Six problems income equality would help solve (Update: Did I get completely suckered by The Spirit Level?)

October 19, 2010

Update [10/19/10]: Read the following post with a big grain of salt. A commenter has pointed out some serious sounding criticisms of the book from much of the post is excerpted.

I’ve threatened a couple of times to blog about income inequality as a way of addressing climate change. Robert Frank’s most recent column in the New York Times gives me an excuse to begin laying out the argument, which I’ve cribbed from a handy little book called The Spirit Level: How Greater Equality Makes Societies Stronger.

Frank gives us the context:

During the three decades after World War II, for example, incomes in the United States rose rapidly and at about the same rate — almost 3 percent a year — for people at all income levels. America had an economically vibrant middle class. Roads and bridges were well maintained, and impressive new infrastructure was being built. People were optimistic.

By contrast, during the last three decades the economy has grown much more slowly, and our infrastructure has fallen into grave disrepair. Most troubling, all significant income growth has been concentrated at the top of the scale. The share of total income going to the top 1 percent of earners, which stood at 8.9 percent in 1976, rose to 23.5 percent by 2007, but during the same period, the average inflation-adjusted hourly wage declined by more than 7 percent.

He also spells out the first problem that income equality would help solve:

1. Consumerism

Recent research on psychological well-being has taught us that beyond a certain point, across-the-board spending increases often do little more than raise the bar for what is considered enough. A C.E.O. may think he needs a 30,000-square-foot mansion, for example, just because each of his peers has one. Although they might all be just as happy in more modest dwellings, few would be willing to downsize on their own.

People do not exist in a social vacuum. Community norms define clear expectations about what people should spend on interview suits and birthday parties. Rising inequality has thus spawned a multitude of “expenditure cascades,” whose first step is increased spending by top earners.

The rich have been spending more simply because they have so much extra money. Their spending shifts the frame of reference that shapes the demands of those just below them, who travel in overlapping social circles. So this second group, too, spends more, which shifts the frame of reference for the group just below it, and so on, all the way down the income ladder. These cascades have made it substantially more expensive for middle-class families to achieve basic financial goals.

Frank claims this working paper of his shows that U.S. counties where inequality grew the fastest showed the greatest symptoms of financial distress.


Our next five problems that income equality would help solve come from The Spirit Level, which presents a series of correlations showing that health and social problems are more prevalent among industrialized countries or U.S. states exhibiting high income inequality relative to those showing low income inequality. (The measure for inequality used by the authors is the ratio of the income of the richest 20 percent to that of the poorest 20 percent.)

 

The strengths of the correlations differ, and some are based on more overwhelming evidence than others, but the trends all point in the same direction, which the authors take as evidence of causation: income inequality is causing the health and social problems. I’m sure somebody savvier than me could poke holes in the authors’ methodology, but the sheer number of linkages makes me think there’s something to their argument. Now, without further ado, problems 2-6:

2. Trust

This one is based on survey data from the European and World Values Survey and the U.S. General Social Survey. Respondents were asked whether they agreed with the statement, “most people can be trusted.” Here’s a plot of the data for industrialized countries, from the authors’ web site:

Among 41 states for which comparable data existed, the spread was similar: North Dakota, Montana and Minnesota had trust levels like the Scandinavian countries, whereas North Carolina, Alabama and Mississippi were more like Singapore and Portugal.

The authors’ make this plausibility argument (p.51):

We tend to choose our friends from among our near equals and have little to do with those much richer or much poorer. And when we have little to do with other kinds of people, it’s harder for us to trust them. Our position in the social hierarchy affects who we see as part of the in-group and who as out-group — us and them — so affecting our ability to identify with and empathize with other people.

And they cite this study, which supposedly demonstrates that inequality affects trust and not the other way around. I am completely unqualified to judge.


3. Mental Health

 

For this category there was no significant correlation for U.S. states (except a weak one for women) — an anomaly among the health and social problems the book examines. The country data comes from the World Health Organization:

The mental health problems most strongly correlated with inequality were anxiety disorders, impulse-control disorders and “severe illness” (which I assume means psychosis), whereas mood disorders showed less of a correlation. Anxiety disorders also accounted for more of the total mental health problems in more unequal countries.

Calling the following a mechanism might be a stretch, but who knows? (p. 69):

Psychologist and journalist Oliver James uses an analogy with infectious disease to explain the link. The ‘affluenza’ virus, according to James, is a ‘set of values which increase our vulnerability to emotional distress’, which he believes is more common in affluent societies. It entails placing a high value on acquiring money and possessions, looking good in the eyes of others and wanting to be famous. These kinds of values place us at greater risk of depression, anxiety, substance abuse and personality disorder[.] … As inequality grows and the super-rich at the top spend more and more on luxury goods, the desire for such things cascades down the income scale and the rest of us struggle to compete and keep up. Advertisers play on this, making us dissatisfied with what we have, and encouraging invidious social comparisons.

Shh, don’t tell Jonah Lehrer.


4. Drug Use

 

Country data from the United Nations — the authors say something similar holds for states:

The following may have little to do with why humans do drugs, but it’s compelling as a factoid on the psychological effects of low social status (p. 71):

In a clever experiment, researchers at Wake Forest School of Medicine in North Carolina took twenty macaque monkeys and housed them for a while in individual cages. They next housed the animals in groups of four and observed the social hierarchies which developed in each group, noting which animals were dominant and which subordinate. They scanned the monkey’s brains before and after they were put into groups. Next, they taught the monkeys that they could administer cocaine to themselves by pressing a lever — they could take as much or as little as they liked. … Monkeys that had become dominant had more dopamine activity in their brains than they had exhibited before becoming dominant, while monkeys that became subordinate when housed in groups showed no changes in their brain chemistry. The dominant monkeys took much less cocaine than the subordinate monkeys. In effect, the subordinate monkeys were medicating themselves against the impact of their low-social status.


5. Life Expectancy and Infant Mortality

 

Same pattern in rich countries and in U.S. states: greater income inequality correlates with lower life expectancy and higher infant mortality. Here’s the infant mortality plot:

Again, the following is a little sketchy but maybe it contributes (p. 85):

The psyche affects the neural system and in turn the immune system — when we’re stressed or depressed or feeling hostile, we are far more likely to develop a host of bodily ills, including heart disease,  infections and more rapid ageing. … When we experience some kind of acute stress and experience something traumatic, our bodies go into the fight-or-flight response. Energy stores are released, our blood vessels constrict, clotting factors are released into the bloodstream, anticipating injury, and the heart and lungs work harder. … If the emergency is over in a few minutes, this amazing response is healthy and protective, but when we go on worrying for weeks or months and stress becomes chronic, then our bodies are in a constant state of anticipation of some challenge or threat, and all those fight-or-flight responses become damaging.


6. Obesity

 

You get the idea by now, but again, obesity rates show the same pattern for countries and states:

And again, this doesn’t strike me as a great explanation for obesity in the U.S., but it’s an interesting connection to draw (p. 95):

People with a long history of stress seem to respond to food in different ways from people who are not stressed. Their bodies respond by depositing fat particularly round the middle, in the abdomen, rather than lower down on hips and thighs. … [C]hronic stress affects the action of the hormone cortisol, and researchers have found differences in cortisol and psychological vulnerability to stress tests among men and women with high levels of abdominal fat. People who accumulate fat around the middle are at particularly high risk of obesity-associated illnesses


In a subsequent post I’ll present five more problems that income equality would help solve, and I’ll make some concluding remarks about what any of this has to do with climate change. Stay tuned, fistlings stick to subjects on which I can say something halfway informed.

 

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2 Responses to “Six problems income equality would help solve (Update: Did I get completely suckered by The Spirit Level?)”

  1. JL Says:

    “The Spirit Level” is junk science based on selective use of data. See here.

  2. JR Minkel Says:

    Hmm, it does seem as if there are reasonable criticisms to be made of The Spirit Level. Personally, I’m not so committed to the life expectancy correlation. I’m more interested in the trust correlation, which appears to hold, no?


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