Inequality, in short, is immiserating. One could cite more evidence in the same vein. Places in the United States with more inequality have higher stress and worry, more political polarization and lower social connectedness, even among the wealthy. Moreover, what counts for subjective well-being is not just reality but also perception. If social media and reality TV disproportionately depict millionaires and amazing homes, or if talk-radio pundits insist that government takes from hard-working whites to subsidize lazy minorities, resentment grows, never mind what the statistics may say.
In a poor country with low inequality, rising national income should make people happier, and of course reducing poverty is a good in and of itself. But in a wealthy, unequal country like today’s America, gains in national income can decouple from well-being.
“Each person would become happier because he was richer, but less happy because other people were richer,” Mr. Layard writes. “The two effects would cancel each other out, because relative income would be unchanged.”
Moreover, if inequality is growing (as is the case in the United States), economic growth pushes the rungs of the socioeconomic ladder farther apart even as it lifts the ladder. Because people tend to compare upward when gauging status, they perceive themselves to be losing ground.
In light of what happiness economists have had to say, the interesting question is not why the Reagan-Thatcher consensus finally failed but why it prevailed for two generations. Partly, I think, because its call to transcend envy is morally appealing, and partly because, in the 1980s and 1990s, pro-growth policies and free-market economics seemed to have turned around a troubled economy. But partly also because there was no viable alternative. Mainstream liberalism worried about inequality but offered only policies that much of the public viewed as discredited or unfair.
Now the Reagan-Thatcherist alternative has crumbled, too. In 2008, the economic meltdown made the system look rigged and ignited a populist backlash. In 2016, the backlash coalesced behind the populisms of Mr. Trump and Mr. Sanders, each of whom had a compelling story to tell those suffering from real or perceived loss of status: We will de-rig the system with radical solutions like trade wars and socialized medicine. Those may be (as I believe) wrong answers to the problem of inequality, but they are answers, and their appeal is evident.
Today it is free-market conservatism that is voiceless. After insisting for two generations that inequality does not matter, the heirs of Mr. Reagan and Mrs. Thatcher — people like the House speaker, Paul Ryan — have neither a coherent program to reduce inequality nor a philosophical rationale to seek one.
Like it or not, inequality in today’s America drives politics toward rage and polarization, and toward destabilizing and dangerous populisms of both left and right. Trumpism and Sandersism have something to say about inequality, but mainstream conservatism does not, and it will be no match for them until it does.