21 comments

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  Kenny Easwaran

  4 years ago

  one's perception of one's place in the income distribution matters to happiness, such that people lower in the distribution are less happy in virtue of being lower in the distribution (or thinking they are). But, aside from total egalitarianism, which isn't likely to make anyone happy, there is nothing to be done about this.
  
  Is it clear that being in the bottom quintile makes someone equally unhappy, no matter what the gap between quintiles? It's probably the case that any amount of income inequality leads to some unhappiness, but (not having seen the relevant studies) it doesn't seem plausible to me that being in the bottom quintile would always feel just as bad. It's much more plausible that people get used to their absolute status, but that the sizes of relative status gaps in relation to their absolute status make a difference.
  
  And besides, even if being in the bottom quintile always feels just as bad, by having a narrower gap, it seems that there would be more mobility between quintiles. I don't know if the benefit to people as they're moving up would be enough to make up for the pain as they're moving down, but that calls for more study.
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  monkyboy

  4 years ago

  The share of income going to the bottom quintile fell 28% between 1979 and 2002
  
  The share of income going to the top quintile increased 13% between 1979 and 2002
  
  The share of income going to the top 1% of families increased 44% between 1979 and 2002
  
  An 8% tax on the top quintile transferred to the bottom quintile would double the income of the bottom quintile
  
  Once the Republicans took over all branches of government, they stopped the publication of income distribution numbers. One can only imagine how income distribution has changed since the massive Republican giveaways to the rich in 2003.
  
  Maybe the poor are unhappy because they can't afford adequate healthcare and education for their children, not petty jealousy...
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  Blar

  4 years ago

  This argument for redistribution from the rich to the poor is as old as the idea of diminishing marginal utility, and, if my understanding of the SWB literature is correct, then the shape of the utility vs. money curve still supports it. My understanding is that more money does translate into increased happiness for people who don't have much money, but happiness reaches a plateau at a fairly low level of money (something roughly in the neighborhood of twice the poverty rate). So redistribution of money from the rich to the poor does increase utility, since many of the poor are still poor enough to not be in the flat part of the curve.
  
  A related argument from the SWB camp (e.g. in this Frank article) is that, instead of redistributing resources to different people, we should redistribute them to different pursuits, like increased leisure time, which actually do have an impact on people's happiness. If you believe that the vast majority of Americans are already on the flat part of the utility vs. money curve, then this kind of redistribution becomes much more attractive than the money-to-the-poor kind.
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  Half Sigma

  4 years ago

  But sometimes it just FEELS GOOD to stick it to the rich bastards. Doesn't it?
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  monkyboy

  4 years ago

  It feels good if the bastards got rich by slipping a few bucks into Tom Delay's panties so they can suck at the government's teet. Outside of Bill Gates, Steve Jobs an few other actual capitalists, most wealthy get their money through some form of corrption conected with government spending these days. A few years in jail and a 100% tax rate is just.
  
  I'm sure those who use terms like subjective well-being are considered "in the know" in certain female-free psuedo-science classrooms. To see Will, who has less intellectual freedom than a North Korean diplomat, acuse others of a fixed mindset is truly comical. The happiness that comes from being able to provide for your family is getting pretty tough to come by for a large number of Americans.
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  Patri Friedman

  4 years ago

  I agree that the spin put on the research is very political, but I don't think that condemns the research. I think it is interesting and important that absolute money beyond a certain amount doesn't seem to add much to happiness. This is not economically revolutionary - its just declining marginal utility that declines faster than we thought - but it is interesting.
  
  But the pitch as "so then rich people won't suffer much if we take their money" instead of "So poor people aren't actually that unhappy" and "Why should we be sympathetic to people who are sad because of their relative poverty even though they are rich on an absolute scale" is rather biased.
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  Half Sigma

  4 years ago

  Will Wilkinson's trackbacks don't seem to be working, so check out the post I wrote in response to this.
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  Will Wilkinson

  4 years ago

  But it's marginally easier to make people love you if you buy them things that make them "feel all right," isn't it?
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  Andrew Norton

  4 years ago

  A couple of studies carried out here in Australia suggests that traditional income-happiness studies may understate the differences between rich and poor. If you ask about net wealth as opposed to annual income the SWB gaps are slightly larger. Net wealth probably captures standard of living better, since assets purchased from income earned in previous years contribute to current well-being. At least moderate levels of net wealth will also protect against financial stress, which is known to reduce well-being (and which can occur in high income households living beyond their means).
  
  Another issue is whether people can accurately judge their relative income position. The limited Australian research on this suggests that perceptions of this are very inaccurate. So even objective changes in wealth/income distribution won't necessarily translate into subjective well-being.
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  Andrew Norton

  4 years ago

  A couple of studies carried out here in Australia suggests that traditional income-happiness studies may understate the differences between rich and poor. If you ask about net wealth as opposed to annual income the SWB gaps are slightly larger. Net wealth probably captures standard of living better, since assets purchased from income earned in previous years contribute to current well-being. At least moderate levels of net wealth will also protect against financial stress, which is known to reduce well-being (and which can occur in high income households living beyond their means).
  
  Another issue is whether people can accurately judge their relative income position. The limited Australian research on this suggests that perceptions of this are very inaccurate. So even objective changes in wealth/income distribution won't necessarily translate into subjective well-being.
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  Will Wilkinson

  4 years ago

  Glenn, Sure we can have less inequality. I need to check, but I don't think the point in the literature is that not the absolute degree of inequality matters, but people's take on their position in the income distribution. My point was that even if the income distribution is much flatter, there is still a distribution, and people at the bottom will be just as nonplussed about being at the bottom even if the distance to the top is short. I mean, whether the distance between first and last in a footrace is 1 minute or .2 seconds, first is still first and last is still last. And it seems people care about their rank, and the ranks will be the same in a highly equal and highly unequal group of runners.
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  Wild Pegasus

  4 years ago

  No one should find it surprising that material things don't make us happy. We humans have been evolving along a separate line from the rest of the Great Apes for longer than 3 million years. Until about 10,000 years ago or so, none of us had hardly anything. Happiness wasn't found in material things in our evolutionary past because there were no material things to make us happy. I'm not surprised that we are happy, briefly, when we get something new but pretty soon find it mundane.
  
  On another tack, happiness isn't necessarily a good indicator of what we should do. After all, it would make me happy to beat to a living pulp the guy who cracks his gum behind me in the movie theatre. That doesn't make it right. If people are unhappy because others have more than they do, and it makes them happy to tear those with more down, that doesn't tell me whether it's the right thing to do or not. Envy is one of the seven deadly sins, after all.
  
  Monkyboy makes a good point about how some of the rich get their wealth, one that matches my distinction between happiness and correctness. Of course, his economics is atrocious zero-sum nonsense.
  
  - Josh
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  monkyboy

  4 years ago

  Hehe, bad economics.
  
  I was just pointing that rich Americans are getting a huge slice o' the pie these days. It's so bad, the Republicans stopped publishing income distribution numbers after their 2003 giveaways. In 2002 the wealthies 20% of American families got 55% of income...bet it's over 60% now.
  
  Just out of curiousity, what number would indicate a problem to those in the "let them eat cake crowd?," 70%...80%...90%...100%?
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  Wild Pegasus

  4 years ago

  An 8% tax on the top quintile transferred to the bottom quintile would double the income of the bottom quintile
  
  That's Bad Economics 101 right there.
  
  - Josh
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  monkyboy

  4 years ago

  I notice you dodged my question, Josh.
  
  What percentage of income going to the top 20% of families do you consider a problem? If current trends continue, they will be at about 75% around 2010...
  
  Across the globe and back through history, a strong middle class indicates a strong country. We are losing ours. Not sure if it's a chicken and egg kinda thing, but it is troublesome.
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  Wild Pegasus

  4 years ago

  Your question had no bearing on my comments, nor does it address economic law, so I ignored it. Here's a kleenex.
  
  - Josh
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  monkyboy

  4 years ago

  I feel like Brad Pitt in "Troy"...are there no "libertarians" who will answer my question? Or do none of you feel that the top 20% of families getting 99% of the income pie constitutes a problem?
  
  And Josh, your comment has nothing to do with mine, I wasn't suggesting a tax, just pointing out the top quintile has 12 times the average income of the bottom quintile.
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  Wild Pegasus

  4 years ago

  It isn't a problem so long as it's consistent with market distribution. Unfortunately, we are far from that, and many of us have every reason to expect that freer markets mean less disparity in wealth distribution. For a different perspective on libertarianism, try anarcho-mutualist Kevin Carson's website: http://mutualist.blogspot.com.
  
  - Josh
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  monkyboy

  4 years ago

  I'm not quite sure I get your point, Josh.
  
  America is the longest running experiement in capitalism as we understand it. We seem to be going the same way as every other economic system that came before us.
  
  The rich are getting richer is a cliche for a reason. If, in 20 years or so, The top 20% of families are getting 90-95% of all income, do you think libertarians would support government redistribution measures that are counter to everything they believe in?
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  Wild Pegasus

  4 years ago

  I'm not sure what's difficult about my point. Libertarians don't care about the distribution of property as long as that distribution is due to just acquisition and just transfer.
  
  America is the longest running experiement in capitalism as we understand it. We seem to be going the same way as every other economic system that came before us.
  
  I think it would be better to say that the US is going the same way as every political system that went before it. Governments grow in size and power as time goes by, and America is no exception. A group of elites uses the government to protect themselves from competition (both foreign and domestic) and to make sure workers need to keep working long after they could have retired in a free market. Read some of the New Left revisionist history, such as Gabriel Kolko's Triumph of Conservatism. I also suggest Carson's blog and his Studies in Mutualist Political Economy (available on his website).
  
  If, in 20 years or so, The top 20% of families are getting 90-95% of all income, do you think libertarians would support government redistribution measures that are counter to everything they believe in?
  
  I wouldn't, because that wouldn't solve the root problem. It'd be like a bandage on a gaping wound. The real problem is one group using the government to enrich themselves at the expense of another. And no, I don't mean welfare queens.
  
  - Josh
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  Wild Pegasus

  4 years ago

  Whoops, the second and fourth paragraphs in my previous post were supposed to be italicised. I'm quoting monkyboy.
  
  - Josh
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