The end of entitlement

Robert Samuelson writes that the public is going through a downshift in expectations that is having deeper political consequences.

Weighed down by these contradictions, entitlement has been slowly crumbling for decades. The Great Recession merely applied the decisive blow. We're not entitled to many things: not to a dynamic economy; not to secure jobs; not to homeownership; not to ever-more protective government; not to fixed tax burdens; not to a college education. Sooner or later, the programs called "entitlements," including Social Security, will be trimmed because they're expensive and some recipients are less deserving than others.

The collision between present realities and past expectations helps explain the public's extraordinary moodiness. The pandering to the middle class by both parties (and much of the media) represents one crude attempt to muffle the disappointment, a false reassurance that the pleasing past can be reclaimed. It can't.

I don't think this is true. We still have the paradox that we have more productive capacity and underlying abundance than ever before. The problem is we have less and less clarity on how to distribute it, or what we value, or what incentives are or ought to be.

What it does mean is we need a deeper rethink of economic institutions to cope with a world in which many of the things we value most are not easily traded. Government cannot deliver what people want if we have no shared vision of what people ought to want, in their own different ways. Instead, our general discourse on rights and universal rules tends to evade the question.

"..some recipients are less deserving than others" says Samuelson. That is the heart of the problem. It is a matter of ethics, not economics. The left wants universal (unearned) rights. The right wants a changing mix of pure market allocation and tradition.

Labor and Social Links

I've been working intensively on another project in the last few weeks, so blogging has been lighter here. There's a build-up of things I want to blog about and say.

I just wanted to note this column by Ross Douhat in the NYT about the decline of work, however. The transformation of work is a major theme on this blog.

If the utopia of a world without work is being achieved, Douhat says, it isn't because the upper classes can afford it and it will gradually spread down to laborers and high school dropouts. It's happening from the bottom up.

Yet the decline of work isn’t actually some wild Marxist scenario. It’s a basic reality of 21st-century American life, one that predates the financial crash and promises to continue apace even as normal economic growth returns. This decline isn’t unemployment in the usual sense, where people look for work and can’t find it. It’s a kind of post-employment, in which people drop out of the work force and find ways to live, more or less permanently, without a steady job. So instead of spreading from the top down, leisure time — wanted or unwanted — is expanding from the bottom up. Long hours are increasingly the province of the rich.

The problem with this, he says, isn't so much income or survival. People are not starving. It's lack of social integration. It's part of the wider trend of the decline of community and social links.

One could make the case that the right to not have a boss is actually the hardest won of modern freedoms: should it really trouble us if more people in a rich society end up exercising it?

The answer is yes — but mostly because the decline of work carries social costs as well as an economic price tag. Even a grinding job tends to be an important source of social capital, providing everyday structure for people who live alone, a place to meet friends and kindle romances for people who lack other forms of community, a path away from crime and prison for young men, an example to children and a source of self-respect for parents.

It's a problem of flourishing.

In a sense, the old utopians were prescient: we’ve gained a world where steady work is less necessary to human survival than ever before.

But human flourishing is another matter. And it’s our fulfillment, rather than the satisfaction of our appetites, that’s threatened by the slow decline of work.

This is an interesting take. And of course I agree that the prime question is how our institutions contribute to human flourishing, so he is going in the right direction.

But he doesn't go far enough, perhaps. There is a difference between the labor market, which is going to keep getting more productive, and a sense of vocation.

What is clearly at issue is motivation and purpose, and how you retain and encourage and cultivate them when the economy is changing. Our civil discourse has become very bad at providing that, as I've often argued , such as here.

 

The pessimism of blue elites

Here's a magnificent essay by Walter Russel Mead on us continuing theme of the decline of the "blue" economic mode and changes in the economy.

There is deep pessimism among "blue elites".

The blue vision of the future, as I wrote in my last essay, is a bleak one in many respects. If the establishment liberals of our time are right in their future vision, most of the population will be economically surplus; globalization and automation will empower a creative class on Wall Street and in Hollywood and Silicon Valley. Most of the rest of the country will be stuck in low productivity, low wage jobs as manufacturing fades and is replaced by … nothing, unless you count government benefits and food stamps. The blues think that a redistributive and regulatory state (naturally enough administered by wise and well intentioned people such as themselves) can pump enough money from the growing parts of the economy onto the plebs and the proles in the post-industrial doldrums, providing at least a degree of middle class life to the sidelined majority.

But the transition can still lead to something better, as happened when employment in agriculture collapsed. Education levels had to rise.

The task facing America today looks something like the task we faced after the Civil War. How do we manage the transition from a well-established political and social system to something more productive? Both then and now, many of the negative features of the transformation appeared first, while the benefits came slowly. The population boom and the agricultural transition drove millions into cities looking for work when there wasn’t yet enough factory employment.

It is the great question of the age. But as I keep arguing, it is as much an ethical question - what do we value? What do we reward! What is the good life? - as economic.

 

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.

 

 

 

The Fourth Great Awakening

I read Robert Fogel's The Fourth Great Awakening and the Future of Egalitarianism over the holidays, and it is a very interesting book. Fogel is a Nobel Laureate in Economics (1993) , mostly for his earlier quantitative economic history and study of the historical economics of slavery in the US. Perhaps he felt liberated to write a much more original book, published in 2000. Yet it is based on deep knowledge of US history.

He focuses on the impact of the waves of religious revival in the US on broader growth and public policy. The main challenge for egalitarianism now is not material redistribution, he says, but the maldistribution of "spiritual resources."

The agenda for egalitarian policies that has dominated reform movements for most of the past entry - what I call the modernist egalitarian agenda - was based on material redistribution. The critical aspect of the postmodern egalitarian agenda is not the distribution of money income, or food, or shelter, or consumer durables. Although there are still glaring inadequacies in the distribution of material commodities that must be addressed, the most intractable maldistributions in rich countries such as the United States are in the realm of spiritual or immaterial assets. These are the critical assets in the struggle for self-realization. p2

Traditional measures of income inequality are inadequate. They ignore consumption of leisure and improved health, for example.

They focus on a variable - money income - that currently accounts for less than half of real consumption and that in a generation may account for less than a quarter of real consumption. Such measures shed little light on the most intractable forms of poverty (those related to the unequal distribution of spiritual resources). Nor do they bear on the capacity of individuals to overcome the social estrangement that undermines their quality of life. p3

So a politics based on income transfers is exhausted. That naturally leads to consideration of the good life.

A good place to begin a consideration of the content of a postmodern egalitarian agenda is with Socrates' question, What is the good life? That was a crucial question not only for the sons of rich Athenians but for the sons of the landed rich throughout history. Freed of the need to work to satisfy their material needs, they sought self-realization in public service, military adventures, philanthropy, the arts, theology, ethics and moral philosophy. p2

Naturally, I felt a huge sense of recognition and agreement at this point, as I believe that without some sense of the good life public action is empty. Fogel adds another twist. State action cannot redistribute such spiritual resources.

Realization of the potential of an individual is not something that can be legislated by the state, nor can it be provided to the weak by the strong. It is something which must develop within each individual on the basis of a succession of choices.

The quest for spiritual equity thus turns not so much on money as access to spiritual assets, most if which are transferred and developed privately rather than through the market. Moreover, some of the most critical spiritual assets, such as a sense of purpose, self-esteem, a sense of discipline, a vision of opportunity, and a thirst for knowledge, are transferred at very young ages. P4.

This is very much in tune with what I have been arguing on this blog. The main challenges we face are more ethical than economic now, about how people can be helped realize the good life and what kinds of behavior should be rewarded. It is surprising to see such a clear statement in this vein from an academic economist - although economic historians consistently seem more heterodox and interesting than mainstream model-builders.

We will look at more tomorrow, especially his emphasis on how ethical concerns develop over time.

 

 

 

The Golden Age and the stale 1980s debates

Here's a take on Keynes' long view from an Australian economics professor. (H/t AI Daily).

Malthusian ideas of scarcity began to be contested in the late 19th century.

The idea that a combination of technological progress and political reform could produce a genuine utopia became an appealing alternative to the ‘pie in the sky’ of an afterlife. Edward Bellamy’s Looking Backward (1888), a critique of 19th century capitalism written from the imagined perspective of the year 2000, was the archetypal example of this literature.

Few utopians had a serious theory of growth, he says, but Keynes was more realistic in expecting incremental improvements in living standards over many decades.

The trouble is Keynes' vision has not been realized.

So on a first reading, ‘Economic Possibilities for our Grandchildren’ seemed prophetic. Yet, 40 or so years later, I am a grandparent myself, the year 2030 is rapidly approaching, and Keynes’s vision seems further from reality than ever. At least in the English-speaking world, the seemingly inevitable progress towards shorter working hours has halted. For many workers it has gone into reverse.

The culprit, he thinks, is market liberalism. He says

If work was distributed more equally, both between households and over time, we could all be better off. But it seems impossible to achieve this without a substantial reduction in the centrality of market work to the achievement of a good life, and without a substantial reduction in the total hours of work.

The first step would be to go back to the social democratic agenda associated with postwar Keynesianism. Although that agenda has largely been on hold during the decades of market-liberal dominance, the key institutions of the welfare state have remained both popular and resilient, as shown by the wave of popular resistance to cuts imposed in the name of austerity.

Key elements of the social democratic agenda include a guaranteed minimum income, more generous parental leave, and expanded provision of health, education and other social services.

This is the problem. He sees it as a reason to go back to 1980s-style welfare liberalism and expand already bloated public services. It is fighting out the debates of the late twentieth century over and over. It makes it far more difficult to achieve any genuine change if it becomes associated with outdated liberal leftism.

However, he does come close to a good point.

It seems clear enough that technological progress can generate the necessary productivity gains, so what is needed most is a change in attitudes to work that would make a guaranteed minimum income socially sustainable. The first is that the production of market goods and services needs to become pleasant enough that those doing it don’t mind supporting others who choose not to. The second is that the option of receiving a guaranteed minimum income does not become a trap, leading into the kind of idleness that produces despair.

The key is to make some form of minimum income "socially sustainable" without causing resentment. That is where the left's ideas of equal distribution block anyway forward. Without some convergence on ideas about the good life, most people will not want to subsidize other's "rights". Liberal ethics undermines liberal economics.

 

The Importance of Stocks and Depreciaton

 

We're looking at Double Entry: How the Merchants of Venice Created Modern Finance by Jane Gleeson-White, starting here. Book-keeping evolved into accounting as outside investors needed assurance that dividends were paid out of actual income, not capital.


Railways and factories also wore out, however, which led to another important concept: capital stock and depreciation.

The advent of the corporation raised several other key accounting issues; for example, how to calculate the declining values—due to wear and tear—of large investments in machinery, rails, rolling stock (or railway vehicles), and so on. This problem gave rise to the concept of depreciation.

It took a long time for accountants to come to terms with depreciation and properly accounting for assets. And this is still a problem, she says, when it comes to the environment since many assets are free.

This is because until recently economists have assumed that natural resources are so plentiful that any loss of them is insignificant, not worth counting. They assumed that natural resources like water, soil, forests and air were free gifts of nature.

But just as the nineteenth-century railway entrepreneurs had to learn that human-made capital—rails and machinery—wears out and must be depreciated, so some economists are beginning to understand that nature’s capital is also subject to wear and tear and depletion. Cambridge University’s Professor Sir Partha Dasgupta is one economist who is critical of the GNP and its use to judge the progress or otherwise of nations. He argues, ‘as so many economists have already done, that GNP’s main weakness lies in the fact that it is insensitive to the depreciation of capital assets’. And from an environmental point of view, this is critical.

The Modern Economy is about Stocks

This is no doubt true. But she perhaps over-emphasises environmental gaps to the exclusion of other social assets like trust or quality of life.

The larger point is we are often too focused on flows rather than stocks, including the depreciation of assets (stocks meaning an amount, like a stock of wheat, rather than an equity share like the stock exchange.) This is a basic economic distinction we often forget. As Dasgupta says, we need to be sensitive to the depreciation of capital assets.

We are much better at being conscious of flows of income rather than the valuable stock of assets which produces that income. Yet many of the great economic challenges of our era have more to do with stocks than flows of income. Many or our capital assets, such as the knowledge required to build an Intel processor or the song "Hey Jude" do not depreciate in the traditional way. They may have to be re-learned or passed on, but they do not wear out.

So what happens when the stock of our valuable assets, properly defined, gets disproportionately much larger than money income flows? In many ways, our prime objective should be to increase the stock of assets. Income and distribution are secondary factors , especially of many of the benefits flowing from those assets are free. Some of our political thought gripes towards this, especially those who think capitalism should be left unfettered to create wealth which government can then redistribute. But that often confuses income with value.

We will come back to this point another time.

Finally, Gleeson-White emphasizes again how the numbers may often conceal deeper uncertainties.

Even accounting’s most fundamental concepts and practices, such as income measurement and asset valuation, are based on uncertainties. Accountants still cannot agree on how to define income, the measurement of which remains one of the intractable problems in financial accounting theory and practice. The valuation of assets only becomes more complex and more fiercely debated as modern global corporate structures and financial instruments become increasingly labyrinthine, and income measurement, the key to determining profits and therefore dividends, is inextricably linked to this contentious, chimerical practice of asset valuation. Nor is the crucial measurement of costs an objective process: costs are also highly contestable figures and may result as much from the collusion or rivalries of firms as from any other actuality. Accrual (or corporate) accounting—the need to allocate revenues and expenses between accounting periods and to value assets and liabilities at the end of an accounting period—raises problems which have never been solved and are probably incapable of solution. Numbers can be negotiated to make management look good. In effect, ‘accounts are used to justify decisions and to excuse mistakes’.

She concludes

In an era of international capital, when our wealth is more than ever tied up in its fortunes, and at a time when corporations, governments and financial institutions are demonstrating their fallibility on a global scale, it is essential that we are aware of the somewhat arbitrary laws of account that govern them—especially because it is in the labyrinthine workings of our accounting systems that value itself is assigned. It seems that if we want to bring our infinitely voracious consumerism into line with the resources of our finite planet, we must consider giving our planet a value that the market can recognise and account for, assign a monetary value to the oceans, air, forests, rivers, wildernesses. • Delete this highlight

(My bold). In the end, we come back to the problem of economic value. There have been many major shifts in perception of costs and decisions and stocks and accountability and depreciation. Together, they make up the modern economy.

It is time for another major shift, to cope with intangibles and abundance and our reliance on those abundant stocks. Value should not be defined by arbitrary default.

 

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.

Krugman, Robots and Redistribution

There's a lot of attention to this post by Paul Krugman on long-term growth.

And this means that in a sense we are moving toward something like my intelligent-robots world; many, many tasks are becoming machine-friendly. This in turn means that Gordon is probably wrong about diminishing returns to technology.

Ah, you ask, but what about the people? Very good question. Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.

Perhaps at some stage there will be a deeper discussion of these issues. He says in a related column he will talk more about long-term growth in due course. But, he concedes, economists know very little about long-run prospects.

The great bulk of the economic commentary you read in the papers is focused on the short run: the effects of the “fiscal cliff” on U.S. recovery, the stresses on the euro, Japan’s latest attempt to break out of deflation. This focus is understandable, since one global depression can ruin your whole day. But our current travails will eventually end. What do we know about the prospects for long-run prosperity?

The answer is: less than we think.

The long-term projections produced by official agencies, like the Congressional Budget Office, generally make two big assumptions. One is that economic growth over the next few decades will resemble growth over the past few decades. In particular, productivity — the key driver of growth — is projected to rise at a rate not too different from its average growth since the 1970s. On the other side, however, these projections generally assume that income inequality, which soared over the past three decades, will increase only modestly looking forward.

It’s not hard to understand why agencies make these assumptions. Given how little we know about long-run growth, simply assuming that the future will resemble the past is a natural guess. On the other hand, if income inequality continues to soar, we’re looking at a dystopian, class-warfare future — not the kind of thing government agencies want to contemplate.

Yet this conventional wisdom is very likely to be wrong on one or both dimensions.

An additional problem is economics has very little understanding of the drivers of productivity. I don't know how many times senior officials have told me that it is a "residual of a residual" in quantitative terms.

 

Redistribution

We've looked at these issues before, such as here and here.

In particular, we looked at an excellent survey of technological developments here. Diamandis and Kotler conclude their book Abundance: The Future Is Better Than You Think with this:

Our problem is not that we don’t have enough stuff—it’s that we don’t have enough ways for people to work and prove that they deserve this stuff.

However, simply transferring money from "the rich" to the middle class or the poor is ultimately self-defeating. It undermines self-reliance and self-respect and the fact that living is more than just having stuff.

Redistribution is going to be the core issue in coming years - but even the word itself is tainted with leftist welfarism.

Instead, we need a better conception of how people earn a living, especially if the labor market is in trouble. And that means a better idea of value. And that entails some idea of the good life for people, instead of liberal neutrality whose whole point is to avoid any discussion of value.

Economics has deep difficulty with this, because value is primarily an ethical issue which is not reducible to models. Indeed, we saw recently economics as a discipline sidestepped the problem of value in the marginalist revolution by replacing it with a poorly conceived mathematical treatment of utility.

The whole apparatus of pareto-equality and welfare economics is flawed. Liberal ethics is flawed. Both lack any conception of human flourishing. Automatic equality of respect destroys any prospect of a better life, because it corrodes value. If everything is equal, there is no value.

 

The Art of Choosing

I read Sheena Iyengar's The Art of Choosing last week. It is a stimulating and rewarding book about recent psychological investigation, often by Iyengar herself, into choice. She is a Professor at Columbia, and her work seems another prime example of the renaissance of psychology has a discipline in the last ten-twenty years. We looked, for example, at Martin Seligman's work here, and Daniel Kahneman has had a major impact on economics.

Iyengar is more interested in choice than happiness or heuristics, however.

Our deep need for choice

First, she emphasizes the profound importance of a feeling of agency, of having some control, to almost all creatures. Even zoo animals exhbit listlessness and distress if they do not have agency. One might think of a zoo as a paradise for wild animals, with food and material needs taken care of. Instead, this "perfect hotel" is anything but.

In spite of the dedication of their human caretakers, animals in zoos may feel caught in a death trap because they exercise minimal control over their lives. .. Due to these physically and psychologically harmful effects, captivity can often result in lower life expectancies despite objectively improved living conditions. Wild African elephants, for example, have an average life span of 56 years as compared to 17 year for zoo-born elephants. p11, 13

There are other examples. Lower ranks of the British civil service have worse health and die younger than the upper ranks, according to a famous piece of research, as they have less control over their daily tasks. Giving residents of an old people's home more control over trivial things - plants, movie screening times, TV - leads to significantly better outcomes in health and happiness.

This is fascinating. We need a minimal sense of control over our surroundings and workflow to be happy. A utopia that takes care of material needs but allows us no sense of control or agency is likely to be make us miserable.

A society built on keeping people in captivity is bound to be unhappy. People need to feel they have choice, or they shrivel. Material abundance alone is not enough to make people happy. It is more likely to be an existence like a captive zoo animal.

Cultural differences

However, cultures differ quite radically in how they think about choice. Most cultures emphasize collective needs and approval over individual needs. The United States, not unexpectedly, is at the individualist extreme.

She contrasts this with the SIkh wedding of her parents in India. All choices were made by the families and tradition. The first time the groom saw the bride was when he lifted her veil after the marriage ceremony.

These cultural predisposotions affects workplace behavior too. She studied worldwide employees of Citibank, carrying out the same tasks. They differed significantly in the amount of choice they perceived they had on their jobs, and how much they preferred management to exert.

 

"Freedom from" versus "freedom to"

She traces such cultural attitudes back to a more fundamental difference over "freedom from" versus "freedom to", which she says Erich Fromm postulated in his 1941 book Escape from Freedom (which I read as a teenager). "Freedom from", said Fromm, is "freedom from the political, economic and spiritual shackles that have bound men,", especially others interfering with the pursuit of our goals. "Freedom to" is an ability, the ability to "attain certain outcomes and realize our full potential."

A system tending too far in either direction can limit people's opportunities, Iyengar says. Capitalism tends towards "freedom from", but not everyone will have access to all the choices available. Communism tends towards "freedom to", including equality of outcomes rather than opportunities. The problem is there is little incentive to work harder or produce more, and it requires a strong government which may become corrupted by power.

She found strong differences still endure between West and East Berliners in her research, for example.

.. people's long-held assumptions about fairness can't simply be swapped for another set of beleifs. I consistently found that West Berliners, like Westerners in general, understand the world through the lens of "freedom from." On the other hand, East Berliners, and in particular the older people, focused on "freedom to", even though communism was now only a memory for them. p65

The American dream is all about "freedom from".

People who see themselves and others as having high personal control tend to favor "freedom from", not only because it provides more opportunities to attain their personal goals but also on grounds of justice - those who put in the most effort will be rewarded, while those who slack off won;t be able to ride on anyone else's coattials. p68

Americans as a whole arguably believe more wholeheartedly in "freedom from" than any other nation.. The basic premise is no one can stand in the way of your highest aspirations, provided that you have the ambition and skills to realize them. p70

This matters because it might mean potentially fundamental and irreconcilable cultural differences in what people believe about the good life, which is a primary interest of this blog. The good life in the Confucian tradtion would be very different from the good life in the Jeffersonian tradition, so perhaps it is better not to think about it at all.

Freedom to what?

I don't think that's true, though. The fact of abundance, the end of the struggle for material survival, is a challenge to every culture, whether one contronts it on an individual or social level. We face "freedom from" the traditional limits of material and social scarcity. That is a massive change from the lot of humanity for all the thousands of generations before we solved the "economic problem".

Since the 1960s, many of the traditional limits in society have been lifted. What have we achieved with it? TV and the welfare office.

We have abundance. Then the question is - what do we actually want? And "Freedom from" in isolation doesn't say anything at all about that. It suffers the traditional liberal blindspot about where preferences and tastes and wants and desires and pleasure actually come from.

How do people find what they want, especially when older cultural institutions like the churches are in decline? What cultural influences or standards influence what people want to do with their lives after it becomes genuinely a matter of choice? Iyengar doesn't go into this.

For example, we looked some time ago at economist Tibor Scitovsky's work. People want the right level of stimulation, he argues, but it has to be genuinely novel stimulation, not simply quantitatively more. How do we achieve a system where there is more genuine choice, rather than people running faster and faster on hamster wheels for more of the same?


But at the same time, simply accepting traditional or collective notions of what "freedom to" means seems alien to our tradition in the West, and at risk from technological and cultural change. There is an impoverished group of choices for "freedom to".

In the past, "freedom to" has often meant spoilt aristocrats fighting futile dramas of status and prestige and honor, or rich trust fund kids subsiding into drugs and nihilism. It has meant religious extremism and monastric austerity and self-denial. At present, it often means crystal meth in small towns and people thinking of the office cubicle as a second home. In practice, it can lead to alcoholism and divorce and loneliness and pursuit of celebrity. As John Stuart Mill once pointed out, much rests on the quality of what we want.


There is, in fact, a longer history to these ideas. "Freedom from" is analagous to "liberty", whereas "freedom to" is more consonant with older ideas of "freedom", where being free has a positive meaning. (This reminds me of one of David Hackett Fisher's books, Liberty and Freedom: A Visual History of America's Founding Ideas (America: A Cultural History)which I must look at again. ) America was at the forefront of liberty in the eighteenth century, with lingering social consequences. It ought to be at the forefront of what freedom means now.

Everyone has to answer the question of "what next?". Perhaps the Woodstock Festival or the ABC Fall Line-up or the Google free snackbar in their Silicon Valley offices is the highest point people will ever achieve. Perhaps not. We do not discuss what we should aspire to any more, beyond egailtarianism.

 

"Freedom to" is not necessarily egalitarian or traditionalist

Iyengar's conception - and the traditional view - of "freedom to" is too limited. "Freedom to" is not necessarily socialist or egalitarian. It is not necessarily about minimal provision for all, or Rawlsian maximin welfarism. After all, we've seen that Aristotle's account of the good life has been criticized since for being so unconcerned with equality.

Instead, I think this is an example of where we have taken such a wrong turn. As soon as any suggestion of material sufficiency or abundance has appeared, the first response has been equal distribution. It seems to set off an egalitarian mania, in terms of welfarism and rights and taxation. Yet egalitarianism is not the only vision of the good life, or indeed, a particularly inspiring or just one.

There are deep potential problems with "freedom to", particulalty if people are coerced into a state vision of what it means. But once "freedom from" has been achieved, the only alternative to more discussion of "freedom to" is an unthinking default socialism or nihilism. We need a new conception of "freedom to" that will also correspond to an answer to the conundrum of "value" in economics which we were discussing recently.

I think that has to be centered on people developing their skills and capacitiies to their full potential, and that has to be connected to a conception of virtue and the good life.

We'll look at more of the book tomorrow.

 

 

 

No flying cars, but there is still progress

Virginia Postrel writes that a spate of gloom about the rate of technological innovation is wrong. People lament the fortieth anniversary of the moon landings.

“You promised me Mars colonies. Instead, I got Facebook,” reads the cover of the current issue of MIT Technology Review. In an essay titled “Why We Can’t Solve Big Problems,” editor Jason Pontin considers “why there are no disruptive innovations” today.

But we hardly notice many of the improvements around us, she says.

The world we live in would be wondrous to mid-20th-century Americans. It just isn’t wondrous to us. One reason is that we long ago ceased to notice some of the most unexpected innovations.

Forget the big, obvious things like Internet search, GPS, smartphones or molecularly targeted cancer treatments. Compared with the real 21st century, old projections of The Future offered a paucity of fundamentally new technologies. They included no laparoscopic surgery or effective acne treatments or ADHD medications or Lasik or lithotripsy -- to name just a few medical advances that don’t significantly affect life expectancy... The glamorous future included no digital photography or stereo speakers tiny enough to fit in your ears.

 

"More Heat than Light": the failure of modern economics

I'm going to turn now to Philip Mirowski's More Heat than Light: Economics as Social Physics, Physics as Nature's Economics, which is a quite devastating critique of mainstream neoclassical economics.

The heart of modern economics, he argues persuasively, was lifted wholesale from physics in the late nineteenth century. The trouble was that the main figures of the marginalist revolution, such as Walras, Jevons and Marshall, didn't quite understand all the math they imported into political economy.

The neoclassical founders almost all came from an engineering or natural science background. But they had a limited grasp of the state of the art of physics even at the time. Above all, says Mirowski, they failed to understand the importance of conservation principles in the math. To accurately measure change, something must stay the same. That means most of the edifice of neoclassical economics is based on stale physics contaminated by basic errors.

 

Substance and fields

What happened was basically this. Natural scientists struggled in the early nineteenth century with ideas of heat and motion, imagining fluids or ethers or substances. By the 1870s, that had given way to a unified view centered on energy, and the conservation of energy as it was transformed from one kind to another. Instead of fluids or other kinds of substance, physicists now thought of fields and forces, and worked out the vector math of kinetic and potential energy.

The heart of neoclassical economics, says Mirowski, is that economists replaced energy with utility in the same equations, and lifted the framework wholesale. The marginalist revoluton paralled the revolution in physics in preceding decades. Classical economists saw Value as a substance, such as the equivalent of wheat for the physiocrats or the labor theory of value for Ricardo and Marx. But for neoclassicals, Value was a field, like electromagnetism in physics. Kinetic energy was essentially spending and income; potential energy was utility.

He quotes several of the major marginalists who explicitly acknowledged that this is how they thought. But later economists mostly forgot these origins. The discipline has never been that historically self-conscious.

There were two main problems with all this, however. First, without a conservation principle, the math didn't work. Conserving energy implied income and utility were a constant - so essentially the same thing. That would mean utility would be superfluous as a separate measure to money, which was not at all desirable. The point was often lost in a technical debate about "integrability". Leading physicists tried to explain the point to economists, who appeared to have been mostly baffled and nonplussed at the argument.

Secondly, physics moved on from its 1870-vintage "proto-energetics" state, as Mirowski termed it. The second law of thermodynamics implied entropy was always increasing, so interactions were not easily reversible. Special relativity, general relativity and quantum theory all upset the mechanical "Laplacian dream" of 1870s physics, bringing frames of reference, probability, indeterminacy and the role of the observer into the picture. Symmetries and conservation principles could be broken. Matter could decay. Particles could pop in and out of existence. In contrast to notions of inherent "scarcity", the whole universe might be a "free lunch", something which came from a temporary variation in nothing.

None of these could easily be incorporated into the neoclassical framework. However, economists insisted all the more stridently that they were pursuing disciplined science, in contrast to sociologists or anthropologists, while actual scientists were increasingly doing something quite different.

As long as the Laplacian Dream was their dream, they clutched neurotically at their portrait of persons as irrotational mental fields suffusing an independent commodity space, as science ebbed ever further away toward a world subject to change, diversity and indeterminacy, and at one with the observer. P275

And the outcome?

In brief, the practical dissolution of the energy concept in advanced twentieth-century physics has painted neoclassical economics into a corner. p388

Mirowski wrote the book in 1989. Of course, the metaphor of utility as (potential) energy looks even more strained today. We now know that the visible universe of 1870s physics is only 4% of the universe. The rest is dark matter and dark energy that we cannot as yet observe and don't understand.

So what? Some mainstream economists concede to his argument about the origin of the neoclassical model, notes Mirowski, but they claim it is not relevant to the subsequent evolution of the discipline.

But it is. They still want the appearance of science, while being stuck with a model which is increasingly divergent from science in reality, he claims. To talk about analogies to entropy, said Samuelson, for example, is always the mark of a crank. But Mirowski points out that Samuelson frequently published articles with tenuous links to physics himself. Indeed, the key to Samuelson's career was maintaining the appearance of scientism.

Economists have produced various ad-hoc conservation principles in the twentieth century, according to Mirowski, "but in the final analysis this is all one big shell game, with the offending conservation principles passed from one assumption to another." p274

 

Production

The metaphor of utility as an energy field is too embedded to be given up by neoclassical economics, he says The trouble is it is also a metaphor of instantaneous exchange, and as such it has proved consistently difficult to reconcile with production, which had been the focus of classical economics. Classical economics thought that value was created in production, circulated in trade, and consumed in consumption. Neoclassical economics was focused on exchange, and found it hard to explain production at all.

That inconsistency explains a proliferation of production functions in postwar economics, and difficulties with temporarily and the existence of firms through time.

Economists have effectively tried to reinvent a substance theory when it comes to production, says Mirowksi. But this is bound to be inconsistent with utility as a potential energy field. So the profession has not been able to settle on a satisfactory answer.

The situation was embarrassing, but no neoclassical was willing to come right out and say that production was superfluous or irrelevant in their scheme of things. (Lionel Robbins came the closest). p272

Scarcity

There are also implications for scarcity. The idea of scarcity as the heart of the economic (and human) condition was largely an artifact of the neoclassical approach, he says.

Prior to that time, scarcity as some sort of primordial state of mankind did not play any signficant role in the value theory of classical political economy. Only with the dominant impression that Nature enforced a general state of dearth, say, rather than the physiocratic notion of Nature's bounty, could it become possible to even think of economic equilbrium as a state of psychological counterpoise, hemmed in by the urgent necessity to clear markets in a state of stringent limitations. p240

This caused obvious problems.

The metaphor of utility as potential energy was predicated upon a Weltanschauung of a closed, bounded system that exemplified the natural state of mankind as enduring ineluctable scarcity. If and when production was to be introduced into this morality play, it had to be done in such a way as to prevent the contravention of the scarcity principle, all the while maintaining the field theory of value. p293

Of course, I think this is fascinating given I think one of our main challenges now is thinking through the implications of abundance.

Keynes, he says. succeeded in introducing a kind of value substance in the guise of "national income". That allowed the idea of an economic process to be reintroduced. There has been an immense effort in recent decades to link macro with rational choice "microfoundations." But this is doomed to failure, says Mirowski.

Keynes generated a theory of an unstable economic process by the instrumentality of his reversion to a substance theory of value, a tactic that allowed the joint conceptualization of production, growth and the passage of time in (relatively) internally consistent manner. In contrast, it is the avowed intention of the microfoundations school to renounce all value substances and to recast all macroeconomic analysis in the format of production and utility fields. It is precisely this choice that prohibits the logical modeling of process in priduction, in growth, and in exchange, as explained earlier in this chapter. The field metaphor cannot represent a circular economy where outputs become inputs and so on, ad infinitum. It cannot specify precisely what it is that grows in an economy. p346

Fields are just not suitable when time is involved.

.. the formalism of the field is useful only in cases where one can safely abstract away all considerations of process and the passage of time. p346

Utility

Mid-twentieth century neoclassical economics would have found an alternative to utility if it could, he says. The mainstream forgot how widespread concern about utility had become in the profession before the second world war. Mirowski quoted Viner as saying economists' understanding of utility was comparable to "the knowledge of heat prior to the discovery of the thermometer." It could not be satisfactorily measured. There had always been concern at how locating value in a purely mental framework came close to idealism or solipsism.

The development of the indifference curve approach and Samuelson's theory of revealed preference were not durable responses, either, and only served to obscure the origin of the utility metaphor. Revealed preference was not empirically tractable, for one thing, and confused preferences and behavior.

In the absence of the metaphor of utility as nineteenth-century potential energy, there is no alternative theory of value, no heuristic guide to research, no principle on which to base mathematical formalism, no causal invariant in the Meyersonian sense, and most threatneing, no basis for the claim that economics has finally become scientific. p368

So what does this lead to? There is, Mirowski says, no scientific method that can guarantee economics' scientific status.

This lesson is the legacy of the decline of positivist philosophies of science in the late twentieth century. Juxtapose this fact with the hypothesis that economic research has always met with the greatest difficulties in establishing the credibiliy of its results and fending off charges of charlatanism and quackery. p357

It is hard to revise the neoclassical framework without undermining it. New approaches do not have that problem. This means, he says, neoclassical economics will be vulnerable to new contenders for the role of social physics.

Theories of Value

And is there an alternative theory of value? Mirowski says there are two main alternatives. One is to deny any separate value, rarely advocated, but as represented by someone called Samuel Bailey (who I have never heard of).

This position argues that no economic phenomenon is conserved through time, and therefore scientific analysis is impossible. Whatever one might think of the truth of this option, it should be clear than the nihilism inherent in the program assures that in this instance there can be no legitimate research program called economics. p400

The other alternative is a "social theory of value", he says, based not on scientific or social metaphors , but in social institutions such as accounting conventions or property rights.

I doubt myself whether this is true. I imagine evolution is the main contender for an alternative scientifc framework, together with the notion of adaptability and "fitness" of some kind or another.

Conclusions

Overall, it is a very bracing read. It seems, at least to me, highly persuasive - but I would want to read some reviews and responses to make sure I am not overlooking flaws in Mirowski's own analysis. .

What it underlines is that utility and scarcity were chosen not so much because of their psychological or social accuracy, but because the math "worked". And if the math worked there was more scientific respectability. I have always had the firm impression that this was the driving force of major parts of the discipline, which is likely the main reason I did not become an academic economist. It did not ring true. It was about the aesthetics of models rather than genuine insight. It was about a particular quasi-religious view of rationality rather than solving problems.

The book is also highly illuminating , not to say shocking, about the origins of utility in modern economics. I've often talked before about how ethical theory went off the rails in the eighteenth and nineteenth centuries, dropping the older tradition of the virtues and the good life for a more utilitarian, neutral and welfarist approach. Mirowski excavates a much deeper layer of intellectual history underlying current economics. It was not a matter of an import from Bentham. It was an import from physics, and just more or less happened to be called utility.

The metaphor of potential energy as a utility field locked economics into an increasingly less productive path for a century - and to a large extent still does. I knew most of the arguments about indifference curves, production functions and revealed preference, of course, but I was much less familiar with the intellectual history of the arguments. It is fascinating. And disturbing.


Perhaps most of all, it shows how value theory is the great unsolved problem at the heart of economics. That is what I have been grasping toward in my own terms on this blog. To understand the future of the economy , we have to be back up into ethics and the question of the good life and human flourishing. That, after all, is the only place a valid notion of value can come from.

 

Welfare and the Good Life

 

We're looking at Charles Murray's Coming Apart: The State of White America, 1960-2010, starting here.

Against the European Welfare model

The connection between the four basic social institutions and happiness leads Murray to argue for American exceptionalism, as against the European welfare model.

The tacit assumption of the advanced welfare state is correct when human beings face starvation or death by exposure. Then, food and shelter are all that count. But in an advanced society, the needs for food and shelter can be met in a variety of ways, and at that point human needs can no longer be disaggregated. The ways in which food and shelter are obtained affects whether the other human needs are met.

People need self-respect, but self-respect must be earned—it cannot be self-respect if it’s not earned—and the only way to earn anything is to achieve it in the face of the possibility of failing.

This is of course a version of what I have talked about before, a change in needs as we rise up Maslow's hierarchy. The welfare state ramified in the 1960s as one response to abundance. Given sufficient wealth, the main political drive has been towards equal distribution rather than new flourishing and possibility.

Upper class people still generally practice these four institutional virtues, he says. They are much more likely to be married, see a job as a calling and work hard, practice religion, and believe others can be trusted. In a sense, getting ahead requires them.

The new upper class still does a good job of practicing some of the virtues, but it no longer preaches them. It has lost self-confidence in the rightness of its own customs and values, and preaches nonjudgmentalism instead.

He thinks this view, nonjudgemental "niceness", is living on borrowed time, however, as science produces more results which refute it.

Here are some more examples of things I think the neuroscientists and geneticists will prove over the next few decades: Human beings enjoy themselves when they are exercising their realized capabilities at the limit of those capabilities. Challenge and responsibility for consequences is an indispensable part of human motivation to exercise their realized capabilities at the limit of those capabilities. People grouped by gender, ethnicity, age, social class, and sexual preference, left free to live their lives as they see fit, will produce group differences in outcomes, because they differ genetically in their cognitive, psychological, and physiological profiles. Regardless of whether people have free will, human flourishing requires that they live in an environment in which they are treated as if they did.

So he thinks it will become obvious that nonjudgemental welfarism will be understood to undermine the crucial institutions of society.

The institutions surrounding marriage, vocation, community, and faith will be found to be the critical resources through which human beings lead satisfying lives. It will be found that those institutions deteriorate in the advanced welfare states for reasons that are intrinsic to the nature of the welfare state. It will be found that those institutions are richest and most robust in states that allow people to work out their lives on their own and in company with the people around them.

Putting it together

So what do we make of this? As a rule I consider libertarianism a horrible mistake. But Murray is a strange kind of libertarian. He is not so much arguing for the market and voluntary Ayn Randian contractualism, as strengthened independent social institutions.

He calls for an emphasis on virtue, which I like, but it in practice he means strengthening his four core institutions rather than the Aristotelian virtues as such. It is sociology more than ethics. He does not have much of the rest of virtue ethics, such as the golden mean, or an emphasis on the multiplicity of virtues.

What he does have is a kind of sociological vision of the good life, of flourishing, which I think makes him divergent from full libertarianism. Flourishing for him means strengthening those four institutions and reducing the role of government and bureaucracy in life.

I think this is what my friend, who I mentioned at the beginning of the post, was hostile to. Murray says people have to make their own choices in life, but his view is much less sympathetic for radical innovation in lifestyles. He believes in marriage, in standard jobs, in the churches, in stability.

But there is a basic confusion here. People do not work out their lives on their own, or even just in the company of those around them. They do so in the context of an ethical vision of the good life, of what contributes to happiness. We do not start off from year zero every time we make a decision.

Government and bureaucracy cannot run our lives for us. That much is true. But we still need a conception of the common good. Traditional libertarianism does not do that. It is just about process. Murray's distaste for government means he throws much of the possibility of common culture out as well.

I've said a number of times I think the debate between government and the market is a stale 20th century debate. Instead, the real issue is what we do about abundance and what flourishing means. Murray contributes some hard statistical evidence to that question, about the value of social institutions. But it correlation, rather than explanation.

It is a good argument against welfarist government. But it does not make any case for the positive possibilities of abundance, or how institutions need to adapt. What becomes of work if the demand for medium-skilled jobs is being hollowed out, for example? How do you promote social trust?

America is about new possibilities of freedom - and what that means substantively when material necessities are met.

 

 

Coming Apart

I read Charles Murray's Coming Apart: The State of White America, 1960-2010 the other day. Murray, of course, is controversial. I had lunch back in late spring with a liberal friend from work who mentioned the book in passing - and spluttered in outrage. I wasn't sure why. My friend didn't give arguments, but radiated hostility to the book. So I decided I should read it at some point, although I looked at Murray before, here.

Murray repeats and extends his arguments in the book, with much more data. He argues that America is increasingly not divided by race, but by class. Hence he uses statistical evidence to demonstrate massive declines in social institutions among whites since the early 1960s (specifically, the date Kennedy was assassinated in Dallas, marking the end of an era), without needing to consider any racial differences or stereotypes about an underclass.

THIS BOOK IS about an evolution in American society that has taken place since November 21, 1963, leading to the formation of classes that are different in kind and in their degree of separation from anything that the nation has ever known. I will argue that the divergence into these separate classes, if it continues, will end what has made America America. ..

It is not the existence of classes that is new, but the emergence of classes that diverge on core behaviors and values—classes that barely recognize their underlying American kinship.

He has a marked libertarian view, but with a conservartive slant. Government is the enemy because it saps vitality out of the other institutions of society, the "little platoons" as Edmund Burke would have called them.

But the American project was not about maximizing national wealth nor international dominance. The American project—a phrase you will see again in the chapters to come—consists of the continuing effort, begun with the founding, to demonstrate that human beings can be left free as individuals and families to live their lives as they see fit, coming together voluntarily to solve their joint problems.

The most interesting thing by far is his discussion of the emergence of a new elite university-educated upper class which is heavily clustered into a few narrow districts, the "SuperZIPS". The value of brainpower started rising sharply in the postwar years, he says, as the economy developed from agriculture and manufacturing and towards more sophisticated services and technology. More people, and smarter people, went to college.

The average Harvard freshman in 1952 would have placed in the bottom 10 percent of the incoming class by 1960. The same thing happened throughout the college system.

And the graduates of selective colleges naturally associated with each other.

The human impulse behind the isolation of the new upper class is as basic as impulses get: People like to be around other people who understand them and to whom they can talk. Cognitive segregation was bound to start developing as soon as unusually smart people began to have the opportunity to hang out with other unusually smart people.

The shift in the upper class was dramatic and swift, with consequences that we are still feeling today. The new upper class is very different to the past, he says. He uses alumni data from Harvard and Yale, among other sources, to show that a huge proportion of the graduating classes live in just a few upscale suburbs and cities across the continent. Unsuprisingly, there are clusters in New York, Washington, Boston, San Francisco and LA.

The new upper class is liberal, but not notably more so in most of the country. It is very much the four principal major cities which have very liberal upper classes.

They have increasingly little exposure to the mainstream of American life.They are isolated, mostly talking and interacting just with each other. (I of course live in one of those "superZIPS" in Manhattan).

That is not an argument for turning the clock back, he says.

..I have described the America of 1960 in ways that have sometimes sounded nostalgic. But if a time machine could transport me back to 1960, I would have to be dragged into it kicking and screaming. In many aspects of day-to-day life, America today is incomparably superior to the America of 1960.

The increased presence of brainpower in the upper reaches of society starting in the 1960s made a major difference in daily life:

That brings us to the timing of changes in the American standard of living. From the early 1960s to the late 1970s, not much changed in the technology of daily life. ... Then things took off. Beginning around the mid-1970s—the appearance of the Apple II in 1977 is a good symbolic opening—the cascade of changes has been unending. They range from the trivial (it was still difficult to get a really good cup of coffee or loaf of bread in most parts of America in the late 1970s) to the momentous (the Information Revolution is rightly classified alongside the Industrial Revolution as an epochal event). The design, functionality, and durability of almost any consumer product today are far better than they were in 1960.

The social changes are not simply a product of wealth, however. Taxing the upper classes to achieve greater income equality would make little difference in behavior or culture.

The new-upper-class culture is not the product of great wealth. It is enabled by affluence—people with common tastes and preferences need enough money to be able to congregate—but it is not driven by affluence. It is driven by the distinctive tastes and preferences that emerge when large numbers of cognitively talented people are enabled to live together in their own communities. You can whack the top income centile back to where it was in the 1980s, and it will have no effect whatsoever on the new-upper-class culture that had already emerged by that time. Places like Marin County are not fodder for cultural caricature because they are so wealthy.

This is very interesting.

Education and cultural change

He essentially says the cultural change is a natural outcome of sorting and acculturation by higher education. As I see it, perhaps it is a shift in society in a more priestly direction - the triumph of the brahmins, as opposed to the warrior, merchant or lower classes in the traditional fourfold Indian classification , for example.

In the past, a military aristocracy has often dominated society. Now the ruling class is the one which is more skilled at symbolic manipulation and arguments and moral deliberation - traditionally the role of the priests. We have a secular religion with its own upper class factions.

We have discussed before whether the massive social changes of the 1960s came about because humanity for the first time was not impelled by immediate survival needs. The possibility of abundance caused an outbreak of aquarian utopianism, followed by backlash.

Part of it was also technological, like the new possibilities opened up by the contraceptive pill.

And part of it was the rise of a more intellectual, educated upper class.

I'm not sure that higher education is inherently liberal or egalitarian in orientation. Rather, it was in a particularly liberal and secular phase in the 1960s and since. Harvard started off as a training center for the hardline Calvinist ministry, after all. The Jesuits have been famously highly educated, and not particularly liberal. The same applies to Chinese scholar-officials educated in the classics, or many Jewish Rabbis or graduates of the old Islamic Universities like Al-Azhar.

But having an upper class that did pass disproportionately through a few key institutions means it is likely to be stamped with the ethos of those institutions at a point in time. Most of the people would never have attended those institutions had they not become meritocratic. Hence there was natural self-interest in reinforcing those values.

We'll look at more of the book tomorrow.