A view from the balcony on the fictional island of Mai Tai, in the Pacific Ocean.
G and I talked more about Mai Tai. I think it's interesting, she says. But with so many people out of work and deep economic problems, is abundance really the problem? Don't we have too much deprivation?
Sure, I said, we've got huge economic problems. But it's not because we lack the ability to produce goods and services. It's not lack of stuff. Even people who lose their jobs have plenty of stuff. Entire provinces of China are working 24/7 producing more stuff with remarkable speed and efficiency.
We're having serious setbacks because the current economic model is running out of steam. The market is a wonderful way of allocating scarce resources. It enforces basic reciprocity, which is the foundation of its success. You can't get something for nothing. You have to work if you want to eat. You have to produce if you want to consume.
Except those things increasingly aren't true. Look at the biggest growth companies. Facebook is preparing for a titanic IPO. But it charges nothing to individual users. And it employs very few people for a company its size.
Technology is increasingly eliminating routine jobs. Whenever that has happened in the past, the economy created new jobs even faster. But that isn't happening in the same way now, because the new goods and services we want are not labor intensive, and are often not even traded.
They are things like personal connection, social interaction and purpose, just as we saw in the Mai Tai example. And those aren't excludable, rivalrous goods like a car or a transistor radio. They are increasingly nonrivalrous, nonexcludable, public goods or goods with almost zero marginal cost. Markets work brilliantly for specific material goods. But as the song goes, you can't buy love.
We've deferred the problem for decades by expanding the scope of the market economy, by women moving into the workforce, for example, and by huge asset booms to make up for feebler income streams. We sold the future and amassed titanic mountains of debt. We built a huge welfare state.
But now there are savage political arguments over the size of government and the welfare state. Fiscal policy is tapped out. We've had increasingly serious crises in the last twenty years, even as many argued we were seeing a "Great Moderation." The position of the less educated and unskilled is becoming far weaker.
And the pace of technological innovation is increasing. It's exponential, as new tools make it easier to design still better technologies. Whole areas of the economy like retail are starting to get amazoned. Better artificial intelligence could eliminate millions of jobs. Siri is just the start.
Education and health have been major areas of spending and job growth. But they too could have productivity revolutions before long.
And that's why we have to rethink the institutions and incentives in the economy. Just as we transitioned from agriculture to manufacturing and then the modern service economy, we need another transition.
The crisis is a symptom of the fact that what works for an economy of stuff no longer works for an economy of connection and purpose and flourishing.
Instead of stuff, we need purpose. And you can't easily exchange that at the local store.
G and I were just talking about the experimental island of Mai Tai, which I invented here. If you can't connect to the outside world, it isn't really a modern life, she says. You can have a high material standard of living but without communication it's not really modernity.
That's interesting. I wonder if there is a step change between allowing them to listen to outside radio broadcasts, to keep up with the rest of the world, and the internet, which allows participation.
I think the most difficult thing myself would be lack of connection to loved ones. People would not want to be isolated from their families, children, friends. It's the personal connections that people would miss and would persuade them to leave the island.
Much would depend on how social or friendly the castaways were. It could go Lord of the Flies, says G.
And of course people would potentially get bored. Anomie, purposelessness, drift.
You put it together and it comes down to connection, social interaction, purpose. That is what people want even in conditions of materialist abundance.
I had in mind philosopher Robert Nozick's Experience Machine as well. Imagine neurologists develop a machine that can give you the complete, immersive experience of a perfect life of pleasure. You can plug in and have a perfect life of pleasure and success. Would people ever unplug? Given the choice, would we prefer to live in the machine or real life?
It's a bit like the Matrix, says G.
The WSJ talks to Deirdre McCloskey, whose books are on my reading list. She's a major but controversial figure in the economics profession.What interests me in particular is she wants to bring the older ethical tradition of discussing the virtues back into economics. And of course I've been interested in those older ethical traditions recently too.
Ms. McCloskey sees a problem in the way that economic models are dominated by a strange, sociopathic character—"Max U" as she calls him, referring to the standard economic problem of maximizing utility subject to various constraints. Her own scholarly work has become increasingly focused on bringing love, hope, faith, courage and other virtues back into economics.
I've also been frustrated with the narrow focus on utility in mainstream economics. She says:
If her talk of ethics sounds fluffy, recall that in 1759 Adam Smith earned his reputation by publishing "The Theory of Moral Sentiments," in which he accounted for the emergence of sympathy and moral judgments. It was only in the 20th century that ethics disappeared from economics, partly as a result of the increased mathematization of the discipline. Ms. McCloskey says it was a fundamental error for economists to start making their arguments in terms of "Max U" alone. "In fact, 'Max U' would be a much more sensible person if he had gender change and became 'Maxine U,'" she chuckles.
She also has a controversial and quite sad personal life, as one of the more prominent transgender people in the country. Deirdre used to be Donald.
Although many of her colleagues in academia were supportive of her crossing, that period was difficult for her and her family. Her children have cut ties with her, and she has never met her 13-year old grandson. "People throw away love too easily," she told me as we drove to Hartwell House.
It suddenly occurred to me as I was walking down a rainy 34th Street after writing the last post: a lot of what is missing for people in the Mai Tai scenario is a game - something where you can compete within rules, win, lose, keep score, strive, show off, exercise skill, feel emotion, group identification and loyalty, a limited purpose which people voluntarily do for fun.
Maybe the economy is turning into something more like game playing as we move into the age of abundance. Certainly games have become steadily more important in the culture. Team sports have grown into vast businesses. Young men play endless rounds of Warcraft, to the frustration of young women wondering where the single guys are.
A century and a half ago games really didn't exist to the same extent we have today. Most of the main organized team sports go back to the 19th century, although they have more informal precursors like football played in medieval towns. The modern Olympics also date back to the 19th century.
Of course, board games like checkers or chess are much older. And athletic competitions date back to the original Olympic games. Spectacles and entertainment go back to Roman gladiatorial combat which long predates the Colosseum.
But as far as I know there was nothing before the 19th century on the industrial scale of modern games. As society has become wealthier, more and more time and effort has been devoted to organized forms of play for adults.
People get pleasure from just watching games as entertainment. But their main significance is they involve participation. Spectators at a football game are involved, rooting for their team. soaring on the joy of victory and suffering agonies of defeat, in a way they are not participating at, say, a music concert.
They are more than just an immersive experience, as I was discussing back here in connection with the book The Experience Economy.
So maybe these questions of purpose and meaning and incentives are better thought of as finding the right games for people to play. People want a set of game rules to give the effort meaning.
There is a developing game science which tries to make computer games as enticing and compulsive as possible. They brilliantly calculate just the right level of challenge and resistance to make people want to get to the next level. I wrote before about the game Cowclicker, which people get obsessed about even though there is almost no real content. Other companies like Zynga have manipulated people's motivations into billion-dollar returns. It gets at something quite primal about people's behavior and motivation.
In many ways games are an alternative or substitute for work.
Here's a little thought experiment. Daniel Defoe's Robinson Crusoe, published in 1719, caught the imagination of the world and (according to Wikipedia) had more editions, translations and imitations than any other work of fiction through the end of the 19th century. The individual was shipwrecked alone on a desert island where money and society were useless. It is the vision of the independent individual, and in some ways was a precursor of enlightenment thinking. It was also often used as a metaphor in economics.
We've also had other tropical island shipwreck stories in the culture. Lord of the Flies is one (which I haven't actually read.). Recently, there was Lost, which is a story of mysterious forces and hostile opponents. There were various iterations of Survivor.
Here's a different updated tropical island story, motivated by spending some time on one just recently. Let's call it Mai Tai.
There are plenty of remote Pacific islands with runways left over from the second world war. A transpacific flight has engine trouble, and loses altitude. The radio is knocked out. Just as a water landing in mid-ocean looks inevitable, the pilot spots an island, and even better, a runway.
The plane comes to a halt and the door opens. Two hundred people slide down the chute onto the island of Mai Tai. The beach is beautiful, the palm trees sway in the soft breeze, and visible just where the forest begins is a sign saying "beach bar this way".
There's a sign beside the runway, however, in English, French and Chinese. "Quarantine zone", it says. The runway was built to serve an experimental biological station back in the war years, and the lab leaked. No-one can leave the island for at least a year, and even after that only two people can be properly decontaminated each year and leave the island.
There are beautiful houses for all the castaways nearby on paths through the jungle. Supplies will be delivered regularly. Delicious food will be available.
All production of necessities will be taken care of. There is enough food, shelter, water, and wine. It's an endless tropical holiday. No payment will be demanded, and there is no set time limit. Every year you can choose to leave the island, but you can't return. And you can send one letter a year to anyone you like in the outside world.
How long will people stay? What will happen? Will people decline into aimless boredom, or arrange things into paradise?
The essence of this is of course all material necessities are taken care of. What then? That is the choice we are going to face.
Here's another link, embedded in that Atlantic article below, about consumption and happiness. The writer, a psychology professor, says the discipline is increasingly providing clear conclusions on what makes people happy.
Of course, this is a theme we've been consistently following on this blog, but it's a nice succinct statement. He says:
The lesson in all this research is that prioritizing what we do over what we have will lead to greater satisfaction with our lives
The crisis may provide some opportunity for a reset, he says.
I suspect that there is little in what I’ve written that people don’t already know. This suggests either that people don’t need to be told, or that telling people is a waste of time because they just can’t help themselves when it comes to acquiring more stuff. It does seem to me, however, that the economic crisis of recent years may provide us with a unique opportunity to encourage people to recalibrate their aims and aspirations.
Can we help ourselves from acquiring more stuff?
That is a potential downer. Even if we know what makes us happy, we often find it difficult to do it in practice.
So maybe the virtual consumption discussed below is a significant shift, at least if it gains any traction. It flaunts choice rather than possession, and taste rather than bling.
Indeed, maybe for some people showing off on their Facebook stream burns off some of the conspicuous consumption/status competition desires.
And maybe the next billionaire in social media will figure out how to bring bitchy clique management and cool kid rivalry to the internet in a more explicit way. It won't be enough just to defriend, but to diss, to bring the virtual equivalent of being frozen out and looking in to the internet. The virtual velvet rope. Sigh. I bet people are working on it right now.
All the same, even if we know what would make our lives better and manage to organize the economy that way, could we actually help ourselves from screwing it up? We have to deal with people as they are, and human beings can often be a tangled ball of conflicting and flawed desires.
This goes back to the issue of incentives for good behavior and penalties for free riding or bad behavior, and the institutions and values and ethics that go along with that. Every time we touch on the economy, we keep getting drawn back to these prudential and ethical issues.
Here's a variant on the coffee shop question, then, the original underlying theme of the blog. How can we help people to do things that bring them joy, instead of working long hours in tedious jobs to get more bland stuff? In the long run, how do we get people out of the office and into the park?
People are suspicious of that because they think it would negatively affect others. At least if people are in their cubicles they are producing rather than consuming goods paid for by others, or so the thought goes.
Both production and consumption are blurring together, however. Our measurements are increasingly wrong. Wrong measurements, wrong incentives, wrong outcomes.
This piece in the Atlantic says bookmarking sites like Pinterest are replacing some of our actual shopping with virtual consumption and display. People like to show off their taste and aspirations. They can satisfy their foraging instincts and have the pleasure of finding shiny things without actually spending any money.
The world is getting lighter. G and I increasingly find we often prefer to have digital rather than tangible products. They take up less space in a small New York apartment, and in most cases you have access to them anywhere - subway, park, Europe. The Kindle app is increasingly a godsend in reducing the pace at which books outrun their shelf space.
While I talk about these issues, I sometimes feel so much of it has been said before, too, in grappling with human nature all down through the ages.
Kant, for one. "Out of the crooked timber of humanity no straight thing was ever made."
We're forever looking for ways to help people not screw things up.
Here's a very good piece by Walter Russell Mead, who has been arguing for some time that the "blue social model" of big government, big labor, big corporations and big benefits is running out of steam.
He says liberalism has had to renew itself in fundamental ways at least four times since it emerged in the seventeenth century. Liberalism 1.0 was the Glorious Revolution in 1688 in England, which established parliamentary supremacy. Liberalism 2.0 was the more individual creed of 1776 and Washington and Jefferson. Liberalism 3.0 was Machester Liberalism, the laissez faire of the 1880s. Liberalism 4.0 was Theodore Roosevelt and the turn-of the century progressives, who thought a stronger state was necessary to counterbalance giant corporations and trusts. And Liberalism 4.1 was Franklin Roosevelt, the New Deal and the more explicitly welfarist and redistributionist model of the 1950s and 1960s.
All were immensely successful in their day. All were superseeded by newer and better versions.
But now the decline that happened to the blue private sector -theGeneral Motors and Kodaks of the world -is hitting the public sector.
The real crisis today in the United States is the accelerating collapse of blue government, not blue private industry, which is a phenomenon largely behind us.
So, he concludes, we need to develop liberalism 5.0, a new synthesis of the noble concept of liberalism which better reflects changed circumstances.
All four versions have something else in common: None can serve as the political program for the heirs of the two great revolutions today. We don’t want the constitutional monarchy and Anglican establishment of William III; we don’t want the aristocratic, limited-franchise republic of George Washington; we don’t want the Manchester liberalism of the 1860s; and we don’t want the managerial state that liberals and progressives built in the first two-thirds of the 20th century. That doesn’t mean we should not admire, learn from and build on each of these liberal traditions, but our job today is to synthesize enduring liberal values in a 21st-century liberalism 5.0.
A lot of the problem with the blue model, he says, is it stripped lives of meaning.
Finally, in this regard, the blue model has impoverished our lives and blighted our society in more subtle ways. Many Americans became (and remain) stuff-rich and meaning-poor. Many people classified as “poor” in American society have an historically unprecedented abundance of consumer goods—anything, essentially, that a Fordist factory here or abroad can turn out. But far too many Americans still have lives that are poor in meaning, in part because the blue social model separates production and consumption in ways that are ultimately dehumanizing and demeaning. A rich and rewarding human life neither comes from nor depends on consumption, even lots of consumption; it comes from producing goods and services of value through the integration of technique with a vision of social and personal meaning. Being fully human is about doing good work that means something. Is a blue society with our level of drug and alcohol abuse, and in which the average American watches 151 hours of television a month, really the happiest conceivable human living arrangement?
The key is to find the balance between freedom and stability.
Uniting all the versions of liberalism since 1688 has been a drive to find a creative compromise between the individual’s drive for self-expression and freedom and the need for a stable society. Liberalism insists that an open, dynamic society will lead to a better life for all, and that promoting ordered liberty is the morally obligatory as well as the pragmatically desirable thing to do.
I very much agree that much of the problem in society is purposelessness and lack of meaning. Our basic problem is our economy is designed to produce frozen chicken legs or televisions or iPods with remarkable effectiveness and ease. But not satisfaction or ease of mind.
The problem is most versions of liberalism have steered away from those issues. The whole point of liberalism is the individual is left alone on issues of purpose and meaning. It was designed to stop monarch and church and (to some extent) the state encroaching on those issues - until liberals came to see procedural liberalism and its values as the only acceptable purpose as well.
Dynamism and stability are also very much in tension. The problem with the progression towards liberal values centered on reciprocity /exchange and procedural fairness, which we were looking at in recent posts in connection with Pinker and North, is that it may potentially not be compatible with stability.
So I think Mead, who is prolifically brilliant, without a doubt, clearly identifies the problem but does not have much of a solution.
What does a solution look like? I keep coming back to the fact that we are seeing a phase shift in the nature of needs, away from issues of material scarcity to higher levels of need - happiness , connectedness , purpose, meaning. And that phase shift requires broader changes to incentives and institutions.
We have the frozen chicken, check. We have the gizmos, check. We need more than that, the things past monarchs and aristocrats and moguls maybe never got to.
Here's another vision of the good life to talk about later. A tropical beach with palm trees, in a place which sometimes plays on being "paradise". We loved being there. But would we want to live there?
... Which is just sad. Heidi Klum and Seal are divorcing after six years of marriage and three children.
G and I were talking about this yesterday. So many celebrity marriages break down. Why? The spouses are often separated on tour, of course, or on location for months at a time. You often need a large dose of narcissism and self-absorption to become a celebrity in the first place, as well as sharp elbows and laser-like will. And that is often incompatible with easily living together with someone else.
But it is also just sad as an indictment of one vision of "the good life", to use the older Aristotelian term.
The entertainment celebrity is one of the pinnacles of aspiration of the culture, after all, from the American Idol shows all the way through to the obsessive interest of Access Hollywood and People magazine and celebrity websites.
It's almost a cliche to say that the Hollywood life can often be a very empty one. It is a capricious and risky lottery to begin with. For every successful actor or singer, there are a thousand still waiting tables or selling real estate.
If you are successful, it can be a short-lived career. The parts dry up, the next album doesn't sell. You become a has-been a short flash of time after being a wannabe.
I think this is one reason why Hollywood so often inclines towards liberalism, as success seems so capricious, rather than earned or deserved. It always seems precarious.
And the personal toll on relationships can be severe, as we see today. The lifestyles of the rich and famous in Brentwood and Mandeville Canyon may be lavish, but drug-addled and loney.
The people who seem to have it all suddenly clearly don't. in fact, that is probably one of the reasons the gossip magazines sell. See, Jennifer Aniston may be beautiful and rich and famous. But she can't find or keep a man! It is a strange mixture of idolization and knocking people from their pedestals into the ordinary mess of life.
Maybe you can tell a lot about a culture from the people it idolizes. Other cultures have idolized the warrior, or the aristocrat, or the saint, or the (supposed) "proletarian.". It tells you a lot about what a culture considers the good life to be.
In older epics like the Iliad or Beowulf, warriors fight and die to achieve a sort of immortality of reputation, or lingering glory. And perhaps there is a sort of immortality in entertainment, too. Every other week another starlet seems to dress up as Marilyn Monroe, for example.
Some cultures have very different ideas. In medieval or early modern times, people obsessed over saints' lives and bloody martydoms the way they now obsess over actresses. Foxe's Book of Martyrs was one of the great best-sellers of the sixteenth century.
And for many centuries in the west the chivalric knight or (later) the honorable "gentleman" was an object of aspiration or admiration.
Hollywood aspires to the status of "art", which is a different sphere from celebity, of course. But that is not what the celebrity magazines are interested in.
Being beautiful, rich and famous, an ex-Victoria's Secret Angel and a fashion icon ticks a lot of the boxes of our culture. But it is still sad. It's difficult to imagine any sort of good life if your most important, intimate relationships fray and fail. Even if everyone could live like a Hollywood star, it wouldn't be a particularly happy society.
Even with wealth and talent and beauty and fame, it can be hard to be happy. On one level, it is the most obvious thing in the world to say. Folk wisdom and church preaching and other strands of the culture have said this for years, or even centuries.
On the other hand, it suggests that the good life is hard to achieve with just material resources and vulgar admiration. And that should make us think about just adding to GDP and labor market measures as well and how we want the economy to evolve as well. The volume of monetary transactions in the economy is not exactly the good life either.
The culture matters too. And Hollywood has not always been good for the culture. It's not necessarily its job, of course.
What exogenous causes are shifting the allocation of moral intuitions away from community, authority, and purity and toward fairness, autonomy, and rationality? .. the micro-geography of liberalism suggests that the moral trend away from community, authority, and purity is indeed an effect of mobility and cosmopolitanism.I realized this is very much what Douglass North was saying about the development of modernity, which I covered in an earlier post. North says:
The contrast between the institutions and beliefs geared to confronting the uncertainties of the physical environment and those constructed to confront the human environment is the key to understanding the process of change.The shift from personal to impersonal exchange has produced just such a stumbling block both historically and in the contemporary world. Personal exchange relies on reciprocity, repeat dealings, and the kind of informal norms that tend to evolve from strong reciprocity relationships. Impersonal exchange requires the development of economic and political institutions that alter the pay-offs in exchange to reward cooperative behavior.So here's the thing. The argument is that the transition to modernity necessarily breaking some of those older communitarian ties and social structures.
If the economic problem is solved, mankind will be deprived of its traditional purpose. Will this be a benefit? If one believes at all in the real values of life, the prospect at least opens up the possibility of benefit. Yet I think with dread of the readjustment of the habits and instincts of the ordinary man, bred into him for countless generations, which he may be asked to discard within a few decades.To use the language of to-day-must we not expect a general “nervous breakdown”?
We need another phase transition in society.
I'm sitting here watching Romney and Gingrich slug it out with each other in an NBC debate. Gingrich completely upset Romney' plans in South Carolina. So now they are playing for high stakes in Florida.
High stakes means high tension on stage.
It's dramatic - and dispiriting too. They are getting bogged down in Romney's tax rate and Gingrich's lobbying contracts, the ad hominem stuff which seems to suck the life out of political debate. It is maybe a bit TOO entertaining for our own good. Lurid and dramatic isn't necessarily a good thing.
I think it would be better if at least once you gave candidates - and their chosen staff - an tangible problem or crisis to solve in a simulation. It is one of the tried and tested way to hire people, after all. You give them an actual problem or group discussion or team exercise or document to work through. You ask them to do the kind of things they would have to do on the job itself. Give them a day of real-time challenges with limited and conflicting information, and see how they and their advisors deal with it. We'd learn about their decision-making ability.
No candidate would willingly agree to it, most likely, as it would be too risky and potentially revealing. Candidates don't even want to answer hypothetical questions, let alone simulations.
We DO test people on their ability to run a campaign, give a stump speech, raise money and kiss babies. And to some extent we may test them on their persuasive rhetorical ability.
But we don't have any idea how they'd deal with the 3am telephone call that wakes them up in the White House, which says there is a serious problem out there. We don't have any real sense of their priorities. And that is what we ultimately need to know.