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This talk explores the attenuated response of governments to rising economic inequality in Europe and North America. Political interventions in the economy depend on how elected representatives learn and reason about various forms of inequality and, ultimately, and how they decide when political action is required. Regardless of actual changes in inequality, legislators with leftist identity perceive inequality as rising and unfair, while rightist politicians hold the opposite views. When legislators then think about public demand for redistribution, they rely on their own redistributive preferences as a heuristic: the more supportive politicians are about redistribution, the higher their estimation of support for redistributive policies. Politicians thereby display a false consensus effect in their assessment.

Surveys and interviews with over 800 politicians in five democracies—Belgium, Canada, Germany, Netherlands, and Switzerland—elicit politicians' perceptions of economic inequality, their redistributive preferences as well as their estimates of public support among citizens. Politicians belonging to conservative parties perceive inequality to be smaller than those on the left. They also attribute less unfairness to inequality. Similarly, politicians who strongly oppose a redistributive policy do not believe that a majority of citizens favor it; however, when politicians are supportive of the measure by themselves, they believe that over 60% of citizens prefer a redistributive policy. These perceptions have behavioral consequences: legislators who believe that inequality is rising and unfair raise this issue in their parliamentary speeches. The talk probes into the intentions of elected representatives when dealing with economic inequality, unequal representation and economic policymaking in European democracies.