Inequality, happiness & age

Is inequality worse for older societies? I ask because of this new paper. It shows that the effect of other people’s incomes upon happiness varies with age.

The over 45’s are unhappier the higher is other folks’ income relative to their own. But the opposite is true for the under 45s; they are happier, the higher are others’ incomes.

There’s an obvious reason for this. When we are young, other people’s high incomes tell us that we have a chance of a high income ourselves if we work hard. But when we are old, it tells us that we have failed or been unlucky.

This suggests that, as society ages then - ceteris paribus - a given level of inequality will be worse for happiness, as there’ll be more people suffering the relative deprivation effect and fewer benefiting from the increased optimism effect.

You might think this runs into a paradox. It suggests that the old should be more left-wing than the young, whereas the opposite is the case. This, though, is easily resolved. (Some) older people internalize inequality; they read it as a reason to blame themselves rather than “society.” (Some) young, on the other hand, have cognitive dissonance, both rebelling against inequality whilst expecting it to benefit them (this was true for me in my 20s).

This leaves us with a conflict. Utilitarians should become more egalitarian as a society ages, because inequality does more to depress happiness. But this in turn means they should become less keen on democracy - because, given the tendency of older folk to be more conservative, ageing societies are less likely to vote for egalitarian policies. To borrow Norm’s phrase, the conflict between interests and political will becomes starker.

How can this conflict be mitigated? There’s a leftist and rightist answer.

The leftist answer is that it is not always the case that young people are happier when others’ incomes are higher. Although this is true for Germany, it does not seem true in the UK, where the impact of relative income on happiness is insignificant. There might be a simple reason for this difference. Social mobility is higher in Germany than in the UK, so inequality in Germany signals better prospects for the worse-off young than it does in the UK.

Unfortunately for the left, there’s also no significant link between relative incomes and the happiness of older folk in the UK - which suggests that utilitarians needn’t trouble themselves about inequality at all.*

The rightist answer would be to ditch utilitarianism, and claim that some things - the popular will, freedom, whatever - matter more than happiness. This, though comes at a cost. One cannot easily make consequentialist arguments for economic freedom - as it mightn’t make an older society happier. And one has to ditch the rationalist assumption that people’s expressed preferences are consistent with what makes them happy.

These issues, then, are awkward across the political spectrum.

* Curiously, though, there is a significant adverse correlation between relative income and happiness for people of all ages. This might be an example of Simpson’s paradox. 

Comments

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There could be a basic explanation behind this departure. Social versatility is higher in Germany than in the UK.