Saturday, May 7, 2016

These are the best of times, these are the worst of times

An alien observing humanity over the past century would probably say that things have gotten a lot better for Earthlings as a whole. And it's hard to argue with the facts and figures from The State of Humanity or with Hans Rosling's interpretation of data for all sorts of metrics like poverty, disease, and access to basic necessities.

On the other hand, the May edition of The Atlantic has an article covering the deteriorating state of the middle class in America. However, the American middle class is, relatively speaking, the wealthiest large cohort in history so complaints about its situation are hard to take seriously. The middle class votes itself all sorts of privileges that undermine the poor and disproportionately take from the rich.

And is it really unreasonable for the American Dream, the idea that every generation will be better off than the previous, to end? And by better off, I don't mean only technologically better off which is almost a given, but also in relative income (which is an awful zero-sum way to look at things despite the popularity of angst over income inequality).*

Living memory has the US with maybe 5% of the world's population producing over a quarter of the worlds goods and services - largely thanks to being the only major power unscathed by World War II. As countries rebuilt and technology diffused, the relative position of the US will approach that of its population. Given the resources of the US, it's doubtful that American share of world GDP will ever drop to 5%, but the trend suggests that a resurgence in the relative position of the middle class is unlikely.

Given the political climate, it's clear we haven't really accepted our fate. The Atlantic is publishing an article next month about how the self-esteem movement has created a situation where happiness is only possible for the above-average. Unless you live in Lake Wobegon, this means most people will be unhappy. It's why Bernie Sanders complained about Romanians having faster internet and why Donald Trump says that they are beating us

This isn't unique to the US. Tall poppy syndrome, crab mentality, the Russian parable of the genie and the neighbors wish, and numerous psychological studies showing that inequality makes people unhappy suggest it's universal.

But internalizing and making policy out of our innate distaste for inequality is a mistake.

* Which is not to imply via the fallacy of affirming the consequent that inequality is desirable. The growth in inequality has been influenced by the largely ignored and even lauded crimes of inflation and cronyism.