A Modest Proposal
Tyler Cowen remarked offhand the other day that "The long-term consequences of a slightly lower growth rate are in any case troubling, no matter how well a society works at any moment in time." Will Wilkinson made the case for economic growth at some length on the Cato blog. And, certainly, a rapidly growing economy is an excellent thing to have and I'm not the sort of person inclined to say, "hey -- we're really rich by historical standards, let's leave well enough alone." Still, it doesn't make much sense to look at something and proclaim it good and important without saying good and important compared to what. The issue, always, is what kind of tradeoffs people think we're making, or could make, and what are the merits of those tradeoffs.
To take an example, at least part of the reason France is poorer than the United States is that the French policy environment is designed in a variety of ways (workweek limitations, vacation mandates, etc.) to encourage people to spend less time working and more time engaged in leisure than is the American policy environment. France could generate more GDP by shifting policies to encourage people to spend more time doing paid, market workand less time doing other stuff.
The American policy climate is much more work-oriented but we, too, have failed to adopt work-maximizing policies. Surely if we thought about it creatively, we could come up with lots of ways to get people doing more paid work and less other stuff.
When thinking about this, it's worth keeping in mind that not all non-work is really leisure in the traditional sense. A lot of it is just non-market, non-paid household production. One clear step in a pro-growth direction would be a universal publicly financed system of day care and preschool either through a voucher system, some form of publicly-managed institutions, or a combination of the two. That would be helpful for single parents or existing dual-income families, but would also encourage more female labor-force participation both in terms of stay-at-home moms entering the labor force and in terms of women who already work trying to go for longer hours. It encourages labor force participation both directly by facilitating it, but also because of the universal, taxpayer-financed structure of the proposal. In essence, you're paying for daycare (via the IRS) one way or the other, so anyone who doesn't take advantage of it is losing out.
Somewhat similarly, in almost every state you need to pay sales taxes on prepared food and meals at restaurants, but can buy groceries you cook at home tax free. This tax-preference for amateur, unpaid, home-production of food vis-a-vis purchasing cooking on the market has a clear anti-growth bias. The treatment of the two categories of food could be equalized. Or we might even consider giving tax preference to prepared foods versus home-cooked ones to really ensure that we're maximizing work and minimizing leisure and home production.
For that matter, federal, state, and local governments actually spend non-trivial sums of money positively encouraging people to engage in unproductive leisure activities. We could close the National Parks to human visitors and leave them as pure refuges for wildlife. Public beaches, similarly, should be shut down, along with conventional city parks. Urban parkland could be auctioned off, and the money thereby earned (along with the money saved by not operating so many facilities in the National Parks) could go into a trust fund that aims at slowly purchasing up privately owned beachfront property in order to close it down and eliminate these dark temptations to leisure.
No, no, obviously I'm kidding here. We shouldn't shut down parks.
The point is simply that leisure -- what people do when they're not working -- is a somewhat tricky subject. Lots of endeavors have value to people without necessarily having monetary value. Other times, it's a bit hard to say. Things like cooking at home can be pleasurable, leisure-esque entertainment activities. They can also be dull drudgework undertaken due to a lack of sufficient funds for available alternatives. And the distinction, as regards to cooking, isn't always obvious. Similarly for time spent taking care of children.
Interestingly, I think technological advancements are, in many ways, further muddying the waters here. Most peoples' blogs, I would say, count firmly as hobbies, things they do just for their own amusement. Other blogs -- Josh Marshall's or Andrew Sullivan's, say -- are definitively professional activities, work done as the primary means of earning a living. Lots of others (including this one) are somewhere in the middle -- they have some monetary value and some value as loss-leaders for other paid work while also still having a lot of aspects of a pure hobby endeavor.
One aspect of the internet, however, is that it makes it much easier than it was in the past to gain an audience for your hobbies since the distribution costs and necessary capital investment are tiny. So you have lots of blogs that are pretty definitively hobby endeavors from the writer's point-of-view but are still read by non-trivial numbers of people. A site with 500 readers a day isn't going to earn any money, but 500 people isn't nothing, and the site clearly has some kind of value to those 500 people. And if you have thousands -- tens of thousands -- of sites operating on those terms, well, then, there's a lot of activity happening whose value isn't really being captured by financial exchanges.
And one could say the same of YouTube gambits like the Tony Blair video I linked to earlier. Or public Flickr pages. And, of course, there's open source software. As it happens, relatively few people use OpenOffice or NeoOffice instead of the Microsoft juggernaut, but they're honestly just as good. One could imagine a situation in which a few large institutions dump Microsoft, adopt the open source alternatives, and it leads to a tipping point that destroys the economic viability of non-trivial portions of the closed-source software market. Something like that would register in the macroeconomic indicators in a pretty odd way even though the value would, in some sense, still be there.
Marx's badly discredited theory of value seems to me to have some relevance in that sort of thing. A copy of OpenOffice has basically no exchange value but does have considerable use value. Maybe. Or maybe that's the wrong way to think about it.
One way or another, though, it's long been known that our main economic statistics -- including, most prominently, GDP -- have flaws as metrics. We use them, though, because they work pretty well and because nobody's devised superior alternatives. There's no guarantee, however, that the extent to which things like GDP, the CPI, and other main indicators are imperfect metrics will stay constant over time. Technology and society change, and things that used to be good satisficing tools could become quite bad ones.
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but they're honestly just as good.
That this is not true is particularly clear if you use spreadsheets for stuff. Office (or at least Excel) is better than people seem willing to grant.
I assume you’re well aware of debates within & about utilitarianism. Nobody thinks GDP is a sensible measure of well-being. In addition to household production there’s the value of leisure, which isn’t reflected in GDP. And it’s questionable whether welfarist or wealth-maximization criteria should even be used. Should fairness we taken into account? How about Aristotelian considerations.
"Marx's badly discredited theory of value seems to me to have some relevance in that sort of thing. A copy of OpenOffice has basically no exchange value but does have considerable use value. Maybe. Or maybe that's the wrong way to think about it."
The right way to think about this is in terms of total surplus and the consumer/producer partition of it. I'm willing to pay just as much for an open source application as an equivalent proprietary product, so my consumption of either generates the same total surplus (though with a different allocation of benefits).
Matt wrote: "As it happens, relatively few people use OpenOffice or NeoOffice instead of the Microsoft juggernaut, but they're honestly just as good."
Not really. I wish that this were the case, since I like to use open-source software when possible, but OpenOffice.org just isn't really ready for prime time yet. To take one example, OpenOffice.org Calc's regression features don't allow the equation to be shown on the graph, which makes it useless in my entry-level college Statistics class. I can only imagine that anyone who does serious work in this field would have even more trouble with this. Also, OpenOffice.org is far slower than MS Office - which is really remarkable, considering the bloated nature of MS software in general these days, and inexcusable.
Also, no third party software can handle Microsoft file formats with 100% accuracy, which is necessary in the business world for interchange purposes. Admittedly, this is mostly Microsoft's own fault for keeping the formats proprietary. (Hopefully, the European Union will manage to pry them loose eventually - they're trying.) Also, VBA script compatibility is important for many businesses that have mini-apps embedded into spreadsheets and so forth.
I do think that for the average home user, AbiWord is an acceptable substitute for MS Word. It's fast and the layout is very workable to anyone familiar with MS Word. And it can read most (though not all) MS Word documents as long as they don't use really complex features. For business, though, its lack of two-way document interchange is really a problem. Also, it would be nice if the Windows version implemented MDI.
1. Given the demographic fact of more retirees, the growth of the gov't debt, and the extent of debt to foreigners, the U.S. is in a pickle without strong growth. And to expand on the Cato argument, if growth is accomplished via higher productivity, and as long as it's environmentally sustainable, it's a win all around.
2. It's certainly true there's lots of activity not captured by GDP, but this is hardly news! Any econ textbook will have a page or two of disclaimer when the concept of national output/income is introduced. The "flaws as metrics" bit is meaningless without specification of *what* we want to measure. And why the weirdly defensive reference to Marx? The use/exchange distinction is surely separable from the labor theory of value, which I assume is what's being referred to as "discredited." Anyway if you're really interested in alternatives for assessing well-being look at Amartya Sen's work, look e.g. at the UNDP's Human Development Index, etc. etc. The "nobody's developed" part is simply wrong, though again it's hard to say more without clarity about what we want to measure. (And what do the last two sentences of the post mean? The whole last pargraph looks like something written very late at night.)
3. Surely technologies like cell phones and easy 'net access have created efficiencies that show up in higher productivity. But getting back to (1), retirees can't live on blogs alone, nor will foreigners buy them, so measurable output of food and housing and electricity and whatnot is still pretty important. From that point of view there's a certain advantage in measures that stress marketable output.
4. "Value" has way too many meanings in ordinary English to be useful analytically.
"Also, OpenOffice.org is far slower than MS Office - which is really remarkable..."
OpenOffice is cross-platform, though. Which means they have to maintain a virtualization layer between core functionality and the operating system shell. That can be expensive stuff, especially when there's a lot of graphics involved.
A hobby website that starts reaching pro-level popularity sorta has to turn into a pro website, just to pay for bandwidth. And I reckon that OpenOffice would do the same. I mean, Linux is technically open source but who, apart from hobbyists, doesn't buy it from a vendor? If things go kablooie, you want someone to call on the phone and complain to. Everybody's dream is to make their living working at their hobby, though its not really a hobby anymore when it happens.
A feeble attempt at relating this to the topic. Best I could do.
Isn't there a story about colonial powers in Africa finally having to institute a per capita tax, payable only in cash, to drive content natives off the land and into "paying" jobs? You couldn't point a gun at somebody for not coming to work, but you could for not paying a tax.
Most of what Matt says is confused. Working more can only generate growth in the short run. There are only 24 hours in a day, and obviously limits to how much we can work kick in long before that.
Growth is mostly about technological change, and there's no limit to that.
France, by the way, has similar growth to the US, on a per capita basis. The fact that they work less means that they don't have as much income, but has no affect on how fast their income is growing.
The Commodity as Spectacle ...Guy Debord
41
"THE COMMODITY'S DOMINION over the economy was at first exercised in a covert manner. The economy itself, the material basis of social life, was neither perceived nor understood — not properly known precisely because of its "familiarity." In a society where concrete commodities were few and far between, it was the dominance of money that seemed to play the role of emissary, invested with full authority by an unknown power. With the coming of the industrial revolution, the division of labor specific to that revolution's manufacturing system, and mass production for a world market, the commodity emerged in its full-fledged form as a force aspiring to the complete colonization of social life. It was at this moment too that political economy established itself as at once the dominant science and the science of domination."
42
"EXCHANGE VALUE COULD only have arisen as the proxy of use value, but the victory it eventually won with its own weapons created the preconditions for its establishment as an autonomous power. By activating all human use value and monopolizing that value's fulfillment, exchange value eventually gained the upper hand. The process of exchange became indistinguishable from any conceivable utility, thereby placing use value at its mercy. Starting out as the condottiere of use value, exchange value ended up waging a war that was entirely its own."
But most of that page is pretty good.
Should fighting a "war" be considered productive work?
Should funding a "war" be considered an "investment" by the government?
China's economy is now growing six times faster than America's...and shows no sign of slowing down anytime soon...wonder why?
"China's economy is now growing six times faster than America's...and shows no sign of slowing down anytime soon...wonder why?"
It is an extraction economy, like Saudi Arabia, with the extracted resource being very cheap labor. A simple urbanization surge, like most first-wave industrializing economies, including the US 1880-1930. The US also benefited by liberal immigration policies.
It will not last. Even excluding wages, when urbanization reaches a certain point, services have to be increased to maintain efficiency. Transport, energy, pollution control.
Military spending is important comparing the US to China, but not so significant comparing Japan or EU to China.
China's boom has been going on for 20 years now, bob.
America's economy has never grown anywhere near as fast...except when that lefty FDR was in charge, of course.
China's economy is also able to avoid many of the mistakes America made and is too poor to correct now...
hat this is not true is particularly clear if you use spreadsheets for stuff. Office (or at least Excel) is better than people seem willing to grant.
Excel is one of the best pieces of software ever written.
here in hawaii, the state "sales" tax (actually an excise tax) is applied equally to both restaurants and grocery stores. perhaps it is partial support of Matt's (somewhat sarcastic) theory that we in hawaii have the highest per-capita consumption of fast-food in the nation, and I think that holds true on up the price ladder for restaurants. on the other hand, perhaps this is just driven by the fact that cost of living / median salary is particularly bad, which drives up the number of jobs per household (people have to have more than one job, sometimes 3-4 incomes per family), thus people have less time for leisure and cooking seems more like work and less like fun...
For that matter, federal, state, and local governments actually spend non-trivial sums of money positively encouraging people to engage in unproductive leisure activities.
Compare:
We've actually got some pretty good quantified measures for the quality of life that aren't just real purchasing power parity GDP per capita. We've got the Human Development index (HDI), the sickness impact profile (SIP), quality-adjusted life years (QALY), and many others. Taken together, measures like these can tell you a surprising amount about the quality of life people are living. And, as you say, that's really what matters.
If you were so minded, you could maybe measure the Aristotlean quality of life using a combination of the hierarchy of needs from psychology and revealed preferences from economics.
Aristotle said you "need" things that make your life a "good life". And he basically listed sensible middle class values (though his reasoning was iffy). You need a food, clothing, and shelter. You need a liberal education and quality health care. You need some amount of work, some amount of productive leisure, and some amount of rest. According to Aristotle, you need these and various other things because without them you can't live the good life as he saw it - a life of contemplation.
Then Maslow built a hierarchy of needs, which basically prioritized Aristotle's needs. According to Maslow, material needs matter more than safety, which in turn matters more than social acceptance. Then self-esteem matters less than social acceptance and self-actualization matters even less than self-esteem.
You could try to pinpoint what need people were trying to satisfy with any given purchase or pursuit. We do this unofficially all the time. If I spent my whole paycheck on designer clothes, you'd think I was looking for social acceptance. If I lived on a bench in McPhearson Square and spent all the money I could find on food and liquour and drugs to escape my miserable life, then you'd think I was trying to satisfy basic needs. If I were Bill Gates-rich, well liked, and striving to perfect my piano playing, then you'd think I was trying for self actualization.
But we don't do this officially because it's impossible to decide objectively what need people are trying to satisfy. If you buy a big house you could simply be satisfying your need for shelter. But you could also be satisfying some desire to be accepted by a given society, or some desire for self-esteem. And you could be buying that house because it's neighborhood would provide good schools for your children, which is close to a self-actualization need. So how do you account for those different needs being satisfied by that big house? Too hard.
So we're left with simple measures like GDP per capita and HDI and SIP and QALY. If anybody reads this and can think up a better way to measure this stuff, sing out.
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