'Hedonism' (3)

It's not really about hedonism at all, but it follows from the last post I made. I mentioned one problem I have with specialization, and that's how it leads to instability in life because it is, in essence, a risk.
I think it's worth mentioning the link to the subject of 'The Spirit Level', which I never finished reviewing here. People take risks and many suffer the consequences of failure because of the urge to do well. If you need to acquire phenomenal amounts of wealth in order to stand on an equal footing with the wealthiest, then you need to take the sorts of risks that provide such massive benefits if they pay off. It is patently untrue (to me; proving it will have to be a subject of another post) that it is possible to work one's way up to being a millionnaire or billionnaire without any luck at all, but merely by hard work. Part of the proof will necessarily involve pointing out that listening to millionnaires explain how they did is a perfect example of selection bias; you need to count not only the people who are successful self-made millionnaires, but also the people who tried and failed.

The risk of success is not the same as the pressure. The pressure to succeed, whether it stems from personal goals, family needs or social environment, might well be stressful in itself, but that stress is in addition to the stress of taking on risk. A person might very well know that he is at risk: that the job is uncertain, or that the field is unstable, but need to specialize anyway. One of the effects of inequality is to set unreasonable standards for people to aspire to. If there are 'super-rich' people who own or earn (typically both, in one sense of the word 'earn') far more money than even the very well-off, people will aspire to that level of wealth, and will take risks to get there.
These risks can be working very hard in the hope that this will pay off later, when if it doesn't you've wasted your life, including your chance at a pleasurable social life, and quite possibly your health if you worked very hard.
Or the risk can be putting your money on a risky bet. Or getting a difficult loan. Or simply studying for, or taking, a job in a well-paid but small sector, in which numbers and market demand might make a big difference. In this context, risk covers a multitude of choices the outcome of which is not known by the chooser, but without which long-term success is not possible.

The greatest risks are too much even for most aspiring millionnaires, and in modern society, too much for the very poor, since they already have a nice enough life. Whenever someone says that a hopeful just doesn't want it enough, it annoys me. The hopeful isn't desperate enough to risk losing what he has. Taking risks is not manly; it's boyish. Risks are for those who have nothing to lose, except a lot of testosterone, and these people are typically young boys just making their way into society.
However, I see it as fundamentally unequal that risks are necessary and of different value to different people. A very wealthy child can take risks safely, knowing that his parents can support him. The risks are not risks to him, but merely opportunities. That is not equality, for which some people hope, nor equality of opportunity, for which I hope. As long as risk is necessary, the rich will have more opportunity.
I also regard it as wrong that one's outcome in life can depend on chance; that to do well one must risk some fairly consequential failure. The ideal would be that talent, ability and hard work, which are indistinguishable from each other, fully determine outcome, so that if there were millionnaires they were the most talented and dedicated individuals.
If it were truly possible for anyone to earn any of the range of incomes in society then wealth by birth would not be such a terrible thing; a person would merely be as well-off as anyone else who wished to be. The two problems of wealth are the unfairness of people receiving not only what they didn't earn, but what others cannot hope to earn, and that if a person starts from that point, they will be able to accumulate more: the rich get richer and the poor get poorer, or 'wealth accumulates'.
I wonder what the arguments are against a cap in income in a country. If we set it at 5 or 10 times the national median would we damage the economy greatly? If we did damage it greatly, would that actually matter in terms of human suffering, or would it simply reduce some otherwise worthless numbers?
If one could currently earn the national cap, the argument would go, then one would simply do less work until the national cap was the market rate for the amount of work. And presumably the argument would be that an inferior job was being done on the work cast off in this way, and hence the company and the economy and the efficient distribution of goods all suffers.
But I wonder if there really is such a detrimental effect. The person who doesn't work as much surely benefits; he gets time off, and relief from the pressure of chasing more. Because really, I wonder if people at that income level really feel the need for it, rather than simply getting caught up in a competition to earn; to beat one's own score and everyone else's, in which income is the score. Do they actually need that extra income, or is it merely exploring the limits of what is possible?
Secondly, I wonder whether the job will be done worse. There are plenty of sensible people out there who respond very poorly to the extreme financial incentives that are in place at the top of corporate hierarchies. Mismanagement and corruption are hardly rare nowadays, and are often the consequence of arrogance, risk-taking and bonus/incentive chasing. In a culture in which risk is better understood and avoided, and in which money can no longer be a target to chase, rather than earn, it is quite possible that people will behave more responsibly. The cult of the CEO has been interestingly examined in the book 'Bad Company' by Gideon Haigh. The psychology of incentives, and how incentives can fail, has been examined by many behavioural economists and psychologists.
http://www.ted.com/talks/barry_schwartz_on_our_loss_of_wisdom.html
http://www.ted.com/talks/dan_ariely_on_our_buggy_moral_code.html
These two talks looked appropriate, but there are a number of examples: how motivating incentives encourage not creativity and inventiveness, but hidebound devotion to established systems, and only encourage better concentration at work that is mentally understood; how introducing monetary incentives over-rides or replaces moral or other concerns rather than adding to them, even when the two are aligned to create the same action; how culture and financial reward in these working environments leads to short-term goals and often not even good short-term strategies.

All these influences that cause problems would be lesser in a more equal society, in which CEOs earned a fraction of what they earn today. Is one man really worth 50 average people, or even 10 people in the top percentile of the population? Can any job reasonably require a better candidate than the job of running the whole country? If we made these CEOs work only 10-hour weeks and shared the work, would these large number of very intelligent replacements really ruin a company more than a CEO? I really doubt that a CEO is necessarily such a specialized and talented individual. The idea that people who are paid a lot must be very talented because they earn it, and therefore would be good at your company being paid a bit more has it the wrong way round: using the money as a way to judge talent is a mistake in trusting market decisions.
The more you abstract from the quantity you wish to judge, the more liable you are to bubbles. CEOs are just earnings bubbles; entirely over-rated, but paid because everyone believes everyone else. Once again, economics terms can be applied successfully to individuals within economies. A sane, rational world would judge the talent directly.

I've had a bit of a tangent here, but to return to the concept of ' The Spirit Level', it is the ultra-rich who cause the problems. The well-off accountants and financial officers who earn (at the moment) £40,000-100,000 are not the ones at the top end of the gross inequality spectrum, making everyone else anxious to keep up. It is the ultra-rich who are the problem.