Richard Epstein on Happiness, Inequality, and Envy
Nov 3 2008

Richard Epstein of the University of Chicago talks with EconTalk host Russ Roberts about the relationship between happiness and wealth, the effects of inequality on happiness, and the economics of envy and altruism. He also applies the theory of evolution to explain some of the findings of the happiness literature.

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Explore audio transcript, further reading that will help you delve deeper into this week’s episode, and vigorous conversations in the form of our comments section below.

READER COMMENTS

Johan
Nov 3 2008 at 2:25pm

I have a big problem with happiness research. Let me try and illustrate my problem.

If I am arguing with another person about the volume of a bucket we can disagree. The disagreement can rise from misunderstanding or mistake. We might be using different units or talking about different buckets. If nothing else suffices to solve this I can head over to him with my bucket and show it to him: “This is the bucket I am talking about!”. And I can show him the cup I am using to make the measurements. After having filled the bucket with 28 cups of water I can even pour it all over him and stick the bucket on his head. We can share experiences of the same object and so calibrate our words and the scales we use.

Not so with emotions. There is a lake a few hundred meters from here. If I told you that the lake on a scale from 1 to 5 is of the size 2, that wouldn’t tell you anything. You have no idea what my scale means because we have no convention for using a scale from 1 to 5 to measure the size of lakes. This means I just made a scale up. Happiness research often collect data by interviewing people and asking how happy they are on a numerical scale. Since there is no convention for the scale people just make one up. Not only may the scales vary between people, they might not overlap at all. I believe there is a minimum size for something to be considered a lake, and maybe the lake close to here isn’t big enough to be considered a lake, but I don’t know that. So if you were to ask my neighbor the size of the lake he might answer that there is no lake at all. This only captures part of the problem with emotions. At least we might head out to the pool of water and the decide if we are to call it a lake and the agree on a scale from 1 to 5. Emotions are even worse.

There is no way we can experience each others emotions. If I had a box, in which there might or might not be something, which I was calling a beetle. And I was the only person who could look into my box. Me telling you that the beetleness of the beetle was a 2 on a scale of 1 to 5 would not mean anything to you. I cannot invite you into my brain so that you can see the beetle, or experience my emotions. So there is no way for use to calibrate our word usage and agree on what a scale of 1 to 5 means. We have a limited form of consensus for our use of emotion-words based on some kind of subconscious readings of other peoples body language and our own ability to project, through sympathy, our emotions onto others. But this we do with all kinds of things. We can often project emotions onto stuffed animals even though they have non. Turning this kind of fuzzy knowledge into analytical knowledge is doomed to failure.

Even our ability to talk about emotions in a scientific language is limited. I might be able to sort the words into two columns for positive and negative emotions, and you doing the same would give you mostly the same results. If you and me I were to subjectively do the same with our emotions in our head our results might differ widely. Maybe the emotion I consider positive and call happiness you sort under negative emotions. How we can produce data that we can plug into normal scientific thinking with this is beyond me.

PS. Having the lone person in a room in an experiment the behaviorists do sounds like the result of trying to reduce social science into natural science. Economics have suffered from the same.

PPS. Evolutionary psychology worries me because it lends itself so very well to impressive narrative explanations. We humans do love our stories. The very ease that evolutionary psychology produce this multitude of stories both makes it vague and lends it to being taken advantage of to support someone’s bias.

Mike
Nov 3 2008 at 2:48pm

Russ, I’m a big fan of the econtalk podcasts, but I admit that the first part of this one was very disappointing. The discussion gave an inaccurate description of the variety of both findings and policy implications of the happiness literature. This makes me worry that listeners will come away with the wrong picture of the happiness literature. In particular, not all of the happiness literature is motivated by paternalistic impulses, and not all of it suggests paternalistic policies are best.

Let me give two examples off the top of my head. First, some of the happiness literature identifies autonomy in choice as important for happiness. This suggests taxation and government intervention impose an additional negative effect on people’s happiness by reducing autonomy. Second, some happiness literature identifies how “earning” your pay yields much higher happiness than being given it without making effort. Just giving someone more money in the form of a handout does not have the same happiness effect as creating an environment in which people can earn that money themselves.

I just cringed every time Richard said “The happiness literature assumes…” because he is implying that there is a monolithic happiness literature with a monolithic ideology. Instead of pushing an oversimplified and inaccurate depiction of the happiness literature, the discussion would instead have benefited from more talk about the literature’s richness, more discussion about how different findings have different policy implications, and a more honest assessment that there’s a lot more synthesis needed. Maybe a future podcast could bring out this richness?

All that being said, please keep it up. I look forward to seeing what comes out each Monday.

Pablo
Nov 3 2008 at 3:28pm

This week’s podcast is clipped, unfortunately. The “levels” probably need to be adjusted a bit.

http://en.wikipedia.org/wiki/Clipping_(audio)

Econ Talk is the best thing on the Web generally though

Maestro
Nov 3 2008 at 4:06pm

Russ, I always enjoy these podcasts, but this one was the least enjoyable. The problem wasn’t you, it was Epstein. He is clearly very intelligent, and I often agree with him, but what an insufferable blowhard. I am very impressed that you were able to remain so patient throughout the podcast, but I do wish you had kept him in line more. What I like about the other podcasts is that they are conversations, with the guest talking to you. Epstein just talked at you most of the time.

bluhawkk
Nov 3 2008 at 4:45pm

I enjoyed the podcast. I like Epstein’s humour and volubility.

enronal
Nov 3 2008 at 4:49pm

I can’t disagree more with Maestro. Epstein’s intelligence and fluency is astonishing. I kept waiting for a pause and “y’ know” that it seems all English speakers throw into their speech nowadays. Not one. More to the point, Epstein is a national treasure, in the elite company of people like the late Milton Friedman, in the power, consistency, and persuasiveness of his arguments for the advantages of freedom and the dangers, seen and unseen, of arguments for others to make decisions over our lives or take control of our property.

Alvin
Nov 4 2008 at 7:39am

Russ.

Richard Epstein is awesome. I love when he comes on Econtalk. Can you try to get Judge Posner as a future guest?

Maestro
Nov 4 2008 at 2:22pm

enronal, I agree that he is extremely intelligent and extremely fluent with English. Like I said, I often agree with him, and you’re right that he doesn’t use ya know or say um, or have other annoying tics that most others (including me) have. At the same time, he wasn’t having a conversation with Russ, he was having a conversation with himself with Russ as facilitator, which is not nearly as interesting. I’m apparently in the minority on this one, but I find his speaking style very annoying. I hope that’s not out of line to say.

Tony
Nov 4 2008 at 2:52pm

I’ve been listening for a few months now. This podcast is one of my favorites. When Richard bites at conventional wisdom, he does so in a way that’s informative without sounding arrogant. It makes me happily want to find out more.

My above observations are opposite to the way I feel after a podcast featuring Mr Boudreaux. Informative, but with a frustrated, angry, arrogant feel. I want to find out more, but less happily.

Regardless, podcasts like this are a true gift. Thank you Russ and to all who contribute. Every week I feel like I’m painlessly working on an Econ degree. Assimilating the economic perspective with my scientific perspective has opened the world up in an exiting way. A positive consequence of the internet and our relative freedom in this world.

Jesse W.
Nov 4 2008 at 10:53pm

Great stuff and VERY valuable information!

BoscoH
Nov 5 2008 at 4:06pm

He almost touched on it, but different people find different things that make them happy. Instead, it seems that he poses it as a trade-off where unhappy people trade years of unhappiness for more money. That’s really my biggest complaint about so-called happiness research. There are lawyers who actually like being in high powered law firms.

Personally, there are times when I like going to the gym every day. There are other times when I like stuffing myself with pizza and being lazy. There are times when I like working 80 hours in a week on a project that had to get done yesterday. And there are other times when I just need to veg out and recharge. There are times when a two hour walk with the dog is exhilarating and times when a mile is 20 minutes of undistilled tedium. The idea that happiness is universal among people or even consistent for a single person seems silly to me. Or maybe I just diagnosed myself with a serious mental disorder!

Andrej
Nov 6 2008 at 9:27am

Well Mr. Epstein’s arguments do sound very persuasive as do the arguments of a number of other similar guests of EconTalk.

Having said that I wonder if Mr. Roberts could arrange a discussion in which the speakers would compare the arguments for and the outcomes of the economic philosophies and policies of say the US and the Scandinavian countries.

I come from a transitional economy in Eastern Europe and currently there is a lot of debate regarding which economical/philosophical pathway we should embark on. Do we embrace free market,liberal style capitalism? Or do we go for a kind of nordic,welfare-state capitalism.

On my own part, I was educated in England and consider my self an economic conservative. However I have to say that when I hear that some hot shot bank executive made 150 mil in 2006 that just does not sound right, especialy considering the ensuing events. Now I know that this is due to the incentives and that these decisions are made by the firm’s owners but still it does not sound/feel right.

Being a close follower of EconTalk I have already heard a number of arguments proposed by Mr. Roberts’ estinguished guests as to why free-markets, low regulation, low redistribution enhances wealth and hapiness.

My question would be as follows. What would your arguments be as to why Nordic countries have, for example, lower unemployement rates, lower homicide rates, similar suicide rates and slighty higher hapiness indices (the Economist)? These countries also have considerably lower GDP (PPP) per capita and income inequality. My choice of variables may be biased but I have chosen them after a discussion with a couple of colleagues of mine and because of their ease of collection.

I think this is a very important topic and I would find it very interesting to hear what EconTalk would have to say.

Overall good work Mr. Roberts. Keep it up! There is already a small army ( I should rather say a company, in US ARMY terms) of EconTalk followers in Croatia.

mjh
Nov 6 2008 at 10:28am

I understand Maestro’s point. Epstein really does seem like a boulder rolling down a hill. Once he gets started, he can’t stop, and he links the question that was asked to 30 different things that weren’t asked about. As a consequence, it really is less of a conversation and more of a lecture.

But I also agree enronal. Personally, I found it difficult to keep up w/Epstein. But if I paused the podcast from time to time (so that I could catch up) I was completely amazed at the breadth and depth of the answers. And considering the breadth and depth, how much persuasive information was communicated in such a short period of time.

I really enjoyed this podcast, but I can see how others would not.

Steve: A Fat Triplet
Nov 7 2008 at 10:07am

Russ,

Great podcast. Maybe I am biased since I am a huge fan of Epstein. He is, indeed, a national treasure. Listening to EconTalk is one of the highlights of my week every week.

Cheers,

Steve

PS. Munger rocks too.

Greg
Nov 9 2008 at 7:51am

I thoroughly enjoyed this talk but then again I am a big fan of any discussion which uses the field of evolutionary science. There is so much to be learned from using that powerful theory. We are only scratching the surface in all the non biology fields but there is some real power.

I understand where Johan is coming from regarding the field of evolutionary psychology, sometimes it sounds like the “just so” stories are too good to be true, however, just like any good scientific answer these “just so” stories are always termed as “what we understand right now” and are therefore amendable in the future. This stands in stark contrast to those who desire a neat little summation or a “God just made it that way” kind of explanation.

Human nature and behavior is messy and quite unpredictable at times but by observing our genetic cousins and by understanding more about the environments which shaped our brains we can begin to get a handle on some ways in which to enrich our understanding of our selves and our social “group forming” dynamics.

Johan is right in that happiness research is difficult but I think we can all agree that most of us are seeking happiness. So first off that which you see people doing over and over is probably what they view as making them happy. The problem he mostly has is with QUANTIFYING happiness. I think all who study this stuff would heartily agree that that is what is most difficult. Difficult doesn’t mean impossible (on every level) but it might mean imperfectly. The search for a perfect explanation is a fools errand and no one knows that more than the evolutionary psychologists themselves. The question should be is the methodology helpful and can it reveal new information. From that standpoint the answer, I believe, is a resounding yes. Any one looking for neat little explanations for our complex nature will never be satisfied, but if we want insights that may aid our understanding of ourselves, the power of evolutionary theory is undeniable.

Johan
Nov 9 2008 at 2:47pm

All human endeavor aimed at achieving knowledge, be it scientific or not, contains an element of trying to fit the pieces together so that they make sense. Finding and explanation to superconducting that makes sense immediately adds it to the list of hypothesizes worth spending resources investigating because it is so hard to make sense of the seemingly inexplicable phenomenon. Explanations that make sense in evolutionary psychology are dime a dozen. They cannot all be right.

The links between the genes and psychology is still only little understood. And the psychology of an individual and the society surrounding him is intertwined. Epstein made this very point in the podcast. What do we really know about the society of humans tens of thousands of years ago? How much is the descriptions we give about it us projecting our own group-dynamics and those we observe in other groups of mammals. Just during recorded history we have a multitude of different societies and cultures. There are many different potential societies that can be imagined as the basis for those old societies. Were people monogamous? Were there alpha-males, -females? What kind of family structures were there. Who raised the children? How big were these groups? How did the these groups act when meeting each other?

What about the individuals? How smart were they? Sure, we can measure cranial size, but that tells us only how much brain-size the had to work with, not what that brain-size was spent on. What kind of language did they have? What roles did verbal and non-verbal play? How did the discovery of tools change peoples view of the world around them and their place in it, and thus their place in society? When did what evolve how?

I have nothing fundamental against evolutionary psychology, and I do not deny its power. In fact, it is its power that worries me. When you have only a few explanations that make sense you do not need a lot of evidence to weed them out and find the best one. In evolutionary psychology there are not a few explanations that make sense, but a multitude. To me it seems we are building an up-side-down pyramid, basing a lot on very little. Add to this that evolutionary psychology marries social science with natural science. But the discourse of social science cannot be reduced to the language of natural science, nor the other way around. A new evolutionary psychology terminology needs to be developed and agreed upon. Nor are the methodologies directly compatible, so a new one is needed. Evolutionary psychology holds great promise, but it is still a very, very young discipline.

On the happiness subject I have a more fundamental objection. I may very well be able to quantify my happiness but human language does not enable me to communicate it to you in such a way that you can understand what I mean. It is not just difficult, it is impossible. Brain imaging and an understanding of how the firing of neurons gives rise to consciousness may be able to overcome this, but until then, we are stuck.

If we are to talking about what people do, then let us talk about what people do.

Paul Downs
Nov 10 2008 at 8:32pm

I was struck by Epstein’s description of the range of jobs under consideration: high pay/high pain or low pay/much fun. Maybe I missed it, but shouldn’t he have explained what effect having a crappy, poorly paid job might have on your happiness? Or are the huge number of people caught in such a situation not worth consideration? Also, aren’t a lot of high paid jobs really a blast? Who wouldn’t want to be a rock star? It would be interesting to hear about the relative numbers of people in the different job categories. Do a majority of people have the “work a few years to get rich” option? Or the “poorly paid but fulfilling” option? I would imagine most people have to work to support themselves, and they might frame their choices entirely differently.

J Mann
Nov 13 2008 at 5:36pm

Essentially, are the happiness people arguing that medieval farmers, assuming minimal inequality, were about as happy as modern middle class westerners?

At some level, it makes some intuitive sense. As Prof Epstein pointed out, our emotions presumably evolved in adaptive ways, so it would stand to reason that we are generally happiest when we are getting our share of economic and reproductive resources.

Therefore, if the MRI had never been invented, most of us would be just as happy, because the capital that now goes into building and maintaining MRIs could go to something else we like, and we wouldn’t know about the expansion of total capital that we *could* have had. Similarly, if no one can afford winter trips to France, it probably wouldn’t bother me as much as seeing my neighbors take those trips without me. (I am only slightly wistful, for example, about my inability to visit the Moon or Middle Earth).

However, I ultimately think that’s intuitively wrong.

1) It overlooks life expectancy. Even if I would be as happy with half the wealth that I have now, assuming that my share of the pie was equal, I wouldn’t live as long, or have as many of my children survive! Presumably, as long as life has any value, the greater lifespans at greater wealth is worth something.

2) It overlooks change over time. If my expectations were set at the wealth levels of the 1970s when I grew up, isn’t it wonderful that I am now enjoying the increased wealth of the 21st century? We can cure or suspend diseases that were death sentences when I was a kid! We can fly anywhere in the world! We have the internet, and cell phones, and electronic research! Intuitively, the *improvement* in my lot over time has done a lot for my sense of well being. The only way to continue that improvement for the population is by continuing economic growth.

3) I think we appreciate that there are desirable outcomes in addition to happiness. It may make me a snob, but IMHO, if you give the population of the world an opportunity to learn about science and art, or an opportunity to travel, or any number of other things, you have achieved a societally desireable goal, even if they would have been just as happy as peasants who didn’t know about the world outside their village.

Greg
Nov 14 2008 at 11:06am

Johan,

I’d like to see some examples of which you speak regarding the the number of examples that are presented tomake sense in evolutionary psychology.
While my exposure to the field is very limited ( I read a book by Robert Wright called “The Moral Animal”) I am wondering if what you are saying is multiple explanations to the same issue is really a recognition that what appears to be so is actually a recognition of subtle differences that are not apparent at first glance.

An example I’ll use is from Wrights book.

He is using Darwins life to describe some of the findings around sexual selection, kin selection and individual “striving” if you will (that is my words not Wrights). In one chapter he is talking about How Darwin and his wife reacted to the loss of children. He had one die soon after birth or maybe stillborn and another when (s)he was 8-10 yrs old. Well they reacted quite differently to both situations and were much more distraught in the second case. Why? It could be explained by the changes in their own lives at the time, where Darwin was in his work, the age of his wife etc etc. When you look at it simply as return on investment into genetic material passing to the future it begins to make sense. Someone you had invested more money ,time and effort into and was closer to reproductive age would be harder to lose than one lost right out of the gate. Similarly its been found that ,generally, once they are past the age of reproduction there is a dropoff in the “grief factor” following a death. This does not make us cold hearted computers driven by a DNA chip it is what makes us human. This behavior is noted in other species of animals as well. Our primate relatives “favor” the child they have invested the most in as well, and the one that has the better chance of passing on the genes.

There is also a difference in the way we view our male and female off spring. Males have more opportunities to procreate (unlimited really) whereas females can only do it once a year.
Males are therefore “favored”. Now there are situations where females are favored but it is the exception to the rule.

Its all very interesting

Jonah Houston
Nov 18 2008 at 11:09am

I very much enjoyed Epstein in spite of the fact that this was mostly a soliloquy and less of a conversation.
I’m not sure if I completely agree with his critique of the bulk of the happiness literature or the extrapolation into tax policy but I was very engaged regardless.
Looking forward to the next time he’s on the program. Keep up the great work.

Rick Weber
Nov 23 2008 at 1:45pm

I tell my students every chance I get: Equality does not equal quality!

Thanks for a great discussion!

MelJ
Nov 29 2008 at 2:44pm

When talking about the charter school his son
teaches at, Epstein conveniently omitted some
information. At the Harlem Success Academy web site it says,

Our parents and students sign “The Contract”
and commit to coming to school everyday,
on time, dressed in uniform, ready to learn.

Without taking that factor into account, comparing
any charter school to any public school is
completely bogus. It’s interesting how Roberts
finds fault with any comparison when it does not
confirm his beliefs, but readily accepts one when
it does. Is there any study of how learning
improved when a regular public school just removed
students who did not have regular attendance, came
to school late, and dressed and behaved improperly?
How much of the variance in performance can be
attributed to just that?

Eva
Nov 30 2008 at 4:03am

Epstein’s argument was very compelling, even though I have to agree with some of the previous posts that some bits were not entirely conclusive, the point was well and eloquently made.

More podcasts that challenge the standard assumptions of “mainstream” economic paradigm would be very much appreciated – they are the most exciting ones.

Actually, listening to this one made me happy. Skip!

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AUDIO TRANSCRIPT

 

Time
Podcast Episode Highlights
0:36Intro. Happiness research in economics. Standard models of economics assume people have well-ordered utility functions. Social progress in this model comes from two agencies: since you know that people are selfish, trade generates mutual gains, local improvement; if selfish and take from someone else, gain and someone else loses, so prohibition of force. Neoclassical position: cooperation yes, aggression no. Happiness literature: ulterior fashion designed to undercut this market calculus. Behavioral economics line: people are not nearly as rational; backdrop of systematic uncertainty and ignorance. No problem with prohibition of force, so negative side of utilitarian calculus remains pretty much intact. Happiness literature designed to deal with other issues. Logic of neoclassical model implies mutual gains from trade but doesn't guarantee gains of equal proportion. High dispersions of income off of a higher median. A lot of people worry about this because they are worried about relative status. Suicide contest if your relative preferences really matter. Russian proverb: My neighbor has a cow, I do not. Genie gives me one wish. It's not for me to have two cows, but for him to have none. Part of happiness literature: world is designed to make everybody miserable. Okay to take away the wealth. Both of these fields are designed to explain why it is that government action in the field of redistribution and guaranteed minimum rights is useful and to undercut "cooperation yes, aggression no, redistribution last. Starting from other end. May seem to be matter of order, but where you start may dictate where you went. Produces perfect equality with everybody poor.
6:15Used by environmentalists, anti-growth. If you are very poor, increases in material well-being do lead to gains in happiness but not after a while. Neoclassical answers to the environmental question. Environmentalists: We really want gas to be $4/gallon because people will drive less. Giving up a lot of consumption, though. Right way to do this is to have a tax on pollution. Happiness proponents would say: all that extra consumption is an illusion. Don't get any happier driving around, should spend more time with your family. Theory of revealed preferences. We see people moving hard to get raises. Happiness literature suggests that everyone is under deep delusions about what makes them happy and the guys running the survey know better. Methodological fallacy: data seem to suggest that when you have higher incomes you don't necessarily have a whole lot higher level of happiness. Example: international megadeal. People make pact: I'll be miserable for a few years if you'll make me rich in the longer run. So, in the short run they report being less happy. They don't want to be unhappy forever, so eventually take a lower paying job--and report being happier. To tell people they have to have a constant ratio between happiness and income at all stages in life is a restriction on freedom. Can't put together these megadeals unless you get people on an airplane at the drop of a hat. Adopt an information strategy rather than a coercion strategy: publish anything you want on happiness, and people can read it and decide. People understand these kinds of tradeoffs. Don't necessarily take the job that pays the most money; or the one that pays the least. Tradeoff. Example: Academics don't make as much money but make that choice, trading off happiness against income. Market ranks jobs out there; people know their own utility functions and decide for themselves what they want to do. Envy's a terrible emotion in this world. Envy literature. Most people have a relative amount of good cheer for the success of others. Nurses don't seethe that doctors earn more than they do. What you do see is that resentments are great if two people have similar ranks but one is doing more of the work.
16:02Wealth-meaningfulness tradeoff: religious literature, both literally and secular religions, preachers: people who want us to recognize that the bigger car and fancier job title doesn't always lead to more happiness. Even though we may know that it's hard to act that way. Revealed preference ignores regret. Law firm example. Easy to romanticize and vilify. People do make mistakes. Goes both ways: I could have been a contender. Some people take the safe job. Can regret low risk strategy as well as high risk strategy. Have to gain the self-knowledge as to what you really like. Getting married; serious illness like cancer. If repetition eases the pain of decision, we find that resources are most strapped at the time we need them most. Nothing about a system of economics which will insulate people from hard choices or remove uncertainty. Hayekian insight: if you subsidize farmers to minimize the fluctuations they experience, then all the fluctuations are borne by people providing the subsidies. Need stable legal rules instead. No way that we can remove uncertainty; no way we can remove regret. High risk, high stakes decisions: people who try to make them alone make mistakes. Literature on behavioralism always has people acting in voids in experiments. When you are in trouble, you want to get the view of someone a little removed from the situation. Dynamic labor market in the United States; dynamic marriage market also. Costs of errors are lower in the United States. Clark [clerk] in Scrooges firm. Key advantage of U.S. system of education, competitive at highest level. English and French system route people at an early age. Creates standardization within these professions. In an American law school you get variety in age and background. Richer array of understanding results, stronger people at the top. Competition creates variation and variation creates excellent. Those are the kinds of things that tend to be missed by these models. Almost always solipsistic. Natural tendency to cooperate with people they like, friends, is not present in behavioralist models. Element of trust leads to gains from trade.
24:52Envy. Theme in literature, working paper, tension: wealth doesn't make you happy but relative wealth seems to be very important in these studies. Complicated literature: truth within limits. Assume group of people who all have about the same wealth. Within this group, one popular, one nerd or doormat. Informal social rankings; competitive; if someone has high status, someone else inevitably has to have a low status. Misery literature. Maybe woman is disappointed she is not getting married but doesn't want to wreck someone else's engagement. Just wish you'd been a little bit better. People tend to say "Congratulations." Opposite direction in other body of literature: optimistic. Give people choice on how to spend money: make an investment of 10; can recover 12 for yourself or 20 for a group of 4 people of whom you are only 1. Turns out surprising number of people willing to expand and share the wealth. Unlike the usual form of sharing the wealth, which is income redistribution through taxation which shrinks the pie, people are willing to take less. Nice kind of feature. Reduces the serious problem associated with the creation of public goods. See someone littering in a public park. Littering will cost everyone 10, but I'm only 1 out of 100. Why would I want to stop this guy and risk some kind of retribution? Everyone should be indifferent. Always one or two people who do go up to the litterer and ask. At a discrete cost to themselves they are improving the group. Modest public spiritedness on the part of many but not all. Can you reconcile the literatures? The most natural characteristic is variability. There will be some who are selfish, some generous. Some evolutionarily have empathy; others do not. Most of the distribution is around the middle. In a market system you can encourage the do-gooders at one end of the distribution. The last thing you want to do is tax them. Snuff out the bad guys and encourage the good guys. Back together: Guy with envy can't kill the neighbor's cow. Guy with envy can go out and cooperate with someone else. System works fairly well.
32:18Over last 35-40 years, measured inequality has risen in income distribution. Large increase in immigration, demographic change in the 1970s due to an increase in the divorce rate. Returns to education have risen, especially at the high end; entrepreneurial environment, small group of people earn high rewards. Superstar literature, best athletes, entertainers, etc. Bernstein podcast: crime rates, health rates result. How does this inequality start to come about? If entrepreneurial activity, quite wonderful. How much consumer surplus did that entertainer generate? Probably dwarfs the income side. Michael Jordan's salary vs. pleasure people got by watching him. Another side: systematic decline in the level of public education, correlates with breakup of family and strong oversight; barriers to entry up. Low ability people find it harder and harder to get to that first step. Created in the form of protectionist legislation barriers to entry so they can't get on the train to begin with. Los Angeles. Unionization one, minimum wage hours another, resistance to vouchers and charter schools. Two-tier educational system. Large public school monopoly systems. NYC, Chicago. Higher returns to education at same time as inferior education given to some. Return to basics, students chosen at random, example. Worry about the social institutions that drag down the least fortunate in society. Can't slip at an early age or it costs you twice as much to catch up. Jim Heckman: Interest, which is what you save from deferring education, is but a rounding error relative to the additional cost of trying to make that education go. Resentment.
40:38Evolution: envy and the role of wealth in our lives. Socio-biology, evolutionary psychology. Attacked as form of sexism or racism. If individual self-interest were the only form of motivation in life, we would never be able to have children and never be able to go through the evolutionary cycle: have to find a way to get the next generation up to the same level. Wouldn't take care of children. W. D. Hamilton: individuals are holders for their genes. Inclusive fitness, act not only to benefit yourself but those who are near and dear to you. Parents have protective instincts toward their offspring--humans, rhinoceros, not fish. Darwin: emotions are not immune from evolutionary pressures. Natural love and affection--legal literature term. Parents internalize your children's welfare into your psyche. Question: Is happiness an emotion which will promote survival of the species? Within limits yes but not always. Parents can't just walk away from a sick child in order to be happier--won't be evolutionarily successful. Parents won't answer that they are happy, but they wouldn't choose any other kind of behavior. Happiness surveys falsely assumes a kind of hedonism which is inconsistent with the evolution of the species. Sense of dread, grieving; but can't be so miserable you can't take care of your other children. So complex. Happiness literature never looks at this--simply reports that people are not as happy with children as they expect. Momentary happiness may not be high, but lifetime happiness is. Worth the cost. Consistent with religious literature that is not aesthetic or pain-based. Hedonism is not the road to happiness. Father Sirico: attacks on hedonism, discount the future. People think Adam Smith was a proponent of getting whatever you can and get ahead; but that was not his view; Theory of Moral Sentiments. Word "sentiment"--what he meant was the effort to figure out how people react toward the misfortunes of others. You don't treat them as acutely as if they are your own; but you are not completely indifferent either. Impossible to only care about your children but not your children's friends. Theory of inclusive fitness. Prisoner's Dilemma games don't cause societies to founder. Individual utilities are inherently interdependent. Back to maxims: cooperative first but not aggressive. These sentiments increase the ability to be cooperative, but not perfectly. All you can say about the nature of human sentiments is that on balance we will have an easier time developing pro-social than anti-social behavior, but you still have to worry about the outliers. Hobbes.
52:23Outliers: At one end, thug, breaks into 100 homes; at other end Thomas Edison, Sergei Brin. Real risk of the thug is when the thug has the power of the state to murder millions of people. Outlier at other end can do all kinds of good. Can you get a monopoly of power to control the thug without becoming the thug himself? Soviet Union, Pol Pot. Don't want to worry only about the modest little risks. U.S. Constitution fragments power to the point where it becomes harder to perform heroic functions but also harder for anyone to become a tyrant. Danger of populism. Stoking the fire on envy will lead to a climate in which there will be long-term social stagnation. Safeguards weaker today than they have been. Gains from private rent-seeking activity are perhaps larger than they have ever been before.