There are many other points in the book. They attack happiness economics at length as being too concerned with mental states.
To go from the pursuit of growth to the pursuit of happiness is to turn from one false idol to another. Our proper goal, as individuals and as citizens, is not just to be happy but to have reason to be happy. To have the good things of life—health, respect, friendship, leisure—is to have reason to be happy. To be happy without these things is to be in the grip of a delusion: the delusion that life is going well when in fact it is not.
I won't go into this in detail, although they devote most of a chapter to it, because I think positive psychology is already moving on from a simple focus on happiness as a mental state.
They express deep reservations about current environmentalism. In fact, they are not, as I had expected from reading initial reviews of the book, just looking to go back to a kind of 1970s anti-growth environmentalism. They just think GDP measures are increasingly divorced from the good life.
Virtue and the Good LifeInstead, let's focus again on their philosophical discussion in a little more detail, because they do it so well. They have a fascinating discussion of how the rise of economics overtuned older virtue ethics. Mandeville's Fable of the Bees was a turning point.
Enter Virtue: prosperity dwindles, and the hive is ruined. This depiction of a slump in fortune brought on by an onset of frugality delighted Keynes, who quoted several passages from The Fable in his General Theory. Mandeville’s moral is plain: you can have riches and vice, or poverty and virtue, but not riches and virtue. Which do you want?Adam Smith continued the process of deemphasizing the old virtues.
It also meant there was no independent stance to judge the nature of those preferences.
Smith’s doctrine of self-interest did more than just turn avarice into a virtue; it turned classical virtue into a vice. ...Smith’s economics was a triumph of intellectual economizing—an ingenious application of Occam’s razor to man’s social behavior. The turbulent passions were reduced to the single motive of self-interest. This gave economics its unique analytic power. It would not have to worry, as did the political science bequeathed by Machiavelli, about understanding and managing the varied and contradictory passions. One master motive, the self-interested pursuit of wealth, subsumed all others. ...The value-neutral language of “utility” and “preferences” renders capitalism’s Faustian bargain necessarily invisible.
And without a way to judge those preferences, without any reference to older virtues like temperance, it is hardly surprising that our wants appear insatiable.
As economics developed, it became increasingly difficult to distinguish wants from needs. In this respect, Keynes was heir to the neoclassical tradition, which is why his idea of “satiety” seems quaint.
NeutralityThe older idea of the good life has (they argue) been replaced with liberal neturality.
Rawls has set the terms of the current debate.
For all its vestigial resonance, the idea of the good life no longer forms part of public discussion in the Western world. Politicians argue their case in terms of choice, efficiency or the protection of rights. They do not say, “I think this policy will help people lead fruitful, civilized lives.” Private discussion has tended to follow suit.
And Economics is methodologically wholly opposed to looking at the nature of needs or preferences.
Ever since the publication of John Rawls’s A Theory of Justice in 1971, liberal thinkers have insisted on public neutrality between rival conceptions of the good. The state, they claim, should not throw its weight behind this or that ethical outlook; rather, it should leave citizens free to follow their own moral lights, insofar as is compatible with a similar freedom for others. Needless to say, this philosophical ideal has never been fully realized in practice. The French state is not neutral in its treatment of hijab wearers, nor is any liberal state neutral with regard to heroin. But at the level of argument, the Rawlsian ideal has triumphed. ... The principle of state neutrality is now so well established that we sometimes forget how revolutionary it is.
“Nothing in economics so quickly marks an individual as incompetently trained,” wrote J. K. Galbraith, “as a disposition to remark on the legitimacy of the desire for more food and the frivolity of the desire for a more elaborate car.” Economists are all for the satisfaction of wants, at least within certain limits. But as to the wants themselves, they maintain a fastidious indifference.
If we think about this, education or character are supposed to elevate or develop the nature of wants, at least on an older view. That was to a large extent the aim of a "liberal education." A more vocational and instrumental view of education in recent years makes it difficult to conceive of different kinds of wants as well. And that leaves "taste" to be unchallenged cultural capital of the upper middle classes. Many of the things we care most about have to do with the non-givenness of wants.
This skeptical standpoint has passed into mainstream economics under the slogan “the givenness of wants.” Desire is no longer, as it was for the ancients, an arrow capable of hitting or missing its mark; it is a bare psychological fact, guiltless and inerrant. There is no intrinsically desirable life, only a range of desired lifestyles. Once this keystone of pre-modern economic thought is removed, the other blocks fall rapidly to the ground. First to go is the distinction between needs and wants. Needs, on the classical conception, are objective; they refer to the requirements of life or the good life. Wants, by contrast, are a psychological phenomenon; they are “in the mind” of the wanter. Needs and wants are independent of one another.
Of course, I agree with their arguments here. I've argued at length similar points before - here's one recent example. In fact, I've been continually surprised at how often discussion of core economics issues leads me back to these foundational matters of ethics and philosophy. There is rot the foundations of how the economy works for us.
My natural arena is bond yields and interest rates and payrolls and exchange rates. So the fact I keep being drawn to the philosophical underpinnings as the source of much that has gone wrong interests me. I've talked a lot about virtue ethics. The Skidelskys put it very well from the other direction as well - problems in economics' conception of utlity and preferences.
Basic goods and AutonomyRawls does admit "primary goods,", "goods that a rational individual will want whatever else he wants."
The real focus of modern liberal theory is autonomy, however, not flourishing. The same applies to the "capablities" approach and measures of quality of life developed by Amartya Sen and Martha Nussbaum. (We looked at Sen here).
Rawls’s list of primary goods includes civic and political liberties, income and wealth, access to public office, and “the social bases of self-respect.” Primary goods are not themselves elements of the good life, but rather the means to achieving any possible version of the good life. They are the external conditions of autonomy. A liberal state must ensure that they are fairly distributed among its members, but should not take a view on the uses to which they are put, for that would be to violate its cardinal principle of neutrality
This is a smart and well-taken point. In effect, autonomy is preferred to most other values. But there is no inherent reason to prefer it to more connected or communitarian notions of the good.
For all their disagreements with Rawls, Sen and Nussbaum share with him an overarching concern for autonomy. It is this very concern that prompts them to go beyond his list of primary goods...The desire to safeguard autonomy explains Sen and Nussbaum’s focus on capabilities rather than actual functionings.
The Skidelskys put forward their own, different list of seven basic goods - health, security, respect, personality, harmony with nature, friendship and leisure. These are the good life, they argue. And here is the key point:
Many of the things we most want are non-marketable. That should not be taken as a condemnation of the market. Instead, it is an issue about the scope of the market.
The continued pursuit of growth is not only unnecessary to realizing the basic goods; it may actually damage them. The basic goods are essentially non-marketable: they cannot properly be bought or sold. An economy geared to maximizing market value will tend to crowd them out or to replace them with marketable surrogates. The result is a familiar kind of corruption.
Use-Value and Basic NeedsThe Skidelskys also note the older conception of "use value", which has also been subsumed by utility.
Last not but least, modern economics has dispensed with the central concept of use-value. For Aristotle, as we saw, the use-value of an object is its particular contribution to the good life. Wine, for instance, enhances food and friendship, both central human goods. It therefore has use-value, whereas crack cocaine (which enhances neither food nor friendship nor any other good thing) does not. That I prefer crack to wine does not alter this fact; it simply shows me to have corrupt taste.
Use-value was a central part of economics until the marginalist revolution of the late nineteeth century.
Aristotle’s concept of use-value was taken over by Smith, Ricardo and of course Marx, who put it to sturdy critical work. But in the late nineteenth century, and partly in reaction to Marx, economists set about dismantling it. “Value,” wrote Carl Menger, a pioneer of the new approach, “is nothing inherent in goods, no property of them, nor an independent thing existing by itself. It is a judgement economizing men make about the importance of the goods at their disposal.” This new conception of value, better known by its English name of “utility,” has since become standard in the discipline. Utility is a purely descriptive concept; it expresses what I want, not what I ought to want. If I prefer to spend my money on crack rather than wine—well, then, crack has more utility for me.
Without a separate concept of use-value, there is no independent anchor for the system. Any judgement or anaylsis of needs falls away.
I find this interesting just because I am also working my way through a little bit of Marx, simply to grapple with some of the original classics - including Smith and Schumpeter. And use-value is of course fundamental to Marx's system. I'll come back to this in a few weeks or months.
Index and metricsOne other point they briefly make is also potentially of much wider importance. Metrics can be signals rather than measures of welfare or transactions.
growth might interest us as an index of something else we value. ... Growth, in other words, might function like a cardiograph—in itself a trivial gauge of something important. But it can perform this function only if (a) it is reliably correlated with economic freedom and (b) economic freedom is itself an overriding good.
I think this notion of metrics as indices or signals represents the future of economic statistics, as a diagnostic aid rather than an aim in itself. Accountants look at ratios when they analyse companies. Companies will look at operational data relative to their business, such as aircraft turnaround time for an airline or time through the sorting facility for FedEx, or customer sastisfaction indices. Doctors will take a high temperature as indicative of sickness, even if it is just a byproduct or associated phenomenon. We'll come back to this idea in future posts as well.
Working HoursFinally, the Skidelskys discuss at some length why working hours have not fallen, as Keynes had expected. They present a whole variety of explanations , which I will not go into here in any detail. One, however, is a shift in the proportion of service jobs.
This is a serious structural problem, There are deep problems with expecting a viable future economy to come from personal services. For one thing, productivity will be too low to make it viable - too expensive for people to want to hire services in most cases, and too poorly paid for most people to want to do it. Not everyone can survive on being personal trainers or dogwalkers.
In Keynes’s day, manufacturing in developed countries accounted for 80 percent of output, services for 20 percent. Today this ratio is reversed. Service jobs on average are less well paid than the manufacturing jobs they replaced, partly because they cannot be automated to the same extent—think of schoolteachers, nurses, hairdressers, taxi drivers—and partly because they cannot be unionized as effectively.