Inequality and unhappiness

by on September 30, 2007 at 6:33 am in Science | Permalink

What I found was that economic inequality doesn’t frustrate Americans at all.  It is, rather, the perceived lack of economic opportunity that makes us unhappy.  To focus our policies on inequality, instead of opportunity, is to make a grave error–one that will worsen the very problem we seek to solve and make us generally unhappier to boot.

Here is the full article, interesting throughout.  This paragraph is right on the mark:

One of the many problems with the egalitarians’ line of reasoning is that it misinterprets the experimental evidence.  The two famous studies mentioned above don’t necessarily mean, as the egalitarians claim, that people would be happier in a world of total equality.  Rather, they suggest that in a world of inequality, people like having more than others and dislike having less–even to the point of neglecting their financial interests.  How people would react to a miraculously equal world is something that the studies don’t attempt to address.

And this:

But there is another, more fundamental, reason that the arguments linking economic inequality to unhappiness are mistaken.  If the egalitarians are right, then average happiness levels should be falling.  But they aren’t.  The GSS shows that in 1972, 30 percent of the population said that they were “very happy” with their lives; in 1982, 31 percent; in 1993, 32 percent; in 2004, 31 percent.  In other words, no significant change in reported happiness occurred–even as income inequality increased by nearly half.  Happiness levels have certainly shown some fluctuations over the last three decades, but income inequality explains none of them.

Thanks to Michael Cragg for the pointer.  You might also revisit my earlier post on mobility.

Tim Worstall September 30, 2007 at 7:08 am

Far more importantly, a lot of the happiness studies are based on the finding that social inequality (ie, the existence of a social heirarchy) causes unhappiness. For example, studies of beta status monkeys having higher rates of heart disease than alphas: but when the same monkeys are moved into new environments where they themselves are the alphas then they have the same heart disease rates as the other alphas. One famous study is the Whitehall one, which shows that senior civil servants have better health and longer lives than junior ones.

These are showing the effects of one’s position upon the societal totem pole.

We’re then told that th solution is to equalise incomes. But there’s two problems with that logic. While incomes are “part” of the way that social status is defined they’re not the whole of it. Secondly, does anyone really believe that with equal incomes there would be no social heirarchy? In status seeking animals like humans?

Thus the argument fails: we’ll not cure the ills of having a social heirarchy by equalising incomes.

conchis September 30, 2007 at 8:20 am

False dichotomy alert!

It’s an entirely valid point that the perception of mobility is really important for subjective well-being. But this isn’t an either-or proposition, and Brooks seems to be massively overselling the critique of the inequality-unhappiness link.

(1) It’s true that the experimental evidence doesn’t directly assess what would happen in an equal world, but it is nonetheless pretty suggestive.

(2) IMHO The best that can be said of GSS style macro level evidence is that it tells us very little useful… either about the question of whether money buys happiness, or whether it comes at the cost of others’ misery. It’s in general just to crude to be capable of drawing out any of the relationships you want. (See Ormerod et al. recently, who argue that macro-level trends pretty much correlate with nothing. The rest of the piece is a little one-sided, but on this I think they’re right.)

(3) Brooks’ claims about individual level data are consistent with some evidence (e.g. Alesina and di Tella’s work of differences between European and American attitudes to inequality), but inconsistent with other work (e.g. Luttmer’s stuff on neighbours as negatives, which uses better data). There’s a little bit of a puzzle here, but Brooks isn’t contributing to it’s resolution by selectively citing just the evidence that he agrees with. If anything, my sense is that the stuff on the other side is slightly more reliable.

TheophileEscargot September 30, 2007 at 8:28 am

I’ve read Richard Layard’s “Happiness: Lessons from a New Science” and I don’t think Brooks is fairly characterizing its arguments.

Firstly, Layard accepts that to a degree, greater wealth does create greater happiness. Over the last 30 years, US overall wealth has increased. Brooks points out that reported happiness has remained constant. That does not invalidate Layard’s argument, since some other factor must be counteracting the tendency of wealth to make people happier. In Layards view, this factor is inequality.

Secondly, the unhappiness at lower status may not just be due to being at a lower status, but how much and how distinctly below you are. A flatter hierarchy may therefore be better since it reduces the scale of the differences. If your neighbour has a Ferrari and you have a Ford, this may make you unhappier than if he just had a slightly more expensive model of Ford than you.

Michael Foody September 30, 2007 at 10:56 am

Since 1972 many things have changed for the better. Medicine, technology, food and entertainment have all improved. I t could be that these improvements in peoples quality of life don’t actually make people happier or it could be that these improvements make people happier and something else about life makes them unhappier. That something could be increasing inequality. I have no idea whether it is or not, but with so much changing over a 35 year period, to point to static happiness levels and claim that as evidence that inequality doesn’t effect people’s happiness seems just short of silly.

By this thinking, iPhones, pluots, civil rights, the end of the cold war, ebay, aids, and aids medicines have all had no effect on peoples happiness.

Jody September 30, 2007 at 11:19 am

what matters is the impact on happiness when inequality decreases at the margin.

In general there’s a tradeoff between the goals of equality and the overall rate of growth. That’s not merely true of economics, but also true for all sorts of applications where both “fairness” and performance are desirable goals. For instance, in wireless networks, there’s a tension between maximizing total cell throughput and cell-edge throughput. Basically if you want to maximize the average throughput of a cell, the devices on the cell-edge do worse and improving the cell-edge performance comes at the expense of average throughput.

The important question to me intellectually is characterizing the tradeoffs between marginal fairness, marginal average wealth increase, and the aggregate effect on happiness.

Lauren September 30, 2007 at 4:37 pm

Per the previous post, mobility has increased for women, while decreasing for men. Meanwhile, happiness has decreased for women, and increased for men. If mobility=happiness, wouldn’t the figures be reveresed?

jonnyb October 1, 2007 at 9:58 am

I agree completely that creating economic opportunities benefits everyone more than redistributing wealth does. This means economic opportunities for all, including the disadvantaged. There are incentives all around for allocating resources toward creating opportunities for the disadvantaged, however, but by chalking it all up to hard work and ignoring real barriers, the haves are just asking to be burdened long-term by the have-nots.

The main value of this article for me was to get me to switch positions for a while. The article is so self contented and logically sloppy that I found myself championing the author’s straw-man egalitarians.

Let’s rehearse the argument:
1) Happiness is rising and inequality is rising. Aha!
2) There can’t possibly be any other factors involved that might actually be offsetting growing unhappiness with inequality.
3) So if that’s not it, it must be perceived opportunity, which for reasons we won’t get into we’ll assumed are at loggerheads with equality.
4) Now—and stay with me here cause it gets tricky—did you know that people who think they have a good chance of improving their lot are actually happier than others!? (We’ll ask you to please assume that “people like me and my family† means everyone).
5) Liberals believe that work is a vice just like smoking. (We questioned actual people).
6) Conservatives are more likely than liberals to have conservative views.
7) Conservatives are happier (again, assume this is due to the single factor of perceived economic opportunity).
8) “If schools don’t bring the bottom up in America, isn’t opportunity a myth?† Just in case it’s reality rather than perceptions that’s important, and despite all sorts of studies, like the recent one that says that students from the top socioeconomic quartile are 25 times more likely to attend a top tier college than students from the bottom quartile. Despite that, “millions and millions† (wow!) escape poverty every year.
9) OK, forget all that. Don’t we value love and faith and fun more than money, after all? Where are the policies, the outrage, on inequality in those things? (Don’t ask us if we should have policies to create opportunities in those things, though, please.)
10) Those who don’t escape won’t be any happier with redistribution. (We just know. We questioned actual people.)

Ergo: “Honest work, just reward, that’s the way to please our Lord.†

Brilliant!

Neal Piwowarski October 2, 2007 at 10:06 pm

People seem to have learned that economic equality cannot be their sole source of happiness. Maybe people are simply tired of keeping up with the Jones and have learned to find happiness and contentment in other ways, such as taking pride in the quality of their work even if they don’t receive impressive remuneration for it. It takes a real person to accept their place in the economic landscape and accept the fact that they will likely not ascend to a higher socio-economic strata unless their current sitz im leben changes dramatically. There’s no reason to get depressed about someone else’s socio-economic status if one has confidence that they are putting their present financial resources to the best use possible.

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