Tag: more is better

Research Confirms: More Is Better

There’s a nice article in the WSJ Online today reporting on recent research by Betsey Stevenson and Justin Wolfers at the University of Michigan. Their article takes to the task a popular assertion that, above some level of income, more money doesn’t really lead to greater happiness. Of course, that would violate on the basic assumptions underlying this blog. They write:

The income–well-being link that one finds when examining only the poor, is similar to that found when examining only the rich. We show that this finding is robust across a variety of datasets, for various measures of subjective well-being, at various thresholds, and that it holds in roughly equal measure when making cross-national comparisons between rich and poor countries as when making comparisons between rich and poor people within a country.

Moreover, Stevenson and Wolfers also find that the third rule of the blog is also substantiated; namely, more more is less better. Or, to use their terms, “while each additional dollar of income yields a greater increment to measured happiness for the poor than for the rich, there is no satiation point.” That is, someone earning $10,000 may get more sense of happiness from an additional $1,000 than does someone earning $1,000,000, but both experience an increase in well-being in a consistently proportional way.

So who cares? Well, I do for one. Hey, if you’re going to build a blog on a pretty basic concept, it’s nice to have the research back it up (unlike, say, some Keynesian economists).

You should too. Some government policies seem to assume (conveniently so) that once a person has a certain amount of income (call them “rich”), they do not value additional money anymore. Therefore, you can take money away from them and give it to people who do value the additional money (call them “poor”) and make society better off by creating a greater sense of well-being. This utilitarian approach would seem to justify redistributive social policies. The only problem is, it isn’t accurate–or at least it isn’t as simple as that (as the research above shows). And that’s even before taking into account the costly nature (both direct and indirect) of the mechanisms for redistributing the wealth.

So there you have it. No matter how much you make, no matter what country you’re in, more is better than less.

Beginning With The Basics

The purpose More Is Better Than Less (MIBTL…I may have to think about that acronym) is to have a venue for sharing information and for sharing my perspective on various economic issues. So I figured it would be good to start with the basics. And I think these basics are so important that I also have a page devoted to them so they’ll be easy to find as the blog grows. If you think economics is too complicated, too mathematical, or just plain stupid, I hope I can convince you otherwise—and that you, too, are capable of wielding the sword of economics to cut through much of the muck and mire that muddles public discourse.

Economics, at its foundation, is simply a framework for understanding how people choose to use the resources available to them; whether money, raw physical goods, knowledge, talents or time. Economists can make it very complicated–to the point of losing the economic intuition in the mathematics of the models they use. But at its foundation economics is based on some very simple premises that don’t take a PhD in economics–or mathematics–to understand and apply to real life. Sadly, too few people understand that–and fewer still use that understanding.

There are three basic assumptions I propose at the beginning of every course I teach. I believe they are sufficient to understand the vast majority of human behavior. And they involve no math: Continue reading “Beginning With The Basics”