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September 03, 2006
Status Won't Go Away
Don Boudreaux
Alex, Arnold, Greg, and Megan each mention solid reasons for questioning the wisdom of reducing envy by taxing the rich and giving the proceeds to the poor. (Brad DeLong recently offered such a proposal.)
It bears repeating that monetary wealth is certainly not the only dimension of our lives that matter to us and that we use as a basis for comparing ourselves to others. Indeed, I suspect that it is not as important as many who champion "redistriution" believe it to be.
Back in April the New Yorker magazine ran this interesting article by John Cassidy in which Cassidy used evidence of social hierarchies in some animal species to suggest that we humans should "redistribute" income. The specific evidence was that animals low on the totem pole were more likely to get sick and die than were animals in the same group but higher up the social pecking order.
A few weeks later the New Yorker published this letter of mine in response:
John Cassidy bolsters the hypothesis that people's health is harmed by relative (rather than absolute) deprivation by citing evidence from the animal kingdom ("Relatively Deprived," April 3). For example, "dominant rhesus monkeys have lower rates of atherosclerosis (hardening of the arteries) than monkeys further down the social hierarchy."
Contrary to Cassidy's suggestion, however, such findings do not support policies to redistribute income. After all, animals with social hierarchies have no monetary income. Because status among humans is determined not only by income but also by traits such as political power, athletic prowess, military heroics, intellectual success, and good looks, equalizing incomes will intensify the importance of these non-pecuniary traits as sources of status. And there's no reason why persons with low status in these non-pecuniary categories will not suffer all the stress and envy now allegedly suffered by people with low incomes.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA
Posted by Don Boudreaux in Standard of Living | Permalink
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» Size Matters from Muck and Mystery
I'm too busy to think and write but still read. There's been a cross media discussion about envy, spite and redistribution for a couple of days that was mildly interesting. Today Don Boudreaux gets to the meat of the nut. Status Won't Go Away. Alex, A... [Read More]
Tracked on Sep 3, 2006 6:09:12 PM
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There's a fun discussion going on in the academic corner of the blogosphere this weekend. The topic is spite. Are poor people envious of the rich, or vice versa? If so, should public policy address the concerns? The discussion first started on Friday m... [Read More]
Tracked on Sep 4, 2006 5:52:41 PM
Comments
Here's the thing though. Other than some measure of contribution by external factors like genetics and upbringing, all of the status traits you mention, both pecuniary and non-pecuniary, are highly influenced by the application of effort and choices made about focus of time and resources.
Athletic prowess doesn't just happen. It's the result of years of hard work and good choices. Likewise, I've seen hard work and good choices make a big difference in beauty, intellectual sucess, etc.
What we are really saying when we seek to equalize certain status markers and not others is that we wish to discourage the application of effort and judgement to some areas of life relative to others. No one requires exceptional atheletes to sacrifice a percentage of their training time to help coach the obese, but that's exactly what progressive taxation does in the financial arena.
Posted by: quadrupole | Sep 4, 2006 12:47:59 AM
Is there anything to say that the causality in the animal kingdom doesn't run the other way? It is certainly possible that animals that are healthier have more status.
Posted by: Chris | Sep 4, 2006 1:22:45 AM
Great minds and all that (or is it that consistency is the virtue of narrow ones? To choice I guess). From a review I didof Richard Layard’s "Happiness":
http://www.socialaffairsunit.org.uk/blog/archives/001057.php
This thought is also accompanied by the (obviously) true statement that social status and the competition for it is a zero sum game. We cannot all have high status within our society, some must be on top and others not. Thus, we should equalise social status to a degree by equalising incomes to a degree. This is fine until we see one of the reasons given: that those of low status suffer greater disease than those of high status (true, by the way) and this is illustrated by animal and primate studies.
Err, were the animals or primates using money? Of course not, as indeed is noted, but there seems to be no connection made between this and the futility of restricting monetary income in order to restrict status rivalry. We will always compete for status and if we change society so that money is not the measure (as it largely is currently) then something else will take its place. As it has in other societies at times and in places: order of birth, the position of one's parents, religious zeal, one's ability at hacking at peasants with a broadsword, all of these have been used in our own isles. It would be difficult to argue that these would be better than vying for money via invention or hard work: for the latter method has at least one positive externality, that my higher production, which brings those greater rewards, will be consumed by others which will, presumably, bring them at least that six months boost of happiness.
Posted by: Tim Worstall | Sep 4, 2006 6:02:18 AM
Fantasy Tory Leadership election http://www.lonympics.co.uk/Coooool/fantsayleadership.htm
Posted by: Haggis | Sep 4, 2006 6:28:56 AM
Gentlemen:
The age-old arguments on behalf of redistributing income, and the as-old arguments against, are grounded in our two opposing perceptions of the nature of human nature.
It is long overdue for economists to include reading Nietzsche, or James, for a better understanding of how our personal psychologies shape and color an economic argument. Essentially, in the dicussion of income redistribution, we are, perhaps unfortunately, merely arguing autobiography.
'Be free.'
Posted by: a Duoist | Sep 4, 2006 6:58:51 AM
Who has higher status, the welfare mother watching television 24/7 in her govenment furnished apartment, or the single mother who works two or three jobs in an attempt to make ends meet? Before all of the Cafe's welfare mother readers get upset, I'm simply pointing out that even when we do provide income redistribution, we often do it with a certain degree of loathing. So in what way is status associated with income redistribution at all? To follow Quadropole's lead, status is a recognition of excellence.
Posted by: Randy | Sep 4, 2006 10:42:44 AM
The problem with conspicuous consumption is NOT the status effects - status is a zero-sum game. The problem is the waste of resources.
Posted by: guest | Sep 4, 2006 2:36:17 PM
Here's the thing, we are relying on debt finance to pay our bills, both the war in Iraq and much of the profligate spending by the Republican Congress. Paying for this by a consumption or even a proportional income tax scheme is, in effect, a wealth transfer to the already wealthy. This will slow the economy at the margins and also lower corporate investment, since corporations invest when they have customers, not just because money is cheap. As long as we pay net interest, it should be financed largely by a back transfer from the wealthy. Once the debt is gone and the currency is backed by loans at the discount window to directly fuel business expansion (rather than government debt), I have no problem with eliminating higher tax rates for the wealthy. Until then, however not doing so is both exploitive (and if you are blogging, you are not likely paying these rates anyway) and economically stupid.
Posted by: Michael Bindner | Sep 4, 2006 3:50:46 PM
It is my understanding that the lowest, and therefore most visible, position on a totem pole was the one which represented the most status.
Posted by: triticale | Sep 4, 2006 7:38:55 PM
Michael Binder:
Anyone who suggests that a consumption tax "slow[s] the economy at the margins" should be very wary of calling others "economically stupid." A very great body of evidence shows that, whatever issues one has about the tax incidence, a broad-based consumption tax is one of the most efficient taxes in the revenue it produces compared to the cost on the economy.
Posted by: John Thacker | Sep 5, 2006 8:55:24 AM
Guest,
I don't think that conspicuous consumption is a waste of resources. Would the professional athlete, actor, fashion designer, diamond cutter, yacht builder, liberal arts professor, or blog host, be of greater benefit to society if forced to work in a clothing factory? No, because we already have plenty of people working in clothing factories.
We live in a luxury economy, and the key to future economic growth will be to expand the range and depth of luxuries - including conspicuous consumption. I would go so far as to say that conspicuous consumption is the path by which the poor are most likely to lifted out of poverty. It doesn't take a lot of skill to groom a rich lady's poodle, or throw some rags together and call it fashion, or slap together a country song, but there are people willing to pay good money for all of them.
Posted by: Randy | Sep 5, 2006 2:15:19 PM
randy: "It doesn't take a lot of skill to ... slap together a country song, but there are people willing to pay good money for all of them."
Why do you insult country music?
If it takes no skill, then every country music writer should have an equal likelihood of financial success. So why have the same songwriters won the country song lottery year after year? How is it that Rodney Crowell wrote 21 Top Ten country hits, half of which were #1? Or that Kris Kristofferson wrote four of the most popular country songs of all time?
That's Kris Kristofferson, the genius who won creative writing awards from Atlantic Monthly for his short stories, who attended Oxford as a Rhodes scholar, and who found inspiration for at least one of his songs in the writing of Voltaire.
Posted by: JohnDewey | Sep 5, 2006 4:17:56 PM
John,
I knew someone would jump on that. No offence meant. I like country music. I've actually written a couple of country songs myself - and no, they weren't any good. But historically, music and entertainment have been a route out of poverty - and part of the reason is that it is easier to take up the guitar or drums than to become an engineer (no offence to engineers either). The point is that closing down the non-essential (luxury) trades does not free up resources for other uses, because the resources used are already free.
Posted by: Randy | Sep 5, 2006 4:55:51 PM
Posted by: laptop battery | Oct 13, 2008 12:12:52 AM
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