Sub-optimizing Happiness

At Christmas time, we put out a chair pillow in bright seasonal colors, embroidered simply “Dear Santa, I can explain.”  It’s one of my favorite things because it encapsulates so neatly our universal human problem of misunderstood and conflicting goals.  The teacher wants Johnny to learn arithmetic; Johnny wants only to be happy and play games.  Each means well, despite their appearance to the other.  The teacher’s fear is that Johnny’s low math score will ruin his/her record; Johnny’s fear is that lack of practice will make him drop that outfield fly ball. Each breaks the other’s rules and must struggle to be understood.  But it is the teacher who is the “Santa” capable of enabling or destroying Johnny’s dreams.

An article in the Federal Times the other day expressed the same issue in different terms.  Imagine two workers, one from government and the other from the private sector, about to retire and planning their investment strategy.  The government worker invests 100 percent in aggressive stocks and the private sector worker goes 40 percent in stocks and 60 percent in bonds; which is more conservative? It turns out to be the government worker, because 70 percent of the government worker’s retirement income comes from defined benefit pension plans, while the private sector worker’s retirement derives almost entirely from IRAs and 401-Ks subject to stock market fluctuations.  In terms of risk analysis to total incomes, the government worker’s strategy is appropriately conservative.  What causes the apparent anomaly is our focus only on the part of the risks to income that we are making choices about.  We tend to ignore the total income picture in favor of sub-optimizing one part.

The DC city government is currently battling WALMART over the requirement for a recently enacted $12.50 an hour “living wage” in DC.  The DC government points out that at the DC minimum wage without the “living wage”, a worker in a family of three or more would be living under the poverty level; WALMART cites its responsibility to shareholders and the fact that the productivity of low-wage workers is less than the wage level just enacted, and threatens not to build more stores there and possibly close existing ones.  It is a classic example of the ongoing struggle between corporations and government that I’ve written about.  WALMART is exercising its raw power as the Santa who threatens to take away its gifts if DC is a bad boy.  It is also an example of the misunderstood and conflicting goals problem.  WALMART’s profits come from the economic productivity of workers exceeding their salary costs, with no consideration of their happiness outside the store.  DC government’s success comes from happiness of its citizens, their “social productivity”, regardless of their skills and income. A strong case could be made for each point of view, and usually is.  But they each sub-optimize the total picture.

A city dweller’s happiness comes from the sum of economic and psychic income they derive from both employment and other factors - schools, parks, crime-free streets, interesting activities and facilities, etc. – generally provided through government.  A sound piece of real estate advice used to be to buy the cheapest house in the best neighborhood; much of life is lived outside the house and work place.  The total “happiness income” of a person comes from a variety of public and private sources.  A sound role of DC government would be to improve the economic life of its citizens by providing better schools and other training.  A sound role for WALMART would be to improve the health and morale, and consequentially the productivity, of its workers through better training and pay rates that are at least at or above the poverty level.  Each claims they cannot afford to meet the other’s demands, but there is room in the middle for joint efforts to improve the productivity and living conditions of WALMART workers.  A “living wage” of $10 an hour would exceed the poverty level for a family of three; improvements in employee training and in public education, with funding support from WALMART, would benefit both WALMART and DC government.  In this rapidly changing world, WALMART cannot continue to prosper by creating an old fashioned serfdom of marginal workers, but total economic support of workers includes things that go beyond WALMART.  DC needs better funding and better organized government to support its citizens.  WALMART can become a better “citizen” of DC by pushing for that.

The battle for dominance between corporations and government benefits neither and has gone on too long.  Each makes societal contributions the other cannot, and it is time for each to recognize and support the legitimate needs of the other.  A big part of the problem is that each is seeking success measured in different ways.  Both need to resist sub-optimizing and to seek solutions to problems that speak to the needs of both.  Given the problems ahead of us with climate change and global strife, the responsible actions of both will be needed for the survival and prosperity of either.