Saturday, October 26, 2013

Inequality and resentment

One of the arguments typically employed by inequality doom-mongers in justifying their demand that wealth be forcibly redistributed from the rich to the rest is that gaping inequalities of income and wealth pose a threat to social cohesion. Absent such redistribution, the thinking commonly goes, the seething masses will produce widespread unrest, manifesting itself through higher crime, disengagement from the political process, a loss of respect for valued institutions, etc. At a minimum such continued inequality could make for some real unpleasantness and at worst could threaten our very way of life and/or system of government.

There are at least two problems with this school of thought, not the least of which is moral. Even if we accept full-blown revolution in the streets as a likely consequence of income and wealth inequality, then is not the redistribution of wealth some claim is needed to stave it off little more than protection money? How is this any different from terrorist or mafia figures who threaten violence unless their demands are met? 

A more practical objection to such thinking, meanwhile, is that most people either don't compare themselves to the very rich or are very resentful about how much money they have, a point made very well by Tyler Cowen on an episode of Econtalk last month:
What people resent are the people who are close to them -- their colleagues, people they went to high school with, in-laws. For the most part, Americans do not resent the wealthy...For ordinary Americans the home of envy is Facebook...That's where envy blossoms. You look at the people you grew up with, the people you know, you see how well they are doing; if they are doing better than you, you feel bad. That's what I observe. You're not worried about the Titans of Silicon Valley -- you know, he earned another billion, I hate that guy. I don't see much of that.
Exactly right. For the vast majority of people the very rich, the 1 percent if you will, are an irrelevance and an abstraction. When people turn to others for use as a measuring stick to evaluate their own well-being or success, they use those they are familiar with from similar circumstances, not those they only recognize through television or magazine articles. 

Econtalk host Russ Roberts then makes a couple of good points of his own:
I think part of the reason we think we have an inequality problem is we spend a lot of time telling people we have one. So they start to think it's true. And as you point out, I think people look at the people around them, and in fact -- they like rich people who aren't near them. They love looking at, reading about Bill Gates's house and the lifestyles of the rich and famous. They don't find -- it doesn't enrage them. They find it entertaining.
In other words, not only are most people not resentful of the rich, they oftentimes actually enjoy following them, which helps explain the celebrity status enjoyed by figures such as Bill Gates, Warren Buffet or the late Steve Jobs. As an aside, I'll add that to the extent the rich are resented it isn't for their wealth per se, but for the unfair manner in which they are perceived as obtaining it, with Wall Streeters who enjoyed federal bailouts a prime example. 

Roberts' comment that "we spend a lot of time telling people we have [an inequality problem]" is another good observation. To the extent people express anger or resentment over inequality, one can only wonder how much of this is a result of drawing their own conclusions and how much is simply a product of repeatedly being told by members of the media and intelligentsia what a problem inequality is and how angry they should be. 

In any case, the notion that huge swathes of the populace -- driven by anger over inequality -- are on the verge of taking to the barricades appears to be mostly leftists (and, in fairness, more the extreme left) projecting their own wishes and desires rather than an objective analysis of the country's mood. This is why the short-lived Occupy Wall Street movement provoked such near-delirium in leftist circles, as the long-awaited rebellion against capitalist institutions and the rich appeared to finally be at hand. Maybe next year.

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