We have heard from Warren Buffet, one of the most successful investors of our time, suggesting that we should let the tax cuts for the wealthiest expire. We also see a new club of philanthropists forming, pledging to give half their money away. Perhaps this is their token offering of appeasement to the middle class for what they did to them to get where they are now. Or they may be waking up from the buzz of an addiction as I'll explain later. In any case, we know that change is coming, we just don't know the form or the time of it for sure.
I bring all of this up because last year, I read this very interesting article which discusses the question of whether or not income inequality creates unhappiness in America. Here is the relevant part of the article where Timothy Noah of Slate Magazine comments on a point made by Arthur C. Brooks, president of the American Enterprise Institute. Brooks has said that income inequality doesn't create unhappiness, and Noah responds:
"Living conditions improve over time. But people do not experience life as an interesting moment in the evolution of human societies. They experience it in the present and weigh their own experience against that of the living. Brooks cites (even though it contradicts his argument) a famous 1998 study by economists Sara Solnick (then at the University of Miami, now at the University of Vermont) and David Hemenway of the Harvard School of Public Health. Subjects were asked which they'd prefer: to earn $50,000 while knowing everyone else earned $25,000, or to earn $100,000 while knowing everyone else earned $200,000. Objectively speaking, $100,000 is twice as much as $50,000. Even so, 56 percent chose $50,000 if it meant that would put them on top rather than at the bottom. We are social creatures and establish our expectations relative to others."So the majority of people in the study would prefer to know that they make more money than others rather than to know that what they have is a lot and more than enough to cover their expenses, even if others are making far more. That can probably be extrapolated to the general population without much controversy. That extrapolation would make sense since the need for social hierarchy is hardwired into human brains. What this suggests is that what makes the top of the line Mercedes so appealing to a higher ranking human is that other people can't have it, not just that he can have one with everyone else, right?