Kahneman and Happiness

by Shihang

I really like Daniel Kahneman’s book and it has been pretty well-reviewed on the blogosphere (click here for a pretty interesting profile of the man). This book, as most psychology books try to do, packs some rather surprising insights into human behaviour, and expectedly, economists try to use them to argue for all sorts of things.

This is one of the arguments that I’ve been a little troubled by. The author of the article concludes that “leftist outrage over income inequality is therefore deeply misguided” because “to a large extent, incomes differ because priorities differ”. Here, Kahneman’s book seems to have some evidence that backs up his claim, that when one of your goals when young is to earn more money, you generally tend to earn more money.

If you think about it, the argument is reduced to a familiar “success is determined by how hard you are willing to work for it” form. But notice: the sample data is from “approximately 12,000 people who had started their higher education in elite schools in 1976″ (underline mine). Surely this does not include people leftists generally talk about (people in a poverty trap, disadvantaged minorities etc.). So while this seems to hold at what we can assume to be a fairly comfortable level of existence (to be enrolled in an elite school for higher education), the correlation might not hold at lower levels of income, especially if there are significant impediments near the bottom to stop people from moving up. I doubt that Caplan’s arguments hold for people of all income levels, which seems to suggest that there is still some direction in leftist outrage.