Income Inequality and Human Nature
An interesting read from yahoo finance. Most of the arguments should seem familiar: gini indices and crime rates. However, this bit was interesting and a bit surprising:
I suppose it is important to remember that economics is greatly impacted by psychology.
There's a very interesting strain of economic research showing that our sense of well-being is determined more by our relative wealth than by our absolute wealth.
In other words, we care less about how much money we have than we do about how much money we have relative to everyone else. In a fascinating survey, Cornell economist Robert Frank found that a majority of Americans would prefer to earn $100,000 while everyone else earns $85,000, rather than earning $110,000 while everyone else earns $200,000.
Think about it: People would prefer to have less stuff, as long as they have more stuff than the neighbors.
I suppose it is important to remember that economics is greatly impacted by psychology.
posted by rz at 1:59 PM
4 Comments:
that is ridiculous!
actually I suspect they made the right choice, b/c if everyone else makes 15k less than you do, you will have slightly more buying power. However if you make 90K less than everyone else you will have significantly less buying power and could find yourself in a very bad place. So while people might be making the choice on greed, I suspect it makes correct economic sense and if I knew more economics, one could could probably show it algebraically .
You are largely missing the point. Regardless of people's economical analysis being correct, the fact remains that income inequality is something to be concerned about. Furthermore, relative wealth being more important than absolute wealth (perhaps you could show/argue) would make that point stronger.
Simple example, look at how much something costs in one country to another. So one can make less in one country and still have more buying power than someone technically earning more. The point is the basic supply/demand idea . . . so that if you find you earn half as much as everyone else, a lot of things could and should end up being priced too high for you to buy. ie you will find that you have less buying power in the case where you make substantially less than everyone else.
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