Economics of Happiness (Economist Book Review)

[Infohawk]

Economist Review of book on Happiness

[A]ccording to many surveys taken in rich countries. These tend to show that, once a country has lifted itself out of poverty, further rises in income seem not to create a meaningful rise in the proportion of people who count themselves as happy.

Among many things, the behaviourists have found that it is relative, not absolute wealth, that matters most to people.

Mr Layard cites as evidence a study in which [...] students claimed to prefer earning $50,000 a year when their peers are on only $25,000 to a world in which they earn $100,000 while their peers get more than double that amount.

So, Lord Layard's thinking goes, by spending 90 hours a week in the office, you may be improving your own income, but you are also causing other people to feel less satisfied with theirs. They may be encouraged to work longer themselves just to keep up, taking from the time that gets devoted to family and community.

Fortunately, he notes, economists have already figured out how to deal with such externalities: tax them so that the polluter internalises the cost of his actions. And so, near the top of Lord Layard's list for improving human happiness, comes the following recommendation: much higher rates of income tax to tame the rat race.

 

[yllus]

I'm not particularly pleased at the prospect of working for the rest of my life, but other than making note that 'this sucks' I realize that we've yet to come up with an alternative mechanism to make the world go 'round.

 

[Infohawk]

Originally posted by: yllus
I'm not particularly pleased at the prospect of working for the rest of my life, but other than making note that 'this sucks' I realize that we've yet to come up with an alternative mechanism to make the world go 'round.

Nobody is disputing that. :roll:

 

[CADsortaGUY]

Originally posted by: Infohawk
Economist Review of book on Happiness

[A]ccording to many surveys taken in rich countries. These tend to show that, once a country has lifted itself out of poverty, further rises in income seem not to create a meaningful rise in the proportion of people who count themselves as happy.

Among many things, the behaviourists have found that it is relative, not absolute wealth, that matters most to people.

Mr Layard cites as evidence a study in which [...] students claimed to prefer earning $50,000 a year when their peers are on only $25,000 to a world in which they earn $100,000 while their peers get more than double that amount.

So, Lord Layard's thinking goes, by spending 90 hours a week in the office, you may be improving your own income, but you are also causing other people to feel less satisfied with theirs. They may be encouraged to work longer themselves just to keep up, taking from the time that gets devoted to family and community.

Fortunately, he notes, economists have already figured out how to deal with such externalities: tax them so that the polluter internalises the cost of his actions. And so, near the top of Lord Layard's list for improving human happiness, comes the following recommendation: much higher rates of income tax to tame the rat race.

Info - do you think higher taxes will make people happy?

CsG

 

[yllus]

Originally posted by: Infohawk

Originally posted by: yllus
I'm not particularly pleased at the prospect of working for the rest of my life, but other than making note that 'this sucks' I realize that we've yet to come up with an alternative mechanism to make the world go 'round.

Nobody is disputing that. :roll:

Where in what I wrote did I try to contend a point with anyone? It was a general comment. Little touchy there, aren't ya?

 

[Infohawk]

Originally posted by: CADsortaGUY
Info - do you think higher taxes will make people happy?

CsG

There is no single answer to that question. It would depend what the baseline is and how much higher you want to make it. If what the author says is true than higher taxes on certain people might produce gains in happiness in rich countries.

 

[CADsortaGUY]

Originally posted by: Infohawk

Originally posted by: CADsortaGUY
Info - do you think higher taxes will make people happy?

CsG

There is no single answer to that question. It would depend what the baseline is and how much higher you want to make it. If what the author says is true than higher taxes on certain people might produce gains in happiness in rich countries.

OK, so IF what he claims is true, what is your take on how it applies to the US? Or did you have a different angle on this?

CsG

 

[Infohawk]

IF his claims were true and we wanted to have a happier society we would increase the higher tax rates (and probably add more tax brackets). You would increase taxes (and lower others probably for poorer people) to try to mitigate income disparity. I think by extension you would also have a good argument for instituting work limits and mandatory vacation because the study suggests people only sacrifice those to keep up in the rat race.

 

[CADsortaGUY]

Originally posted by: Infohawk
IF his claims were true and we wanted to have a happier society we would increase the higher tax rates (and probably add more tax brackets). You would increase taxes (and lower others probably for poorer people) to try to mitigate income disparity. I think by extension you would also have a good argument for instituting work limits and mandatory vacation because the study suggests people only sacrifice those to keep up in the rat race.

You are saying this in the context of the US?

CsG

 

[Infohawk]

Yeah, though it would work better if we could get cooperation from other rich nations.

 

[miketheidiot]

I remember reading in psychology that increases in wealth only caused signifigant gains in happyness up to a certian point. Why work more when you already have everything you need? I suppose its like dimishing marginal utility in aggregate.

 

[Infohawk]

Originally posted by: miketheidiot
Why work more when you already have everything you need?

This guy's argument is that it's the rat race effect. I tend to agree with him. I think a lot of people prefer to be top dog than a high-earning person on the bottom of society. And apparently he has data to back it up.

Let's face it that even poorer people today stil have much more than aristocracy did far back in the past. Yet they don't feel high and mighty.

 

[CADsortaGUY]

Originally posted by: Infohawk

Originally posted by: miketheidiot
Why work more when you already have everything you need?

This guy's argument is that it's the rat race effect. I tend to agree with him. I think a lot of people prefer to be top dog than a high-earning person on the bottom of society. And apparently he has data to back it up.

Let's face it that even poorer people today stil have much more than aristocracy did far back in the past. Yet they don't feel high and mighty.

And so what is the fix? Take from those people and give it to the people who feel sad?
How exactly do you or the author think the problem can be solved? If everyone wants to be on top - how is that going to be accomplished? Pay everyone the same no matter what their function in society is?

CsG

 

[Engineer]

Originally posted by: CADsortaGUY

Originally posted by: Infohawk
Economist Review of book on Happiness

[A]ccording to many surveys taken in rich countries. These tend to show that, once a country has lifted itself out of poverty, further rises in income seem not to create a meaningful rise in the proportion of people who count themselves as happy.

Among many things, the behaviourists have found that it is relative, not absolute wealth, that matters most to people.

Mr Layard cites as evidence a study in which [...] students claimed to prefer earning $50,000 a year when their peers are on only $25,000 to a world in which they earn $100,000 while their peers get more than double that amount.

So, Lord Layard's thinking goes, by spending 90 hours a week in the office, you may be improving your own income, but you are also causing other people to feel less satisfied with theirs. They may be encouraged to work longer themselves just to keep up, taking from the time that gets devoted to family and community.

Fortunately, he notes, economists have already figured out how to deal with such externalities: tax them so that the polluter internalises the cost of his actions. And so, near the top of Lord Layard's list for improving human happiness, comes the following recommendation: much higher rates of income tax to tame the rat race.

Info - do you think higher taxes will make people happy?

CsG

No, but smaller federal government and LESS spending would!

<-- The fiscal conservative side!

 

[SuperTool]

Originally posted by: CADsortaGUY

Originally posted by: Infohawk

Originally posted by: miketheidiot
Why work more when you already have everything you need?

This guy's argument is that it's the rat race effect. I tend to agree with him. I think a lot of people prefer to be top dog than a high-earning person on the bottom of society. And apparently he has data to back it up.

Let's face it that even poorer people today stil have much more than aristocracy did far back in the past. Yet they don't feel high and mighty.

And so what is the fix? Take from those people and give it to the people who feel sad?
How exactly do you or the author think the problem can be solved? If everyone wants to be on top - how is that going to be accomplished? Pay everyone the same no matter what their function in society is?

CsG

Progressive taxes = diminishing returns from working too much.

 

[Infohawk]

Originally posted by: CADsortaGUY
And so what is the fix? Take from those people and give it to the people who feel sad?
How exactly do you or the author think the problem can be solved? If everyone wants to be on top - how is that going to be accomplished? Pay everyone the same no matter what their function in society is?

CsG

Like I think I said above, hisfix is to decrease wage disparity. That doesn't mean get rid of it and pay a janitor and a doctor the same wages. It probably means limiting the doctors wages. There would still be people at the top but it would be mitigated. And you wouldn't give to people who feel sad on a individual basis. It would be a more progressive scheme.

Personally I've always thought an easier way to do this is to really jack up the estate tax for people with over a 1 million dollar estate (per child). If everyone started from a baseline at birth there would less disparity in wealth (here i'm not talking about wages) and less of a rat-race feel but still reward people for providing in demand labor. That said, I think more progressivity, especially on the very high-ends would be great.

 

[Infohawk]

Originally posted by: SuperTool

Progressive taxes = diminishing returns from working too much.

Or what if we actually taxed work over 40 hours a week to a higher extent than income below the 40 hour limit (yes this would screw with overtime but lots of people working long hours are exempt anyway)? That would get rid of the working too much problem. But I think that was only part of the author's complaint. His other complaint is that the mere existance of haves and haves-way-mores makes people unhappy. It makes the haves-mores unhappy because they sacrifice so much to get it and it makes the haves-less unhappy because they feel the need to catch up.

 

[CADsortaGUY]

Originally posted by: Infohawk

Originally posted by: CADsortaGUY
And so what is the fix? Take from those people and give it to the people who feel sad?
How exactly do you or the author think the problem can be solved? If everyone wants to be on top - how is that going to be accomplished? Pay everyone the same no matter what their function in society is?

CsG

Like I think I said above, hisfix is to decrease wage disparity. That doesn't mean get rid of it and pay a janitor and a doctor the same wages. It probably means limiting the doctors wages. There would still be people at the top but it would be mitigated. And you wouldn't give to people who feel sad on a individual basis. It would be a more progressive scheme.

Personally I've always thought an easier way to do this is to really jack up the estate tax for people with over a 1 million dollar estate (per child). If everyone started from a baseline at birth there would less disparity in wealth (here i'm not talking about wages) and less of a rat-race feel but still reward people for providing in demand labor. That said, I think more progressivity, especially on the very high-ends would be great.

Right, so this guy want to take from some and give to others to "fix" it. Sounds like theft to me.

So anyway, lets say taxes were raised on those who make more. How does that "help" those who are close to the bottom? Doesn't it just bring the top down instead of the bottom up? Or are you suggesting that only the very top pay taxes(which still doesn't bring the bottom up as they don't pay much in taxes)?

CsG

 

[Tommunist]

I think this is a situation where people need to realize what makes them happy. You can do without sweeping economic policy changes and just realize that you don't need to have the nicest car on your street, etc. I see a lot of people at work really killing themselves to get ahead and I wonder why - what's the point of getting ahead if you are misreable while you are getting there. I'm comfortable enough to support myself and save for the future. Sure I could really bust my balls and get ahead and make more cash but why? I'm happier as it is.

 

[Infohawk]

Originally posted by: CADsortaGUY
Right, so this guy want to take from some and give to others to "fix" it. Sounds like theft to me.

Well if you're coming from the natural law - tax is theft perspective, I can't help you... Personally I don't think of it in moral terms and I think most attempts to do so are weak and outdated (see natural law). It's just tax policy. My view is that if society is better off with lower taxes, so be it. If they are better off with high taxes, so be it.

So anyway, lets say taxes were raised on those who make more. How does that "help" those who are close to the bottom?

It would probably help the middle class more. It would help them by making them feel less like they were inferior to those above them.

Doesn't it just bring the top down instead of the bottom up?

It depends what is being brought down. The study suggests it wouldn't hurt them in the happiness department. Again the study shows increases in wealth after a certain point doesn't really help happiness. But if you are talking about how much cash they will have-- it would be less.

Or are you suggesting that only the very top pay taxes(which still doesn't bring the bottom up as they don't pay much in taxes)?

No.

 

[Infohawk]

Originally posted by: Tommunist
I think this is a situation where people need to realize what makes them happy.

I think there's a lot of truth in this. But I think what this author and some psychologists are saying is that most people cannot make this realization. It may be based in some biological reality, not just on their value-set. I haven't read the book but if someone made the case that humans have a happiness ceiling based on the existence of people those who are wealthier, it would make me a lot more interested in progressive taxation. If this isn't true than obviously it's more efficient to let people make their own decisions.

I think a good medium ground is having better overtime and vacation laws. Competition helps our society be efficient but I think the efficiency gains brought by allowing people to work all the time creates more harm than good.

 

[CADsortaGUY]

Originally posted by: Infohawk

Originally posted by: CADsortaGUY
Right, so this guy want to take from some and give to others to "fix" it. Sounds like theft to me.

Well if you're coming from the natural law - tax is theft perspective, I can't help you... Personally I don't think of it in moral terms and I think most attempts to do so are weak and outdated (see natural law). It's just tax policy. My view is that if society is better off with lower taxes, so be it. If they are better off with high taxes, so be it.

So anyway, lets say taxes were raised on those who make more. How does that "help" those who are close to the bottom?

It would probably help the middle class more. It would help them by making them feel less like they were inferior to those above them.

Doesn't it just bring the top down instead of the bottom up?

It depends what is being brought down. The study suggests it wouldn't hurt them in the happiness department. Again the study shows increases in wealth after a certain point doesn't really help happiness. But if you are talking about how much cash they will have-- it would be less.

Or are you suggesting that only the very top pay taxes(which still doesn't bring the bottom up as they don't pay much in taxes)?

No.

1)No, I'm not saying all taxes are theft. However the motives behind them can make them theft. Why exactly should one person pay 30% of his earnings when another only pays 10%? Is the one paying 30% being punished for something? Why does he pay a higher percentage? Yes yes, he uses more:roll: But he already pays more if he earns more. So again - what is the basis of your take more(percentage) from those who make more idea?

2) so we are manipulating our revenue collection system to support a "feeling"? And to achieve this, we have to knock those on the top down?

3) Yes, happiness may not be proportional to one's monetary wealth, but I think their unhappiness might be stirred if their earnings are confiscated to knock them down some.

4) then how exactly are you going to make people happy? If you take from the top - where is it going? Why do you need to take anything from the middle or low? Wouldn't it help them be happier if you took nothing from them and more from the top? It'd get bring them closer - would it not?

CsG

 

[Infohawk]

Originally posted by: CADsortaGUY
1)No, I'm not saying all taxes are theft. However the motives behind them can make them theft. Why exactly should one person pay 30% of his earnings when another only pays 10%? Is the one paying 30% being punished for something? Why does he pay a higher percentage? Yes yes, he uses more:roll: But he already pays more if he earns more. So again - what is the basis of your take more(percentage) from those who make more idea?

The motive is to improve happiness across society. The basis is that it would increase happiness.

2) so we are manipulating our revenue collection system to support a "feeling"? And to achieve this, we have to knock those on the top down?

Again this article and other scientists do measure feelings. There have been happiness studies and I don't see a reason to discredit them because they are quantifying emotions.

3) Yes, happiness may not be proportional to one's monetary wealth, but I think their unhappiness might be stirred if their earnings are confiscated to knock them down some.

That's a fair point. But the author thinks that they would not be that greatly harmed based on the reality that more money doesn't create more happiness. And so even if there was a little unhappiness created by the top people, it would be outweighed by the increase in happiness in the middle AND maybe even the happiness from the top of not having to worry so much about the rat race.

4) then how exactly are you going to make people happy? If you take from the top - where is it going? Why do you need to take anything from the middle or low? Wouldn't it help them be happier if you took nothing from them and more from the top? It'd get bring them closer - would it not?

You make people happy by decreasing the amount of social stratification via progressive taxes. Yes, in a more progressive system it's definitely possible you'd take nothing from the bottom and less form the middle.

 

[sandorski]

Originally posted by: Tommunist
I think this is a situation where people need to realize what makes them happy. You can do without sweeping economic policy changes and just realize that you don't need to have the nicest car on your street, etc. I see a lot of people at work really killing themselves to get ahead and I wonder why - what's the point of getting ahead if you are misreable while you are getting there. I'm comfortable enough to support myself and save for the future. Sure I could really bust my balls and get ahead and make more cash but why? I'm happier as it is.

Yup, agree totally. Though Taxes could "force" people into living with Less, it won't necessarily make them Happy about it, they'll just feel Oppressed. What's needed is for people to have a Conversion(so to speak) to be satisfied within themselves with Less. Part of the problem(especially in the US) is that everything from Movies, TV, Music, and (especially) Advertising pushes the conept of Increased Wealth 24/7. In such a Culture the Idea of being Content with anything is practically non-existant. I think Europe really has an advantage in this respect.

 

[Infohawk]

Originally posted by: sandorski

Originally posted by: Tommunist
I think this is a situation where people need to realize what makes them happy. You can do without sweeping economic policy changes and just realize that you don't need to have the nicest car on your street, etc. I see a lot of people at work really killing themselves to get ahead and I wonder why - what's the point of getting ahead if you are misreable while you are getting there. I'm comfortable enough to support myself and save for the future. Sure I could really bust my balls and get ahead and make more cash but why? I'm happier as it is.

Yup, agree totally. Though Taxes could "force" people into living with Less, it won't necessarily make them Happy about it, they'll just feel Oppressed. What's needed is for people to have a Conversion(so to speak) to be satisfied within themselves with Less. Part of the problem(especially in the US) is that everything from Movies, TV, Music, and (especially) Advertising pushes the conept of Increased Wealth 24/7. In such a Culture the Idea of being Content with anything is practically non-existant. I think Europe really has an advantage in this respect.

I dunno... you could make a pretty good argument that Europe doesn't have a problem with living with less this precisely because they have less income disparity. You would argue that they don't feel the need to have more and more because everyone around them has the same schooling and health insurance and even with regards to cars most families don't have too many.

There are other interesting effects of income disparity. I think one study looked at female attraction compared to it. The more income disparity there was, the more women loooked for rich men. The less income disparity (and I think in this particular study, more importantly-- the more self-sustainable the women were), the more they looked for looks in men!