Measuring inequality

While the wealthiest accumulate billions of euros, large sections of society languish in the financial doldrums – and this is not just true of other countries, but also of Germany, where the wealth distribution is extremely unequal. Moreover, wealth inequality continues to increase. Fabian Pfeffer investigates the structures and social mechanisms that allow such imbalances. Besides holding the Chair of Social Inequality and Social Structures at LMU – a position he took up a year ago – the sociologist is also the founding director of the new Munich International Stone Center for Inequality Research (ISI). The official opening of the new center, which takes place this week, will include a presentation by the prominent French economist Thomas Piketty. Funded by the James M. & Cathleen D. Stone Foundation, ISI is one of almost a dozen centers with similar orientations in the United States and Europe. In our interview, sociologist Fabian Pfeffer sketches out the roadmap for the new center.

What are the aims of the new center?

Fabian Pfeffer: Our research center is devoted to foundational research on social inequality, with a special focus on the distribution of wealth. People like to think that countries like Germany, and even more so Scandinavian countries like Sweden, are less unequal than the United States. Although this may be true for incomes, when it comes to wealth the discrepancy is not smaller than in the States, where I have studied the wealth distribution for many years. In our research, we’d like to describe this inequality precisely, investigate the mechanisms through which is it maintained, and explore how wealth inequality affects subsequent generations. At the same time, we want to subject new visions for a fairer society to rigorous scholarly analysis.

How will the center work?

Pfeffer: The institute is strongly geared toward international exchange and is meant to become a hub of international inequality research. We will bring guest researchers to the center, launch collaborative projects, and establish exchange programs with a strong focus on the next generation of researchers. We’re planning to set up one-year international mentoring programs to bring junior scholars into contact with established inequality scholars from around the world. Improving the data infrastructure for the analysis of inequality will also be a top priority for the center. In Germany, we’re hampered by the absence of a wealth tax since the late 1990s, meaning that we lack corresponding tax data with direct information on wealth. It’s nevertheless possible to use income tax data to make inferences about wealth, but this a complicated and very labor-intensive business. The center should helo build up new data infrastructures in this area.

So you are investigating what exists – but also, what could be?

Pfeffer: Yes, we’re also studying what has been labeled “real utopias.” Incidentally, this work benefits a lot from our international orientation and the global network of Stone Centers, which further expand the perspective of comparative social research. We want to free ourselves, at least momentarily, from the actually existing in order to develop a conception of potentially realizable but utopian-sounding alternatives. Imagining such worlds is already hard work in itself – but then we also have to subject the resulting alternative social models to our normal scientific methods to gauge their promises and limits. A US economist back in the 1990s, for example, started calculating what amount of reparations is owed to the descendants of enslaved Black people in the United States. A lone voice, his peers viewed his work with beffudlment– until 20 years later when presidential candidates for a major party knocked on his door and wanted to know more. Unconditional basic income was also considered a crazy idea until a few economists ran the numbers.

A topic for the center as well perhaps?

Pfeffer: I think that such issues are not so far removed from what we could take up in the longer run. The funding from the foundation allows us, indeed calls us, to address subjects that might be more difficult to implement, say, with German Research Foundation money, as they lie outside the typical funding guidelines.

Could you give an example?

Pfeffer: For instance, we also plan to forge new paths in science communication. Unlike, say, quantum physics, it’s relatively easy for us to communicate what our research is about. I’d like to re-develop a short video format in which we’ve already produced eight pilot episodes in the United States. The videos feature scholars talking about their novel research finding in four minutes. Not a brand new idea, certainly, but the way it’s implemented is what makes it different. For this project, too, I’d like to bring leading inequality researchers from around the world to Munich.

What’s so special about the way it is implemented?

Pfeffer: The inspiration came from the United States, where the largest public radio station NPR (National Public Radio) presents so-called Tiny Desk Concerts on YouTube – a small concert series recorded in the offices of the music editors, between desks and crowded shelves. So along comes, say, Alicia Keys and takes a seat to sing three songs. It’s very intimate – great music unplugged. I was always fascinated by this format and wondered what it would look like in a scientific context. Perhaps we don’t have so many Alicia Keys in the academic world, who make it all seem so easy and relaxed. But our pilot episodes showed that the basic idea can work here as well – personal, accessible, in a small setting.

Are there plans for the center to get its own premises?

Pfeffer: Yes, I could even image that the center will break out of the university walls. I could imagine an old shop with a storefront, a window to the street to create a certain public character. Around the corner from Georgenstrasse, for instance, there’s this great 1950s gas station – something like that would be ideal.

There are just under a dozen similar centers in the US and Europe, financed by the Stone Foundation. Some of them, like the one you founded and directed in Michigan, have been up and running for a few years now, while others, like the one in Munich, are in the process of being established. Is there a common structure?

Pfeffer: Eventually I expect that the centers will form an international network and cooperate in various ways. At the moment, we’re jointly planning a European doctorate network. There’s no clear division of responsibilities between the center.

What does the LMU contribute as locations?

Pfeffer: LMU is an internationally leading university with great expertise in sociology, economics, the political sciences, and adjacent disciplines. There are relevant Max Planck institutes and other non-university research institutions that are working in our topical areas. I’d like to cooperate with the ifo Institute, for example, on things like data infrastructure. The other Stone Centers are also attached to excellent universities, including Harvard, Berkeley, or the Paris School of Economics. I think Munich is in this league.

Will you only do basic research? Or political consulting as well?

Pfeffer: The institute is committed to basic research. But this doesn’t mean we practice research completely remote from application. We will be relevant, including in the sense that we will consider and empirically investigate different – sometimes radically different – models, irrespective of whether they can be politically implemented at this point in time. This is probably the main feature that differentiates us from classical political consulting. What’s relevant and implementable can swiftly change. And then we should be ready for when it does.

What does the roadmap look like for the next few years?

Pfeffer: For all my talk about visions, I’m going to be cautious in making predictions about what this center should look like in five years’ time. I’ve looked at highly prominent, successful research institutes, including here at LMU, which have grown over ten, twenty years to have 100 people on their payrolls. This could be a model for sure, but ISI could also remain small and nimble. The funding for this center is provided with a long-term perspective and I want the institute to grow organically. My ambition is that in ten years, we can say that the major new wealth and inequality scholars have all been here, whether as employees, in an exchange program, at a conference, or to visit.

What projects are you currently planning?

Pfeffer: We have research proposal pending on the potential connection between the growth in wealth inequality and the decline in social trust and social integration. In other words, how does wealth inequality affect the survival of our democracies? This project will be undertaken by a team of outstanding junior scholars from institutions such as Oxford University, the University of North Carolina in Chapel Hill, the Pontificia Universidad Católica de Chile, and the Max Planck Institute in Cologne, whom we plan to bring together here in Munich. We also have a postdoctoral researcher at the chair, Laila Schmitt, who is investigating how wealth inequality is perceived by people in the first place. And I still have a large data project ongoing in the United States, which analyzes U.S. tax data to derive information about wealth and ultimately measures the net worth of all people in the US. We will aggregate these data by localities and districts and display the corresponding wealth level, wealth inequality, and even intergenerational wealth mobility to create a novel data infrastructure for the analysis of U.S. wealth. A similar project for Germany could become one of our first data infrastructure projects.

Professor Fabian Pfeffer is Chair of Social Inequality and Social Structures at LMU and founding director of the Munich International Stone Center for Inequality Research (ISI). Pfeffer studied sociology at the University of Cologne and the University of Wisconsin–Madison (USA), where he also completed his Ph.D. Subsequently, he taught and and did research at the Institute for Social Research and the Department of Sociology at the University of Michigan in Ann Arbor (USA), most recently as Associate Chair. He also founded and directed the Stone Center for Inequality Dynamics there before coming to LMU in 2023.