Tuesday, April 06, 2010

Should We Tax Happiness?

A new study suggests that a good part of income (for cricket players) comes from luck. Home field advantage matters a lot in cricket (apparently), scout show up randomly, and a good debut has a lasting impact on your career. If you happen to be on your home turf when the scout shows up, you're be in a better long-term position than your opponents. (The study was able to separate out performance from the field and performance from skill.) Matthew Yglesias argues that this is evidence for "Progressive taxes and more and better public services."

This leads to an intriguing question: should we tax happiness? The goal of public services (in this context) to the help the worst off and we use progressive taxes to fund those services, ethically justified because the wealthy didn't "earn" 100% of what they made. And because taxing someone because they got something by luck is justified in the area of salary, then taxing someone because got something else by luck must be equally justified.

Before I go further, two points. One is that this is not a serious policy proposal. Measuring happiness is very hard to do, made even more so since you'll be taxing people based on information that's completely subjective. I have no idea how you would do it nor do I care to figure it out. It's just a discussion to check for consistency. Second, yes generic happiness and wealth are functionally the same thing. Yes, the happiness research disagrees with me on this, partly because of issues with happiness research and the difficulty of measurement. All I'm saying is that when you take money away from people, you make them less happy and when you give them money they are more happy. The two are, on the margin, interchangeable (so no comments about how taxing income takes away what people didn't earn but taxing happiness doesn't collect "happiness" for the government to consume).

With that out the way, consider your own happiness. Most notable in my happiness is my relationship with my girlfriend, Tanya. I love her a great deal and she's by far the most serious relationship I've had. We met somewhat by chance, via match.com. (I call this is by chance because I was thinking about leaving the site having gone on so many dead-end dates and she had recently joined it.) According to Yglesias, this is grounds for a tax on my happiness. Most happiness that comes from social interaction is very similar to the cricket story: if you happen on a good opening conversation (performance) with the right person (scout), it can scale into something truly astounding. The question becomes, is this a stupid idea because it's impractical or because the whole notion of taxing happiness inequalities is silly? My vote is the latter as, I wager, it would be for most people.

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