Happiness, income and status

Money is valued because it provides access to goods and services, but it can also be used to keep score in a competition.

Oh, OK. Yup, this sounds right on the nose. Heard it on AM talk radio a few times – some caller offering for no apparent reason that he makes ‘well over a hundred grand’.

Looking at the current crop of Republican presidential hopefuls…I’d venture the theory that right-wing mistresses and ex-wives are more expensive than their left-wing counterparts to explain the data.

I’ll offer the possibility that those on the right may not be so different from the rest of us as they seem to be at first sight.

But your explanation does not account for the finding that those on the right habituate to changes in status. Your thesis is that these folks care about money only as a means of score-keeping in a status competition (which is to say, they’re still status driven), but then you have to explain why they seem indifferent to status in other forms. Because it’s not as if one could not care about being the nth richest man AND also the nth coolest AND nth most famous …

And, of course, the group of people who are self-employed (as, full disclosure, I am) include countless millions who are nowhere near the top ten in any country (or state/province, or city) and who don’t have an accurate idea of how one’s income compares, so genuine score-keeping is near impossible.

I know this probably seems bizarre to academics, but not only is my job title meaningless, but my income is not a function of my rank nor does it rise steadily with seniority nor cost-of-living nor anything else. In fact, it varies pretty dramatically depending on business conditions (as much as a factor of 2 from lean year to fat year).

Which means operating with a buffer of savings many times greater than that of a tenured academic with a defined pension plan. Which, in turn, means spending during a given year is really not a function of income. So for a self-employed person like me, status in terms of titles/rank/promotion is generally meaningless and income is not of much use in score-keeping, since comparisons are difficult and the data is very noisy. But money IS extraordinarily useful in filling up the savings buffer — it has a much stronger effect on the sense of short and long-term security (which, of course, are complete non-issues for tenured academics) than it does on status.

I really don’t think we can reject the hypothesis that people in different life circumstances have different attitudes toward money & status (or that people who view money & status differently make different career choices).

abb1 / #7 – I think the point slocum is making that while of course people trade-off income for status, the details of how much they do this trade-off can include a large component of risk and assocated variability that may not be accounted for in a simplistic model of “income”.

In particular, tenured academic is (relatively) low-income/high-status, but also low variability.
On the other hand, NON-tenured academic is low-income/high-status, but with a high variability too.

That’s much less true now in the era of outsourcing/offshoring/”global economy”. Companies have adapted, and pushed a lot of risk onto the consultants. They’ve basically figured out that it’s a way they can avoid paying health benefits and unemployment insurance, and well as escape many labor laws. There have been some big lawsuits around this area, notable involving Microsoft.

Like many economic changes, the very top often make out like bandits, but everyone else can be worse off.

I guess I don’t understand what your objection to JQ’s explanation is. Suppose my idea of status is my grade in the hierarchy and your idea of status is independence (which, incidentally, requires a lot of cash). Seems all right, what does it have to do with risk?

And maybe someone who’s read the study could expound upon what is meant by “one standard deviation in status”? Status seems like a quantity ill-suited for for such apparent precision. We don’t normally speak of “one standard deviation in beauty,” for instance. Moreover, changes in status seems hard to classify. As #8 points out, “tenured academic” seems high-status to a non-tenured academic, but suppose the tenured academic then takes a job in government or private industry — is that an increase in status or a decrease?

Most people (in the German sample population) initially react more, as regards self-reported happiness, to a change in income than to a change in occupational status, but gradually get habituated to changes in income.

This is interesting – it implies that money has more of a long-lasting impact on most people than their occupation, which perhaps I can madly generalise to income being more important to many people than occupational status.

#15 and #17, those assertions may be true, but insofar as they conflate income and status, they don’t really have anything to do with the NBER study, do they, since that study measured income and status separately?

Hasn’t Robert H. Frank been writing about this point for nigh unto 20 years now? Of course i haven’t yet checked how frank and the NBER paper correlate.

Shorter version of the above: the argument from the left isn’t that absolute wealth doesn’t affect happiness, but that it does so with decreasing marginal utility.

Does the article specifically define what they mean by happiness? If the group studied have universal health care, it would seem, that the results can only be applied to other countries who take care of their sick — meaning we can’t apply their results to the good ole USA.
I may be missing the point here, of course.

So to flip #1 around, they get a new title and years later they’re three times happier than they would have been with a raise? Weird. And what a boon to employers.

At this point I think it’s clear that there’s enough total wealth that the above can be provided at reasonable levels to everyone and that the redistribution that achieves it wouldn’t crash the economy below the point that we couldn’t provide enough for everyone. So inasmuch as the only barriers to these objective material goals are distributional…

I don’t think it’s clear at all that there’s enough total wealth so that the kinds of things I listed could be provided to everyone via redistribution (leaving aside the likelihood that massive redistribution would shrink that wealth — which is a dynamic product not a fixed lump). For example, the long-term trend is toward more time out of the paid work force, both on the front end (more years of schooling) and back end (many more years of retirement). For that trend to continue, absolute levels of wealth will need to continue to grow.

And, again, this is the point of the discussion, but everyone doesn’t have the same preferences as I do. Some would rather have a sharp stick in the eye than work from a home office and supervise the kids. And some have absolutely no idea what to do with themselves when not gainfully employed, so early retirement would be a nightmare. And many, of course, do care very much about traditional forms of status, and derive satisfaction from being promoted to full-professor or becoming department chair or editor of a prestigious journal and dream of being elected a member of the NAS.

And then consider the recent rhapsodizing here over the iPhone. Is that all about a positional good that Kieran would wield to demonstrate his rank and humble his inferiors (and which opportunity for zero-sum one-upmanship a just society would deny him)? Or is it just possible that he would experience non-status derived aesthetic pleasure from a beautiful, functional object that might reasonably considered a work of art? And is it possible that a life with more of such gracefully designed objects is more satisfying than one without — regardless of what the Joneses have? Is Kieran’s attraction to the iPhone an indication that even CTers can’t escape the consumerist status competition? Or was he accidentally lending support to Virginia Postrel’s thesis?

Perhaps thoughts of earlier rather than later retirement are odd. Possibly very few others are interested in leaving their kids with college degrees unencumbered by student loans. But I doubt it. And these all depend on absolute, not relative wealth and are valuable in themselves…

I agree that these are valuable in themselves, but the astounding increases in college and real-estate costs are partly because they are dependent on relative wealth.

#32: Perhaps, but the study purports to be measuring job prestige, not job responsibility. Certainly, these elements can be hard to separate, but they’re often hard to separate from income, too.