People Aren’t Happy, So Let’s Fix It With Taxes


The Economist this week is all about capitalism and happiness. One of the lead articles discusses the idea that greater societal wealth doesn't make people happy. Why? Because we don't really want stuff, we just want more stuff than our neighbors. We want to be better than our peers. People spend so much time trying to get stuff that they don't need, then wonder why they are so unhappy. The surprising suggestion from this article is that taxes can fix the problem. The even more surprising suggestion from this article is that these taxes are not meant to address inequality, but rather, to force the acceptance of elitism and societal hierarchy.

Think of the scramble for schools, Mr Frank says. Only 10% of kids can go to the top 10% of schools. In many countries, wherever the schools are good, the houses will be expensive. Thus parents who want the best education for their child must overwork to afford a house in a good school district. In doing so, however, they raise the bar for everyone else.

Is mutual disarmament possible? Not without government help, Mr Frank and Lord Layard argue. The exchequer should tax earned income heavily enough to deter one-upmanship, they say.

Despite appearances, this is not a naked example of punitive redistribution-the fiscal politics of envy. Mr Frank and Lord Layard do not want to level the social order. Their aim is much more conservative than that. Their taxes would leave the pecking order intact and envy undiminished. But people would be deterred from acting on the green-eyed monster. The problem these economists want to tackle is not inequality per se. It is that people don't know their place and scramble vainly to improve it. Carlyle, who thought man should content himself with being the worthy follower of worthy superiors, would no doubt have approved.

This is such an odd thing to read because taxes are usually proposed under egalitarian ideals. The assumption behind so much left-wing thinking is that we should all be more equal, despite being dealt different hands in the game of life, and playing the hand we have been dealt in different ways.

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The article goes on to talk about unhappiness at work.

Not that Carlyle was workshy. On the contrary, he thought that work was the only lasting measure of a man. As he put it, whatever insight, ingenuity and energy a man had in him "will lie written in the work he does". And the "only happiness a brave man ever troubled himself with asking much about was, happiness enough to get his work done."

Economics, on the whole, disagrees. It thinks of labour as a chore. People sell it, at the expense of their leisure time, purely as a means to the end of consumption. Indeed, Carlyle first anointed economics the "dismal science" because liberal economists insisted that American slaves be free to sell their labour in the marketplace like everyone else.

As far as work goes, I blame much of the unhappiness problem on managers who are so damn disconnected from their employees that they don't channel them into doing work they like. When I go home, I sometimes read annual reports in my free time because I find them interesting. It is totally irrelevant to my job (and probably an indication I should switch to an investing related field some day), but it is *work* for some people. There are all sorts of other things, from programming to graphic design to organizing to quality control that are considered work in some contexts, but some people really enjoy doing them. Part of a manager's job is to get the most out of limited resources, and one way to do that is to understand those resources and, in the case of labor, channel people to do work that they really enjoy.

Anyway, click over and read the whole article. It's interesting stuff, and touches on some issues that aren't well explained by basic economic theory.