Why progressive taxation is not the route to happiness Happiness is fashionable these days. Yet should we accept the common view that the new "science" of happiness has cemented the superiority of Scandinavian social democracy over Anglo-Saxon liberalism? The answer is: No. The results are just as destructive to the pious certainties of "progressives" as to those of their opponents. Richard Layard of the London School of Economics and the UK's House of Lords produced an elegant, brief and influential exposition of the new doctrine two years ago. That doctrine itself, as he explains, is a modern reincarnation of Jeremy Bentham's utilitarianism*. (...) Its most important negative conclusion is that, beyond a certain threshold, extra wealth does not make us any happier. In any society, richer people tend to be happier than poorer ones, but the proportion of people saying they are very happy does not seem to rise over time. The explanation for this is partly that relative position matters and partly that we become used to prosperity. (...) What is under challenge, then, is modernity itself, not a competitive market economy alone. Prof Layard makes that clear in his comments on the decline of community and the family and the rise of individualism, crime and television. A conservative could read this book, agree with the analysis and reach policy conclusions that are almost the polar opposite of those stressed by a good social democrat, such as Prof Layard. Prof Layard's conclusions are, however, rather different from those of such a putative conservative: tame the rat race by taxing excessive effort; increase economic security; and promote mental health through cognitive therapy and modern drugs. (...) For the economist, then, it is the economic policies that are most questionable. Prof Layard argues that higher income is a route to higher status. But higher status for some is always lower status for others. So this is what economists call an "externality". The externality should be taxed, just like any other form of "pollution". One answer to that is that effort is already taxed quite heavily in western societies. Another is that if monetary status is discouraged, people will seek status on other and often more damaging dimensions, power being a particularly dangerous example. Yet another answer is that it is far from obvious why differences in status become increasingly disturbing as income differentials increase. The fact that someone is one's boss or has a more prestigious position in society is a big enough difference on its own. Furthermore, how far should we pursue this opposition to status? Why not abolish all indications of superior performance, from classed degrees to Nobel prizes? Finally, is it not evident that the search for status also has positive externalities - innovations of all kinds, for example? In all, these arguments for more progressive taxation seem weak. This is less true of what Prof Layard says on economic security. While policies that raise unemployment are harmful to happiness under any plausible assumptions, there is no reason to abandon the welfare state's most important achievements: universal health insurance, state-funded education and security in old age.
Happiness is fashionable these days. Yet should we accept the common view that the new "science" of happiness has cemented the superiority of Scandinavian social democracy over Anglo-Saxon liberalism? The answer is: No. The results are just as destructive to the pious certainties of "progressives" as to those of their opponents.
Richard Layard of the London School of Economics and the UK's House of Lords produced an elegant, brief and influential exposition of the new doctrine two years ago. That doctrine itself, as he explains, is a modern reincarnation of Jeremy Bentham's utilitarianism*.
(...)
Its most important negative conclusion is that, beyond a certain threshold, extra wealth does not make us any happier. In any society, richer people tend to be happier than poorer ones, but the proportion of people saying they are very happy does not seem to rise over time. The explanation for this is partly that relative position matters and partly that we become used to prosperity.
What is under challenge, then, is modernity itself, not a competitive market economy alone. Prof Layard makes that clear in his comments on the decline of community and the family and the rise of individualism, crime and television. A conservative could read this book, agree with the analysis and reach policy conclusions that are almost the polar opposite of those stressed by a good social democrat, such as Prof Layard.
Prof Layard's conclusions are, however, rather different from those of such a putative conservative: tame the rat race by taxing excessive effort; increase economic security; and promote mental health through cognitive therapy and modern drugs.
(...) For the economist, then, it is the economic policies that are most questionable. Prof Layard argues that higher income is a route to higher status. But higher status for some is always lower status for others. So this is what economists call an "externality". The externality should be taxed, just like any other form of "pollution".
One answer to that is that effort is already taxed quite heavily in western societies. Another is that if monetary status is discouraged, people will seek status on other and often more damaging dimensions, power being a particularly dangerous example. Yet another answer is that it is far from obvious why differences in status become increasingly disturbing as income differentials increase. The fact that someone is one's boss or has a more prestigious position in society is a big enough difference on its own.
Furthermore, how far should we pursue this opposition to status? Why not abolish all indications of superior performance, from classed degrees to Nobel prizes? Finally, is it not evident that the search for status also has positive externalities - innovations of all kinds, for example?
In all, these arguments for more progressive taxation seem weak. This is less true of what Prof Layard says on economic security. While policies that raise unemployment are harmful to happiness under any plausible assumptions, there is no reason to abandon the welfare state's most important achievements: universal health insurance, state-funded education and security in old age.
In a nutshell: rich people are a less dangerous form of elitism than others. So, as you cannot fight 'modernity' and the quest for superior individual status, you should let that harmless form flourish.
As good a justification of neoliberalism as it goes, I guess. In the long run, we're all dead. John Maynard Keynes
This is enfuriating, because although Mr. Wolf has encountered evidence that does not comport with the understanding provided by their mindset (I mean this is the broadest sense, as in the set of rules that provide order and certainty by providing individuals a way in which to interpret life around them. To use another cliche, they think inside the box) they struggle to provide explanantions that reinforce existing understandings of the way in which the world works.
As much as Mr. Wolf laments that the absence of income based status forces those who seek to prove themselves better than others forces the status seeker to assert their superiority through the use of other social distinctions.
Well, doesn't it stand to reason that the rise of identity based politics amongst lower income populations globally in which status is determined not by wealth but by adherence to religious and cultural tenets is essentially a reaction to income inequality and declining ecnomomic mobility.
Thus fascism in Europe arises as a response to the commodification of human dignity inherent to the creation of a labor market in which labor is not reconized as carrying humanity. Humanity being the basis of order in the democratic society.
Consider that while in political order, anything but the doctrine that one person equals one vote is anathema. While in the economic sphere, the idea that some animals are more equal than others (the irony is killing me) is inherent to the market where price is the basis of decision making. And intensity of preference matters, such that the willingness to pay larger sums of money indicates greater preference. Thus the prefernces of the wealthy matter more than those of the poor. Such is the basis of the neoliberal assault on democratic values, and the danger of the infiltration of economic paradigms into every crevice of human life.
What other institution in modern society is permitted to be so grossly anti-democratic as the market?
Shouldn't the implication of Mr. Wolf's revelation not be an argument for the expression of status through income, but rather an argument that the market and the economic sphere as a whole must be subject to the same rules of democratic governance as the political sphere?
After all the firm is a social creation. See how long it last without society guaranteeing investors that their liability is limited to their investment. Why not privatize the limitation of corporate liability?
Now much do you supppose it would cost to get that sort of coverage in the private sector. And that's a line of attack that attacks the internal inconsistencies of neo-liberalism. And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg
One answer to that is that effort is already taxed quite heavily in western societies.
It is? Where? And how?
Another is that if monetary status is discouraged, people will seek status on other and often more damaging dimensions, power being a particularly dangerous example.
We're lucky there's no evidence that this happens already.
Yet another answer is that it is far from obvious why differences in status become increasingly disturbing as income differentials increase. The fact that someone is one's boss or has a more prestigious position in society is a big enough difference on its own.
Well, no it's not. The narrative is really about cooperation vs exploitation. If I run a company in which I'm paid more, but I'm clearly willing to work hard and to share the profits with the employees in an inclusive way, the perceived differential is much smaller than if I flaunt my private jet and yacht and treat them as personal slaves.
Furthermore, how far should we pursue this opposition to status? Why not abolish all indications of superior performance, from classed degrees to Nobel prizes?
Status based on genuine achievement is far less damaging than status based purely on robot-like commercial exploitation.
There are no prizes for running your sweat shops more brutally than anyone else. Because no prizes are needed.
Finally, is it not evident that the search for status also has positive externalities - innovations of all kinds, for example?
Innovations are fine, but creativity and ingenuity are too often parasitised by accountancy and capital-diddling which builds status without being innovative.
In outline, this is a desperately silly straw-man argument that confuses the existence of status - not a bad thing when it's based on proven talent, and is inclusive - with the nature of status in capitalist economies, which is often illusory and disconnected from hard work, talent or the kinds of achievements that make a social contribution.
money isn't power?
rich people don't start wars?
hands up anyone who can think of a recent large-scale war that wasn't run by rich people... and didn't make rich people even richer?
where did this hopeless schmuck get the idea that wealth isn't a "dangerous" form of status? The difference between theory and practise in practise ...
