Economists say (I generalise) that a) every valuation is subjective, b) most exchanges are due to differences in those valuations, and c) the emergence of a common medium of exchange is a natural consequence of many exchanges.

I think this is fine if all you’re doing is trying explain what’s going on in the market.

But I think Tel’s right to say that not all relationships between people are relationships of exchange. There’s a tendency amongst some economists (eg Gary Becker) to extend economic analysis well beyond the market.

The other problem is that economists sometimes slip from positive to normative accounts. Instead of just explaining economic activity they start to prescribe.

These prescriptions are usually grounded in welfarism and consequentialism. And the frustrating thing is that people who make these normative assumptions don’t recognise that they’re controversial — that rational, well-informed people might disagree with them.

One of the controversies is over valuation. Personally I find Isaiah Berlin’s arguments about pluralism persuasive. I don’t see how valuation (normative) can be done using a single metric.

a) every valuation is subjective,
b) most exchanges are due to differences in those valuations,

I have no problem with either of these, but economists ignore all the cases where exchanges do not occur, or where those exchanges are non-dollar exchanges. Thus, the resulting picture is not the world, but a projection of the world onto the one dimensional surface of dollar valuation.

c) the emergence of a common medium of exchange is a natural consequence of many exchanges.

Hmmm, there’s nothing particularly “natural” about a central currency created by decree of a central authority and backed up with physical force. I would argue that the currency of accepted status within some subculture would be a far more “natural” form of exchange between cooperating individuals. The fact that dollars can be exchanged on a worldwide market whereas status tends to only be recognised within a limited group is quite rational — the status is useful as a currency precisely because it is NOT transferable outside the group.

The economist is saying that in general, other people in the society / economy place little value in medieval pottery, bong-making or skateboarding. Sorry, but thats just how it is, nothing personal.

But which “other people” are we talking about here? Yes, I know that with pretty much any endeavor there will be someone making money out of it somewhere (and searching the net will turn up lots of weird stuff for sale) but despite those fringe cases, probably the vast majority of artistic talent remains amateur and gets little or no financial reward. Similar with religious / spiritual / philosophical skills or other things that are non-mainstream and difficult (not entirely impossible) to market as a career option.

My point is that, given one global market where all things are exchanged by dollar value, many skills and services will not be exchangeable at all because the potential service provider values their skill at a much higher rate than the global market does. Thus large numbers of abilities will remain latent. However, within a restricted community of like-minded individuals, people will be able to enjoy exchange of the things that they see as valuable but which the broader market does not. For this to happen requires a transaction that cannot be converted to global currency.

For example, some communities consider you “high status” if you have been in that community a long time. There’s no way to buy or sell this, you simply have to join and then wait. If there was a system allowing individuals to trade their position, it would completely defeat the purpose having such a measurement.

Suppose (for argument’s sake) , I feel it is of great importance that everyone believe in God. I’m hardly going to pay them dollars in exchange for having them believe harder. On the other hand, within a circle of believers, I would be quite likely to bestow appreciation upon someone who is particularly devout. I may even offer one of my very valuable relics (such as a splinter from the true cross) to show how impressed I am.

Welfare economics has a serious problem with valuation. The problem is incommensurability.

Thanks for the link, I’ll take a while to study that one. As for welfare, I tend to think you get better results by handing out necessities in physical form than you do from handing out money. If a man is hungry then give him some food, if he is cold then give him shelter. If he earns his own money, then of course he is welcome to spend it how he sees fit. I recognise that the modern world sees exchange of dollars as the universal answer to all problems, I see it as merely a good answer to some problems, and largely useless for others.

I can’t help feeling this is yet another article sneering at inner-city lefties. The sentence “In a PoMa household theres almost always someone with a food allergy or intolerance” does seem a bit of a giveaway.

I’m sure you don’t care what I think, but for me to take you seriously, I’d like some evidence please, otherwise I’ll have to conclude that you’re just recycling right wing prejudices.

John Quiggin explains this better than anyone in the Australian blogosphere. It has to do with something called the ‘Baumol effect‘:

To simplify drastically, the Baumol effect arises when productivity growth is more rapid in the goods-producing sector than in the service sector, and particularly in the provision of human services, including health, education, culture and recreational services … Since labour and capital are mobile between sectors in the long run, wages grow at much the same rate in both sectors, so the price of services has to rise relative to the price of goods.

In the US, Elizabeth Warren and Amelia Warren Tyagi explain why it’s not the lust for material goods that’s forcing American families to devote more time to earning money.

The PoMa delusion is the belief that everybody else has been duped by advertisers. That people buy more and more stuff thinking it will make them happy but in the end are left feeling unfulfilled.

But the truth is, a lot of families are short of money for exactly the same reasons PoMas are short of money.

The problem is about to get a lot worse. Because governments are heavily into in the business of providing services, politicians have a dilemma. To avoid a decline in the quantity and quality of services they’ll need to tax us more. (Population aging will make this problem worse.)

Alternatively, they can shift the burden onto consumers (eg you get a nursing home bed and the bank gets your house). And once people are slugged with the extra cost of self-funding what they expected to get in return for their taxes, they’ll be unwilling to pay even more tax.

Hamilton seems to think that we can afford all the health and education we want if only we give up the flat-screen tvs and stainless steel barbecues. I think this is a dangerous delusion.

Humans are multi-dimensional, whereas economic analysis is one dimensional (everything converts to dollar value).

Tel – I think this is a really important point. Welfare economics has a serious problem with valuation. The problem is ‘incommensurability‘.

Anyway, for me the interesting question is _why_ flat screen televisions, surround sound home entertainment systems and stainless steel barbeques all seem to be getting cheaper, services (and well-located housing) just get more and more expensive. Ideas?

Are you kidding? Raw materials might get more expensive but the services embedded in these devices are partly automated and partly performed in far lower-cost countries than this, plus technological progress generally makes it easier to make things all the time (more efficient techniques, etc).

Services are hard to make such big changes in – but see outsourcing, and consider consumer/banking/travel websites as a service: paying bills is a lot cheaper now than it was in the days of writing cheques and posting them and reconciling them (let alone the days of going to the banks and post-offices yourselves!).

Hmm, is this pottery? Is this a skateboarder? I believe that those this reinforces Jacques’ point.

Humans are multi-dimensional, whereas economic analysis is one dimensional (everything converts to dollar value).

Not quite. Economists say (I generalise) that a) every valuation is subjective, b) most exchanges are due to differences in those valuations, and c) the emergence of a common medium of exchange is a natural consequence of many exchanges.

Thus, the economist sees someone who is a genius in recreating medieval pottery as equally worthless to someone who is a genius at smoking bongs and skateboarding neither of them can get a job above minimum wage.

Again, no. The economist is saying that in general, other people in the society / economy place little value in medieval pottery, bong-making or skateboarding. Sorry, but that’s just how it is, nothing personal.

Firstly – it’s amazing to see just how strongly people interpret this post via their own prejudices. The anti-environmentalists see it as satire, as “one of our boys sending up those stupid hypocritical greenies, yeah!”. It seems to me the post is really quite neutral as to the moral value of the proposed PoMA outlook, except for the ‘theres almost always someone with a food allergy or intolerance’ comment which seems a bit of a cheap shot.

Anyway, for me the interesting question is _why_ “flat screen televisions, surround sound home entertainment systems and stainless steel barbeques all seem to be getting cheaper, services (and well-located housing) just get more and more expensive”. Ideas?

I would argue that good urban planning, and a genuine political challenge to neoliberal doctrines, would make it easier to become less materialistic and still live in a good area and look after your family’s health. The Netherlands and Scandinavia are by no means perfect societies but they offer a lot of ideas to look at in this respect.

As Andrew Norton suggests, what kind of perverted society would we live in if no-one had to work?

Zardoz is the story where they are all bored out of their noodles for want of any purpose.

rms gives us GNU, larry gives us perl, linus gives us. well, these guys are all in the pantheon.

The urge to research, and give people the results of your research (whether in science, tech, sociol or whatever), or the calling to teach are similar examples.

Stallman is by no means a wealthy man, he does what he does because he believes in it, not because he enjoys high pay. Given that the only meaningful economic definition of “work” is activity that you get paid for, Stallman would be an example of someone who deliberately works much less than he could do, in order to pursue other activities (probably you can’t call this leisure, but economics has no category for activity that is neither work, nor leisure).

But how many people only downshift because they already have a fortune in the bank?

Some downshift because they are intelligent enough to recognise that they never will have a fortune in the bank. Whatever particular skill that they possess (no doubt something very significant to themselves) is not valued by today’s job market, and they are unwilling to reconfigure themselves to make better money with some different skill. Thus, they work enough to stay alive and spend the rest of their time doing what is important to themselves.

Humans are multi-dimensional, whereas economic analysis is one dimensional (everything converts to dollar value). Thus, the economist sees someone who is a genius in recreating medieval pottery as equally worthless to someone who is a genius at smoking bongs and skateboarding — neither of them can get a job above minimum wage.

But practically, the marxist bit sits neatly over that, doesn’t it?

James, in short I think Hamilton only really appreciates woodcarving and fishing as work. But some guotes:

But why would we want to work more? Hadnt we always striven for more time to devote to the things that mattered more?

despite the accumulation of evidence that showed that long hours of work are linked to lifestyle illnesses such as obesity and cardiovascular disease, as well as certain psychological disorders including sleep disturbance, substance abuse, depression and anxiety

Having shorter working hours is a choice. People accept lower incomes in order to enjoy more leisure.

In that particular speech, the last quote comes just after an absurd comparison between France and the US. Only be conveniently asserting earlier in the speech that taxes do not affect work and by ignoring the laws that forbid work in France can he reasonably speak of the different choices people in both countries make.
The earlier quotes are the most significant though. (April 2008)

‘Growth fetishism’ is redolent with the implication that we only work longer because we are stuck on the materialist treadmill, or in the gilded cage, or what-have-you, as demonstrated by his praise of down-shifting:

They are choosing fulfilment over money or, as I say elsewhere, rich lives instead of lives of riches.

But how many people only downshift because they already have a fortune in the bank? (ironic note, in that same speech he puts the overthrow of the Shah in the same sentence as the fall of apartheid and the iron curtain, not sure if he had reflected enough on that one).

I think his comments on downshifting reflect that he inevitable sees work as a means to the end only:

In the last decade we have seen the emergence of a new demographic, the downshifters, those people who have voluntarily decided to reduce their incomes and win back time to devote to activities they regard as more worthwhile than making more money.

(February 2005)

And if I have understood properly, the ‘Genuine Progress Indicator’ rewards less work. In a world where more people worked a bit longer and employed nannies and cooks, assuming and otherwise static labor market, unemployment would decrease but GPI also would decrease, subject again to my understanding.

But I think the real quote is this one:

Traditionally, indigenous people have understood that the support the natural world provides to their survival must be repaid by nurturing and recreating the land each day. In this way there is a mutually sustaining cycle between humans and their natural world just as there is for each creature that plays its own unique role in the reproduction of the cosmic cycle. In modern guise, this is perhaps the central insight of ecology.

Here I think we see what he understands to be meaningful ‘work’ – because I don’t think he really accepts that ‘office work’ or ‘factory work’ can deliver ‘meaning’. In very marxist fashion, I think he pines for the reunion of the worker and ownership of the product, and despises the atomisation of work. I

This is probably why taken as a whole the empirical work on labour supply elasticity in regard to income is surprisingly weak. It’s not all about the money (or at least, people are fairly capable of balancing according to their leisure-money goods preferences).

I say it is quite fortunate because it means that progressive tax schemes aren’t nearly as distortionary as they could be. The higher up the income ladder you go, the more likely an occupation as a large product of non pecuniary utility, such as professional fulfillment or status. The higher taxes on income aren’t taxing these quite large incentives, so funding can be gained for necessary state functions with a minimum of distortion.

And I am being provocative, but I’m not being facetious. It is fairly sad to see the points made in this in post/comments limited to a tribal battle between one tribe and another. A clashing of mishmashed shibboleths isn’t going to get us anywhere.

In my review of the evidence, there is no basis whatsover for saying that this would lead to an increase in well-being.

…what kind of perverted society would we live in if no-one had to work?

If my memory of a years ago reading (and re-reading) of Brave New World serves me right, the book doesn’t depict a world where ‘no-one has to work’: as I recall it, it depicts a future society organised into castes (Alpha, Beta, Gamma & Delta), produced by in-vitro fertilisation and gestation with pre-natal manipulation of the foetus to produce the traits appropriate to each caste. Deltas, the lowest caste of industrial workers, were kept stupid with liberal doses of ‘alcohol in the blood surrogate’ of the artifical wombs in which they were raised. All castes ‘worked’, even the Alphas. If you want a more sympathetic (but by no means idealised) depiction of a society where no one has to work, the place to look is in the Culture novels of Iain M Banks – the latest Matter is a cracker.

If working weren’t a disutility, no-one would be paid for doing it – instead they’d pay for the privilege of doing it. Yes, for many people it provides ‘friendship, achievement and a sense of purpose’ – the last largely because in our culture work is the purpose of life. The first two aren’t intrinsic to work: they’re externalities, a product of the working environment not the work itself.

Very witty and cutting post, Don.

Even where status has a zero sum aspect there are so many status systems that the same individual can be low in some and high in others.

That’s to be exactly what I’m saying, Andrew, except I said it the other way around: even when there are many status systems, it’s still a zero sum game.

Of course, competitive games usually aren’t zero-sum. There can be only winner in a tournament, but it’s still good for everyone to play sport. The fun is in the striving; it’s not whether you win or lose…; etc. But that’s exactly why we try to inculcate in our kids a balanced attitude to sport. Likewise, it seems sensible to asses whether, in our respective subcultures, we might be collectively running on a status treadmill.

On another point, both you and Patrick say that Hamilton assumes that work is disagreeable. Is that really true? As I recall, he has a lot to say about the importance of work satisfaction. I can’t believe anyone who thinks about happiness in any depth could overlook the fact that many people love their work. Many don’t, though, and there is another group who get a kind of utility that isn’t good for them, like the gambling addict and the alcoholic.

These are all important issues, but as I said, this post doesn’t really address them. It’s just about how dopey it is to despise ‘materialistic’ lifestyles, based on an arbitary definition of materialism that emphasises durable goods over non-durables and services.

I suspect many people rightly judge it better than the domestic chores that wait for them at home.

Or, they would rather spend an extra x hours a week doing something they find at least mildly interesting, or at the very least is likely to contribute in some way to their future earning capacity/social status, and pay someone else to do the chores that they don’t.

I agree with nearly everything Ken said and indeed a lot of his comments apply to my family, aside from the part where we are presently driving one of the (I’m pretty sure) 10 biggest cars in the world, which we love :) The cycling is dead-on though – I ride to work and the park, walk or ride to the shops when practicable, etc, but it is nothing to do with carbon footprints!

My fundamental gripe with people like Hamilton and their obsession with the disutility of work is how wrong it is. As Andrew Norton suggests, what kind of perverted society would we live in if no-one had to work?

rms gives us GNU, larry gives us perl, linus gives us…. well, these guys are all in the pantheon.

The urge to research, and give people the results of your research (whether in science, tech, sociol or whatever), or the calling to teach are similar examples.

Is the PoMa seeking merely a diminution of guilt, or by buying “moral necessities” rather than “immoral” goods, providing a “gift” to the community.

If these are all examples of types of “gift economy” (and the PoMas actually bring this to the material world rather than just information), and these ARE significant to the big picture of how resources move, are economists doing an appropriate amount of research into gift economies?

The Hamilton spend less time at work kind of argument wrongly assumes that work is a disutility, when for many people it provides friendship, achievement and a sense of purpose. I suspect many people rightly judge it better than the domestic chores that wait for them at home.

Like Andrew Im sceptical about the idea that many people overwork because they mistakenly think more money will make them happier.

But that’s not what the post is about, is it? The post is about how status is achieved differently from one subculture to the next. However, as you rightly observe, the status game is a zero sum game, so in the aggregate we gain nothing by playing it. By contrast, utility from family and friends is not a zero-sum game. Therefore we’d be happier if we allocated more time to that. Nothing in the post contradicts that argument (though for all I know you might have refuted it on Andrew’s thread).

Perhaps you’re making a worthwhile point about innner-city middle class hypocrisy, and the folly of shallow notions of materialism, but it doesn’t seem a very original point to me.

Crikey Don, way to generalise (you too Jaques).

I know … but it fit so well into LP’s jihad against Kerr and the Oz.