Here’s my outlandish theory: that economic resentment at the bottom of the top 1 percent of America’s income distribution is the new wild card in public life. Ordinary workers won’t rise up against ultras because they take it as given that “the rich get richer.”
…[But] If people no smarter or better than you are making ten or 50 or 100 million dollars in a single year while you’re working yourself ragged to earn a million or two – or, God forbid, $400,000 – then something must be wrong.
Thanks to Greg Mankiw for the pointer.
My own observation, from working in business, is that people always compare themselves to similar individuals who earn more. “That guy down the hall takes a longer lunch than I do, but he makes $5000 more.” They never compare themselves to similar individuals who earn less. “I’m lucky to be making $4000 more than so-and-so, given that what he does contributes more to the company.”
I think it’s deeply ingrained in us to believe that many other people are getting more money (for a given level of skills and effort), better sex, and more satisfaction out of their jobs. So the bookstores are lined with volumes purporting to explain how you could be like those mythical others.
READER COMMENTS
nelziq
Oct 26 2006 at 11:54am
I think this applies even more strongly if you narrow this down to the upper-middle class. The complaints of income inequality are really coming from ivy league educated journalists and authors who are complaining that ivy league educated executives are making way more than them. They are mad that the people they went to college with are now making 10-100 times what they do. Extreme poverty in Africa is annoying, but having your college roommate lord his riches over you is a reason to bring out the knives.
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bgrindle
Oct 26 2006 at 1:05pm
This is the classic assumption of equity theory in management. If we perceive that someone is getting something more than we are while doing something similar we will adjust things in our work to compensate. For example, slacking off a little more to compensate for the (perceived) lower pay. The differences do not have to be real for this to occur, just imagined.
It can, and sometimes does, work both ways. If you think you are getting a better deal at work than your peers you might start working longer hours.
True, the second instance isn’t heard about as much, but it does happen.
Good article on it: http://en.wikipedia.org/wiki/Equity_theory
Ragerz
Oct 26 2006 at 1:12pm
“[T]hey never ever compare themselves to similar individuals who earn less.”
Who is they? All we know from Kling is that it is “people.” Does he mean some people, all people, some of the people he has worked with in business, or all of the people he has worked with in business?
Whatever the claim, I think even the most modest one, that some of the people he has worked with in business have never compared themselves to the less fortunate is very likely false. Obviously, the more broad possible interpretations are even more likely to be false.
That people compare themselves to people who make more money and dislike what they view as unearned wealth does not imply that they don’t compare themselves to people who make less money also. It is possible, and indeed, overwhelmingly likely, that most people will do both.
Of course, it is a fallacy, I think, to be envious of another merely because they make more money, especially to the extent that the more money mainly translates itself into consumption on status symbols (or as Veblen would say, “conspicious consumption”) rather than the purchase of more important things (like food, basic clothing, basic housing, transportation, medical care). The reason I think envy is a mistake is because one who is envious typically underestimates their own worth and also values the wrong things.
Nonetheless, as a factual matter, one can be non-envious (i.e. not wish that one were in the position of someone who captures more money) AND still think that the person with more money does not deserve it. That is, the thought that a CEO who receives a huge amount of pay by using his position to ensure that those on the board of directors support or at least do not oppose excessive pay packages does not deserve the pay so received by gaming the system, does not imply that one is envious of the CEO. Just as one may not think that a drug dealer deserves the money he has captured and not be envious. Just as one may think that a person who gained money by fraud without getting caught does not deserve the money they have captured.
Finally, aside from matters of desert, one might oppose what one might characterized as “unearned” differences in income due to its tendency to distort a more optimal allocation of resources. As when resources are shifted to “conspicious consumption” when more critical basic needs have not yet been met.
Ultimately, I think that Kling’s assumption that people always compare themselves with people who make more sort of assumes their motive is envy (i.e. their opposition should not be taken seriously because it is not that they have truly principled disagreements with the system, only their own place within it).
There is no way that someone who is truly familiar with what motivates someone like, say, New York Attorney General Eliot Spitzer (soon to be Governor Spitzer, and if we are really lucky, in the future President Spitzer) can say that it is envy, rather than a belief in fair play, honest dealing, and principle that motivate him. (Of course, I am not sure that this implied by the Fortune article, which classes him as an “ultra” rather than “lower upper.”)
That one assigns all opposition to one easily dismissed motive (i.e. envy) when this motive only explains the positions of some people tends to be demonstrative of an insecurity in the individual making such an assignment. Just as dependence on strawmen arguments often demonstrates an underlying insecurity.
In any case, I am rather suprised that Kling chose to post something primarily concerning motive (i.e. “Envy and Resentment”). After all, as this TCS column demonstrates, Kling is supposedly against what he called Type M (“Motive”) arguments and instead favors Type C (“Consequence”) arguments. While I do not think that Kling’s position that Type M arguments are irrelevant is sound, I think if you take that position, then this post is irrelevant. After all, this post is all about motive, as is illustrated by the title, “Envy and Resentment.”
– Ragerz, the ex-libertarian
Brad Hutchings
Oct 26 2006 at 1:16pm
Has anyone ever studied this kind of thing on professional sports teams where pay is individually negotiated? Curious. Could you correlate pay disparity with or against team performance, especially in salary capped sports where salaries are theoretically a zero sum game?
shecky
Oct 26 2006 at 1:26pm
I think some of this resentment comes from the realization that life isn’t a strict meritocracy. One could do all the right things better than anyone else and still never catch up with the old money loser who couldn’t pick his nose, except to make himself a remarkable golden parachute on the ruins of his folly.
liberty
Oct 26 2006 at 1:35pm
it would actually be pretty depressing if you thought you were doing better than all others with the same skill level or level of attractiveness (for the latter, at least if single) since there would be little to look forward to. If you’re already getting laid the most and having the best sex, in the best career position, earning the most for any person equivalent, likely you are at the end of the road. The probability that you will advance much from there is fairly slim.
So, maybe its actually an optimistic outlook to look around and notice those ahead of you in one or more areas.
Cyrus
Oct 26 2006 at 3:00pm
If people primarily compare their incomes to those of their peers, and not to those who make vastly more or less than them, then beyond a certain level of need-fulfilment, the value of income is purely positional.
It follows, then, that large incomes can be taxed without deadweight loss, because the motive to increase an already large income, namely, making more than the next guy, exists in undiminished strength under a heavier tax regimen, so long as the next guy is being taxed under the same regimen.
Ragerz
Oct 26 2006 at 3:13pm
liberty,
Very interesting points. One could look at someone whose actions are no more meritious than yours (i.e. they don’t deserve more), but who has more “stuff” and this would give you something to hope for. Maybe if your lucky, you will end up with more stuff too.
On the other hand, one might question whether getting “laid the most” and having a “better career position” is really what one should aim for after all. As you point out, once you reach the top, there is nowhere to look but down. More significantly, these things are awfully superficial. Getting laid more is positively associated with getting more STDs and having “more” sexual partners is very inferior to having just one really excellent relationship. A “better career position” does not necessarily translate into a “better life.” Life has many dimensions. Who are you to say that the person with the “inferior career position,” but who devotes themselves seriously to, say, kickboxing or some sort of martial arts, or scuba diving, or spear fishing, or… the list goes on and on, does not have a “better life?”
One major motivator for those aiming for a “better career position” is the prestige that is attached to such positions. (Another, more legitimate motivator, might be the power to do good that such a position gives you.) But prestige is rather empty. A more developed individual does not need the opinions of others to validate them. A developed individual is so secure in themselves, that prestige is irrelevant. So, seeking prestige is like seeking a crutch rather than learning to walk on your own. (On the other hand, merely possessing prestige, when it is not needed, is not harmful.)Rather than developing into a more complete individual, those who seek validation end up empty.
So, why your point is taken, that one can look at someone who is lucky (rather than deserving) with some sort of hope that the randomness of life might someday put you into a similar position, overall, I think this is rather pathetic. Why hope for the random? Better is to seize the day and take control of that which is in your control.
Bob
Oct 26 2006 at 3:43pm
Ragerz,
I enjoy your comments, but am puzzled by your attachment to Spitzer. I cannot speak to his motives, although my presumption would be more cynical than yours, but I can say that even if they are pure his methods reek of “the ends justify the means.” There is a reason for the old saying that “the road to hell is paved with good intentions” and I, personally, would prefer to avoid living under a President Spitzer regime.
Ragerz
Oct 26 2006 at 4:08pm
Bob,
With respect to Spitzer and your “end justifies the means” criticism, I would be interesting in learning more.
I just finished an excellent book on Eliot Spitzer called Spoiling for a Fight by Brooke A. Masters. (Available here.) From reading that book, reading various articles in periodicals, and also from listening to him speak with an opportunity to ask questions, I have a strong tendency to agree with him on issues. Further, he appears to be strongly motivated by principle.
But, of course, one book, a talk, and various articles hardly represents everything that there is to know. I am always interested in further specifics.
Omer K
Oct 26 2006 at 4:24pm
Thomas Sowell commented at length on this in his 1990 book “Preferential Policies: An International Perspective” and also I believe in another called “Affirmative Action Around the World: An Empirical Study”
For instance, this same resentment and envy of those ‘closely above you’ occured in as disparate countries as Nigeria and Maharashta (a state in India).
Taking the Indian example, the guys at the bottom (the indigenous Maharashtrians) did not feel much resentment against the guys at the top (who were the Gujaratis) but rather towards the ethnic group who held mid-level Civil Service and Clerical jobs (the South Indians).
This resentment was so great as to lead to the formation of the Shiv Sena, and to riots that, in one instance alone, lead to the deaths of 200 people and left over 10,000 homeless.
I guess its just Human Nature…
Ragerz
Oct 26 2006 at 6:58pm
An example of why I like Eliot Spitzer can be found in this New York Times article. Unlike so many other Republicans and Democrats, Spitzer does not excuse ethical lapses from those in his own party.
Prashant Kothari
Oct 27 2006 at 12:14am
The WSJ had an article during the tech bubble headlined “The Haves Are Jealous Of The Have-Mores”…
Barbar
Oct 27 2006 at 6:19am
Just wanted to point out the underlying current of “The social is order is good and should be preserved” in this sort of discussion.
If people get agitated by people making more money than them, and maybe want to kill them, or less dramatically tax them more, then this is a bad thing, and they need to chill out, remember that it’s lonely on top, and that prestige is unsubstantial and ultimately meaningless. Think of how lucky you are, and be content.
But if people are spurred by their envy to work harder, then they are to be praised for their industriousness. Status-seeking is the engine of economic growth which makes everyone better off. People who try to discourage the rat race by discounting materialism (i.e., hippies) are annoying and should be ignored. Materialism is good. We know we are doing well because we buy nice cars and big houses and Ipods. These things are very precious.
It’s just interesting, because libertarians and libertarian-types often don’t seem to realize this tension. Similar to how it’s well understood that greed is a wonderful incentive for the rich (don’t tax them, it only discourages them) but fear is the best motivator for the poor (don’t make life easier for them, it will only make them lazy).
Cyrus
Oct 27 2006 at 10:51am
It’s just interesting, because libertarians and libertarian-types often don’t seem to realize this tension. Similar to how it’s well understood that greed is a wonderful incentive for the rich (don’t tax them, it only discourages them) but fear is the best motivator for the poor (don’t make life easier for them, it will only make them lazy).
What I tried to express above, however, was the hypothesis that rich people would not be rich unless they were inherently proclive towards doing money-making things, so they can be taxed with less deadweight loss than other people, for the same reasons that addictive substances can be taxed with low deadweight loss: just as the junkie needs a fix, even if the price is higher, the rich man needs to make more money than the next rich man, even if it’s harder for both those rich man to make money at all.
Matt
Oct 27 2006 at 11:51am
If one is to feel resentment then one would feel resentful about the people around them. This would be the people who are near them in pay and responsibilities.
(-_-)
Oct 29 2006 at 9:22pm
Ragerz may want to shorten his posts if he possesses the want to be read.On the other hand, he may just want to sound more intelligent then he is by making his arguments as long as possible.
Also the man who gets laid the most is not neccessarily the most prone to STD’S. That depends almost entirely on the women looked for. I could go on and on about that paragraph but I choose not to, otherwise I would be a hypocrite. To sum it up, the whole paragraph is based off of inadequate assumptions.
BIquotelink
Oct 29 2006 at 9:51pm
So Ragerz, your first statement is an extended whine about Kling’s argumentation:
“Who is they? All we know from Kling is that it is “people.” Does he mean some people, all people, some of the people he has worked with in business, or all of the people he has worked with in business?”
And you then proceed to indulge in your smug, facetious arguments by using the same tactic:
“Unlike so many other Republicans and Democrats, Spitzer does not excuse ethical lapses from those in his own party.”
So tell me then, who are these “other Republicans and Democrats”…more ‘people’ or something?
Your other remarks are in the same hypocritical vein: your perceived superficiality of others’ choices and aspirations, for example. The envy and resentment of your betters is very clear from your weak arguments.
Ragerz
Oct 29 2006 at 11:03pm
BIquotelink:
First, if you read the newspaper or keep up with current events, you can find many people who overlook ethical lapses by those in their own party. So, why I do not name names, the information is accessible to anyone who is interested, and would be relatively specific to anyone who bothered to look. In contrast, Kling’s “people” cannot be discovered with reference to current events, was imprecise, and more significantly, false under most plausible interpretations of what he was saying. In contrast, given that one can look up examples of the phenonenon I am discussing (people who overlook ethical lapses for political reasons) and I did not make a claim that can be interpreted as a general statement about people, or even a general statement about Democrats and Republicans. All I said was that there are many Democrats and Republicans who overlook ethical lapses.
Second, the focus of my criticism was not Kling’s imprecision concerning what people he was talking about. Imprecision is inevitable due to the fact that time is a scarce resource and language is inherently ambigious. The reason I asked the question concerning “what people” was because before one can criticize what Kling’s claim, one has to fix the meaning of what he is saying. I presented four alternative interpretations that I think fairly ecompass the vast majority of possible meanings and demonstrated that they were false. The intended focus was not Kling’s imprecision (which is understandable and excusable, given time constraints), but rather the falseness of his claim.
For you to say my claim was false, you would have to say that it is not true that many Republicans and Democrats overlook ethical lapses by members of their own party. Something I doubt you would be foolish enough to assert.
You write:
“The envy and resentment of your betters is very clear from your weak arguments.”
This hardly follows logically. That someone makes weak arguments hardly implies that they are envious or resentful. Given the lack of logical basis for this argument, it is clear that this is nothing more an ad hominen attack. Most people would agree that ad hominen attacks are “weak arguments.” I am not about to suggest that this implies that you are envious or resentful…
Aftin Crowe
Nov 1 2006 at 5:50pm
I don’t think people should compare themselves to others on any level. I feel if you do the best you can and work hard you will be rewarded accordingly. Most of the time I feel it is true that people in the same filed that make more, make more for a reason. This reason could be something as simple as having a higher degree, or just being able to do more things in less time. I believe that people that get mad because someone else is making more then them usually don’t know the whole story, and sometimes people don’t tell you want they really make in the first place. How do you know they are even telling you the truth about how much they make a year.
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