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Saturday, January 15, 2005
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UD TO HARVARD: STOP THE MADNESS
Faithful readers know that UD follows with panting enthusiasm all of the latest studies on human happiness -- who's happy, how they got happy, how she can get happy, how she can stay happy (see UD posts dated 7/13/04, 7/15/04 and 9/25/04). Fortunately for UD, happiness is a growth-industry. Many many books and articles dedicate themselves to UD's exhilaration. The latest Economist magazine (a publication UD reads from back to front because the culture pieces are in the back and the finance pieces in the front), reviews a new book on happiness by a British guy who makes what Robert Frank calls the "cascade effect" a central part of his argument. Here's The Economist, summarizing the British guy's book [italics mine]: Among many things, the behaviourists have found that it is relative, not absolute wealth, that matters most to people. Mr Layard cites as evidence a study in which Harvard University students claimed to prefer earning $50,000 a year when their peers are on only $25,000 to a world in which they earn $100,000 while their peers get more than double that amount. The survey sample is anything but representative, but you get the point. So, Lord Layard's thinking goes, by spending 90 hours a week in the office, you may be improving your own income, but you are also causing other people to feel less satisfied with theirs. They may be encouraged to work longer themselves just to keep up, taking from the time that gets devoted to family and community. It is, the author argues, something similar to environmental pollution, where one person's action (or a company's) makes others worse off. Fortunately, he notes, economists have already figured out how to deal with such externalities: tax them so that the polluter internalises the cost of his actions. And so, near the top of Lord Layard's list for improving human happiness, comes the following recommendation: much higher rates of income tax to tame the rat race. The author [thus] singles out income inequality as a psychic wound uniquely worthy of state intervention. And here's Robert Frank with more on this cascading, unhappiness-making economic effect: [T]he behavior of the wealthy has been the root cause of a serious economic squeeze confronting the middle class, whose incomes have failed to keep pace with the prices of housing, tuition, health insurance, and a host of other basic services during recent decades. Through a chain of events, the increased spending of the top 1 percent, who earned three times as much in 2000 as in 1979, has placed many basic goals out of reach for the median family. The links in this chain unfold roughly as follows. When the incomes of the wealthy rise, they eventually spend more on houses, cars, clothing and other goods, just as others do. Upon learning that someone at the top has built a 60,000-square-foot house or purchased a new Ferrari Scaglietti, most of us feel no inclination to alter our own spending. But among those just below the top, such purchases have an impact. They subtly change the social frame of reference that defines what kinds of houses and cars seem necessary or appropriate. Additional spending by top earners thus leads others just below them to spend more. And when they do so, others just below them are affected in the same way, and so on, all the way down the income ladder. In short, burgeoning incomes at the top have launched "expenditure cascades" that have ended up squeezing the middle class. ... [T]he expenditure cascade launched by top earners has placed a real burden on middle-and low-income families. This is not to say that top earners have done anything wrong. Certainly it was not their intent to cause trouble for those below. Yet the runaway prosperity they've enjoyed in recent decades has imposed significant tangible costs on the middle class. Happiness seems to be relative - if there's rough equality of circumstance in your vicinity, you will be more or less content; but excess compensation, excess goods nearby, produces an anxious, misery-making conviction in you that happiness is impossible without that same high level of income and purchasing power. Down and down this phenomenon cascades, from the highest economic classes to the slightly less high, to the upper middle, to the middle, and so forth, each level floundering in depressive, competitive work and expenditure. Yeah, so what? What's this got to do with the American university? Well... It occurs to UD that Harvard University (which after all sponsored one of the definitive studies of the subject) could do all American universities a favor by voluntarily renouncing the spectacular cascade effect it has set going by amassing a $23 billion endowment. This out-of-all-proportion number is prompting an institutional cascade of the most blatant sort; for when Harvard has 23 billion, Yale must knock itself out to approach that number, even though before Harvard got that rich, Yale thought it was pretty well off with its 10 or so billion .... Princeton, meanwhile, suddenly feels a pauper, etc., etc. The result is that universities, like individual Americans, become miserable money-grubbers. Yes, we could, as Layard suggests, tax Harvard's excess; but why not first see whether Harvard would be willing to recognize the damage its enormous endowment is doing to all universities, and begin to shrink it? |