Feeling Happier?

Some economists are alarmed about income inequality. They argue that people feel like they’re worse off when others in society are much wealthier. This Wall Street Journal article (of which only an excerpt is available for non-subscribers — sorry!) should come as good news to them; it reports that the income earned by the top 1 percent of U.S. taxpayers is declining, as a percentage of all income earned in the nation.

Does greater equality cause widespread happiness? I don’t see it in this recession. People care about their own jobs and investments, and the cost of living. The difficulties of a deep recession aren’t made easier by the fact that the nation’s distribution of income has leveled somewhat. Let’s remember this the next time an economist proposes changing the tax code to smooth out inequality a little bit. It isn’t a surefire way to “spread joy up to the maximum.”

I don’t think the economists are entirely wrong, though. Income inequality can indeed cause suffering and strife. The problem is most acute when poor people believe the rich gained their wealth unfairly — for example, if it was bestowed on them as an arbitrary favor. We can avoid this by upholding equality before the law, and eschewing policies in which government officials pick winners in the marketplace.

We also need to pay attention to inequality when it perpetuates itself, locking future generations into their parents’ poverty. The answer is not to make the rich less comfortable, but to open up opportunities for the less fortunate, especially access to credit and education.