Sunday, October 17, 2010

The Todd Henderson story

I got to this one a bit late... Anyone who missed it is encouraged to read here, here and here. It's a pretty instructive story about the times we live in (as well as the risks of blogging...). Henderson is a Professor at Chicago Law School, and blogged on Truth on the Market that he could barely afford the tax rises advocated by Barack Obama on people earning $250,000 p.a. (tax rises which are unlikely to happen anyway by the looks of things). Between private school fees, nannies, cleaners, gardeners, two cars and the morgage on his $1 million house, Henderson and his wife (an oncologist) had no money left at the end of the month and therefore couldn't afford to contribute more to government finances.

A real 'let them eat cake' moment.

The fascinating thing about this - apart from the blinkers Henderson wears as he goes about his life - is just how difficult it is for even exceptionally wealthy people to feel comfortable these days. As Brad Delong points out, instead of looking at those worse off than himself,


Instead, Mr. Xxxx Xxxxxxxxx looks up. Of the 100 people richer than he is, fully ten have more than four times his income. And he knows of one person with 20 times his income. He knows who the really rich are, and they have ten times his income: They have not $450,000 a year. They have $4.5 million a year. And, to him, they are in a different world.

In other words, Henderson is dissatisfied because he knows people way richer than he. This is grist to the mill of Wilkinson and Pickett, who in The Spirit Level argue that very unequal societies have costs to everyone, even the wealthy. This is clearly true - Henderson makes a fortune (at least double what a Law Professor of similar status would make in the UK), and yet he feels hard done by because of the even greater wealth available to others in his social circle. Academics are notorious for this - well educated people who are very well paid by the standards of the vast majority, but who are also disproportionately likely to have bankers, hot-shot lawyers or simply heirs to substantial wealth amongst their acquaintances.

But there is more to this. Henderson feels stretched to the limit by costs which at least in part come about because of the individualization of risk and lack of social solidarity in the United States. He has to pay huge private school fees, because public schools in Chicago's South Side are not good enough, and the main reason they are not good enough is because they are populated by poor Americans, and better educated Americans abandoned them a long time ago. Two cars are a necessity because mass transit is not an option for daily life in a deeply socially divided city (admittedly, Chicago is not really the best example of this). Health insurance is a big expense, and various investments to save for a pension - given the relatively ungenerous coverage of Social Security - is another pressing need.

In short, Henderson is well off, and doubtless griping largely because of his inability to look around him. A quarter of million bucks a year should be more than enough for anyone, and Henderson is either too ignorant or too self-absorbed to realize quite how much money that is for the overwhelming majority of Americans.

But there is an objective reason for his dissatisfaction. Even relatively high incomes just don't provide quite enough security in a deeply divided society.