Post-materialism
In this section
Shifting values
In Kuznets attempt to describe how inequality could relate to development, he did not elaborate but mentioned in passing the potential for shifting political pressure for redistributive and equitable state interventions into the market. This theory was later elaborated with empirical research by political scientist Ronald Inglehart’s as “postmaterialism” (Inglehart, 1971). The basic premise is founded on Maslow’s hierarchy of needs that individuals have an ordering of their priorities of where they focus their attention first for material - basic material needs, shelter, security, and then sense of being connected socially to a community of friends or family and aspirational goals (Maslow, 1943 ; Inglehart, 1971). Once a certain level of developmental milestone where material needs are met by a critical level in the population society could cross a transition threshold where collectively priorities shift to the social dimensions of well-being over the material. These internal value orientations however were not thought to be very flexible throughout life but instead are cemented during critical periods of their life stage when they are “socialized” according to Inglehart around age 10, and they carry with them into adulthood. Inglehart predicted intergenerational political conflict would eventually be inevitable as later generations clashed with older generations on the trade-off of material interests vs aspirational goals of equality, environmental protection and civil liberties (Inglehart, 1971). Inglehart developed his theory into postmaterialist score using survey questions and contemporary political analysis and opinion polls research has confirmed detection of the phenomenon occurring in Western democracies for environmental activism (Booth, 2017).
Subjective reality
One simplified assertion in a capitalism framework is that both firms and households respond to information in markets and behave out of rational self-interest to maximize profits, where profit is defined as revenues less expenses. Presumably households spend expenditures voluntarily in exchange for improvement in well-being. Subjective well-being (SWB) is a measure of practical significance for policy makers. SWB is one’s own assessment of how well things are and has been found to be relevant for how individuals determine their approval of political leaders (Ward, 2015). Given the relationship with political sentiment, SWB may incorporate information both about one’s economic and material circumstances as well as political and ideological preferences and these relationships could shift with the changing postmaterialism dynamics predicted by Inglehart. At lower levels of GDP per capita, a higher percentage of income is spent on material needs whereas at higher income levels corresponds to increases in discretionary spending on other social and intangible motivations.
SWB and “happiness” are sometimes considered as the same and in other reports happiness is defined more narrowly as a transient positive affect which may have reproducibility challenges be more subject to the conditions that the survey was taken such as time-of-date or day of the week (Cohen, 2018). For consistency in this report happiness will not be used and the terminology used will focus on SWB. The anterior cingulate cortex region of the brain is suspected to have a role in this function and schizophrenic patients with lower activity in this region also report lower SWB scores (Gilleen, 2015). There are multiple measurement techniques all of which use surveys such as the Cantril Ladder, Eurobarometer, World Values Survey (Hilliwell, 2017). It is considered as the aggregate of three unique dimensions :
Dimensions of Subjective Well Being (OECD, 2013)
Life evaluation—a reflective assessment on a person’s life or some specific aspect of it.
Affect—a person’s feelings or emotional states, typically measured with reference to a particular point in time.
Eudaimonia—a sense of meaning and purpose in life, or good psychological functioning
Easterlin's paradox
The curve of SWB vs GDP in Figure C.6 suggests that after crossing the transition point the economy reaches a development milestone and should consider adapting it’s strategy to cater to the new demands. The curve can be described as two regions - the left side region where GDP and SWB are strongly positively correlated and the right hand side where the relationship breaks down and further gains of SWB are no longer as tied to income levels. One possible explanation for this nonlinear relationship between GDP and human development and life satisfaction is the possibility that societies experience a shift in priorities after achieving a certain development milestone.
Along with Inglehart, economist Richard Easterlin was also interested in evidence of the relationship of income with one’s subjective psychological experience. To compliment Inglehart’s observed diminishing marginal return of SWB vs income (Inglehart, 2008), Easterlin’s findings were that relative levels in income across time and within countries were more important for predicting SWB than absolute levels of income (Easterlin, 1995). This is known as the Easterlin paradox.
Empirical evidence for shifting roles and priorities of government
Concurrent with a drop in the marginal gains in improving SWB with income, is the rising negative affect from inequality. This could be due to either growing scale of the social cost of inequality, the shifting psychological sensitivity due to postmaterialism or a combination of the two. Two dimensions of incomes measures for the economy are the aggregate income level GDP per capita and it’s distribution - inequality measured by the gini coefficient. While neuroendocrinologist and sociologist Robert Salposky may argue that reducing socioeconomic inequality is a good thing to do and may promote a healthier more productive society in the long run (Sapolsky, 2017), is there evidence that people in more equal societies have higher life satisfaction? There could be multiple mechanisms linking inequality to SWB - trust, social support and generosity and this is an area of active research. There are a mix of results reported depending on the study with some studies reporting positive while others report negative or no correlation with SWB (Ngamaba, 2017). One possible explanation for the inconsistent findings could be that the relationship between inequality and life satisfaction is different for low and high income countries. Table 5.5 below presents evidence for this theory from simple regression results from country level data series from 2013-2015 data (OurWorldInData, 2020). The dataset is split into low (GDP per capita < US $15/k/capita/yr) and high (> US $35k/capita/hr) categories tested on three independent parameters.
For the low income countries, aside from life expectancy, income is a stronger predictor of life satisfaction than inequality and inequality is positively correlated with SWB, whereas the reverse is true for high income countries and inequality is negatively correlated with life satisfaction and is the strongest predictor. Postmaterialism increased demand for public goods and services could also explain the observed increase in government spending as a share of GDP with an increasing level of development known as “Wagner’s law” (Santiago Acosta-Ormaechea , 2012).
Analysis in Appendix B tests for evidence of a shifting role of the state and the market with development stage. Three development stages are defined - developing, emerging and advanced based on the longevity score, similar to how it is defined by the UN Human Development Program. The results are summarized in Figure B.6. The coefficients are scaled so that the largest coefficient is 1.0 in each of the charts. The results show some evidence of the shifting role of the market and the state. The relative strength of the coefficient for market dynamics (blue) is the strongest for emerging economies and shifts towards governance (red) for advanced economies. Examples of governance include rule of law, efficiency controls, regulatory quality, political accountability, transparency and executive constraints. These shifts match Chan Chun Sing’s model of leader-enabler-safeguard (Chan Chun Sing, 2016).
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