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The extent of inequality that people perceive in the world is often a better predictor of individual and societal outcomes than the level of inequality that actually exists. As such, scholars from across the social sciences, including economics, sociology, psychology, and political science, have recently worked to understand individuals' (mis)perceptions of inequality. Unfortunately, many researchers treat the process underlying such perceptions as a black box, focusing predominantly on lay people's numeric estimates of inequality, and paying less attention to how people come to form these perceptions or what these perceptions mean to participants. In the current review, we draw on research in perception, cognition, and developmental and social psychology, to introduce a novel comprehensive framework for understanding individuals' perceptions of inequality. We argue that subjective perceptions of inequality should be viewed as a process that unfolds across five interlinked and iterative stages. To form perceptions of the scope of inequality in society, people need to (1) have access to inequality cues in the world, (2) attend to these cues, (3) comprehend these cues, (4) process these cues (often succumbing to motivational biases), and (5) summarize these cues into a meaningful representation of inequality. Our framework highlights when and why lay people may misperceive the scope of inequality in society and provides a roadmap for research to examine how the processes in people's minds affect the outcomes researchers are ultimately interested in.

The extent of inequality that people perceive in the world is often a stronger predictor of individual and societal outcomes than the level of inequality that actually exists. It is therefore imperative for researchers to theoretically conceptualize and empirically operationalize perceived inequality in a coherent and consistent manner. However, the lack of consensus on what constitutes perceived inequality can lead researchers to use the same words to study different phenomena. What seem like minor methodological decisions made in the study of inequality can substantially influence the outcomes and conclusions that researchers dra from their work. In this review, we draw on a wide range of interdisciplinary work, including from social and cognitive psychology, economics, political science, and sociology, to unpack the assumptions researchers often make. We develop the four questions framework which illustrates the important theoretical and empirical decisions researchers are recommended to address when studying perceived inequality: (1) What kind of inequality? (2) What level of analysis? (3) What part of the distribution? and (4) What comparison group? We posit that this framework provides the conceptual clarity necessary for understanding when, how, and why perceptions of inequality affect individuals and societies.