It has been asserted that the happiness of a population, particularly once a base level of income is reached, depends not on some absolute measure of well-being but rather how one’s income compares to others around them. Of course you know what the chess-masters are thinking about the best way to improve outcomes: tax the rich. I had an old professor who was famous for advocating sharply progressive consumption taxes.
But isn’t that only one of two ways to make lower-income people happier? If we truly were pursuing policy to improve the general well-being of these lower income folks, wouldn’t a more constructive policy be one that advocates the immediate open-immigration for anyone who wants to come to the United States? This would be constructive on the grounds that both I and the relative status folks should support, wouldn’t it? First of all, it would dramatically improve the well-being of the people who would be able to come here. Second, given the large amount of low-wage immigrants coming here, that would necessarily improve the relative standard of living of the prior low-wage Americans. They would favorably compare themselves to the new lower-wage folks in the economy.
So, can you tell me a reason why, if you care truly about increasing our wealth and well-being why every single behavioral anomaly seems to end up being used as a crowbar for more taxation, more open disdain for the rich and for a greater intrusion by government? I’ll begin to take the proscriptions of the behavioralists seriously when they pursue policies consistently according to the standards that they themselves have been promoting for why they do what they do. But I’ve yet to see a Nudger offer up free financial advice to professional athletes who do not take full advantage of global tax havens, and I have yet to see anyone who cares about relative status suggest that it can be “mitigated” (if we accede that it needs to be) not just by forcibly taking wealth from the wealthier among us, but also by allowing the flourishing of the poorest among us.