Lecture review: Does the distribution of economic wealth affect the national level of happiness?

Scandinavians are some of the happiest people in the world, but also those subject to some of the highest tax levels. Does this imply that we would be happier if forced to pay higher taxes? Not necessarily, as explained Professor Dr. Maarten Vendrik, one of the speakers present at the Debate Café on the topic of National Distribution of Economic Wealth and National Happiness.

A Debate Café is an opportunity for a handful of experts to discuss their perspectives on any given theme.

The  Debate Café organized by Studium Generale and the SCOPE Economics student association on Tuesday, February 19th at the Bookshop Selexyz Dominicanen focused on the analysis of the relationship between the distribution of economic wealth and quality of life, with emphasis placed on potential future improvement.

Professor Dr. Joan Muysken moderated the event, while Professor Dr. Maarten Vendrik, Professor Dr. Adam Szirmai, and Professor Dr. Jaap Dronkers offered their opinions on issues concerning social inequality, poverty, and national happiness levels.

Professor Dr. Maarten Vendrik

Maarten Vendrik, a senior assistant professor of microeconomics and labour economics at the School of Business and Economics at Maastricht University, looked at the connection between wealth distribution and levels of overall well-being from the perspective of both developed and developing countries. In both cases however, he emphasized the fact that the national distribution of wealth is becoming increasingly unequal.

Unequal distribution of wealth is not necessarily negative; rather, “it can be okay if it’s good for the people in the least privileged position in society, making even the poorest [people] better off”. In other words, unequal distribution can actually increase income level for this group. Considering the media’s frequent portrayal of the negative effects of income inequality, this alternative viewpoint offered a fresh perspective. Yet if income inequality is on the rise, and such inequality offers, on average, an increase in income, then is our state of well-being also improving?

For developing countries, argued Vendrik, income inequality can be “a good thing” for improvements in well-being. The same effect is not seen in developed countries, however. This phenomenon can be attributed to poverty being a matter of relative income, said Vendrik. In developed countries, poor people cannot afford to buy luxury items, as opposed to food, clothing, or shelter. Because of this, they actually feel more deprived. In Vendrik’s opinion, the most promising proposed solution to this problem is a progressive income tax with tax deductions for savings.

Professor Dr. Jaap Dronkers

Jaap Dronkers, currently a professor of international comparative research on educational performance and social inequality at Maastricht University, spoke about educational inequality, offering examples from both Europe and North America.

Dronkers first explained the four factors responsible for educational inequality within OECD countries:

  • Individual characteristics of pupils and parents (the most important characteristic);
  • School characteristics;
  • Educational, social, and macro-economic characteristics of surrounding region;
  • Educational system characteristics.

He then outlined the four functions of education:

  • To equalize educational opportunity within a society;
  • Sorting and selection efficiency;
  • Preparation for the labour market;
  • Socialization.

Comparing the educational systems in the United States and in Scandinavian countries, Dronkers said that while Scandinavian countries offer seven different educational “tracks”, the U.S. offers only one. Based on preliminary test results, students in Scandinavia are sorted into a different track according to their perceived abilities, and therefore their future employability. Each track comes with a different education system. For example, students sorted into a track emphasizing manual labor, will not receive the same education as students who are more likely to go forward in academia.

Dronkers explained that consensus is growing regarding how to approach this perceived inequality within Scandinavia’s education system. Comprehensive educational systems, such as those seen in the United States (where pupils are not separated into tracks at such a young age) promote increased equality whereas a vocational track system increases education inequality. In his opinion, the best possible solution is to promote accountability for standardized output, i.e. educators offer the same treatment to both the brightest and least bright pupils in an attempt to bridge this ability gap over time.

Professor Dr. Adam Szirmai

The final subject matter concerned gross national happiness and was presented by Adam Szirmai. Szirmai is a professorial fellow at UNU-MERIT, as well as a Professor of development economics at the Maastricht Graduate School of Governance at Maastricht University.

Gross National Happiness (GNH) is a subject matter receiving higher levels of attention as of late. However, Szirmai would not be considered an advocate for this trend; in his opinion, GNH is a “questionable concept” that “distracts our attention from the urgency of economic growth and poverty reduction in poor countries”. He is adamant that implementing GNH into policy decisions aimed at reducing poverty is a “dangerous concept”.

On the contrary, Szirmai mentioned the examples of Taiwan and China to propose that a more equal distribution of wealth and means of production capacity is a much better method to reduce poverty. This does not come without consequences, however, as it has been noted that “accelerated growth in developing countries is almost inevitably associated with large increases in inequality in wealth and income… although the contribution of rapid growth outweighs the distribution of inequality”. Ultimately, as Vendrik said earlier, sustainable economic development requires an equitable distribution of income and wealth.

Szirmai’s presentation was the last before the question and answer session that followed the debate. Although all three professors touched upon different aspects of income inequality, it was clear that they agreed upon one idea: equitable income and wealth distribution promotes sustainable economic development.

How this goal can best be achieved is where the professors’ opinions differed. Vendrik advocated for a progressive income tax, Dronkers for a comprehensive education system, Szirmai for increased production capacities. Although no consensus was reached on this issue, each argument was backed up with concrete evidence outlining respective strengths and weaknesses. The viability of each argument not only created an informative debate, but sparked pertinent questions from the audience.

For example, several people were interested to know if and how business ethics should be taught within the classroom, or whether it is justified not to tax the top 1% of earners in order to maintain their productivity levels. Regarding both of these questions, all three professors concurred that the level of consensus is shrinking, and that one answer has yet to be agreed upon. In the case of The Netherlands, however, the issue of income inequality is gaining importance with equalization back on the policy makers’ agenda and playing a more significant role now than it has in the past 25 years.

As this was my first time attending a Debate Café, I went into the event without any preconceived judgements. Nonetheless, any expectations I held were certainly exceeded. The professors in attendance were informed scholars who backed up their – sometimes opposing – arguments with concrete evidence and the level of participation from audience members was value-adding. For these reasons, I hope to return to an upcoming Debate Café in the near future.

By Emma Harris

Emma Harris documents her travel experiences, marathon training, kitchen mishaps, and otherwise strange adventures at www.culturecopia.wordpress.com

 

There is one comment

  1. Sueli Brodin

    This video shows the extent of wealth distribution inequality in the US:

    http://youtu.be/QPKKQnijnsM

    “Infographics on the distribution of wealth in America, highlighting both the inequality and the difference between our perception of inequality and the actual numbers. The reality is often not what we think it is.”

Post Your Thoughts