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What Portion of Human Welfare is Comparative Welfare?

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Some portion of human welfare is independent of the welfare of other humans. A person can enjoy food, touch, music, and intoxicating substances regardless of the well-being of anyone else; similarly, a person can suffer from physical pain, hunger, or nausea no matter what other humans are up to—even if no other humans exist.

However, some other portion of human welfare (of unknown magnitude) is directly dependent on the welfare of others. This “comparative welfare” may come in two forms:

  • Empathetic welfare: that portion of human welfare that has a positive or direct correlation with the welfare of others. (Example: I feel bad when I see a homeless person who looks unhappy; I feel happy when I see a puppy wag its tail.)
  • Status welfare: that portion of human welfare that has a negative or inverse relationship with the welfare of others. (Example: I feel happy when I win a contest; I feel sad when I have to wear less expensive clothes than my peers.)

The nice thing about non-comparative welfare (welfare independent of the welfare of others) and empathetic welfare is that they may be positive-sum. Consensual transactions may be possible to make all parties better off in terms of non-comparative and empathetic welfare.

The problem with status welfare is that it is zero-sum. No transaction involving status welfare can possibly make all parties better off.

A great deal of evidence exists to support the unfortunate proposition that status welfare accounts for a large proportion of human welfare. Further, the effects of status on welfare are likely themselves a function of status – marginal status changes may have more of an effect on welfare for those of low status than for those of high status.

Status Welfare is Large

Several bodies of research support the proposition that status welfare is a large part of human welfare. (Many of these are cited in the paper “The Economics of Happiness” by Paul Graham at the Brookings Institution. In addition, Richard Wilkinson’s 2006 book The Impact of Inequality: How to Make Sick Societies Healthier is a book-length treatment of the problem; I have not yet read it.)

  • Easterlin paradox” – happiness and income have a much stronger relationship within-country than between countries, at least beyond the level of abject poverty. Status welfare would be expected to come more from within-country differences (directly perceptible) than between-country differences (less immediately perceptible).
  • Homicide rates are highly correlated with income inequality. As income inequality and absolute poverty tend to go together, it has been difficult to establish whether income inequality or mere poverty is the driving force behind such negative competitive outcomes as homicide. However, a 2001 study found that income inequality is a better predictor of homicide rates than mere poverty.
  • Studies directly measuring the effect of income and/or wealth inequality find that inequality has a negative effect on well-being. The effect is larger for Europe than for the United States, and higher for Latin America than for either of these. These studies capture only within-country status, not status within smaller groups, and therefore must be seen as only part of the picture in terms of status welfare.
  • Welfare is affected more by unemployment than by inflation, dollar for dollar. Unemployment tracks inequality, whereas inflation applies to all equally.
  • Many animals change reproductive strategies depending on relative status. Status, therefore, must have strong effects on fitness.
  • In male humans, winning or losing a competition – even vicariously – is associated with hormonal changes, specifically an increase or decrease in testosterone levels, respectively.
  • Blacks and Hispanics spend a much larger share of income on visible consumption (clothing, jewelry, cars) than do comparable Whites.
  • Health effects of inequality are large, and less than a third of the difference is explained by risky behaviors of the poor.

The key point here is that there is a large component of human suffering that free markets and free choice have no hope of mediating. Merely being in a socially stratified market economy imposes a cost on those of lowest status.

The happy trample on the backs of the unhappy. This is not merely an observed fact of our world that can be changed, but an underlying truth of any human system. The unhappy cannot all be made happy. Human existence necessarily implies a high degree of misery for some part of the population. How does the happiness of the lucky justify the suffering of the unlucky?

Comparative Welfare and the Rational Decision Maker

A further problem is that lumping both types of comparative welfare, as well as non-comparative welfare, together as “utility” complicates the classical economic model of individuals as rational actors maximizing their utility.

In a classical economic transaction, two parties consent to an exchange, and are both made better off. All individuals must do in order to achieve higher and higher society-wide happiness is to pursue their own ends rationally. The simplicity and optimism of this model are challenged by the sad fact that an individual’s welfare correlates (in a complicated manner) with the welfare of various others.

Contract law recognizes this problem, especially with regard to transactions that do NOT take place “at arm’s length”—that is, transactions where the participants explicitly care about the welfare of the other participants. This can be traced back to its origins in Gemora, with its different rules for transactions with different groups (e.g., loyalty/no interest on loans for in-group, charging interest okay for out-group).

Most humans (sociopaths and saints excluded) have some component of welfare that is empathetic welfare, and some component that is status welfare. These components are likely large—and vary within populations. These complicate in a rather extreme manner the computational tasks of economic man; transactional partners must be modeled not just as self-interest-maximizers, but as (a) self-interest maximizers, (b) maximizers of the interests of certain others, and (c) maximizers of the difference between one’s own well-being and the well-being of certain others. That is, humans are—to some unknown degree—inquality maximizers.

Update: An interesting response on Why I Am Not.

Written by Sister Y

February 15, 2011 at 8:10 pm

Parental Parasitism

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How parents use their children – and use their children to use society.

The similarities between a fetus and a parasite are striking enough that the metaphor is fairly common. (See, for example, Adrienne Zurub’s The Parasitic Nature of Pregnancy.)

However, as horrifying as the reality of pregnancy can be, it is much more disturbing to ponder the extent to which parents act parasitically with regard to their children.

Babies as a Retirement Plan

One of the most common reasons people give for having children is to have someone to take care of them in their old age. There are really two important questions here: first, is it realistic? And second, is it fair?

The dream that most parents assume will come true for their children is tri-fold:

  1. The parents will have the financial means to support the child without relying on public assistance.
  2. Once raised, the child will support himself for his lifetime without relying on his parents or public assistance.
  3. The child will be financially successful and altruistic enough to voluntarily support the parents in the parents’ old age.

The first assumption is far from guaranteed. The second is shaky. And the third is downright hilarious.

Your Children Won’t Take Care of You

Raising children is expensive. The United States Department of Agriculture estimates that the average cost of rearing a child, adjusted for 2009 dollars – not counting college – is $160,410 for the lowest income families (less than $56,670 annually), $222,360 for middle-income ($56,670 to $98,120 annual income) and $369,360 for the highest earners (over $98,120 annually). That’s far in excess of the 2009 average retirement savings for the 55-64 age group of $69,127. If parents really are concerned with how they will live in their old age, wouldn’t they be better advised to avoid reproducing and stash those hundreds of thousands in their retirement funds? It’s certainly a much more secure investment. An “investment” in children often has a negative return, as I will explain below.

In addition, a 2009 Pew survey found that 11% of people aged 25-34 had moved back in with a parent because of the recession. Far from supporting their parents, an enormous proportion of adults end up relying on their parents far past the age of majority.

Another problem: those children who are going to happily support you in your old age are probably going to have children of their own. You will be competing with your grandchildren for your children’s resources – and who do you think is going to win?

Even breeding advocate Bryan Caplan recognizes that children don’t feel the same solicitude toward their parents that parents feel toward their children:

An old saying tells us that “One parent can care for five children, but five children cannot care for one parent.” It could happen to you.

There are strong evolutionary biological reasons why this should be so. From the perspective of inclusive fitness, an adult child is much more valuable to a parent than a parent is to an adult child. I quote Daly & Wilson’s Homicide (pages 99-100) at length on this point:

Parent and child are equally related to each other, but it does not follow that each should have evolved to be equally concerned for the other’s welfare . . . . [A] parent’s valuation of an offspring is theoretically expected to increase over time, at least until the latter’s maturity. The fact that reproductive value varies over time means that mutual valuations between individuals are similarly unstable. From A’s point of view, B’s value as a potential vehicle of A’s fitness is the product of B’s relatedness (r) to A times B’s reproductive value (RV), i.e. (rAB × RVB). From B’s perspective, A’s value is the product of the same coefficient of relatedness times A’s reproductive value (rAB × RVA). If A’s reproductive value exceeds B’s, and the two are close kin, it follows that B may be more willing to incur costs – risk to own life, for example – on behalf of A than vice versa . . . .

By virtue of greater reproductive value, an offspring will typically be more valuable to its aging parent than vice versa . . . . [Such] interindividual valuations constitute one determinant of the probability that dangerous tactics will be employed when two people find themselves in conflict. In particular we would expect the individual less valued to be more at risk. An obvious prediction, then, is that offspring will kill their parents more often than the reverse. However, we must immediately exclude young children from this proposition, mainly because their relative defenselessness makes them much more likely to be victims than offenders regardless of any relationship with the adult involved, and also because the parent’s reproductive value may well still exceed the child’s at this stage.

In fact, between adults, killings of parents by offspring are vastly more common than the reverse. In a sample of Canadian homicides from 1974 to 1983, 91 adult sons killed their fathers and 45 killed their mothers; only 20 fathers killed their sons, and only one mother killed her adult son. Seven daughters killed their fathers and twelve killed their mothers; just five fathers killed their daughters, and just three mothers killed their adult daughters.

Your children will probably not murder you, but the data illustrate the degree to which children are more valuable to parents than parents are to children. They won’t kill you, but they probably won’t exhibit inordinate amounts of filial piety in the form of voluntary cash transfers, either.

Children are People, Not Investments

But even though having children is a poor financial decision, it is also unfair to expect children to financially support their parents. Parents and children do not properly have a relationship of reciprocity, although it is common to suggest that they should. The title of an article in the Daily Mail illustrates this mistaken “reciprocity” view:

Children should be forced to care for parents and grandparents to repay them for ‘free’ childcare, says lawyer

Why is this completely wrong-headed? Raising children – time, food, toys, diapers, irritation – is a gift to the child, not half of a contract. Parents are properly regarded as volunteers – that is, those who provide a service without a reasonable expectation of compensation. The homeless guy who washes your windshield without your consent is in the same situation – and the guilt you feel if you don’t “tip” him does not reflect ethical reality. He did you a favor – perhaps you appreciate it, perhaps you don’t – but you certainly did not agree to pay him for it. In order to make it fair to enforce a contract, the law requires that you actually willingly exchange something. You can’t give someone a gift and then turn around and expect him to pay for it, hence the legal maxim “equity will not assist the volunteer.” That is, equity (fairness) does not require that a volunteer be compensated.

When we expect our children to be our maids, caretakers, and sugar daddies in our old age, we are, in a sense, ordering them to follow a particular life path: one that allows for a great deal of discretionary income and time. What if a child does not want a high-powered, money-making career? What if he or she wants to support himself as a musician, artist, clergy member, or worker for a nonprofit organization? Shouldn’t this be the child’s choice? It’s bad enough to bring a child into our troubled world, necessarily without his consent. It’s adding insult to injury to saddle him with the responsibility to support parents who were too lazy to plan for retirement themselves, and preferred to push the responsibility off on him.

Babies as Hostages

Parents expect, by and large, to be able to use their children as caretakers in their old age. But more importantly, parents use their children’s helplessness to extort resources from others.

Imagine two people are trapped in a mine with only enough oxygen to keep one of them alive until help arrives. They are both thirty years old; the only difference is that one has small children, and the other has no children. Which one should get the oxygen?

Most people would opt to save the parent. But it is important to realize that the parent has no intrinsically greater claim to life: his children merely have a claim to their provider and caretaker. In this sense, having children is a great deal like taking hostages. Resources are provided to the hostage-taker not because of his own moral claims, but because of the moral claims of his innocent hostages. Unfortunately, this creates an incentive to take hostages. The parent-child relationship allows for a similar parasitism.

In large societies, assistance is provided to children because of their helplessness that also “just happens” to benefit their parents. Welfare, food stamps, and the Earned Income Tax Credit are just a few ways that society attempts to transfer wealth to suffering children, but also ends up transferring wealth to parents whose decision to reproduce was irresponsible. Even child support provided by non-custodial parents fits this model: the money is purportedly for the benefit of the helpless child, but it is paid directly to the custodial parent, and improves her welfare as well as that of the child.

How Parents Use Their Children to Parasitize Society

I wish here to analyze a real-life example. On July 11, NPR aired a story about the possible extension of unemployment benefits, and interviewed in detail a woman named Debra Rousey.

Until November 2009, Rousey was a bank manager. She has been unable to find a job since then, and gets $355 a week in unemployment benefits. The text version of the piece characterizes her as “a single mom supporting her 17-year-old son, her 25-year-old daughter and two young grandchildren.” But while these folks all live with her, it’s misleading to say that she is “supporting” her children and grandchildren. In fact, (1) she is receiving child support from her former husband for her 17-year-old son; and (2) her daughter (who does not work) receives food stamps for her two small children, and the family lives on those. (The audio, but not the print, version of the article contains these details.) She is considering applying for welfare. The story notes that “Rousey was able to pay June’s rent with help from her former in-laws, but she still has to come up with money for July. [Emphasis mine.]”

In Rousey’s words:

“Twenty years ago, when I was a single mother I was on food stamps and Medicaid,” she says. “I feel like I have come so far, making the income I was making, getting the degrees that I got, and to go back to public assistance is like taking three steps backwards.”

Rousey, who seems articulate, kind, and well-intentioned, is a poster child for how the three-fold parental ideal described above can go astray. Her situation illustrates how parents use their children’s ethical claim on society, and on the other parent, to benefit themselves. If she did not have a minor son, she would not be receiving money from her former husband, and it is unlikely that her “former in-laws” would be helping her out with rent. If her daughter did not have small children, she would not be eligible for food stamps.

This is a reality that few consider when making the decision to reproduce – if, indeed, they conceive of it as a decision at all.

Written by Sister Y

July 16, 2010 at 7:50 pm