Mon Oct 29th, 2007 at 04:46:18 PM EST
This is going to be a short diary. One of the things I appreciate about being a graduate student is those rare moments when my efforts to follow a footnote in an academic article leads me to an an epiphany.
During this past summmer, I ran across a reference to Social Limits to Growth and the concept of positional goods.
Positional goods are products and services whose value is mostly, if not exclusively, a function of their ranking in desirability in comparison to substitutes. The extent to which a good's value depends on such a ranking is referred to as its positionality.
Like land, positional goods often earn economic rents or quasi-rents. Examples of positional goods include high social status, exclusive real estate, a spot in the freshman class of a prestigious university, a reservation at the "hottest" new restaurant, and fame. The measure of satisfaction derived from a positional good depends on how much one has in relation to everyone else. A society that devotes more resources to positional goods is arguably wasting effort, since a gain for one must come at a loss for another.
Competitions for positional goods are zero-sum games because such goods are inherently scarce, at least in the short run. Attempts to acquire them can only benefit one player at the expense of others. By definition, not everyone can be the most popular, cool, or elite, and in the same sense not everyone can be a star athlete because all those terms imply a separation or superiority over other people.
Diary Rescue by Migeru
From Hirsch we identify a vital insight into the nature of economic output that has largely ignored by orthodox economists. The willful ignorance of economists to the social component of economic production obscure the true nature of economic output, and creates the undue assumption that increases in the economic output of a society are by their nature largely Pareto optimal, i.e. they leave everyone better off.
In orthodox economics, distribution doesn't matter, because utility is derived internal to the individual. That is to say that the daily bread of the poor man if it increases in quantity is not rendered less valuable by the insistence of the rich man that his bread be of higher quality. More revealing is the case of housing, where the material threshold of shelter is quite low, but the increasing wealth of soceity creates a sort of arms race where everyone wants to keep up with the Joneses.
Returning to Hirsch, we have the idea that the escape from scarcity found in the industrialization of Western Europe and its settler society offspring throughout the world while fulfilling the needs of the material economy through the satifaction of most basic survival neends represented in Maslow's hierarchy of needs.
However, we learn from Hirsch that as the general level of wealth of a society increases and material wants represented by these survival needs is satisfied, the impact of increases in economic output in social well being is made ambigous as increasing portions of economic production are dedicated not to the satisfaction of material wants but instead to the differentiation of social status. Where the initial stages of economic development were destructive to the antecendent social order, as economic output is increasingly directed to the creation of positional goods granting social satifisfaction by creating social distinction.
In his often densely-worded prose, Bourdieu discussed how those in power define aesthetic concepts such as "taste". Using research, he shows how social class tends to determine a person's likes and interests, and how distinctions based on social class get reinforced in daily life. He observes that even when the subordinate classes may seem to have their own particular idea of 'good taste', "...[i]t must never be forgotten that the working-class 'aesthetic' is a dominated 'aesthetic' which is constantly obliged to define itself in terms of the dominant aesthetics..." (page 41)
Contrary to the fairytale told by neo-liberals of the Lexus and the Olive Tree where the Lexus is seen to represent the rationalization of society incurred by economic development and the development of a more equal socity, and the olive tree the reluctance to let go of those past social distinctions granting status antithetical to the democratic society, something rather different emerges.
Mr. Friedman, the Lexus is the olive tree, because it represents only a reconstruction of social status, the bases of ineqaulity, and their justification. Not its destruction.
When the nature of economic output is differentiated, and an understanding of the positional quality of most of the goods in modern economies, we realize that it may well be that further economic output may reduce the welfare of a society through the redistribution of the status as wealth and income is dedicated to providing social distinction rather than satisfying material needs.
In previous thread that got me off onto this idea of economic consumption as status seeking, Jerome quoted Martin Wolff in his justification of the positional economy, and the dangers of redirecting the economy to the satifaction of material needs and the recognition when enough is enough (lagom).
Happiness is fashionable these days. Yet should we accept the common view that the new "science" of happiness has cemented the superiority of Scandinavian social democracy over Anglo-Saxon liberalism? The answer is: No. The results are just as destructive to the pious certainties of "progressives" as to those of their opponents.
Richard Layard of the London School of Economics and the UK's House of Lords produced an elegant, brief and influential exposition of the new doctrine two years ago. That doctrine itself, as he explains, is a modern reincarnation of Jeremy Bentham's utilitarianism*.
Its most important negative conclusion is that, beyond a certain threshold, extra wealth does not make us any happier. In any society, richer people tend to be happier than poorer ones, but the proportion of people saying they are very happy does not seem to rise over time. The explanation for this is partly that relative position matters and partly that we become used to prosperity.
One answer to that is that effort is already taxed quite heavily in western societies. Another is that if monetary status is discouraged, people will seek status on other and often more damaging dimensions, power being a particularly dangerous example. Yet another answer is that it is far from obvious why differences in status become increasingly disturbing as income differentials increase. The fact that someone is one's boss or has a more prestigious position in society is a big enough difference on its own.
Let's be honest. The neo-liberal project is at its heart anti-democratic, because it fails either fails to renognize that economic production is in our societies largely dedicated to the satisfaction of social wants rather than material needs. And because the positional economy is zero-sum granting more to one party inevitably redistributes wealth, and in the case of the past 30 odd years this has involved stealing from the poor to make the rich feel more important. There is a point at which the material needs of a soceity have been met that further production serves to make societies poorer and less equal.