4 ms·

Economics focus: Don’t look down

47 points by diogenescynic 15y ago

100k 15y ago
There is an entire book about this: Choosing the Right Pond: Human Behavior and the Quest for Status. http://www.amazon.com/Choosing-Right-Pond-Behavior-Status/dp/0195049454/ref=sr_1_1?ie=UTF8&qid=1313657484&sr=8-1 http://www.amazon.com/Choosing-Right-Pond-Behavior-Status/dp... It's been a while since I read it, but it was quite interesting. The author presents an economic model to explain status-seeking behavior and how it affects, for example, wages. It presents a model why "super star" performers don't get paid what they're worth (He models it as a subsidy to those below them, who would leave for a different firm if they were at the bottom of the hierarchy).
rbranson 15y ago
In summary: lower & middle class people don't like it when those living in poverty are recipients of social welfare because it makes them feel as if they are socially equal to those welfare recipients. This is an interesting hypothesis. I suppose this also goes along the lines of people getting mad when they had to work for something, but someone else didn't.
- dantheman 15y ago
  I think the second point is that normally when people receive benefits, they are extracted by force from someone else.
- tomjen3 15y ago
  There is a another point to that though: because the money has been taken from those people they are essentially being forced to pay to lower their own standard of living and to upgrade others to get closer to them. No wonder they are pissed at this tripple whammy.
  - _delirium 15y ago
    The money isn't really coming from them, though. Only 50% of U.S. households pay net taxes at all, so most of the lower-middle-class isn't paying anything, not even enough to cover their own use of government services, let alone anyone else's. I believe the top 1/3 pay virtually all taxes (>90%).
    - aranazo 15y ago
      That's Federal Income tax they aren't paying, which is only one tax of many.
      - rbranson 15y ago
        Welfare recipients still pay sales & use tax as well as property taxes (either directly or indirectly via rent payments).
        drcube 15y ago
        Not to mention cigarette taxes and the lottery.
    - Hoff 15y ago
      Think through the implications of those numbers you've posted, and particularly think about what that might imply about the distribution of wealth in the US. The bottom 60% of the US population has around 5% of the aggregate wealth. That's the majority of the population. The top 20% of the US population possess 84% of the wealth. And the curve is very steep, too; the top tenth of a percent holds a whole lot of that wealth, and it's increasing rapidly. http://www.pbs.org/newshour/bb/business/july-dec11/makingsense_08-16.html http://www.pbs.org/newshour/bb/business/july-dec11/makingsen...
mathattack 15y ago
It does explain something of a paradox - why do poor middle Americans support policies that harm them in the short term? Why does the guy who lost his job when a PE firm bought his factory vote for a party that supports a very low tax rate on the PE carried income? (This is ignoring whether it's right or wrong in the broader sense) Why don't the poorer 51% unanimously vote tax hikes on the wealthier 49%? I assumed it was because they still wanted to support the party that appeared stronger on defense, or lined up with their social values. This article uses behavioral economics to suggest a different interpretation.
- yummyfajitas 15y ago
  However, this article fails to explain a similar paradox - why do rich blue state Americans support policies that harm them in the short run? I've always gone with "expressing tribal affiliation" as a good explanation. Since your vote doesn't matter, why not try to raise your status by voting in order to raise your status and signal tribal loyalties?
  - deleted 15y ago
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  - deleted 15y ago
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  - jbooth 15y ago
    In my personal case, it's a belief that I benefit from a better national infrastructure, a balanced budget, and a more stable society where we don't have a ton of people on the verge of poverty. I don't support taxes that are "redistributive" and don't think we really have them.. to the extent that the rich pay higher taxes (which they barely do at all on a % of income basis), they're getting more value from the system.
    - ddw 15y ago
      Exactly, and I wish more people would understand this. You benefit from society/government not only when you get a check from it in the mail, but when you can profit from it indirectly. Once people agree with this premise, everything changes. Unfortunately 30+ years of Reagan's "government is the enemy" agenda have pushed us back too far.

47 points by diogenescynic 15y ago

100k 15y ago

There is an entire book about this: Choosing the Right Pond: Human Behavior and the Quest for Status. http://www.amazon.com/Choosing-Right-Pond-Behavior-Status/dp/0195049454/ref=sr_1_1?ie=UTF8&qid=1313657484&sr=8-1 http://www.amazon.com/Choosing-Right-Pond-Behavior-Status/dp... It's been a while since I read it, but it was quite interesting. The author presents an economic model to explain status-seeking behavior and how it affects, for example, wages. It presents a model why "super star" performers don't get paid what they're worth (He models it as a subsidy to those below them, who would leave for a different firm if they were at the bottom of the hierarchy).

rbranson 15y ago

In summary: lower & middle class people don't like it when those living in poverty are recipients of social welfare because it makes them feel as if they are socially equal to those welfare recipients. This is an interesting hypothesis. I suppose this also goes along the lines of people getting mad when they had to work for something, but someone else didn't.

dantheman 15y ago
I think the second point is that normally when people receive benefits, they are extracted by force from someone else.
tomjen3 15y ago
There is a another point to that though: because the money has been taken from those people they are essentially being forced to pay to lower their own standard of living and to upgrade others to get closer to them. No wonder they are pissed at this tripple whammy.
- _delirium 15y ago
  The money isn't really coming from them, though. Only 50% of U.S. households pay net taxes at all, so most of the lower-middle-class isn't paying anything, not even enough to cover their own use of government services, let alone anyone else's. I believe the top 1/3 pay virtually all taxes (>90%).
  - aranazo 15y ago
    That's Federal Income tax they aren't paying, which is only one tax of many.
    - rbranson 15y ago
      Welfare recipients still pay sales & use tax as well as property taxes (either directly or indirectly via rent payments).
      - drcube 15y ago
        Not to mention cigarette taxes and the lottery.
  - Hoff 15y ago
    Think through the implications of those numbers you've posted, and particularly think about what that might imply about the distribution of wealth in the US. The bottom 60% of the US population has around 5% of the aggregate wealth. That's the majority of the population. The top 20% of the US population possess 84% of the wealth. And the curve is very steep, too; the top tenth of a percent holds a whole lot of that wealth, and it's increasing rapidly. http://www.pbs.org/newshour/bb/business/july-dec11/makingsense_08-16.html http://www.pbs.org/newshour/bb/business/july-dec11/makingsen...

mathattack 15y ago

It does explain something of a paradox - why do poor middle Americans support policies that harm them in the short term? Why does the guy who lost his job when a PE firm bought his factory vote for a party that supports a very low tax rate on the PE carried income? (This is ignoring whether it's right or wrong in the broader sense) Why don't the poorer 51% unanimously vote tax hikes on the wealthier 49%? I assumed it was because they still wanted to support the party that appeared stronger on defense, or lined up with their social values. This article uses behavioral economics to suggest a different interpretation.

yummyfajitas 15y ago
However, this article fails to explain a similar paradox - why do rich blue state Americans support policies that harm them in the short run? I've always gone with "expressing tribal affiliation" as a good explanation. Since your vote doesn't matter, why not try to raise your status by voting in order to raise your status and signal tribal loyalties?
- deleted 15y ago
  [deleted]
- deleted 15y ago
  [deleted]
- jbooth 15y ago
  In my personal case, it's a belief that I benefit from a better national infrastructure, a balanced budget, and a more stable society where we don't have a ton of people on the verge of poverty. I don't support taxes that are "redistributive" and don't think we really have them.. to the extent that the rich pay higher taxes (which they barely do at all on a % of income basis), they're getting more value from the system.
  - ddw 15y ago
    Exactly, and I wish more people would understand this. You benefit from society/government not only when you get a check from it in the mail, but when you can profit from it indirectly. Once people agree with this premise, everything changes. Unfortunately 30+ years of Reagan's "government is the enemy" agenda have pushed us back too far.