by frog
The LA Times has a fascinating story about how irrationally humans (and also capuchin monkeys) respond to money. Apparently we’re less concerned about how much money we have as a quantity, and more concerned about making sure we get at least a fair share of what is available.
Would you rather earn $50,000 a year while other people make $25,000, or would you rather earn $100,000 a year while other people get $250,000? Assume for the moment that prices of goods and services will stay the same.
Surprisingly — stunningly, in fact — research shows that the majority of people select the first option; they would rather make twice as much as others even if that meant earning half as much as they could otherwise have. How irrational is that?
Well it might be irrational for traditional economists brought up with Rational Choice Theory. But it makes a lot of sense if you believe that people basically aspire to an equitable society where they have a fair chance and fair share, and where the planet is not put under undue pressure from unsustainable growth.
That’s probably why, for instance, people have such a visceral reaction to the EMI’s savage downsizing and commercial growth strategy. They don’t really feel the chance for a multimillionaire financier to grow his corporate profits outweighs the cost of thousands of redundancies, and bands wearing corporate sponsor logos on their shirts.
The Greens have been saying for a long time that equity, culture and community are more important values than economic growth. Simply growing everyone’s income doesn’t work if large numbers of people feel they have a less equal share, even if they have more TVs and fridge magnets than they used to have.
Hat tip – Freakonomics
Published in Economy, Work, & Welfare by frog on Thu, January 17th, 2008
Tags: downsizing, economics, EMI, equity, growth, Rational Choice Theory
on the trolls and those who are unable to keep on topic
Im not sure why you didn’t address this, as it would obviously be the first thing that an your opponents who think you’re a bunch of money-stealing Communists would say, but what about more money for health/education etc
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I/we support the concept of equity and healthy communities over and above individual wealth. I/we do not support the scream for tax cuts. If there is a govt surplus, let it retire debt or be swallowed up in health, education and possibly Defence – naval division.
My partner earns a modest wage, but combined with my entitlement we can pay the mortgage and get by OK. Toys and goodies are quite nice, but of little value in the long run.
If we are to have a new leader we would like it to be Jeanette Fitzsimons. No-one, not even wonder boy, comes across as being more honest and thoroughly decent.
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Um, Frog, much as I would love to agree with you, I take from this more that people would rather be at the top of the economic pile, than have a lot of money in absolute terms. Which isn’t quite support for equity, but certainly does support your argument that growth shouldn’t be the aim. There’s lots of evidence that health and well-being are linked to our relative place in our particular society, not our absolute standard of living.
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That’s a fair comment pingpong based on the quote I gave. Perhaps my point is better illustrated by another quote further down the article:
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Frog,
“The moral sense of fairness” is a statement of the columnist’s opinion. It is not a conclusion supported by the research. It would be equally valid to state that jealousy and envy are hard-wired into our brains and frequently override commonsense and rational decision making.
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that’s true kevyn & pingpong, but there is still a rational basis to this – money is power. the ratio of your wealth to someone else’s gives the measure of how many people you can buy, not the absolute wealth figures
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andrew, I kind of agree with you. With the proviso that sufficient money empowers everybody who has it. Partly because it disempowers those who would have us all be credit-slaves.
I have found that your statement applies to positional wealth as well as personal wealth. Many people forgo personal wealth to serve the government because that gives them access to huge wealth that they can “own” as a decision maker.
However not everybody buys people in the sense that you use. Many do so in a philanthropic way, although generally these are people who have aquired their wealth in return for actually contributing something worthwhile to society, albeit often creating a monopoly along the way to protect their “baby”.
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andrew, I think maybe the test should be: is their wealth matched by their mana?
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you thinking of a. carnegie?
everything i’ve heard about him suggests he was a bit of an Rs hole, railroading competitors & his own workers on his way to wealth. Rs holes can be idealistic too of course
as for government workers i thought the main reason they choose public service is so they can take their holidays over the christmas period
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andrew, I always got the impression Carnegie only discovered philanthropy when he realised his days were numbered and he had better atone for his sins before he met his maker.
I was thinking some of the rich and the seriously rich but not the stinking rich.
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oh yeah, funny what the prospect of meeting the maker can do to an evil prick…
here’s william the conqueror’s death-bed confession:
“I have persecuted the natives of England beyond all reason. Whether gentle or simple I have cruelly oppressed them; many I unjustly disinherited; innumerable multitudes perished through me by famine or the sword……I fell on the English of the northern shires like a ravening lion. I commanded their houses and corn, with all their implements and chattels, to be burnt without distinction, and great herds of cattle and beasts of burden to be butchered whenever they are found. In this way I took revenge on multitudes of both sexes by subjecting them to the calamity of a cruel famine, and so became a barbarous murderer of many thousands, both young and old, of that fine race of people. Having gained the throne of that kingdom by so many crimes I dare not leave it to anyone but God…..
http://historytavern.blogspot.com/2007/09/william-conquerors-death-bed-confession.html
(though the authenticity is disputed)
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- “The Greens have been saying for a long time that equity, culture and community are more important values than economic growth. Simply growing everyone’s income doesn’t work if large numbers of people feel they have a less equal share, even if they have more TVs and fridge magnets than they used to have.”
So we are supposed to deplore greed, but envy is just fine.
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{[( I suppose Hitler thought he was envied)]}
The truth is Mouldwarp many of the rich haven’t created wealth, they have gained it by taking advantage of asset inflation or perhaps in the money market (John Key) or managing a hedge fund. People who have put money in a bank have lost out (been robbed) and the same applies to many retirement funds.
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“Would you rather earn $50,000 a year while other people make $25,000, ”
Our business leaders (libertarians) don’t care how NZ will look in the future as long as they are top of the Dung Heap.
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jh,
As long as people have made money without theft, fraud or threats of violence, then why do you care how they made it? It really is none of your business. Why not be happy for them, instead of letting this envy eat away at you? (and, worse, leading you to advocate violence against those who unwittingly find themselves the cause of all your bitterness.)
Equality before the law is a principle you reject at all our peril, yet you and your kind are sadly only too eager to discard it and appropriate the property of anyone you happen to feel is undeserving of their wealth.
You are advocating violence and theft against those who have made their money honestly and peacefully.
- “Our business leaders (libertarians)…”
You are a joke.
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- “Our business leaders (libertarians)…?
I should have said “some of our business leaders” (excluding farmers and manufacturers).
The point I’m trying to make is that there is a section of society which aquires wealth at the expense of others and these people network and prey on the local population (the property “market”). I didn’t advocate violence; I’m advocating a return to traditional values.
1. during the last few years there has been a large transfer of wealth within the community in favour of those who own property or who have title and a lot of debt. No wealth is created (other than “one coat of paint; you don’t get paid for two”… Bob Jones). All asset inflation does is create a charge somewhere else on the economy and in the end someone somewhere has to carry the can for these bounders. The net result of it all is that the communtiy becomes a battle ground where salivating wolves stalk looking for some fools flower garden or a breaking family, befuddled widow etc…. Go Clayton Cosgrove…
2. our immigration policy pushes up our house prices and policy makers are over influenced by business interests (immigration consultants..ex MP’s and members of the construction industry). It is forgotten that we have just about pushed our hydro electric possibilities to the limit and while developers pay a fee to councils I’m suspicious of the terms involved.
Compared to other countries (Austria and the UK), our planning rules are a joke.
What you think about it all depends on where you stand. Those at the top don’t hear the crushing noises down the bottom.
Globalisation is said to enrich us all (where “enrich” includes anything with a monetary value), however there is one class of people who will be left out and where as poorer Kiwis could always live well just about anywhere, in a small house (with a self sustaining patch of garden and supportive community) this option has been sacrificed to enrich Bayleys, Harcourts ect.
*http://tinyurl.com/ywuk8o
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How do you advocate a return to traditional values?
Certainly, whenever religion comes into the discussion, you (a generalized lefty ‘you’) are all for stamping out the Church, who promote traditional values by calling on people to change within themselves and open their hearts.
The Green alternative seems to be to legislate for them.
Maybe Nandor is leaving because he is discovering Political Parties don’t really advance traditional values, they are only concerned with regulation of every aspect of society, because this is all they have the power to do. And the more they tweak, the worse it gets.
Which is why it is important to have restraints on political parties and the government, rather than forcing restraints on the populace.
We do rely on the government to ‘serve and protect’ and evidence of the changes in society over the last 20 years or so indicates they are failing us.
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If I criticise the church I’m criticising the idea that God made man (1.6B at the start of the 20thC and over 6.1 by the end).
I’m advocating traditional community and civic values. Today people satisfy themselves that they are good by behaving morally towards their own selected group but draw a line that doesn’t include the rest of society, who are just trophies to hang on the wall (the housing market). Civil society should extend outwards from a geographical point to ones neighbors. The reality for many is that their neighbour is a property investor who sees the nieghbourhood as his cash cow. In student areas (for instance) landlords don’t loose much if the house is untidy, infact they benefit. The nieghbours sell up and they get the house cheap. Councils (and the government) seem to pee in landlords pockets.
There is a place for free markets and a place for regulation. Some tired parts of the city could use a guiding hand and better from a public body than a developer (if they use the best architects and planners).
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If I criticise the church I’m criticising the idea that God made man (1.6B at the start of the 20thC and over 6.1 by the end).
Yeah, because that is just so much more important to focus on than the Christian values they promote.
Anyway, are you saying landlords are the problem stopping community and civic values?
The reality for many is that their neighbour is a property investor who sees the neighborhood as his cash cow.
The reality is the person living next door is your neighbour, whether they are renters or owners.
In student areas (for instance) landlords don’t loose much if the house is untidy, in fact they benefit. The neighbours sell up and they get the house cheap.
Incredible – landlords are to blame because students trash the place they live in.
Councils (and the government) seem to pee in landlords pockets.
Councils and Government love property investors because they spend tens of thousands in ridiculous fees to ensure they can supply a market crying out for a place to live. If Councils and Governments opened up more development they’d lower the cost of housing. If owner-occupied places got a tax break or leg up, you’d encourage ownership and rental accommodation would suit a smaller market – the transient, mobile, or singles and savers.
There is a place for free markets and a place for regulation. Some tired parts of the city could use a guiding hand and better from a public body than a developer (if they use the best architects and planners).
How did a post about dividing up the pie turn into a rant against property developers? The councils have a lot of power. They get voted in by the community. But as I said – laws and regulations do not create the community values we need to improve society. I think we need to stop looking at our lawmakers for the solution, and work elsewhere.
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jh Says:
>I’m advocating traditional community and civic values. Today people satisfy themselves that they are good by behaving morally towards their own selected group but draw a line that doesn’t include the rest of society,
Jesus said something like that
>Civil society should extend outwards from a geographical point to ones neighbors.
Jesus said something like that too, though of course in our globalised world civil society also has to respect people further away, such as the people in China who make most of or stuff.
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The Greens have been saying for a long time that equity, culture and community are more important values than economic growth. Simply growing everyone’s income doesn’t work if large numbers of people feel they have a less equal share, even if they have more TVs and fridge magnets than they used to have.
You are the party of the upper & middle class now? This data shows that the upper & middle class in the poor society prefer to stay living there and lord it over their poor. Personally I do not share your concern for the happiness of our rich.
What anybody with a social conscience needs to answer is:
Would you rather earn $25,000 a year while other people make $50,000, or would you rather earn $100,000 a year while other people get $250,000?
That is the choice that will be afforded the poor of New Zealanders if we start pretending “equity, culture and community are more important values than economic growth”. The answer is plain – poor people prefer to be poor in richer places as seen by the massive economic migration (legal and illegal) from poorer to richer countries. Making New Zealand sacrafice economic growth for “equity” will make the poor of New Zealand less happy to be here.
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jh wrote:
“It is forgotten that we have just about pushed our hydro electric possibilities to the limit…”
New Zealand can be an energy exporter. In addition to our hydro, we have a world-class wind resource that is barely touched and geothermal, wave and tidal flow resources. Most countries use hydro for peak power rather than baseload, and we can easily expand our peak hydro capacity if we want to spend a bit of money. (Add bigger turbines and generators without building new dams.) As far as renewable energy resources, we are no where near our limits, which is just as well, since we will need to seriously cut back our coal, oil and gas usage.
Trevor.
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jh,
- “I should have said “some of our business leaders? (excluding farmers and manufacturers).”
If you really believe that people can be so easily pigeon-holed then I think there is no hope for you.
You are just indulging your simplistic prejudices.
You conflate globalisation with house price rises and end up with very confused and bitter conclusions.
If you don’t think the less-well-off have benefited from globalisation then you must have so much money that prices are not an issue for you. Clothes, shoes, electrical goods, computers, cars etc etc. All significantly (sometimes, vastly) cheaper than a few years ago. Those savings are as good as a whacking great pay rise for *everyone*.
As for house prices, I’m not sure what you gripe is (and I suspect you’re not sure either).
*Why* have house prices risen so much in recent years? Please, tell us. How is it that they are so far above rental returns? Do you think such a situation can continue indefinately? If so, why haven’t prices *always* been so high relative to rents? What changed?
You seem to ascribe a lot of it to greed on the part of certain people; but were there not such people before? Again, What changed?
Isn’t it the case that development restrictions that groups like the Greens advocate lead directly to higher prices? Shouldn’t they be honest about this, rather than trying to blame evil speculators or the lack of a capital gains tax? If you want to help the less-well-off, shouldn’t such restrictions be largely scrapped, so boosting the supply of accomodation and reducing prices? And isn’t it the case that building regulations add thousands of dollars more to the cost of building a house? What business of the state is it to force certain practises and requirements onto private buyers?
In short, isn’t the truth rather more complicated than you like to imagine?
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having now read the la times article, i think they greatly overstate the concepts that this is “genetic” and “irrational”.
to model real-world behaviour, the game would have to be played for multiple iterations, in which it would be very clear that to accept less than fair offers will condemn the player to receiving only unfair offers as the game progresses.
even in a situation in which a once-off transaction occurred, game theory suggests the rational player will threaten to reject any unfair offer, & will seek to make their threat binding upon themselves to make it credible. people aren’t stupid in other words.
i’m reminded of the prisoner’s dilemma, from which it has been concluded that rational behaviour is to be nice, but to immediately punish any attempt by others to rip you off.
http://en.wikipedia.org/wiki/Prisoner%27s_dilemma
also from the prisoner’s dilemma another conclusion relevant to this thread is that it is best to be non-envious, i.e. not to try to do better than everyone else, note though that this doesn’t mean it is acceptable to fall far behind everyone else.
having also read all the responses in this thread i think some are overstating the view that this preference for relative rather than absolute gain is a characteristic of the ungrateful rats at the bottom of the treadmill looking up at the noble wealth-creators at the top as they gracefully allow their munificence to trickle down.
where’s the condemnation for the player who would only offer $10 of a $100 windfall in order to secure it? surely he could rationally offer $90 in order to get $10 for himself if he were not eaten with envy & cared only about absolute gain?
i’m sure the preference for relative gain is at least as manifest among those at the top of the pyramid
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Author: ZenTiger
Comment:
“Anyway, are you saying landlords are the problem stopping community and civic values?”
My feeling for landlords [generalizing] isn’t that these are rich people who buy (expensive) properties and provide a service to those who are less well off or transient, but they are (to a significant degree) a group who have used the neighborhood to extract wealth (asset inflation). I don’t see them knocking over old houses and planting a nice garden; quite the reverse they divide a section, superficially do up the house (that has probably past its use by date) and jam a little hut where past generations had their swings for the children and goosebury bushes. The feeling is of plunder rather than something beneficial going on.
There is very little structure (?) to the modern nieghbourhood/ community; apart from the resident rank who is there?: the checkout girl; the men who pick up the leaves; the police may cruise by occasionally; but the distant stare of a council official is about as close as we come to experience some sort of a community figure. The council official stands on ground which is the result of a battle for control by business interests and the ordinary citizen.
[somewhere else:]
In the town I live in they have loud party ordinances, (it is a college town). If the tenants in a rental are being too loud they go after the landlord . !st offense is a warning and a fine, 2nd offense the lanlord has to put in writing what he going to do to correct the problem and a fine, 3rd offense in a year the landlord loses his rental license for that unit/building for 30-60 days. That’s the sort of thing we need.
http://www.collegetownlife.com/news/CT_NEWS_05.10_23-31.htm
“The reality is the person living next door is your neighbour, whether they are renters or owners.”
Except that in many cases the landlord makes the decision that ensures what sort of nieghbours you will get. For example, knock down the old garage put up a cheap kit set garage with a room for an extra tenant and his stereo.
“Incredible – landlords are to blame because students trash the place they live in. ”
No landlords aren’t that stupid; they protect their own interests with a bond but they don’t have to worry about the long grass, shabby paling fences and cars all over the place. Neither do they have to bother about the noise, as all though they run a business it isn’t their problem, and if the nieghbours get fed up they can buy the house at a discount.
“Councils and Government love property investors because they spend tens of thousands in ridiculous fees to ensure they can supply a market crying out for a place to live. ”
An overseas market? How do we know the fees are ridiculous? This is a process that goes on around the average citizen. The average citizen is aware of traffic, infill, the need for new roads and the opulent homes of the property developer in Home and Garden Magazine (Hugh Pavlovich’s house in Fendalton has enough land on the front lawn to house a major new development).
“If Councils and Governments opened up more development they’d lower the cost of housing. If owner-occupied places got a tax break or leg up, you’d encourage ownership and rental accommodation would suit a smaller market – the transient, mobile, or singles and savers. ”
This is National Party Policy and “Greenies” are being blamed for ring fencing cities and hence keeping the price of houses high.
There is an element of truth there but overall it seems to ignore (for instance) excess liquidity due to the globalisation of world financial markets, income growth and net migration.
There’s a discussion here from Spiked on line re the UK experience.
http://tinyurl.com/39tuqz
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Trevor29 Says:
January 21st, 2008 at 8:10 pm
New Zealand can be an energy exporter. In addition to our hydro,
………………………
Do you have any reports on the matter Trevor? It has been a criticism of eg Pegasus Town that our electricity system is already strained, but maybe that is the transmission system?
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JH,
I don’t think most landlords are quite as bad as your portray, but having lived in rental accommodation for over 15 years (and given the price of houses, probably the rest of my life) I know what you mean. There certainly are a proportion who act as you describe.
As far as I can see, houses are unaffordable because of the cost of the land. I see people bulldoze perfectly good houses to build new “McMansions”, which cover the entire section, from fence to fence. People only do this because they know the land is much more valuable than the house (otherwise they would build their McMansion on a larger block of land somewhere else). So, is the problem that land is simply too expensive, because councils etc have restricted the amount available for development; or is it that people want to build ridiculously large houses? I guess its a bit of both.
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I’m not sure what sort of links you are looking for. The electricity system is strained because we haven’t invested in the required generation plant and infrastructure, not because we have run out of physical resources.
Trevor.
Check
http://blog.greens.org.nz/index.php/2007/12/26/the-swarm
for my Osmotic Power links.
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“The electricity system is strained because we haven’t invested in the required generation plant and infrastructure, not because we have run out of physical resources.”
That’s my point when people complain about developers fees, house prices and “greenies” ring fencing cities. Places like Pegasus Town market overseas flat out. $hame on National Party.
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Interesting series in The Press this morning about Christchurch’s lost heritage. One of the prominent developer drives a Hummer. Hummers own research has shown that their behemoths have appeal to those who want to project the F.U message to society.
Property rights have there place but the system wont fall down if a portion at the upper end get nipped.
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“Places like Pegasus Town”
The Maoris were given that land, then they sold it to Mr Wong . Get you’re facts straight before you blow your erratic trumpet .
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“What is more, some of those countries – particularly China and India – are getting wealthier all the time. They have a growing middle class, which more and more will want to buy high-quality foods. They want to travel. They want to educate their children. They will want safe places to locate their businesses [and buy a house from my developer mates].
They will look to New Zealand for these things. And they will do this on a scale that is almost unimaginable. National’s goal is to ensure New Zealand can take advantage of these opportunities.
We have an infrastructure deficit throughout the country.
Earlier this month I announced our four-point plan for improving home affordability:
1. Ensuring people are in a better financial position to afford a house.
2. Freeing up the supply of land.
3. Dealing with the compliance issues that drive up building costs.
4. Allowing state house tenants to buy the houses they live in
Going back to basics, supplying a house requires the following things:
• Land to build it on.
• Someone, i.e. a developer, who is motivated to build on that land.
• Regulatory consent to build on that land.
• Resources, i.e. materials and labour, to build the house.
So, it’s safe to assume that when supply is lacklustre then something must be going wrong with one or all of these things
From John Key speech to Contractors Federation:
http://www.johnkey.co.nz/index.php?/archives/213-SPEECH-NZ
Contractors-Federation.html
There are a lot of other things to blame for the housing unaffordability crisis such as the number of people who buy 1,2 or 20 rental properties to take advantage of rising asset prices and generous tax right offs. Why is he so selective?
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Whish I could find the link to Roger Kerr’s speech where he tells the Hutt(?) Rotary that there is enough oil for 1000 years.
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In an interesting twist part of land given to Ngai Tahu was cheap because it had a motorway designation dating back to the 1960s. That designation was lifted when Transit decided it couldn’t complete the works in the timeframe specified in the RMA. Transit has now decided that the only way to cope with the traffic generated by Pegasus Town is to build the motorway. Because Transit can’t compulsorily acquire land titled under the old Native Lands Act unless there is no viable alternative route Transit is left with only two viable routes. Either through Woodend or on the original designation which runs on the corridor between the Pegasus Town and Mapleham developments. Pegasus Town Ltd of course prefers the motorway option that destroys Woodend rather than the one that affects the value of their development.
Which is one reason they are targetting British buyers. They simply omit any mention of transport problem they are creating from their sales brochures because the options are still being “consulted”. A simple case of buyer beware.
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Ngai Tahu now with all the gifted cash are building the biggest dairy farm in Canterbury, which will spell doom for the Waimakariri River.
Forget pommy buyers – go to a mid week Cantab horse or greyhound race meeting and you’ll see the money to burn bro’s strutting their stuff !
They can’t never lose !
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Some useful information about the pie that we haven’t started cooking yet:
EECA’s 2006 status report (the 2007 report isn’t available)
http://www.eeca.govt.nz/eeca-library/renewable-energy/report/renewable -energy-industry-status-report-06.pdf
Other EECA links:
http://www.eeca.govt.nz/renewable-energy/marine.html
http://www.eeca.govt.nz/renewable-energy/wind/index.html
http://www.eeca.govt.nz/renewable-energy/geothermal.html
http://www.eeca.govt.nz/renewable-energy/bioenergy/indexnew.html
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from the john key speech as quoted by jh:
so the national party policy is mass immigration & sell the country…
so i was right to comment a few days ago that the new-right still rule the roost at the national party, & their penchant for selling off everything had not yet met its natural limits by a long shot.
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