Economics focus: Don’t look down | Hacker News Reader

Economics focus: Don’t look down

economist.com

47 pointsdiogenescynic14 comments

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.

I think the second point is that normally when people receive benefits, they are extracted by force from someone else.

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.

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%).

That's Federal Income tax they aren't paying, which is only one tax of many.

Welfare recipients still pay sales & use tax as well as property taxes (either directly or indirectly via rent payments).

Not to mention cigarette taxes and the lottery.

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/makingsen...

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...

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).

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.

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?

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.

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.

"why do poor middle Americans support policies that harm them in the short term?"

Actually, asking the question that way leads you to another answer; they believe the policies will benefit them in the long term. Some people may observe, for instance, that an extensive welfare state may have an apparently economic beneficial effect in strictly monetary terms for those on the bottom but that it has a very corrosive effect on almost every other social measurement. Or that the growth penalty you take in supporting the welfare state is complicit in itself keeping the welfare recipients poor enough to need welfare in the first place. Or an awareness either conscious or otherwise that a democracy can't survive long with the majority voting themselves benefits from a minority, regardless of what other arguments in its favor it may have.

This paradox is better phrased as "people are voting against what I think is their best interest, what gives?" in which case the answer immediately becomes obvious: They don't agree about what constitutes their self-interest. And given that they are where they are and you aren't, perhaps one might take at least a moment to consider a motive other than stupidity or error.

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