"I'll be miserable for five years as long as you make me wealthy."
I've always been a fan of Richard Epstein's thinking. I hadn't known, however, that he had thoughts on the "happiness" literature. I learned a lot about much of that literature from a recent Russ Roberts podcast with Epstein. I highly recommend the whole interview. I can't do justice to the whole podcast in one post and so here is my first installment.
These are some of the key thoughts, along with the approximate point he states these thoughts:
9:00. Researchers who find little connection between either income or wealth on the one hand and happiness on the other have failed to take account of the short-run tradeoffs people make to get wealth. Think of the person whom a company wants to motivate to get on an airplane at the drop of a hat and fly halfway around the world to close an important wealth-creating deal. To motivate that person, the company has to pay a lot. The person gives up current happiness for future wealth and future happiness. Outside work, that person has very little of a life. Query him about his happiness, and he will probably say he's not very happy. But he has a plan: to accumulate wealth and then take it easier later. Thus the quote, from Epstein, at the top of this post.
Epstein does not point out, but I'm sure he would agree, that this tradeoff highlights the unfairness of the graduated income tax system compared to a flat tax rate. The person gets hammered during his high-income years even if his lifetime income is the same as that of someone with a more-normal workweek and a flatter pay gradient.
Incidentally, when Epstein tells his story, he uses examples of people whom virtually all of us would regard as very high-income. But the more general point is about variability. When I was 18 years old, my net worth, not including the value of my books, was about $20. I needed to make about $2,000 in 1969 dollars to pay for room and board, tuition, and books for my last year in college. I knew enough about the way the world worked to know that the way to make a lot of money quickly was to go where other people didn't want to go but where employers wanted people. So my friend, Don Redekop, and I, one hour after writing our last final, hitchhiked from Winnipeg to Thompson, Manitoba. He got a job building a mine and I got a job in a mine. I took every overtime hour I could and sometimes worked double shifts. By mid-August, I had enough for my last year of college plus a trip to the U.S. to go to an Intercollegiate Studies Institute seminar. When I think back about that time, I get the warm fuzzies and think how neat the job was. But a year ago, I found a box of letters I had written my father. In my letters from that summer, I expressed how miserable I was.
11:00. Given that people make these tradeoffs, the appropriate strategy for those who question whether they're making the right tradeoffs is to give people information rather than coerce them.
19:00. Sometimes when we make big decisions, we are most strapped for resources when we need them most. That's when we need friends, family, pastors, etc. When Epstein made this point, I could hear the humanity in his voice. I had the sense that he would be, or is, an awesome parent.