Cowen on Inequality

I adore T-dawg. From his current NY Times column:

Much of the measured growth in income inequality has resulted from natural demographic trends. In general, there is more income inequality among older populations than among younger populations, if only because older people have had more time to experience rising or falling fortunes.

Furthermore, more-educated groups show greater income inequality than less-educated groups. Uneducated people are more likely to be clustered in a tight range of relatively low incomes. But the educated will include a greater range of highly motivated breadwinners and relaxed bohemians, and a greater range of winning and losing investors. A result is a greater variety of incomes. Since the United States is growing older and also more educated, income inequality will naturally rise.

Thomas Lemieux, professor of economics at the University of British Columbia, estimates that these demographic effects account for about three-quarters of the observed rise in income inequality for men and 69 to 95 percent of the observed rise in income inequality for women (AER June 2006, earlier version at www.irs.princeton.edu/seminars/lemeiux.pdf, "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill")...In other words, rising income inequality is not just a result of unfairness or bad public policy...

Studies of personal happiness, based on questionnaires and self-reporting, indicate that the inequality of happiness is not growing over time in the United States. Furthermore, the United States has an inequality of happiness roughly comparable to that of Sweden or Denmark, two nations with strongly egalitarian reputations. (See the symposium in Journal of Happiness Studies, December 2005.) American society offers good opportunities for people to be happy, even if not everyone becomes rich.

This raises an interesting implication of the happiness research that finds, beyond the subsistence level, wealth doesn't correlate with happiness. At once, that's an attack on policies that support economic growth, since---if more wealth doesn't increase happiness---what good is it? At the same time, it's an argument against redistribution---if it won't make people happier, why bother? The only transfer that remains justified is redistribution from those with more wealth to those below the subsistence level.

Perhaps after such a transfer, the utilitarian political goal is for all intents and purposes satisfied. Then we can concentrate on negative liberty and moral desert.