Science News

Economists have shown that cognitive skills — especially math and science — are robust predictors of individual income, of a country’s economic growth, and of the distribution of income within a country (e.g. Hanushek & Kimko, 2000; Hanushek & Woessmann, 2008).

At TEDxCambridge, Michael Norton shares fascinating research on how money can, indeed buy happiness -- when you don't spend it on yourself. Listen for surprising data on the many ways pro-social spending can benefit you, your work, and (of course) other people.

Knowing that your colleagues and peers earn more than you can actually raise your satisfaction levels, but only if you are under 45, according to new research from the University of St Andrews.

Interestingly, participants tended to favor dispositional explanations over contextual explanations on average. That means our participants thought inequality was due to internal states, personal abilities, and individual actions (e.g., hard work, ability and talent) rather than external forces (e.g., inheritance, political influence, education opportunities). This result is not surprising, given that people in the USA tend to favor dispositional explanations more broadly--it's a product of our individualistic culture. What was interesting is that participants who came from families that they perceived to be wealthy and educated tended to favor these dispositional explanations more than their less wealthy/educated counterparts. Said another way, students from upper-class families tended to believe that economic inequality was a result of individual effort, ability, and talent, whereas their lower-class counterparts believed that the same inequality was due to external forces (e.g., political influence, educational opportunities).

Any process that spreads things (such as wealth) out in a more-or-less uniform way on a logarithmic scale will produce an approximate power law with a slope of -1. Note that progressive taxation in which the wealthy are taxed at a higher rate than the poor does not alter the power law, only making it grow more slowly from an initial distribution in which everyone has the same wealth. If the initial condition is something close to a power law, it will remain so in the presence of any reasonable taxation and redistribution of wealth. There will always be some segment of the population whose wealth consistently increases faster than another segment. Of course individuals can change where they lie on the curve through hard work, good money management, and luck.

Studies have shown that not every dollar contributes equally to perceived wealth, people’s standing relative to those around them often predicts well-being better than net worth does, and increasing income trends are preferred over decreasing ones.