. Rare is the life history that is completely devoid of events like these, which share a common attribute: They make people feel miserable. 14/
Such events also share a second feature: They reduce our own incomes while leaving others’ incomes unaffected. Higher taxes, in contrast, reduce all incomes in tandem. This difference holds the key to understanding why people overestimate the pain of higher taxes. 15/
As most prosperous people would themselves be quick to concede, they have everything anybody might reasonably be said to need. If higher taxes pose any threat, it would be to make it more difficult for them to buy life's special extras. 16/
But “special” is an inescapably relative concept. To be special means to stand out in some way from what is expected. And almost without exception, special things are in limited supply. 17/
There are only so many penthouse apartments with sweeping views of Central Park, for instance. To get one, a wealthy person must outbid peers who also want it. The outcomes of such bidding contests depend almost exclusively on relative purchasing power. 18/
And since relative purchasing power is completely unaffected when the wealthy all pay higher taxes, THE SAME PENTHOUSES END UP IN EXACTLY THE SAME HANDS AS BEFORE. 19/
Higher tax rates on prosperous Americans could handicap their attempts to outbid oligarchs from other countries in the contests to acquire trophy properties in the US. But that could be remedied easily by the imposition of a purchase levy on nonresident buyers. 20/
In short, the answer to the question of why voters haven’t supported the taxes necessary to finance desperately needed public investment is that many suffer from the illusionary belief that higher taxes would make it harder for them to buy what they want. 21/
Measured by its consequences for public welfare, it would be no exaggeration to cell this false belief THE MOTHER OF ALL COGNITIVE ILLUSIONS. 22/
UNDER THE INFLUENCE is about the awesome power of the social environment to shape all that we believe, say, and do. It describes simple steps that could harness that power to help solve the most pressing problems we face, chief among them, the climate crisis. 24/
