Happiness vs Inequality

Perhaps  the contradiction is more apparent than real. If  so please set me straight.

The  inequality folks like Wilkinson and Pickett argue – convincingly, to my mind  – that those at the top of the income spectrum do hugely better on a wide range of objective well being indicators (eg longevity) than those at the middle and bottom.

But the happiness folks are telling us that income is not well connected to subjective well being beyond a very basic threshold, so happiness is higher in relatively low income communities like Sherbrooke than in Toronto or Vancouver.

For some reason, progressives seem to have glommed on to to the idea that the level of income doesn’t count for much beyond a basic threshold.

How to square the circle?  

My take is that the burdens of being at the bottom may be alleviated – but not hugely so – by living in a solidaristic lower income community. 

And if folks at the bottom of the income spectrum are “happy”, they shouldn’t be.

9 comments

  • I could have added this. Yes, GDP is a very incomplete measure of well being, But people sure seen to be unhappy when it falls off a cliff.

  • I think you’re saying that happiness levels off but objective wellbeing doesn’t, so we shouldn’t be content with the “decent minimum” form of egalitarianism.

    My understanding is that there’s a leveling-off effect in both happiness and well-being: you can be 100 times wealthier than another person but aren’t going to be 100 times happier or live 100 times longer.

    But you’re right that the leveling-off effect works differently in the two fields. In our society as it is, you are not going to get happier past a certain point. But you are still going to get healthier (for some health conditions, not all). But (W & P) being wealthy in a more equal society is going to be better for you than being wealthy in a more unequal society.

  • It seems doubtful to me that inequality (measured by, for instance, the Gini coefficient) is as important to wellbeing as satisfying basic needs like food, shelter, and medical care. You can do some fairly simple thought-experiments to convince yourself of this if necessary.

  • One explanation is that relative income, wealth and consumption matters for happiness, which a lot of the studies have shown. If inequality and differences in position are obvious it could make lower-income folks less happy.

    There can also be positional races to make ourselves happy by doing better than everyone else, but it is a zero-sum game since others are unhappy.

    The implications of positional consumption and relative income effects on happiness are tricky – but inequality might matter more than absolute income.

  • I agree with Lynette – there’s definitely a levelling off effect happening as income increases for both happiness and a lot of the objective measures you speak of, Andrew. Sure, life expectancy may be higher for the top-paid CEOs than for the average worker, but it’s not 200 times higher (the difference in their wages). Heck, it’s not even double.

    To help you “square the circle”, I’d like to see the actual reports you find inconsistent so I can get an idea of the level of magnitude of the discrepancy in results you’re finding. Which is to say, as usual, the devil is in the details and I think if you look closely you won’t see that much of a discrepancy in the data.

    The Economist had an interesting graph on this in their Daily Graphs section a while ago (link here). They show that if you just plot GDP on the x-axis and a life satisfaction measures on the y-axis there’s a clear levelling off, but if you use a log-scale of GDP then you see a positive relationship. Why you’d want a log-scale and how meaningful it is to look at the effects of doubling per-capita GDP is left as an exercise to the reader.

  • OK, maybe I’m not understanding something here, but I’m not seeing even an apparent contradiction.

    Those who study happiness tend to find that inequality itself makes people on average less happy (mainly those on the bottom of the inequality). So, people with the same income level will be less happy if they are at the bottom of an unequal income arrangement than if they are in a community of near-equals.

    This could reasonably lead to findings that people with low, but more or less workable, income and security levels, could be happier if in a fairly equal, cohesive society than people with higher income levels who were in a very unequal one. This might be particularly true if the more equal society was more stable or had measures, formal or informal, that buffered people from insecurity . . . being higher income (for the moment) but less secure might not lead to increased happiness even aside from inequality issues.

    There’s a side question of measurement in my mind as well . . . cost of living in Vancouver and Toronto are way higher than in Sherbrooke, not so? So, are apples and apples being compared or just dollars? Someone might in fact be just as well off on a considerably lower income in Sherbrooke.

    Finally, do the inequality folks study egalitarian societies? To get control data that told you about the impacts of wealth levels as opposed to positional impacts, it would be necessary both to compare people at the top, middle and bottom of wealthier and less-wealthy hierarchies and to compare egalitarian societies at various different wealth levels. Then you could tell whether middle-class people in starkly unequal societies were equally, better or worse off in health indicators etc. than people in egalitarian societies with the same wealth level, and so on. Just looking at how the wealthy do versus the poor in a given society doesn’t necessarily tell you why.

  • The real reason for this discrepancy is the fact that happiness is not a stable, persistent property of people. Attempts to measure it inevitably lead people to measure their current mood, which is always relative to their usual experience. People aren’t able to consciously evoke their level of happiness in an absolute sense, if such a thing exists at all, which is doubtful.

    Now, there is something to say for the meaningfulness of individual preferences. Tautologically, people seek to fulfill them. But the analysis of the sensibility of individual preferences from the standpoint of the welfare of the individual is by definition outside the scope of the economic model in which the preferences appear. There are many poor people who gamble away their own rent money.

  • Iglika–aha! That’s the cause of the widening gap. The perfectly rational wealthy realize they have to double their income for each new increment of well-being.

  • I endorse Andrew’s clarified thinking on this subject.

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