City Journal: What Really Buys Happiness? (Emphasis is mine.)
The United States is a rich nation getting richer. According to the U.S. Census, between 1993 and 2003 the average inflation-adjusted income in the top quintile of American earners increased 22 percent. But prosperity didn’t end with the top earners: those in the middle quintile saw their incomes rise 17 percent, on average, while the bottom quintile enjoyed a 13 percent increase. This isn’t a short-term phenomenon, either. In the 30 years leading up to 2003, top-quintile earners saw their real incomes increase by two-thirds, versus a quarter for those in the middle quintile and a fifth among the bottom earners.
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...And their [egalitarian politicians] plan draws inspiration from a particular academic theory: that inequality is socially destructive because it makes people miserable. As a scholar working in the field of public policy, I have long witnessed hand-wringing about the alleged connection between inequality and unhappiness. What first made me doubt this prevailing view was not some new scholarly study but rather that when I questioned actual human beings about it, few expressed any shock and outrage at the enormous wealth of software moguls and CEOs. On the contrary, they tended to hope that their kids might become the next Bill Gates.
Were these people somehow unrepresentative of America? Or was the academic consensus wrong? I set out to discover which it was. 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.
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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.
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But happiness does rise if people believe that their families have a chance of improving their standard of living. That belief is worth 12 percentage points in the likelihood of being “very happy.” The GSS asked respondents, “The way things are in America, people like me and my family have a good chance of improving our standard of living—do you agree or disagree?” Those who agreed were 44 percent more likely than those who disagreed to say that they were “very happy,” 40 percent less likely to say that they felt “no good at all” at times, and 20 percent less likely to say that they felt like failures. In other words, those who don’t believe in economic mobility—for themselves or for others—are not as happy as those who do.
This important fact is another reason that the two studies cited above don’t show what the egalitarians think they do: they posit a static universe, a fictional place where incomes don’t change. Perhaps in a world where you have no opportunity for advancement, the most important thing about your income really is how it measures up to other people’s. But in the real world, our attitude about the future matters a great deal. In the 1990s, economist Andrew Clark found that the happiness of British workers actually rose as their reference group’s average income rose relative to their own income—because they saw that rise as evidence of what they themselves could achieve. People take the average income in their group as a measure of their own potential. Rising inequality can even raise our happiness by demonstrating the success that our future may hold.
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Despite the limitations of our school system in improving the lives of the underprivileged, however, more recent studies show robust economic mobility in America. The U.S. Census Bureau, the Urban Institute, and the Federal Reserve have all pointed out that, as a general rule, about a fifth of the people in the lowest income quintile will climb to a higher quintile within a year, and that about half will rise within a decade. True, a significant proportion of people will fall over the same period. But the studies nevertheless put paid to the claim that economic mobility is in any way unusual. Millions and millions of poor Americans climb out of the ranks of poverty every year.
And those left behind, it’s important to note, will almost certainly not become happier if we redistribute more income. Indeed, they will probably become less happy. Policies designed to lower economic inequality tend to change the incentives of both the haves and the have-nots in a way that particularly harms the have-nots. Reductions in the incentives to prosper mean fewer jobs created, less economic growth, less in tax revenues, and less charitable giving—all to the detriment of those left behind. And redistribution can, as the American welfare system has shown, turn beneficiaries into demoralized long-term dependents....
This post reminded me of a quote I recently read by Winston Churchill:
“The inherent vice of Capitalism is the unequal sharing of blessings; the inherent virtue of Socialism is the equal sharing of miseries.”
I think it is exactly opportunity that brings immigrants here- it's what brought my grandparents here, as they saw opportunities diminish in Italy.
It behooves us to create and keep open as many opportunity options as we can. Wish politicians- of all stripes -would take note.
Dana
Posted by: Dana Ames | Aug 20, 2007 at 02:24 PM
My great-grandfather Kruse came from Denmark 125 years ago because he wanted to farm. Being a youngest child, he was not going to inherit land. Land was cheap in Nebraska so he moved there to take advantage of the opportunities.
I agree about opportunities. However, opportunities are only meaningful if one has the knowledge to know how to access them and the support network to encourage pursuit of opportunities. One of my biggest criticisms of conservative economic types who are Christians (who I agree with on a great many things) is the idea of making opportunities available is sufficient. If we are truly to take the mandate that their be no poor among you, then we have to be invested in being sources of transformation in the lives of people living dysfunctional contexts, empowering them to seize opportunities.
Posted by: Michael W. Kruse | Aug 20, 2007 at 05:26 PM
Indeed.
D.
Posted by: Dana Ames | Aug 20, 2007 at 11:41 PM