"I shall grant you three wishes," said the genie, "but whatever I do for you, your neighbor will get double." Aladdin asked for wealth and power. He got it all. Was he happy? Of course not. His third wish? "Take one of my eyes out."
In a recent commentary, New York Times contributor and Cornell economist Robert H. Frank appealed to his colleagues to take normative questions seriously. He urged us not to avoid value judgments since moral philosophers such as Adam Smith founded our field. The column demanded that we recognize rising income inequality as a social evil-imposing "considerable harm" without providing "offsetting benefits." It seems to make the poor more miserable but it does not make the rich any happier.
Frank noted that we are social creatures and that our spending on housing, cars, clothes, presents, etc. depends on other peoples' lifestyle expectations for our income group. When the top income earners start spending more, it "shifts the frame of reference that shapes the demands of those just below them, who travel in overlapping social circles." On and on it goes, until the trickle down of increased expenditures puts more and more middle-income and poor people in financial distress. Frank's column does not provide a plan for fixing the problem but its disapproval of the Bush-era tax rates gently steers the reader to ponder the benefits of redistribution.
Frank's theory of envy is not new. It was Karl Marx who pointed out how improved living conditions for the poor could make them feel worse-off since someone else is doing so much better:
"Therefore, although the pleasures of the laborer have increased, the social gratification which they afford has fallen in comparison with the increased pleasures of the capitalist. . . . Our wants and pleasures have their origin in society. . . . Since they are of a social nature, they are of a relative nature."
Give a weary foot traveler a donkey and he'll complain that his neighbor rides a horse. Give him a Chevrolet, and he feels bad that someone drives a Mercedes. There's no easy cure for envy. We've been trying growth for two centuries. Some have tried radical redistribution. Shall we try reading less Marx and more Dr. Seuss? How about we start this New Year with "Did I ever tell you how lucky you are?"