How self-actualization can produce all-or-nothing marriages

This is an interesting article in the NYT about the evolution of marriage. It argues marriage has changed in the last two hundred years as western societies have moved up Maslow's hierarchy of needs.

Our central claim is that Americans today have elevated their expectations of marriage and can in fact achieve an unprecedentedly high level of marital quality — but only if they are able to invest a great deal of time and energy in their partnership. If they are not able to do so, their marriage will likely fall short of these new expectations. Indeed, it will fall further short of people’s expectations than at any time in the past.

There have been three stages in marriage, according to author Eli Finkel. "Institutional" marriage, until about 1850, was largely a matter of mutual survival - food, shelter, and protection from violence. "Companionate" marriage, from 1850 to 1965, was more about love and companionship and intimacy, once the more basic needs were secure. And then,

Since around 1965, we have been living in the era of the self-expressive marriage. Americans now look to marriage increasingly for self-discovery, self-esteem and personal growth. Fueled by the countercultural currents of the 1960s, they have come to view marriage less as an essential institution and more as an elective means of achieving personal fulfillment.

But this has led to an all-or-nothing phenomenon.

HERE lie both the great successes and great disappointments of modern marriage. Those individuals who can invest enough time and energy in their partnership are seeing unprecedented benefits. The sociologists Jeffrey Dew and W. Bradford Wilcox have demonstrated that spouses who spent “time alone with each other, talking, or sharing an activity” at least once per week were 3.5 times more likely to be very happy in their marriage than spouses who did so less frequently. ...But on average Americans are investing less in their marriages — to the detriment of those relationships.

And so this leads to two very interesting points. At the higher levels of the hierarchy of needs, time and personal energy are much more important than before. And when it comes to self-actualization and self-expression, people's expectations matter more as well - perhaps especially when they become unrealistic or foolish. What can people do to improve theie marriages?

First and foremost, couples can choose to invest more time and energy in their marriage, perhaps by altering how they use whatever shared leisure time is available. But if couples lack the time and energy, they might consider adjusting their expectations, perhaps by focusing on cultivating an affectionate bond without trying to facilitate each other’s self-actualization.

There's perhaps wider lessons to be drawn from this. G remarked the other day that one problem with the Millenials is they have extremely high expectations of life, and then feel all the more crushed or resentful when they encounter resistance.

On one level, that story is as old as time. But it is almost a general truth that improvement often leads to turbulence and conflict and even violence because expectations have a tendency to rise faster than realization - which then produces frustration and anger. A rising Germany produced carnage in 19th and 20th century Europe. American cities burnt in riots mostly after the Civil Rights Act passed in 1964. Many developing countries like Egypt have increasingly educated youth but few jobs or positions for them.

Improvement very often produces accelerated expectations. So it means we ought to pay very close attention to how expectations change over time, rather than simply immediate income levels or distribution of income. So far as I know, there is very little data that tracks those kind of assumptions or expectations, beyond very basic things like whether people expect to earn more than their parents. It isn't a matter just of expected income, or short-term economic confidence. What kind of opportunities do people think they will have? How much security do they think they will enjoy? It must be as related to education as to current economic circumstances. It also must come from medi models How quickly and why do people scale back expectations?

This also relates to the evolution of ideas about the good life - something which I will come back to. But one clear conclusion here is, once again, the diminishing marginal utility of money at higher levels of needs. It is mainly time that needs to be invested in pursuit of happiness here, not dollars. In fact, earning more dollars actually takes away from time spent together.

This is the root of the deeper problems with the modern economy, which I've talked about a great deal before. Markets are extremely efficient at producing excludable rivalrous nonpositional goods, like croissants or cars. But if the things we increasingly want are not subject to definable property rights or depend largely on other people's behavior, like honor or reputation, then the goods we want increasingly lie outside the market sphere. That's not a criticism of markets, any more than you actively criticize a Ferrari because it can't fly. It's just a fact you can't really define a contractual tradable right to a happy marriage.

The article also represents a much more binary vision of outcomes, although it's not entirely clear why this should be seen as inevitable. As society rises up the levels of Maslow's hierarchy, does it mean that this all-or-nothing phenomenon will become more typical in other areas too? Or does it simply mean we need a rethink of use of time and it how it is related to happiness? To what extent to do people who fail to onvest enough time or energy in a relationship do so out of choice? There are certainly plenty of anecdotal stories of people who spend more time at the office to avoid spending time at home, or those who are compelled to stay in the office to keep their job.

Overall, it's a very interesting illustration of how core structures in our society, like marriage, are affected by the evolution of what people want and need as basic survival needs are taken care of.

 

The Prevalence of Loneliness

This, from an article in the New Republic, is an indicator that things are not going well in society. How truly amazing and sad.

... even among the not-so-old, loneliness is pervasive. In a survey published by the AARP in 2010, slightly more than one out of three adults 45 and over reported being chronically lonely (meaning they’ve been lonely for a long time). A decade earlier, only one out of five said that. With baby-boomers reaching retirement age at a rate of 10,000 a day, the number of lonely Americans will surely spike.

I've talked before how we overlook the importance of connection and the experience of the texture of daily lived life, as if we need a "gross national loneliness" to set against GDP.

 

Abundance and Self-Realization

I'm looking at Robert Fogel's The Fourth Great Awakening and the Future of Egalitarianism, starting here.

Distribution of income matters less than distributiion of "spiritual resources", he says. That means there is a tendency in the "Fourth Awakening" to refocus on the individual again, rather than material conditions in society as a whole.

I have often talked about abundance on this blog, such as here and here. Fogel also emphasizes the saturation of material goods.

Our society is so well saturated with consumer durables, in fact, that even the poorest fifth of households are well-endowed with them. Consequently, the era of the household accumulation of consumer durables, which sparked the growth of many manufacturing industries in the many decades following World War II, is largely over in the United States. p189

So where are things going? Meaning becomes more important as survival challenges recede.

Today, people are increasingly concerned with what life is all about. That was not an issue for the ordinary individual in 1880, when nearly the whole day was devoted to earning the food, clothing and shelter needed to sustain life. A half century from now, perhaps even sooner, when increases in productivity make it possible to provide goods in abundance with half today's labor, the issue of life's meaning, and other matters of self-realization, will take up the bulk of discretionary time. p 191-192

Health and leisure time will be the focus of the future economy, although, he says, it is difficult to foresee the details.

The point is that leisure-time activities (including lifelong learning) - volwork - and health care are the growth industries of the late twentieth century and the early twenty-firsty. They will spark economic expansion during our age, just as agriculture did in the eighteenth century and the early nineteenth and as manufacturing, transportation and utilities didin the late nineteenth century and much of the twentieth. The growing demand for health-care services is due primarily, not to a distortion of the price system, but to the increasing effectiveness of medical intervention. p201

What does self-realization mean? Interestingly, Maslow is not mentioned at all, nor are the older classical ideas about virtue in any detail. Instead, Fogel develops his own list.

To those philosophers who have developed the concept, self-realization means the fullest development of the virtuous aspects of one's nature. ..Of all the maldistributed spiritual resources, sense of purpose may be the most important. p205

Others include "a vision of opportunity", "a sense of the mainstream of work and life" which means a sense of where opportunities are and how to pursue them. There must be "a sense of community", an "ability to engage with diverse groups", which entails an "ethic of benevolence". As self-realization is often achieved through an occupation, a "work ethic" and "sense of discipline" are required, as well focus and a "capacity to resist the lure of hedonism". There needs to be a "capacity for self-education", a "thirst for knowledge". an "appreciation of quality", and some "self-esteem." p205-206

To this updated list of virtues he adds a sense of balance or, as Aristotle would put it, the golden mean.

Each of the fifteen spiritual resources just outlined must be possessed in moderation. There is an optimal amount of each spiritual resource, which will vary from one individual to another. Too much of a sense of purpose turns dedication into ruthlessness. Too little sense of purpose may cause one to be uncompetitive in a given pursuit. p207

It isn't quite a virtue ethics, perhaps, as it is more a list of desirable psychological attributes, being well-adjusted rather than arete or excellence. But it comes close. It is not utilitarian, nor based on more simplistic ideas about happiness. It is certainly reconcilable with older virtues such as courage or temperance or practical wisdom. It is also reconcilable with other ideas we have looked at, such as the evolution of the economy from manufacturing to services to experiences to, finally, transformation of individuals, or the requirements for individual flourishing.

What it does not do (and no book can do everything) is explain what happens to labor markets and economic incentives when material needs are saturated. How might a post-scarcity economy work? How will people make a living?

In all, it is quite a radical book for an academic economist. It is also politically quite eclectic - egalitarian, but taking religion seriously; interested in the condition of the poor but skeptical of government intervention. It asks the right questions, even if the answers are not wholly developed.

The basic conclusion is income is no longer a suitable end-point for policy discussions. Nor are national income statistics. Like the rich sons of Athens two thousand years ago, the nature of the good life is the main question that confronts us once material needs are saturated. Even some Nobel Prizewinners in Economics can see that.

 

 

 

"Sure, Big Data Is Great. But So Is Intuition"

An NYT article is skeptical of inflated claims for Big Data:

The quest to draw useful insights from business measurements is nothing new. Big Data is a descendant of Frederick Winslow Taylor’s “scientific management” of more than a century ago. Taylor’s instrument of measurement was the stopwatch, timing and monitoring a worker’s every movement. Taylor and his acolytes used these time-and-motion studies to redesign work for maximum efficiency. The excesses of this approach would become satirical grist for Charlie Chaplin’s “Modern Times.” The enthusiasm for quantitative methods has waxed and waned ever since.

Big Data proponents point to the Internet for examples of triumphant data businesses, notably Google. But many of the Big Data techniques of math modeling, predictive algorithms and artificial intelligence software were first widely applied on Wall Street.

At the M.I.T. conference, a panel was asked to cite examples of big failures in Big Data. No one could really think of any. Soon after, though, Roberto Rigobon could barely contain himself as he took to the stage. Mr. Rigobon, a professor at M.I.T.’s Sloan School of Management, said that the financial crisis certainly humbled the data hounds. “Hedge funds failed all over the world,” he said.

The problem is that a math model, like a metaphor, is a simplification. This type of modeling came out of the sciences, where the behavior of particles in a fluid, for example, is predictable according to the laws of physics.

In so many Big Data applications, a math model attaches a crisp number to human behavior, interests and preferences. The peril of that approach, as in finance, was the subject of a recent book by Emanuel Derman, a former quant at Goldman Sachs and now a professor at Columbia University. Its title is “Models. Behaving. Badly.”

It really is a matter of proper scope, and consciousness of limits. Big Data is wonderful for finding the Higgs Boson among billions of particle paths, or tracking potential credit card fraud. It is not so good at many other tasks where the data is absent or incomplete or misleading. In those cases, it is little different from ancient farmers looking at the sky and seeing mythical animal patterns.

Small Towns and Big Cities

Happy New Year! We are back in New York after traveling to see family over Christmas. It is is great to go away, and it is also great to come back home.

We were in a small mountain town for ten days, and it was very nice. Small towns are so much more livable than they were even twenty years ago. The town is filled with good restaurants of all kinds and cuisines - perhaps not as good as New York, but not bad and much cheaper. Standards have leapt ahead in recent years.

The supermarkets are vast. We love Freshdirect here in the city, but going to those big Safeways etc felt a bit like communist era visitors to the West looking at acres of food with big aisles. You can get pretty much anything even in the sticks now. The cost of living is very low, with Walmart dragging down the price of basics.

And that is before you count instant connection with the Internet and cable and Kindle downloads. We can read the Times updated to the second in a place where you would never have seen a paper copy before. It used to be living far away from a good bookstore was a hardship. Now almost any book you want is instantly downloadable, or can be delivered within days. And the town in question has a magnificent second hand bookstore as well.

We're still happy to come back to our little apartment perched in a tower. But sometimes I feel we pay a lot to live in the big city. Perhaps the relative advantage of cities is changing again.

Of course, relative advantage is always changing. People fled downtowns for the suburbs in the postwar years, escaping apartment blocks for houses with big yards. But many still want to be within commuting distance of major cities. Despite predictions of telecommuting revolutions, jobs still cluster in the major urban centers, with property prices to match.

It has been going on a long time. The fact you can buy enoki mushrooms in a small town is a small change compared to the coming of the railroad in the nineteenth century or radio in the early twentieth. But it still feels as if the relative sophistication of the metropolis is fading.

One theme of this blog is we are approaching material abundance, indeed material saturation as a society. In fact, we tried to hint to relatives that we didn't really have room for more stuff this year as gifts, so memberships, subscriptions etc were great as an alternative. ( We got stuff anyway.) Consumption naturally shifts towards intangibles - culture, relationships, vitality.

But many of these intangibles are spread in different ways.The level of material and cultural services even in remote places is now very high. You may not have the Met Opera, but the local cinema was advertising live HD broadcasts from the Met Opera.

It used to be you would escape stultifying repression in small towns for the anonymity and freedom of the city. But that difference has narrowed too.

Cities if anything have a slight deficit in terms of material standard of living. The main advantage they still have is cultural vitality. But even that can be priced out by soaring real estate prices.

It is now easier to take your life with you anywhere. Digital goods are omnipresent anywhere with a fast connection. I wonder if that will ultimately change property calculations.

Art and Value

I felt like a change from political theory, so read The Value of Art: Money, Power, Beauty by Michael Findlay, an art dealer who used to be head of Christie's in New York. He discusses the art market and how art is valued, broken into commercial value, social value and essential value.

It's an interesting read. One of the things which is most striking (unsurprisingly) is the uncertainty of the enterprise. He quotes James Rosenquist, who said the process of art is " working like hell towards something you know nothing about." P175

Rosenquist also has a striking piece of advice for students:

Fine art is not a career. You may be very good and no one looks at your work until you are dead. Most artists don't cut it. I have had thirty-five assistants in the course of my fifty years as a painter and not one of them has achieved any success as an artist. What you need is luck. Nothing is guaranteed or automatic. P175

Findlay argues there is social value in art, such as the benefits for families of having art in the home, the social circles it brings, the opportunity for philanthropy and legacies. I was thinking about small-time art on holiday in New Mexico back in the early summer, and much of the value of art far from the auction houses of London and New York is social and personal in character.

Of course, as Findlay is a former leading auctioneer, his description of the commercial process of valuing art is very interesting and makes up most of what is absorbing about the book.

Naturally, considerations of quality and - especially - rarity apply. Dealers will know which private individuals own what, and which paintings may come back on the market in the next ten years. Provenance, condition, whether it was an "important" point in an artists' career, whether it has been shown in prominent musuem exhibitions, even previous ownership make a difference to valuation.

But so much has to do with titanic waves of wealth and booms in the art market. It is more a story of the vagaries (and pathologies) of the super-wealthy more than anything else, despite his occasional claims that anyone can collect art. It is a story of substantial extra spending by the auction houses on PR, glossy catalogues and private dinner parties in the last twenty years, and broad shifts in taste and fashion.

Art can overlap with branding and short-term financial speculation, although art investment funds, interestingly, almost never do well. Most of the market is still private, without public auction prices, he says. And choosing the few artists who will do well out of thousands is hard. And then sellers find the market is illiquid and the transaction costs enormous.

He comes from a side of the business which has to be able to make valuations which will satisfy IRS scrutiny for tax purposes, or insurance: a very prosaic angle of a very ephemeral and glamorous field. And purely financial motives are most often self-defeating.

The heart of it is the boundary of practical and eternal value - auction day stories and logistics and snobbery as against insight and talent and beauty.

He insists in the end perception is more important than information; art history, gallery labels, knowledge about the artist or the market are no substitute for, and can't replace, the experience of sustained attention to a piece of art.

Ultimately, he argues, there is essential value to the greatest art. it does not necessarily come from the twenty second glance that is usual in art galleries, however. Indeed, that may be the advantage of collecting and owning, he says: you get to live with a work of art. You get to feel it over time, rather than just have a right-brained summation of information in a quick glance.

Language can be a barrier. He quotes Barnett Newman: "The meaning must come from the seeing, not the talking."

It all sets up in clear terms the deeper issue of "what is value?", which economics often struggle with, as we shall see next.

 

Aristotle and the beginning of the Western tradition

With the election still reverberating in the air, it's a good time to get some longer perspective. I read Aristotle's The Politics (Classics) a few weeks so, but haven't talked about it yet. It is going to take at least a week to go through all the ramifications of this book.

Why read something two thousand years old?

Let me explain first of all how I was led to this. I started off this blog asking what had gone wrong with the economy. The answer, as I've gradually come to think, is we have a set of institutions and practices which are designed for scarcity, the oldest problem of mankind. But the basic things of life are now superabundant, at least in the West. We have more material stuff than we know what to do with. Our problem is not starvation, but obesity.

So we have solved the "economic problem", as Keynes called it. As we become more and more efficient and productive, the amount of labor devoted to the exchange economy - services as well as manufacturing - is plunging, just as agriculural employment did before in the nineteenth century. The economy is sputtering as a result.

Mainstream economists are confident that demand will simply shift to newer goods and services. But the nature of our wants and preferences are changing. Most mainstream economists are oblivious to this, because they take tastes and preferences as exogenous. The discipline ignores changing preferences by definition. It is a profound blind spot.

Many of the other things we want in life are changing, as we ascend what Maslow called the hierarchy of needs. The issue is that the things we increasingly want more of are not easily packaged and sold as excluable, non-rivalrous goods and services. They are not as suited to be as easily sold in the market, or delivered by the welfare state. It is difficult to establish clear property rights. (Ask the music or newspaper industries). Alternatively, as technology advances, the marginal cost of so many new goods and services is so low that (as in Facebook, or Google, or Flickr, or other paragons of the new economy) it is easier to give them away to the consumer.

Most of the value in the economy is now intangible, but we have been slow to catch up with the consequences. Mainstream economists are wrong to assume that new jobs will always be created to replace old ones, even though that has been true for the last two centuries.

I have become frustrated with our general lack of answers for what we do with the economy once many of the things we want are not material or easily tradable - such as connection, enjoyment, security, love and relationships, meaning and purpose. These are the things we turn to once we have enough shelter and food and security.

In other words, we need to take a much deeper look at what makes people flourish; not just what simply ensures survival, because flourishing has to be the objective of the economy from now on. And that means it is sensible to take a step back and look at long-run answers to this question, and older conceptions of human nature.

This is all the more important because most of our political theory has ignored this question for two hundred years, as the idea of ends or the "good life" have been sidelined. Liberal political theory - and I mean here liberal in the broad sense, which covers most of the current political spectrum - has as a matter of conscious intention no sense of what flourishing means or what our ends should be. Instead, it asks how people can minimally coexist together in a largely neutral state. In other words, it focuses almost entirely on the referee rather than asking what game we are playing, and what our goals are.

So, among other things, I was riveted by this book : After Virtue, by Alisdair McIntyre. He argues our ethical theory has become incoherent because we lost the much older tradition in the West, dating back to Aristotle, which is based on the virtues. That tradition places much more emphasis on character and judgement than impartiality, and it seeks the "golden mean" and ways to avoid excess rather than universal rules.

I read Aristolte's Nicomachean Ethics. There has also been a revival of interest in virtue ethics in contemporary philosophical circles. It has even reached some brave mavericks in the economics profession, such as Deirdre McCloskey's magnificent books.

I think many of our most intractable current political disputes arise because we argue over distribution without any reference to the virtues or actual flourishing. The left thinks equal distribution is enough. The right tends to want some standards of behavior or work ethic, but finds it hard to articulate this in liberal or libertarian terms. So it falls back on "the market". Our basic economic and political issue is what "fairness" means.

The Politics

This is why I wanted to read Aristotle's other major book, The Politics. Right at the dawn of the western tradition, he discusses what a society focused on virtue and flourishing and the Good Life ought to look like in practice. Part of the fascination is he is, of course, one of the foundational thinkers of the West, one of the most brilliant thinkers who ever lived. As an educator, he profoundly influenced the next two thousand years of history, including the Islamic world via Avicenna and the medieval Chirstian world via Aquinas. In practical terms, he tutored the most brilliantly successful conqueror in history, Alexander the Great, as well, so he is not simply an ivory-tower theoretical hermot. He taught in post-democratic Athens, but was eventually forced to flee by the mob who were hostile to Macedonian non-citizens like himself.

So we have a pragmatic voice of wisdom from a world which had grappled with many of our issues of freedom, leisure and democracy, but which is absolutely disintersted about our own political divisions. Aristotle lived two millenia before America was even discovered.

We will start off with what he says about household management, oikonomia - the origins of our word for economics.

 

Intellectual Property..and Theft

The NYT has a very interesting series on the impact of intellectual property disputes. The cost of litigation is becoming astronomical:

In the smartphone industry alone, according to a Stanford University analysis, as much as $20 billion was spent on patent litigation and patent purchases in the last two years — an amount equal to eight Mars rover missions. Last year, for the first time, spending by Apple and Google on patent lawsuits and unusually big-dollar patent purchases exceeded spending on research and development of new products, according to public filings.

IP law is a mess, and it is holding back innovation - especially by small companies who cannot afford battalions of lawyers and lobbyists. I was talking about patent trolls here.

Copyright ls is just as much of a mess - for example, Google and publishers continue to fight over orphan copyright works, although they have apparently just settled terms for other uses.

There's a common theme here. Our basic intutions about property and property rights don't work very well for many kinds of intangible property. And much of the value in the economy is now intangible. Instead of owning defined parcels of land, this is more like an evolving ecosystem, like a coral reef, where interactions and recycling and reuse can be highly complex and interdependent.

At very least, patent and copyright terms ought to be getting shorter as change accelerated, not longer.

It isn't clear we do need such an elaborate patent system to incentivize innovation. MIT and public universities and NASA and the national labs and DARPA and the National Institutes of Health are churning out new innovations all the time, and that is just in the US. The fundamental long-teamwork is much more likely to be done this way.

In fact, the worst way through most of history to generate innovation has been to let huge corporations and organizations get monopolies, often at the expense of startups, disrupters and the less connected.

Much of the value in the Economy is increasingly nonrival and largely nonexcludable. An economy based on ideas and innovation has to work differently to one based on manufacturing trucks or toasters or life insurance. That's a fact. We have to get used to it.

 

 

The World Economy in very long view

I've been reading Angus Maddison's Contours of the World Economy 1-2030 AD: Essays in Macro-Economic History. Maddison is one of the major figures in quantitative economic history. As you might expect, the book is a little dry. But it is fascinating to have measures of wealth, income per head and distribution that stretch all the way back to the provinces of the Roman Empire.

In fact, the average gdp per capita was just $473 in France in 14 AD measured in 1990 dollars, $400 in Britain, and a higher $809 in Italy because of cumulative inflows of booty. For Western Europe as a whole in 1 AD, income per head was $576, compared to $19,912 in Western Europe today measured in the same terms.

We have come a long way. But not evenly. On the same measure, average per capital income in Asia was still just $717 in 1950. It had risen to $4434 in 1990 dollars by 2003.

Inflation has also been around for a long time:

Between the first century and 270AD, the silver content of coins fell from 97 per cent to 4 per cent.

Moving on from Rome, he traces the history of the Middle East, Africa and Asia in economic terms from earliest times, and brings it right up to date for the world as a whole.

One thing I didn't know: he (politically incorrectly) says most of the slave trade was organized by Muslim traders preying on non-Muslim populations:

Slavery was endemic in Africa before western contact. There was a flow of more than four million from black Africa across the Sahara in the eight centuries before 1500, an average of somewhat more than 5,000 a year (see Table 4.5a). The traffic was organized by Muslim traders from the north. The flow from north to south was negligible.

Slave traders were generally the most Islamized. Slaves tended to be taken from the acephalous, stateless, and least Islamized groups. There were two reasons for this. The Muslim states tended to have the most powerful armed forces, and they generally avoided enslaving Muslims.

I did know Western slave traders almost never actually caught slaves, who were captured and transported by Africans from the interior, but I didn't know that there was a cultural or religious aspect. I wonder if it is a much older explanation of the tensions between Muslim North and Christian/Animist south that runs right across Africa, including Cote D'Ivoire, Nigeria and former Sudan. That said, I doubt it explains slaving much further south, like Angola.

Turning back to the world as a whole, the most obvious feature is just how much wealth and incomes have risen.

Real per capita income in the west increased 2.8-fold between the year 1000 and 1820, and 20-fold from 1820 to 2003. In the rest of the world income rose much more slowly-slightly more than a quarter from 1000 to 1820 and seven-fold since then.

Capital goods per head soared.

The most dynamic feature was the explosive growth in the stock of machinery and equipment per head. It rose by a multiple of 155 in the UK and 372 in the US between 1820 and 2003, 332 in Japan after 1890. The stock of non-residential structures rose much less, 21-fold in the UK, 33-fold in the US and 89-fold in Japan.

Leisure has increased significantly in longer perspective (even if Keynes' expectations of shorter working hours today have missed the mark.)

A significant part of the augmented production potential was taken in the form of leisure. Labour input per head of population dropped by 47 per cent in Japan, 40 per cent in the UK and 23 per cent in the US between 1820 and 2003.

Explanations for Growth

He offers an explanation of these growth trends, although it seems a bit sketchy. The main ones were as follows:

1. A fundamental change was the recognition of human capacity to transform the forces of nature through rational investigation and experiment.

Europe had an advantage over technologically proficient China, however, because there was less central control.

The major difference between Europe and China was the competitive character of European publishing, and the international trade in books. This frustrated the attempts of the Papacy to achieve thought control through the Inquisition and censorship. China was a centralized state, with vestigial foreign contacts. The education of its bureaucracy was devoted to ancient classics, and they were able to exercise thought control by more subtle and effective methods than the papacy in Europe.

As for other factors,

2. The emergence of important urban trading centres in Bruges, Venice, and other cities in Flanders and northern Italy in the eleventh and twelfth centuries was accompanied by changes which fostered entrepreneurship and abrogated feudal constraints on the purchase and sale of property.

3. The adoption of Christianity as a state religion in 380AD led to basic changes in the nature of European marriage, inheritance, and kinship.

The Church's prohibition of cousin marriage made it much more likely that narrow tribal kindship groups would be broken up and loyalties would shift to broader entities like nation states. The variety of nation states also helped:

4. A fourth distinctive feature was the emergence of a system of nation-states in close propinquity, which had significant trading relations and relatively easy intellectual interchange in spite of their linguistic differences.

 

Macro measurement & Defense

Maddison also looks at the history of macroeconomic measurement. It essentially began with Englishman William Petty in the 17th century.

Macro-measurement started in the seventeenth century, but did not emerge as a basic analytical tool for policy analysts and economic historians until the 1940s. In the past 60 years there has been an explosion in the sophistication of policy analysis and the interpretation of history.

One of the most important steps in macro measurement in the twentieth century was Keynes' How to Pay for the War, published in 1940. The title is a clue. In fact, one of the most important drivers throughout the history of macro measurement, from Petty onwards, was war potential. Governments wanted to measure both their own and adversaries' potential military resources.

This was also a major driver of measurement in the twentieth century.

The main reason for the massive increase in coverage and quality of official national accounts from 1950 onwards was the realization of their usefulness as a tool of macro-economic policy. Denison, Gilbert, Kaldor, Kuznets, Ruggles, Stone, and others in the UK and US, knew from personal experience that such accounts were also an extremely important tool for resource mobilization in wartime.

In other words, much of the usefulness was war-related - and if one thinks about it, this measure of resources in many ways underlies how we still see the economy. It helped lead to a focus on economic growth, although it helped measure more than just tanks and planes.

New measures of GDP and other quantities were not universally welcomed in the economics profession, which I find very interesting as well.

This new macro-economic perspective was very different from that of Hayek and Schumpeter. The latter considered `total output a figment which, unlike the price level, would not as such exist at all, were there no statisticians to create it. We seem indeed to be faced by a meaningless heap-for most purposes, a highly inconvenient composite' (Schumpeter 1939: 484, 561).

I didn't realize there was so much opposiiton. National accounts data just seem so much like a fixed fact of life today. But the measures really only date back to the 1940s and 1950s and to particular narrow purposes.

Hedonic measures

Perhaps the most interesting single thing in the book is his deep distaste for hedonic measures of economic activity, which take into account the quality as well as the quantity of output. Maddison thinks they are "hallucinogenic" and "chaotic."

Hedonic indices are perfectly respectable in small doses, but one can be skeptical about the widespread assumption that quality changes have been so large and monotonically positive. ..

More than 40 years ago, Milton Gilbert warned that such adjustments could open Pandora's box: `In the end, they would make it impossible to construct measures of output and price changes that are useful to the study of economic growth' (Gilbert 1961: 287).

That undermining of simpler quantitative approaches may of course be why Maddison is so opposed to them. But it does not necessarily help if we have accurate measures of a misleading measure.

One of the most famous examples of the hedonic approach is William Nordhaus's measures of improvements in lighting. Maddison says of Nordhaus:

He illustrates the implications of his approach in measuring real wages. The conventional measure showed a 13-fold increase between 1800 and 1992. The `true' rise, he suggests, was between 40- and 190-fold. He derived this result by converting conventional price indices into hedonics for three economic sectors.

Maddison thinks this implies past income would have been much too low.

I estimate that US per capita GDP rose 21-fold from $1,087 in 1800 to $23,169 in 1992. An increase of 190-fold would mean an 1800 level of $122 which would be well below subsistence.

But that doesn't really follow. It just means the incomes were not commensurate in price terms. It is a matter of apples and oranges, as if we tried to measure everything today in terms of grain equivalent. People today would be consuming, who knows, ten tonnes of grain a day in Roman terms, which doesn't make sense either.

I'm very sympathetic to hedonic measurement, because it allows for shifting needs and consumption patterns. But clearly it undermines the usefulness of the standard national accounts, which Maddison is not enthusiastic about.

Overall, it's very interesting to see good quantitative measures over so long a period and have a sense of the deeper history of national accounts. But I'm reminded one has to be careful of quantitiative economic measures as well

 

Means of Production

We're talking about the fashionable neo-Marxist book Empire by Michael Hardt and Antonio Negri. I was fiercely critical in the last post. But there a few glimmers through the fog that do seem potentially illuminating.

New means of production

The most interesting thing, at least in terms of my interests on this blog, is they do recognize that the production process has fundamentally changed, and this has to have theoretical implications:

In postmodernity, the social wealth accumulated is increasingly immaterial; it involves social relations, communication systems, information and affective networks. (p259)

The Soviet Union failed, they say, because its Fordist and Taylorist model of disciplinary government could not adapt to the change in the nature of labor power.

It could not compete... because advanced technologies of communication and cybernetics are efficient only when rooted in subjectivity, or better, when they are animated by productive subjectivities. p272

The Soviet machine turned in on itself and ground to a halt, without the fuel that only new productive subjectivities can produce. The sectors of intellectual and immaterial labor withdrew their consensus from the regime, and their exodus condemned the system to death. p279

This is a broader story of a transition to a more service-oriented economy, where..

The jobs for the most part are highly mobile and involve flexible skills. More important, they are characterized in general by the central role played by knowledge, information, affect and communication. p285.

More and more labor is the "affective labor" of human contact and interaction, such as in healthcare and entertainment.

This labor is immaterial, even if it is corporeal, in the sense that its products are intangible, a feeling of ease, well-being, satisfaction, excitement or passion. p292-293

The network has replaced the assembly line.

Our economic and social reality is defined less by the material objects that are made and consumed than by co-produced services and relationships. Producing increasingly means constructing cooperation and communicative commonalities...

The concept of private property itself, understood as the exclusive right to use a good and dispose of all wealth that derives from the possession of it, becomes increasingly nonsensical in this new situation. There are ever fewer goods that can be possessed and used exclusively in this framework; it is the community that produces and, that while producing, is reproduced and redefined. The foundation of the classic modern conception of private property is thus to a certain extent dissolved in the postmodern mode of production. ..

Private property, despite its juridical powers, cannot help becoming an ever more abstract and transcendental concept and thus ever more detached from reality. p302

This is much more interesting and I like it. Of course, in many ways it is recognizing the obvious, but often that is both difficult and essential. Our economy is no longer just a matter of producing stuff. And the property rights attached to non-stuff - like patents, risk contingencies, relationships and intangibles - are much less intuitive and easy to handle effectively

Apple has been fighting again over essentially the "look and feel" of innovations, for example. Half the tech industry is besieged with patent trolls. Music DRM has proved unworkable.



 

And I've discussed before how economics is having to deal with non-rival and non-excludable goods. Much as I often complain about mainstream economics, it is grappling with these issues in a much more substantive way than Hardt and Negri, however.

Primitive accumulation (again)

Hardt and Negri also say that there has been a continuous movement in the modern period to privatize public property, from enclosures in England to privatizations.

Capitalism sets in motion a continuous cycle of private reappropriation of public goods: the expropriation of what is common. p301

This is their new version of Marxist primitive accummulation. It is possible it happens like this sometimes - like Russian oligarchs in the post-Soviet turmoil, for example.

But it's also in many cases just a silly argument. Indeed, the problem is often narrow producer groups and leftist unions appropriate public resources and run services for their own convenience. Teachers' unions appear not to care about kids (or even young teachers) , but focus on tenure and pensions which will bankrupt cities and ultimately destroy services. Margaret Thatcher privatized British state-owned industries partly because the union bosses cared more about socialist agitation than mundane things like providing phone service or reliable cars or coal supply. The unions' winter of discontent shattered public support and brought Thatcher to power.

And probably the most grotesque and hypocritical appropriation in recent years, given how Hardt and Negri stress the primacy of communications, is left-leaning Hollywood's gratuitous extension of copyright to seventy years or more. Expropriation doesn't come in a top hat and chomp cigars any more. It parades on Oscar night and holds big fundraisers for Obama.

 

Obliterating distinctions

Hardt and Negri emphasize how capitalism, and money, level all distinctions:

.. capital brings all forms of value together on one common plane and links them all through money, their general equivalent. Capital tends to reduce all previously established forms of status, title, and privilege to the level of the cash nexus, that is, to quantitative and commensurable cash terms. p326

This is true, even if it is not a new observation, and it can have negative social consequences. In their tortured way, they stress how all distinctions disappear:

Capital tends toward a smooth space defined by uncoded flows, flexibility, continual modulation and tendential equalization. p327

It thus also obliterates previous Marxist concepts of imperalism. On the other hand, it destroys the segmentation of the multitude as well, which, they claim, has been the traditional means of public administration, a version of divide and rule. So, they argue, there is more chance of unifying the multitude to overthrow capitalism.

In the end, a new notion of "commons" is the way forward, although they are not very specific.

The commons is the incarnation, the production and the liberation of the multitude. (p303).

They apparently have a recent book, Commonwealth, which deals with this, which I might actually read. I do think there is something to a broader need to evolve property rights, and what economists call public goods - although I now doubt what Hardt and Negri have to say is sensible.

Corruption

SO what is left? Empire is "corrupt" against the "generative" power of the multitude, they claim.

Here is where things go a little off-key.

Corruption, contrary to desire, is not an ontological motor but simply the lack of ontological foundation of the biopolitical practices of being. p389.. It is command directed toward the destruction of the singularity of the multitude thorugh its coercive unification and/or cruel segmentation. p391

Huh? The problem with Empire is ultimately a lack of ontological foundation?

The reason for the crisis of European civilization and its imperial practices consists in the fact that European virtue - or really its aristocratic morality organized in the institutions of modern sovereignty - cannot manage to keep pace with the vital powers of mass democracy. p375

The "pallid and parasitic European ruling class" is obsolete, they say. This is probably true. Possibly including neo-Marxist professors, who have cultural and communicative power? Although the "aristocratic morality" is potentially interesting. Europe is still fighting the ghost of the past.

Empire takes form when language and communication, or really when immaterial labor and cooperation, become the dominant productive force. .. Exploitation is the expropriation of cooperation and the nullification of the meanings of linguistic production. p385

Um? What?

" Nullification of the meanings of linguistic production" seems like an ironically self-referential phrase, like the Epimenides Paradox. It deconstructs itself, so to speak. The book certainly seems like an expropriation of clarity of language and communication.

What does the future look like?

When we look closer at how the constitutive process of subjectivity operates, we can see that the new spaces are described by unusual topologies , by subterranean and uncontainable rhizomes - by gegraphical mythologies that mark the new path of destiny. p397 ..

This task for the multitude, however, although it is clear at a conceptual level, remains rather abstract. What specific and concrete practices will animate this project? We cannot say at this point. p 399-400.

And this is the basic problem. They just can't say anything specific. The multitude will experiment, they believe. It is just the same as all the other Marxist gods-in-history and teleological inevitabilities which never came to pass. Ontological myths replace engaging with current arguments.

Mainstream economics and management and politics need plenty of critique, But please, guys, put Spinoza down once in a while. Look around you. The point of philosophy is to make us look afresh, not entrench us in ideological systems.

They do have three concrete suggestions for demands: the right for the multitude to control its own movement with global citizenship; a social wage and guaranteed income for all; the right to reappropriation of the means of production, which now means " free access to and control over knowledge, information, communication and affects". And they say cooperation will change the economy..

Cooperation annuls the title of property. p410

.. which in some form Is probably true. I read Wikinomics: How Mass Collaboration Changes Everything recently. I haven't blogged about it yet, but really enjoyed it. And we looked at Clay Shirky's Cognitive Surplus: Creativity and Generosity in a Connected Age some time ago. Both have more substantive and interesting things about cooperation and property rights than the glimmers in this fashionable leftist book.

 

Orwellian Advice

So in the end, I'm principally alienated by the atrocious prose. Leftist academics ought to be tied down and forced to read Orwell's famous Politics and the English language essay before being allowed anywhere near a laptop or source of public funding. Orwell could have been writing about this book:

As soon as certain topics are raised, the concrete melts into the abstract and no one seems able to think of turns of speech that are not hackneyed: prose consists less and less of words chosen for the sake of their meaning, and more and more of phrases tacked together like the sections of a prefabricated henhouse.

Competing ideas are a good thing. Rotten pompous prose helps no one.

I think there is a lot of potential in seeing production as now largely about cooperation and effect, even if they don't develop it much in this book. And we need to think much more carefully about how a shift to intangibles affects property rights and incentives.

But in the end, the book is a colossal distraction and failure. At best, it drops some previous leftist myths, but does its best to construct free-floating nebulous new ones, like "the multitude." It isn't capitalism or "empire" that lacks ontological foundation. It's the holy multitude.

If this is the best the left can do, no wonder they are an irrelevant rump confined to college campuses. I'll still read some other things - Zizek, Deleuze & Guitari, original Marx - but I don't see much in this stream of leftist thought so far that offers a helpful perspective on what has gone wrong with the economy.

 

 

The Untouchable Economy

...or, subtitle, "Why Americans Are Turning Against 'Stuff'" by Michael Mandel in the Atlantic.

Millennials are shifting from tangibles (cars and homes) to intangibles (education and access to data), but they are not alone. In today's data-driven economy, the business sector is moving along the same tangible-to-intangible path as the Millennials, perhaps at an even faster pace. Business spending on nonresidential structures, other than mining-related, is roughly 30% below the 2007 pre-recession highs, while investment in software is up almost 20% over the same period.

It ought to have much greater implications for how we think about the economy. An intangible economy works differently. Our time-honored intuitions about property rights and exchange and marginal cost don't work reliably.