Wednesday, August 20, 2003

Could this be a major 'root cause' of American voter rage?

From the Economist:

If governments' ultimate goal is to maximise the well-being (ie, “happiness”) of society as a whole, then, says Lord Layard, some highly controversial implications for public policy follow. Conventional economic theory argues that taxation distorts the choice between leisure and income. Taxes reduce the incentive to work an extra hour rather than go home, or to put in extra effort in the hope of promotion. But Lord Layard's argument implies that people have a tendency to work too much. Far from being distortionary, taxes are therefore desirable. He suggests a marginal tax rate of 30% to deal with the “pollution” that one person's extra income inflicts on others, and the same again for habituation. The total of 60% is a typical European level of taxation (taking both direct and indirect taxes into account).

You should click through to decide if I've misinterpreted the rest of the argument (which with supporting examples and evidence is too long to quote), but basically he argues that it's easier to make individuals happy with huge amounts of money than whole societies, because one of the things that makes people happy is having more than the neighbors, and one of the things that makes them sad is having less than the neighbors, so raising average income only makes people happier to a point. He argues that having more vacation time makes people happier even if everyone else has more too. So money is a rat race (after a certain point) but not leisure.

Even if he's right, surely you have to take working conditions and job satisfaction into account as well. All the same, in recent years voter anger about giving people more than five years of welfare has been much stronger than about other forms of waste which are larger in absolute terms. Lack of leisure could well explain a more viscereal rage at feeling bilked by people who don't have to work for a living than by people who are at least hardworking dishonest folks.

No comments: