Professor Charles Adams had a fascinating post on Progressive Pulse earlier this week, developing my theme on inequality and the Gini coefficient. As he asked:
What should politicians do? Make us happier of course. UK politicians are not doing great at this — we are only 18th in the happiness league table of OECD countries. Maybe politicians have got their priorities wrong? As I show below, as happiness and equality are related, maybe they should be doing more about inequality (also discussed recently over at TRUK and Stumblings)?
His analysis went like this:
As with everything there are a range of views on inequality, and there are a range of measures too. It is widely accepted that the most commonly used metric — the Gini index — is misleading at best. Representing a distribution by a single number is never going to tell the whole story.
Thomas Piketty in Capital in the Twenty first century uses the wealth and income share of the top 1%.
Others prefer the Palma index — the ratio of income share of the top 10 % to the bottom 40%.
I prefer to look at distributions, but here I shall focus on the Palma index. A Palma index of around 1 appears to be healthy, whereas a Palma index much greater than 1 appears to be less healthy. Why do I say that? Well, you can correlate happiness (using data from the World Happiness report) with the Palma index (using data from the OECD) as shown in the plot below.
As Charles notes:
I have included the top 18 `happy' countries in the OECD — the UK is bottom at number 18. Top of the list is Finland with a happiness score of 7.632.
Now the top 4 happy countries — Finland, Norway and Denmark along with Iceland (all in the green zone) — all have low income inequality — a Palma index significantly less than 1. The UK — with a happiness index of 6.814 — is significantly less happy, and with a Palma index of 1.52 — significantly less equal too.
But he carefully adds:
Could lowering inequality make us happier? Well, the inverse correlation between inequality and happiness is not perfect. Reducing inequality does not guarantee happiness(you could end up in the blue/purple zone — along with Germany, Austria, Belgium and Ireland — more equal but still not happy), but high inequality — as in the UK and US — does appear to exclude high happiness (the red zone).
Nonetheless a wise politician might heed Charles' advice:
So it seems pretty obvious where politicians should be directing more of their attention — if they care about trying to make us happier?
But will they?
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Chris Hughes – a confounder of Facebook – talks about how to tackle inequality in his new book “Fair Shot”. This talk at LSE from 10th April brings new language to the discussion,
http://www.lse.ac.uk/newsAndMedia/videoAndAudio/channels/publicLecturesAndEvents/player.aspx?id=4043
I think his mistake is in keeping the costs low by targeting the poorest 40%. As we KNOW from austerity, all benefits that are not universal are vulnerable to political attack by “divide and rule” I would prefer to see even a low starting value of Universal Basic Income, than his targeted Guaranteed Income.
Even so he is promoting the kind of debate we need to have now if we are seriously going to tackle rising inequality.
“It seems likely that reducing inequality can make us happier”
To borrow a line from Pink Floyd’s The wall album, “Isn’t this where we came in?”
The emancipated slave Frederick Douglass said ‘ Power concedes nothing without a demand ‘ . For those of us who seek a change of the status quo we had better heed those words because this is a fight and four nice liberal sounding people on a stage at the LSE may well be up for it for all I know, but if they aren’t it’s just blather .
Yanis Varoufakis gave a wonderful talk at the Royal Festival Hall last Monday entitled Globalisation v Internationalism that addresses the issues raise in this post.
Francis Layard’s book on Happiness has some good stuff on equality and happiness. One of the most readable books by an economist that I’ve read.
Is that Francis or Richard (from memory)?
You’re hardly an expert on happiness though. You always seem miserable Richard. Always complaining about something.
Despite being comfortably in the richest 1% in the world, living in a wealthy prosperous country all you ever do is moan about what other people have.
If you had a happier disposition you might have more friends.
I’d suspect most of my friends )of which there are quite a lot, thank you) would disagree with you
I’d suggest you stop trolling
That is a sign of disquiet
“If you had a happier disposition you might have more friends”
I’m 100% positive Richard isn’t without enough friends and I’m also 100% certain he doesn’t need you to explain the complicated complexities of friendships. Not that you seem an expert on how to win friends and influence people Bill mate. What’s your view on Donald Trump btw, wig or natural?
Martin Holder asks: (of the naked troll)
“What’s your view on Donald Trump btw, wig or natural?”
Kevlar.
Kennedy took a headshot; a Kevlar syrup is a sensible precaution.
The FT W/E reports Haldane’s speech in OZ where he says the BoE’s response to the financial crisis (“cut in interest rates… printing money to stimulate the economy”) “gave a £23,000 average boost to the welfare of UK households without significant widening of income or wealth inequality.”
I’m beginning to feel happier already.
It’s a pretty wild claim…
“It’s a pretty wild claim…”
You really are struggling to find the words and expressions you want at present Richard.
Can I suggest ‘Well, the man’s obviously a twat’, is closer to the gist of your intention ? 🙂