Inequality and life satisfaction

It seems intuitive that other things (which means total wealth) being equal, the more equally income is distributed, the more utility gets squeezed out of it. Of course at the limit there’s a tension between equality and efficiency – but then at the limit there’s also a tension between inequality and efficiency. People don’t cooperate well when they think with people they think are ripping them off.

Anyway, here’s a straw in the wind and a new result being promoted by Easterlin.

China’s life satisfaction, 1990–2010
Richard A. Easterlin, Robson Morgan, Malgorzata Switek, and Fei Wang

Despite its unprecedented growth in output per capita in the last two decades, China has essentially followed the life satisfaction trajectory of the central and eastern European transition countries a U-shaped swing and a nil or declining trend. There is no evidence of an increase in life satisfaction of the magnitude that might have been expected to result from the fourfold improvement in the level of per capita consumption that has occurred. As in the European countries, in China the trend and U-shaped pattern appear to be related to a pronounced rise in unemployment followed by a mild decline, and an accompanying dissolution of the social safety net along with growing income inequality. The burden of worsening life satisfaction in China has fallen chie?y on the lowest socioeconomic groups. An initially highly egalitarian distribution of life satisfaction has been replaced by an increasingly unequal one, with decreasing life satisfaction in persons in the bottom third of the income distribution and increasing life satisfaction in those in the top third.

Alas the article is behind a paywall, but available in academic databases.

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9 years ago

Given that some people are savers and some spenders (among many variations), is the utility expectation so clear? I would have thought one of the better ways to determine the relative utility of money is to look at who tries hardest to get it. Though I suppose the problem is whether you look at utility objectively or subjectively. I think incentives work, people respond to incentives to chase the rewards they seek, and money is not the only reward. I could earn more money by working harder, but I’d rather earn less and make dinner for the kids.

But to the article, in other words, people are ambitious and people are envious. What is not clear is whether you think the article supports the intuition or is counter.