I described when I first wrote this book—a “sense of deprivation amidst a stock of possessions that once would have seemed like plenty.”
This discontent and anxiety at the same time that people have greater stocks of material goods than ever before is not simply a perverse refusal to acknowledge what we have or some morally culpable sense of entitlement. It reflects in part the very dynamics of a growth-centered economy and way of life. As I discuss in some detail later in this book, growth-oriented societies run on discontent; it is their most basic fuel. But the distress reflects as well real changes in the structure of American life. Many families have more “stuff,” for example, but are legitimately worried if they will be able to afford sending their kids to college. Private college tuition has gone up precipitously while the average family’s income has not even remotely kept pace, and our system of affordable high quality state universities and colleges is being increasingly both starved out and priced out in a political climate inhospitable to the public funding necessary to maintain their excellence and affordability.
Adding still further to the discontent, many families have only been able to afford those larger homes that I referred to earlier by living further and further from where they work, requiring long commutes that cut down on family time or time for relaxation and recreation. Study after study reveals long commutes to be one of the life circumstances most conducive to discontent and unhappiness. But caught up in the psychology of “more is better” or “bigger is better” that is central to a growth economy, many people make choices that do bring them “more,” but at a price in well-being that they have not anticipated very well.* (In chapter five I will discuss in more detail the psychology of “more” and its embedding in what can be called a culture of quantity.)
Accelerating Inequality
Perhaps the most significant change in our society contributing to the anxiety and discontent I have been discussing is the corrosive increase in inequality. In the U.S., a study by New York University and Bard College economist Edward Wolff found that the top one percent now has as much accessible wealth as the bottom ninety-five percent combined. And, as another mark of the extraordinary inequality that presently marks our society, if one compares the wealth of that small group at the top to the wealth of the bottom forty percent (almost 130 million people), that small group at the top, astoundingly, has more than 150 times as much as the combined wealth of every single person in the bottom forty percent put together.3 Moreover, most of that wealth is still further concentrated among the top one-tenth of one percent. A 2014 study by Emmanuel Saez and Gabriel Zucman for the National Bureau of Economic Research found that the top one-tenth of one percent had the same net worth as the bottom ninety percent of the population combined.4
This degree of inequality is not just “the way things are” or a necessary consequence of a thriving market economy. Rather, it is a phenomenon that has been rapidly accelerating in recent years. The percentage of national wealth held by the top one-tenth of one percent has tripled since the time I first began writing this book.5 This tiny fraction of the population at the top of the pyramid of inequality now holds a full twenty-two percent of all the wealth in the entire country. And as an indication of even more extreme acceleration of inequality as we move closer to the present, Bloomberg Business reports that, “In the U.S., ninety-five percent of post-financial-crash wealth generated (i.e., since 2009) went into the bank accounts of the richest one percent.”6
Reflecting the depth of concern about these trends, a 2015 New York Times/CBS News poll found that a significant majority of Americans—including not only Democrats and Independents but almost half of all Republicans polled—viewed inequality as an urgent issue for American society. Summarizing the results of the poll, the Times reported that “The percentage of Americans who say everyone has a fair chance to get ahead in today’s economy has fallen seventeen percentage points since early 2014. Six in ten Americans now say that only a few people at the top have an opportunity to advance.” A striking feature of the findings was that even among higher-income respondents, the majority stated that money and wealth should be more evenly distributed and that, “Across party lines, most Americans said the chance to get ahead was mainly a luxury for those at the top.”7
Although the problem of growing inequality is worldwide, it is especially severe in the United States. When I first wrote this book, I stated that the fruits of increased productivity were more evenly distributed in the United States than they were in Europe.8 This is no longer the case. Indeed, inequality is now greater in the United States than it is in most other advanced industrial countries. But it is certainly also true that inequality is dramatically evident throughout the world. Bloomberg News has recently reported that the world’s eighty-five richest individuals control as much wealth as the three and a half billion poorest people in the world combined.9
This massive inequality has many consequences and implications. Bearing particularly on the main themes of this book is that our economic system no longer does a very good job of allocating the fruits of increasing productivity. “The economy” may be growing, but for millions of individuals and families, their own incomes or sense of well-being are not keeping pace. “Growth” per se is thus not much of a solution to their thwarted aspirations when the dictates of the market direct the wealth that is generated to the few rather than the many.
To be sure, both logic and data suggest that all other things being equal, there is more for all when the pie is growing and distribution is not just a matter of fighting for a fairer share in a zero-sum game. But very often all other things are not equal. As I discuss throughout this book, in gearing up to promote growth as an overarching priority, we generate unanticipated and unacknowledged side effects that render the human impact of that growth much less benign than we have thought. Relentlessly seeking “efficiency” in order to be able to generate more and more economic output, we cede our moral sense (and sometimes even our common sense) to the market, and treat the increasingly unequal distribution it yields as if it were a phenomenon of nature rather than a consequence of human choices.
The Emergence of Behavioral Economics
According to the assumptions of mainstream economics—the assumptions that very largely guide our society’s social and economic policy—rising inequality should not have much of a negative impact as long as the economy is growing: A rising tide is presumed to lift all boats; if those at the bottom or the middle have just a little more than they had before, it shouldn’t matter that those at the top have a lot more. It is the absolute amount people have and the absolute amount they gain, not how it compares to others, that is presumed to determine their “utility.”*
This idea (along with a number of others also central to mainstream economic theory) is so counter to the experience of virtually everybody who is not an economist that I have repeatedly found that when I mention it to people, they are sure I have gotten it wrong. “They can’t think that!” is the modal response. But as Richard Thaler, the 2015 president of the American Economics Association, puts it, the model still most commonly used by economists “replaces homo sapiens with a fictional creature called homo economicus,” an emotionless hyper-rational being whom he likens to the Vulcan Spock in Star Trek. Thaler is a leading figure in a reform movement in economics that aims to ground the discipline not in fancy equations that only work if one assumes that people manifest improbable levels of rationality and cognitive capacity, but in observations of the ways people actually do behave in the decision situations that constitute the subject matter of the field. This movement, generally called behavioral economics, is marked as well by attention to the findings of psychology and the other social and behavioral sciences, aiming to forge a more comprehensive, interdisciplinary approach to understanding economic behavior.
Behavioral economics scarcely existed at the time this book was originally written, and the term itself had not yet entered our vocabulary. Viewed
