The Economics Of Schadenfreude

A great many people talk about “abolishing poverty”. Of these, some are liars and the rest are illiterates. There are two main reasons for this. Firstly, poverty is a relative concept, because wealth is a relative concept. These terms do not mean having this or not having that, but having more than most other people or having less than most people in the same time and place. As the communists knew, abolishing poverty therefore means imposing equality, even if this is an equality of deprivation.

The rich, however, will always oppose equality to their last breath, because what they wish to do is not merely to possess and enjoy this or that luxury, but rather to possess and enjoy luxuries to which the great majority cannot aspire. The rich do not desire luxury for its own sake, but only as a marker of their power, proof of their being above everyone else on the totem-pole. If everyone could have it, the rich would no longer want it. Whatever everyone has, therefore, is by definition not “wealth”.

For certain goods, demand falls if the price falls, reversing the normal laws of economics. What is happening here is that the rich person perceives that the good will soon be affordable by inferior creatures, and so loses interest. An exclusive good means one that is so expensive that it excludes most people from enjoying it. An exclusive good for the mass market is thus a contradiction in terms, and advertisements for such things are fresh illustration of human stupidity.

Good fortune, wealth and even happiness are meaningful only if there is someone nearby who does not have it. There is a Norwegian saying, “One’s own good fortune is best, but the misfortune of others comes a good second.” We are hierarchical animals; one way for us to be superior to others is to climb higher, another is to push others lower. The point of servants and conspicuous maltreatment of others is to buy inequality, to raise your status by creating a slot below you. What material benefits you get from the servants and maltreatment is irrelevant.

Three examples: The Economist once reported that aircraft seats in long-haul Tourist Class were designed with the precise angle used by interrogators to keep their subjects awake. It gave the following reason: flying is intrinsically uncomfortable, and the limits of the luxury that can be offered to premium travellers are quickly reached. The gap between business and economy class is more easily widened by deliberately aggravating the lot of the unfortunates behind the curtain. This increases the happiness – or “utility”, as economists call it – of the premium passengers. There, but for the grace of my stock options, sit I.

KLM calls its business class “Europe Select”; the name cleverly implies, not that the passenger is rich enough to afford a premium service, which would be a fairly trivial situation, but the much more exciting possibility that Someone has selected him to join an august Inner Ring. A shoe advertisement offers, “Enjoy the last pair in your size”. The only possible utility of having the last pair rather than one of many is the pleasure of knowing that the next customer will be sent away disappointed. Such things are what Fred Hirsch called “positional goods”.

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  1. Written by Mick Whitehead
    on April 19, 2012 at 11:29
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    “I indeed am happy, others sad;
    I am high and mighty, others low;
    I am helped while others are abandoned;
    Why am I not jealous of myself?”

    Shantideva

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