The generative commons of generalised social capital

Paul Krugman has an interesting blog post on the extent to which there might be contagion from one area of social capital (or lack thereof) to another. He’s responding to the claim CEOs made to him that they only started arcing up their pay demands when they saw sportspeople doing it. And we can all understand the micro-foundations for rises in superstar sportspeople – local sub-urban live audiences morphing into TV audiences at the city, national or global level.

One of the things that’s gradually been happening over the same period is a kind of leeching away of general social solidarity. The most striking aspect of this is a stat I heard on Radio National’s All in the Mind. Asked of the importance of “being very well off financially”

The latest data from 2013 for entering university students here in the US, 82% say that that is an important life goal. And back in the late ’60s and early ’70s only about 45% said that was an important life goal.

I expect the figure would have been a lot lower in earlier decades (though we are dealing with college students as the sample population, so perhaps not). This isn’t direct evidence of a loss of social capital, as these are private preferences. Still it seems awfully suggestive to me. Two quick points. Firstly there’s a lot of evidecne that people’s life happiness is a function of their meeting their expectations. So this is pretty bad news for our ability to turn any given aggregate economic product into improvements in aggregate happiness. Most people are not going to be “very well off” which we can safely assume is a largely positional aspiration. Secondly people having a sense that society makes sense and makes credible demands on them to ‘do the right thing’ is a huge public good economically and – as suggested above – in terms of individual’s wellbeing.

I put it this way in an earlier post:

Would you rather be a craftsman or a bullshit artist – will you go into – say – engineering, teaching, nursing, musicianship on the one hand or PR, head hunting, corporate strategy, marketing, media, events management on the other? Well if you feel born into any of the craftsman roles, you’ll prefer the former professions. You may not make as much money, but you’ll be happier doing something you were born for. But surely the more common situation is the person who could go either way, but who is more likely to reach their human potential and achieve life satisfaction plying a craft. But in the world we’re in, they won’t just make less money being the craftsman, they’ll be bossed around by people who have little understanding of their job or sympathy with them (or be the subject of professional forces that have been built by similar people – like ‘research quality frameworks’ for academics for instance). They’ll be restructured, reengineered, performance managed – taken advantage of. And so lots of the good ones leave.

The picture I’m painting here is one in which this leaching away of social capital harms both the purely economic performance of a society and its conduciveness to the successful pursuit of happiness.  I know kids who’d love to be teachers, police, nurses. They’re not bad snobs. But they know a certain amount of acquired snobbery is strongly in their interests.They know that entering a low-income, low-status career leads to a lifetime of being poorly thought of, being treated badly, and perhaps more importantly of all, being regarded as a ‘loser’ – a term the recent popularity of which says a great deal.

The other thing this reminds me to say is that I find the argument that it’s neoliberal policies what dun it – what led to rising inequality – pretty unconvincing. They’ve had some impact, but I think it’s the neoliberal zeitgeist far more than just neoliberal government policies what dun it – though the zeitgeist also drove the policies. Why are jobs much less secure? Well you can say because the law has changed, or firms are more ‘competitive’ with one another today, but I think the main reason is that it’s just much more OK within business culture to sack people. (That’s far from all bad by the way, but it comes with large costs to the fabric of our culture, to the sense in which looking after people is radiated throughout the society as a generalised social sense.)

When I was a kid my parents didn’t enrol us for scholarships to private schools because, even though they were ‘merit’ scholarships and not predicated on an inability to pay my parents thought they should not be taken. I’d be happy to live in such a world, and happy to contribute. But the way things are, that seems kind of quaint. I’d feel like a mug to do it when almost no-one does that. So I pursue a more ‘neoliberal’ approach to the common good which is to take the money and also to make more deliberate contributions to the common good via philanthropic giving of money and my time. But it’s not the same of course. As Adam Smith might have written if he’d written the Theory of Moral Sentiments according to modern lingo, culture is a generative commons.

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18 Responses to The generative commons of generalised social capital

  1. geo says:

    You, like others in a position such as yours actually give up… “so I persue a more neolibetal approach”. And then “give”. So you stay in the field of neoliberalism. When are people like you going to NOT be neolibetals and show others how to NOT feel like a mug?
    You know how to do it but your ego keeps you on the wrong field… dI’d feel like a mug if I don’t excersize my asymmetrical information”.
    Why do you continue to give after the damage is done?
    Why are you beholden to stigma and entrenched piwer games. If you can’t escape it how do you imagine it will ever change?

    • Nicholas Gruen says:

      Thanks Geo,

      Fair questions, but questions that it will take some effort to respond to. Meanwhile in the last ten years on this blog I’ve learned not to take people who don’t identify themselves, too seriously. If you care to identify yourself I’ll have a crack at answering your questions.

  2. conrad says:

    “The picture I’m painting here is one in which this leaching away of social capital harms both the purely economic performance of a society and its conduciveness to the successful pursuit of happiness”

    Perhaps it really spreads the distribution of happiness rather than changes the overall level. What I mean by this is that in previous history, we really did have to co-operate with others due to large events like wars where wealth/status mattered much less, but even with smaller events like crime. Now perhaps we’re moving closer a surveillance/authoritarian state where the technologies that enable this sort of existence are becoming so good we don’t need to rely on others as much any more — just the state being able to enforce things. Thus social capital is replaced by more hierarchical and authoritarian systems. The outcome of this in terms of happiness is that if you are one of the lucky groups then you have no need to associate with the unlucky groups any more, as the state will keep them in the check. This might make you happier because you still have a negative comparison group but don’t actually need to think they are more or less the same as you except poorer (you’ll never meet them), and if you’re an unlucky group, this might make you unhappier because there are simply less options open for you to do anything about your plight.

    Singapore is a good example of this — you have a hierarchical and authoritarian system (culture) with such heavy surveillance that you’ll almost never have to worry about crime, drugs, etc. . You also have very high inequality, and being poor there is bad because of this. But most people seem happy enough.

    • Sancho says:

      Well, a certain type of Singaporean is happy with the status quo. The ones that value the humanities or free speech or progressivism are essentially driven out of the country, or live miserably.

      I was surprised by my Singaporean acquaintances’ compete lack of concern over the US/China showdown happening on their doorstep, but for them it’s simple: the government will tell you when to react, and how. It’s an entirely authoritarian mindset, which has been very effective in engineering economic growth, but at the cost of intellectual life.

  3. Divining the reasons behind changes in the cultural zeitgeist always strikes me as extremely complicated, full of uncertainties, and rather interesting. The British, as I understand it, have moved over history (roughly) from being the obnoxious loudmouths of Europe, to the restrained and very private “no sex please, we’re British” of the Victorian era, to the lager louts of Europe with an excruciating sense of no reserve at all (ever seen “Embarrassing Bodies”?) by the end of the 20th century. Who can account for all of this? In one respect – devotion in marriage – Paul Johnson complained that Prince Charles set a poor example for the nation by dumping Di for Camilla, and I suppose there may be an argument that Queen Victoria set the contrary example, but can people really be swayed that much by the example of their leaders?

    It seems to me that the problem is that the zeitgeist is like individuals – it works on both a conscious and an unconscious level, and at the unconscious level it evades easy measurement. However, it’s still plausible that philosophical and scientific ideas get absorbed and work their way into attitudes in a way that individuals don’t even fully realise.

    To go back to Paul Johnson, he opened his History of the 20th Century with the claim that Einstein’s Theory of Relativity had a profound effect (at least in the West) on the social view that morality was all relative as well. Given that Einstein was a true intellectual pop star of his day, that sounds kind of plausible, but I don’t know that he was much of a hit in Communist Russia; and with Hitler, I don’t think it’s unfair to suspect more influence from Nietzsche, at least in some circles.

    Other factors that affect the zeitgeist, in a more conscious fashion: national or international crises, medical and technological advances (the sexual revolution would surely have been different without the pill), and the stories society tells itself (in terms of fiction and media reporting.)

    As far as it relates to economic field: there is no doubt at all that the American libertarian/small government side of politics over the last 30 years has been influenced by the nutty Ayn Rand to value self interest over active social policy. That’s a conscious effect for those who cite her, but I do wonder about the “unconscious” effect of such thought on the broader society. (By the way, did Malcolm Fraser, as he aged towards the Left, ever say he felt embarrassed about arranging a meeting with her?) I don’t follow the arcane world of Austrian economics and therefore find it hard to know what influence they might have had on the broader public; I’d be interested to hear what others think.

    But something a bit broader might be going on – it does seem that there is a strong and open sense of entitlement now with respect to sexual and relationship satisfaction that is probably tied up with the sexual revolution (and Freud), which has coincided with the growth of self interest in economics in the West. But it has been Lefties who have traditionally being seen as the more sexually adventurous while still the most supportive of the role of government in social justice. And in the US, you have the weird combination of Republican Catholic social conservatives who are amongst the hardest on Tea Party small government policies (despite the Pope being quite a Lefty, relatively speaking, on matters economic.) But other libertarians are, of course, completely neutral on the matter of sexual relationships and changes such as gay marriage.

    So what exactly is going on there still puzzles me. I guess the obvious suggestion is that the rapid rise in the sense of personal entitlement/self fulfilment sexually (of which the incredibly rapid push for gay marriage is a great example) is not causally related to self interest in other areas. Correlation is not causation. But I have my doubts….

    This is the sort of thing that Douthat writes a lot about, but I don’t know that he has ever completely convinced me he knows what’s going on, too…

    • Nicholas Gruen says:

      Thanks Steve,

      I too wonder what Malcolm Fraser thought he was doing – even as a young adult with Ayn Rand and what he’d say now. She’s a nut job and obviously so I would have thought.

      Quite different to Hayek who whether or not you agree with his emphases had a lot to say

  4. Kevin Cox says:


    What you say appears to be true. The cult of the individual is alive and well. Narcissistic Behaviour is rewarded and people appear less likely to aspire to work for the group and more for themselves. While we have most of the population behaving in cooperative ways then those who seek to do the best for themselves will “win”. However, when everyone starts to behave for themselves then all will start to lose. The Tragedy of the Commons.

    Unfortunately I have to blame the economists for this state of affairs with their idea of a stable equilibrium in economic affairs and of market forces driven by individual advantage producing the most efficient outcomes.

    There is no stable equilibrium in economics and the so called “free market” that is meant to produce a stable equilibrium does not exist when you examine any sector of a modern economy. What we see are rent seekers “winning” over those who actually produce the goods and services we all consume.

    The so called FIRE (Finance, Insurance and Real Estate) industries are sucking at least 40% of GDP out of the economy for little increase in output. This is a ridiculous amount to pay for handling the distribution of Capital. A better system should be able to do it for a less then 5% of GDP. Unfortunately the FIRE industries have a lot to lose and they control investment. We need ways to break the circuit and show that we can distribute investment funds more efficiently than the current system.

    As you know there are ideas out there on how this might be done. We are working on some ideas around Crowd Funding for Infrastructure rather than relying on debt financing as one way to break the hold of the FIRE industries over investment.

  5. Patrick says:

    I am curious as to whether this is written from an excessively nationalist perspective.

    Within relatively homogenous groups from privileged socities, I have no doubt that life is fraught with greater uncertainty, hence I suspect (and I thought you were saying) the increased importance of financial security as a form of insurance against the vicissitudes of modern life.

    But is life as an immigrant or an outsider more fraught now than then? Do those same potentially atomizing institutions (generally honest police, relatively open and fair courts, private school scholarships, etc), hurt immigrants because they have less need to rely on kin and what little social capital they can muster in their new land (or indeed on their social capital back home), or do they help them because the reduce the social capital required to effectively participate in life?

    And has inequality gone up globally or down in this period?

    • Sancho says:

      Importantly, the RN piece cites a study of American undergraduates, who are looking at a disappearing middle class and working poverty as the baseline economic status for a huge proportion of the population, so their idea of ‘“being very well off financially” may be more pessimistic than we assume.

      Australia isn’t so bad yet, though our right wing is trying. An Australian turning twenty this year is unlikely to ever own a house, and their uni debt will follow them forever, but we don’t quite crush them completely.

      • conrad says:

        Who knows what life will be like in 20 years from now — there’s no reason to think that generation won’t get it together and change the system.

        Also, even if things didn’t change much, that generation is less bad off than you think — they are basically coming from households with smaller numbers of children and it appears that no-one is going to try to get older people to pay for things even when they have lots of assets. So when their parents drop off, many will be quite well off. For example, single children of moderately well off parents will not only inherit a house but other unspent assets too. Even with 2 children in a family, this group will often get half a house and other assets.

        • Sancho says:

          Forecasting what life will be like in twenty years is what economists do, so it’s hardly a mystery, even though the predictions can be flatly wrong.

          I’m not an economist, but I don’t think inheritance-power is going to swing the game in any major way.

          Every time the LNP is in power, it takes policy directly from the US Republicans, so we’ll continue to head in that direction, and no amount of dwindling inheritance money is going to stop that. We will have greater student debt, greater income inequality, and soaring house prices.

          The death of the baby boomers will be interesting, but it looks like the leavings of middle class boomers will simply accrue to the Gen-X aristocracy.

          There’s a strong argument that the middle class of the 20th century was a giant historical anomaly, brought about by the aftermath of WW2, and that we’re simply returning to the format of masters and slaves that seems endemic to the human race.

          In any case, there isn’t going to be some sudden turn back toward income equality and home ownership. It will be a battle.

        • Nicholas Gruen says:

          Added to Conrad’s comment, remember the younger generation has productivity growth on its side. So it will lead its life at around twice the average standard of living of their parents. Not such a bad deal – but they may get worse housing.

    • Nicholas Gruen says:

      Patrick, if you’re relating your comment to my post, please provide further detail so I can understand the connection.

      • Patrick says:

        “Nationalist” was a bad choice of words. “Australian” or “domestic” might have been better.

        My point was that you are writing about social atomization, as reflected in our institutions, as if its a bad thing for those institutions, creating a negative feedback loop fostering further atomization, etc.

        My point was that this may be a good thing for a greater number of people than it is bad thing for. That what the in-group calls alienating atomization may actually lower the barriers to entry of various groups and social statuses, and that this may actually improve overall wellbeing, which might be reflected in part in the nature of global or regional inequality over that period.

      • Patrick says:

        A separate but related point that I wasn’t making but that occurs to me now is that, in specific cases, your hypothesis as I understood it (social atomization, as reflected in our institutions, is a bad thing for those institutions, creating a negative feedback loop fostering further atomization, etc.) this is absolutely correct, but in other specific cases this is not.

        To wit, the care sector has become vastly more atomized and institutionalised, but were the old more “social” and “community-based” systems really better?

        What about policing?

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