January 13, 2011

January 13, 2011
Why Does Inequality Make the Rich Feel Poorer?

Welcome to another day in my life. Today is Thursday and I hope you are having a safe and great week so far. Dab the AIDS Bear and I are still on the run this week.

Today I have to go to the Department of Transportation to get my drivers license renewed. Luckily, I made an appointment so hopefully it will not take forever. I have other things I need to get done today.

I often wonder why those who complain the most about taxes and government aid to the needy are those who have far more than most others and live a very comfortable secure life.

What I have in mind is a vision of society as being something like a long street running up a hill, in which rising altitude goes along with rising income. And each person along that street evaluates himself or herself relative to the neighbors on either side, rather than the whole street.

Now, there are two slightly different interpretations of this story. What seems to be suggested is that people compare themselves only to their uphill neighbors and since the hill gets steeper as you move up the street, the rich feel worse because the guy to the right is increasingly different from themselves.

An alternative is that people compare themselves to neighbors on both sides, but it is the convexity that changes: if you are in the middle of the income distribution, your uphill neighbor is about as much richer than you than your downhill neighbor is poorer, but in the upper reaches that is no longer true. (I was taught, long ago, that the income distribution is more or less lognormal for most of its range, but turns Pareto at the upper tail. If you have no idea what I am talking about, never mind.)

Either way, what is true is that the gap between the rich and the superrich has grown dramatically.

The net result is a society of winners as whiners, where people who are not only doing fine but doing much better relative to the median than they were a generation ago nonetheless feel left behind.

A personal note: I have always found extreme inequality at the top rather relaxing from my own point of view. I do fairly well all things considered but others are much richer; the fact, however, is that especially in the United States you know that no matter how much you make, there are other people making so much that your earnings look trivial.

So what is the point of evaluating yourself that way? Of course, it is probably a lot easier to feel that way when you have gotten plenty of other ego boosters.

While none of this explains why the rich are so against government assistance for those less fortunate. Unless maybe it is because they do not want others to have a chance to steal their glory or harm their fragile egos.

Until we meet again; here's wishing you health, hope, happiness and just enough.

big bear hug,

Daddy Dab