Thursday, January 11, 2007

Hey jealousy

This article from the “Naked Economist” mentions a study showing that people would prefer to earn 100k while everybody else earned 85k instead of making 110k while everybody else makes 200k.

Now, I don’t know whether the study is for real or serious, but assuming it is, what should we make of that?

Is this something we should seriously respect and consequently apply to our economic policy?

It is interesting to consider that this study doesn’t really show that people value equality. They value being on the top. I would bet big time that the same people that preferred a smaller income just to be on top would prefer a large income difference instead of a small one as long as they were the ones on the positive side.

But what if a study really showed that people prefer a “smaller pie” as long as there is more equality. Should we consider that really a final proof that income inequality is the devil and socialism is the only way?

For me that would be the same as considering rape something legal nowadays just because our ancestors did so.

It is undeniable that a “bigger pie” means more money for hospitals, schools, research, infrastructure, etc. That is, a bigger pie will make the society as a whole to be more advanced.

So should we sacrifice society just because we have this instinct of equality? Aren’t we supposed to be a rational race?

Should we let envy dictate our economic policy?