I find it hard to believe that what makes people happy or unhappy with their lives depends in a really significant way on how much they consume. It seems to me that what matters to most people is the nature of their relationships with their family and friends and the people they work with, and whether they get satisfaction from their jobs or from a sense that they are accomplishing or are on their way to accomplish some important life goals. Compared to the satisfaction derived from their close personal relationships and from a sense of personal accomplishment, levels of consumption don’t seem to matter all that much.
Pointer from Mark Thoma.
If this were true, then the ideal economic arrangement would be the caste system. There would be no economic progress, but everyone would have their place and be secure about that.
I think that it is fair to say that on the margin more consumption would have little effect on our lives. But the cumulative effects of a better consumption opportunities are quite large. The thing is, in order to get those opportunities, you need a dynamic economy. And in a dynamic economy, business models become obsolete and the corresponding jobs go away.
Glasner brings up this issue in the context of the argument about protectionism (he is not protectionist–read the whole thing). But I think that trade with people from other countries is just one aspect of a dynamic economy.
Also, read Scott Sumner’s comments.
Scott Sumner has an old argument. Yeah, people in America are worse off, but its good for peasants none of us have ever seen halfway around the world. So go die off old white people!
First, I think that economists should be explicit about this. Scott Sumner should go to the Rust Belt and hold huge rallies where he tells Americans they need to become poorer because he thinks it will make the third world richer (not included in this shared sacrifice, Scott Sumner’s standard of living). That would be the honest approach to his philosophy. If your goal is to impoverish American workers down to third world levels, you ought to at least tell them.
Second, how far should we take this philosophy. There are six (seven?) billion people in the world. At least half of them are going to be peasants forever, they don’t have the IQ to be anything more. Trying to lift all of them up is a fools game, much more likely to drag us down then lift anyone up. And who knows what the earth’s natural resources themselves can support.
Taken to its extreme Sumner is proposing “The Repugnant Conclusion.” That mere life should be increased exponentially until all of us are living lives barely worth living. At least then everything will be equal! The future is working at a Foxconn factory and being caught by a net when your try to jump to your own death because death would be better then another day of life.
Anyway, I’ve been slowly working on a big trade post. I’m not even sure we can argue that the current regime is good for the Chinese (their manipulated currency is causing a lot of bubbles).
BTW, on a personal note, my cousin is the CEO of a company that does a lot of manufacturing in China. The conditions are appalling and the chemicals used make people sick. Often the goods they are selling (children’s toys) still have the residue on them. He said that when he went to China to see how it was done he threw up.
He still does it though. He got a big payout when they went public, and he was able to book a big name musical act to play at his daughters extravagant Manhattan wedding. I guess that’s worth employing slaves and selling poisonous children’s toys.
No. It’s that Americans are going to be worse off. Done deal. Baked in the cake. We can get a greater extent of market, growth, division of labor, technology, etc. or not.
I think it’s simpler – you’re both right. He’s right on happiness and relationships, but a dynamic world requires a dynamic economy for protection. All else equal, you’re right that switching to a caste system without economic progress would be ideal. But in the real world if we allowed our economy to stagnate, we would expose our population to outside aggression and possible takeover. The desire for preservation of self & relationships forces our hand, in the same way that the desire for someone to stay in a certain region (NYC, SF) might force them to seek a higher paying job to cover the ever-higher rent (even if all else equal the higher paying job is more stressful / worse hours / less desirable).
People confuse what is desirable with what will happen all the time. There are many unrecognized prisoner dilemma’s in the world. Happiness IS based on relationships. But to preserve those relationships, we must work to secure our freedom in this world.
I hiccupped here: “I find it hard to believe that what makes people happy or unhappy ”
People don’t have a single objective function. Some people are entirely focused on consumption. Some on relationships. Some on family. Some on power or status. Some on exploration. Most are a combination. One advantage of a dynamic economy is that it allows each individual to select a tradeoff between income, effort, accountability, and leisure that fits their preferences. It also tends to ‘lift all boats’ over time. With some ill-effects for the boats caught in local rough seas.
Then there are those that don’t want to think about those tradeoffs, those that don’t have the skills/attributes necessary to achieve their desired tradeoff, and those that want to determine the tradeoffs of others.
I’m increasingly thinking that general free trade is a 19th century concept in a 21st century economy. And I say that as someone who’s been thoroughly indoctrinated in free trade…
“I’m increasingly thinking that general free trade is a 19th century concept in a 21st century economy. And I say that as someone who’s been thoroughly indoctrinated in free trade…”
Can you explain this?
Grr. I wrote a long response, but the site ate it. Short version:
19th century:
* Slow info transfer (speed and quality)
* Limited trade volumes
* Limited ability to relocate (speed, safety net, etc)
* Relatively slower PSST evolution (not sure about this one)
21st century
* effectively unlimited info transfer. To the point that you can collaborate in real time across continents
* Massively increased trade capacity. Speed and volume (helped by info improvements)
* Much easier to relocate (transportation, communication, safety nets at the destination may be better than the society you left)
* Faster PSST changes (entire industries can rise and fall in a generation)
In the 19th century, “friction” kept change slow enough that free trade was a decent heuristic. In the 21st century, the friction is much less. So change is happening faster than some can react. Resulting in temporary or even permanent economic dislocation. May be some of both ‘some of the people all of the time and many of the people some of the time’.
I haven’t thought this through completely…so it’s more an intuitive sense than a well-structured model. But coming from ‘free trade is good full stop’ it’s an evolution for me…
Okay, thanks for this.
…and I think I agree. I’ve migrated from being a big L libertarian to a small l libertarian for reasons similar to this.
I’ve gradually found certain libertarian canons to be less universal than I thought, and my policy preferences have become more muddled as a result.
Sounds familiar. I recall a discussion with a friend in which I expressed the view that others using drugs didn’t impact me.
He replied “I’d be fine with it if they didn’t force me to pay for their social net”
I didn’t have an answer for that.
“People don’t have a single objective function. Some people are entirely focused on consumption. Some on relationships. Some on family. Some on power or status. Some on exploration. Most are a combination”
+1
“If this were true, then the ideal economic arrangement would be the caste system.”
Or the Medieval system with its guild privileges, royal monopoly patents and sumptuary laws. It’s not just that these systems helped keep societies poor (which they did), they were also noxious to human happiness in restricting inventiveness, industriousness, and creativity. The idea that this kind of static, statist, restrictive environment was somehow ideal for human happiness and well-being is nonsense. People don’t like being put in boxes and ordered to remain there. They don’t like having their ideas and creativity thwarted.
A better historical example would be the late Roman Republic. After conquering the world for them the Senate decided to replace the Roman citizen farmer with mass slave labor. Similarly, the American middle class defeated the fascists and the communists, and in exchange people like Sumner want replace them with a teeming mass of desperate quasi-slaves.
“soldiers fight and die to advance the wealth and luxury of the great, and they are called masters of the world without having a sod to call their own.”
Did the mass slave economy of Rome lead to innovation? No, there is little need for labor saving devices when labor is cheap.
American workers aren’t loosing to foreigners because the foreigners are better, they are losing because they are cheaper. And not cheaper in the sense of producing goods more productively so they are cheap, but in the sense that the labor input is willing to accept such a low standard of living they don’t have to be that productive. They are cheaper because they are more desperate, a kind of quasi slave.
In some cases, like the UAE, the slavery is rather explicit. In others like China you aren’t even free to kill yourself to escape the torment, they place nets under the factories so their property doesn’t destroy itself.
“soldiers fight and die to advance the wealth and luxury of the great, and they are called masters of the world without having a sod to call their own. “
The very first comment on Sumner’s blog pointed out the huge, gaping hole in Glasner’s argument- the “personal disaster” of job loss is the loss of the ability to consume what one was consuming before- full stop.
It takes wealth to sustain consumption and for most, the only wealth they have accumulated is through their work. Focusing on consumption over wealth and therefore work is the work of spendthrifts. Nor is it consumption itself, but its increase that provides us with a sense of well being. It does take a dynamic economy to deliver this, but we shouldn’t forget it destroys as well as creates and we can have too much destruction just as we can have too little creation, and what/where/who/how is affected is important.
If this were true, then the ideal economic arrangement would be the caste system. There would be no economic progress, but everyone would have their place and be secure about that.
You need to add strong religious beliefs as well to hold society together. And in many areas in Asia that is still true.
1) For most people (families with incomes under $100K) there is still a vast benefit to marginal consumption.
2) When the elite stop supporting the caste/religious systems (let us say US corporations outsourcing factories), they can only buy off the majority of the population with higher incomes.
3) There is a value to work and accomplishment.
4) Again, the developed world is adjusting to dynamic economy by marrying later and having less children. This reality gives young people more flexibility (ie less responsibility when they do fail) in their 20s.
5) We should teach young children that putting off families until 30 and settled in a career is a good thing.
“We should teach young children that putting off families until 30 and settled in a career is a good thing.”
Men, maybe. Women, no. Biological reality dictates that female fertility declines rapidly in the very late 20s/30s. If you want kids, don’t assume IVF will save you.
I know several couples from my MBA days that went the ‘wait a few years route’ and wound up with fewer kids than they wanted.
Women, no. Biological reality dictates that female fertility declines rapidly in the very late 20s/30s. If you want kids, don’t assume IVF will save you.
That is the trade off for couples today in the developed world and goes a long way to explain why fertility rates are dropping. If a couple wants to maximize income they would put off child bearing and have less children. (or better yet not have any children for highest possible incomes.) Or they have less income with more children. (Assuming libertarians don’t support full time child care.)
Smaller families is always weakening church institutions as well.
It’s also hard on pay-as-you-go programs like Medicare and Social Security.
Maybe we need a rule that says you get neither if you don’t have kids since you didn’t create the next generation to pay for it.
We need to fix the education subsidy system so we don’t have to choose between smart career women or smart mothers.
Maybe I’m not getting it but I got one of those robot vacuums and it made my life a lot better. I don’t think it would exist or be affordable without a dynamic economy. Maybe it will take work away from our cleaning lady but that is a long way off.
Another point would be that if you want to maintain economic dynamism a well functioning welfare state can be useful for smoothing over rough spots when creative destruction takes its toll.
He finds “it hard to believe that what makes people happy or unhappy with their lives depends in a really significant way on how much they consume.” I asked him if he’d give me all of his stuff and spend the rest of his days consuming only the bare minimum. I can’t wait.
I don’t think it’s so much about “consumption” as much as it is “activity”. Most people want to do stuff, ideally stuff that is purposeful and meaningful. “Meaningful” doesn’t necessarily mean “save the world”, but the stuff that is done should feel like one can build one’s life on it and it should be at least mildly interesting.
Idleness creates boredom. And boredom is very very toxic, particularly for young people, and should be avoided by any society that wants to avoid wars, terrorism, or violent revolution.
The idea that you can have some sort of handout and this frees people to do art or whatever isn’t going to work. What you will have is a vast population that is desperately seeking ways to avoid boredom. If you’re lucky, they’ll do it through drugs, video games, etc. If not, they’ll find people who will show them ways that they can matter to the world, and this very often ends badly.