ECON: The Affluent Society (was Dyson ) (long)
19 Jan 1999 19:38:38 -0000

[ I assume this is not a discussion of 'basics' because I'm not arguing about whether markets are good but about whether laissez faire is (a) realistically practical given real people or (b) desirable. ]

Billy Brown ( wrote: wrote:

> Growth is good. But as with most things, the more we've had of it, the
> less urgent the next bit is. Diminishing marginal returns. Decent
> housing, good food and clean water are more urgent than mansions and
> SUVs..

One should note that this is only true over short time scales. A generation that grows up with affluence level X will consider it the minimum they can live on, and try to achieve something substantially better. Also, a large fraction of society is not satisfied with anything less than the mansion - there is a wide diversity of opinion over when enough is enough.

People may have higher expectations than their parents, but they're still affluent. We are biological beings; there is a level of physical privation which has been the common fate of agricultural humans, is still common in much of the world, but which has been left far behind by most of the First World. There is a difference between not having a mansion and not having enough to eat. The urgency of growth to get basic food, shelter, and education is less than the urgency of getting the next round of goods.

And I note that if a large fraction of society wants a mansion, then they won't suffer the disincentives to work you fear from a guaranteed minimal income.

This description may fit teachers and scientists. It does not fit knowledge workers at all. Most of us don't stop worrying about money until we can afford lots of our favorite techno-toys, which means upper-middle class at least.

Teachers and scientists aren't knowledge workers?... At any rate, Galbraith's broader point was that educated people generally expect to enjoy their job. Teachers were my extreme case of people who could have done better taking a low-paying job. Programmers and executives and others get (and expect) more money, but they also expect some intellectual engagement with what they're doing. If they don't get it, they switch jobs. They do not toil, not the way factory workers do. Thus progressive income taxes fail to tax all the utility gained from a New Class job.

> people happier; most feel more secure from want, and the rich
> don't have to imprison themselves as they're doing right now in
> Brazil.

Isn't Brazil a good argument for rapid growth? Their problem isn't large income disparities, its that there are too many people who can't afford food.

I was using Brazil simply as an example of what happens when rich people are surrounded by a lot of people who can't afford food and are inclined to do something about it. Whether the people can't afford food because the rich are monopolizing income or because there isn't enough food to go around (thus requiring rapid growth), I can't say.

In more general terms, this analysis ignores the fact that the benefits of growth do not end when you have a warm bed and a full belly. Wealth can be spent to buy health, and the more wealthy you are the more health you can get. No nation on Earth is wealthy enough to provide top-notch medical care to everyone, and the best way to solve this problem is to grow as fast as possible. Growth won't remove the inequality, but it will make everyone better off than they were.

Growth (sustainable) always has benefits. The analysis did not ignore that. The analysis did not claim we should stop growing. The analysis asserts that the new material benefits are less urgent than the old benefits, and that a different benefit we can buy is economic security, such as basic, never mind top-notch, medical care.

experimented with 'totally regulated' society in various guises. I can think of no instance in which anyone has actually tried laissez faire

There's a reason that no one has tried laissez faire, which is that almost no one wants it. I quote from Hayek:

"Above all, it [the market] is a game which serves to elicit from each player the highest worthwhile contribution to the common pool from which each will win an uncertain share."

But many people now would take a lower growth of the pool in return for a more certain share. And they band together or pressure the government for relief from the vigors of pure competition. Farmers, manufacturers, workers, the elderly, the unemployed in time of depression, and more all seek ways partly to maximize their income, but in large part to make more secure the income they already have, by means of government action.

19th century America wasn't laissez faire, but it was closer, and they did make speeches about it, and it was part of the conventional wisdom, and a lot of activity went into constructing the classical liberal state, with a lot of the gov't imposed inefficiencies swept away, and balanced budgest, and stable currencies. We grew, and had depressions, and worse depressions, and grew some more, and had the Great Depression, and finally tried something else, because 25% of the population was persistently unemployed.

I predict that if any nation in the next 50 years tries something close to real laissez faire, it will be China in some enlightened despotism mode, because they have the willingness to shoot protesters. Democracies find ways to save people from losing Hayek's game.

Laissez faire might work with a Heinleinian or Randian population, in much the same way that communism could work with a truly Christian population. Real populations will probably be as likely to subvert or frustrate either.

Also, the 1% idea is completely divorced from reality. Most people don't want to work, for the very simple reason that they have other things they would rather do. If you make it possible for them to do

Wait, I thought they wanted mansions. You can't have most people having higher and higher ideas of what constitutes affluence but also have them go fishing once the gov't provides them with $8000 income.

The idea isn't to imitate the Culture where all desires are met. The idea is to provide, well, a safety net. Perhaps a negative income tax. Perhaps just generous unemployment insurance, between the US and European levels currently. Certainly not blank medical checks. Most people will still work for fun, or for 'luxuries' (more fashionable clothes, better tasting food, bigger houses, electronic toys, more drugs), or both. Some won't; we can afford it.

(He also links not trying to run at full employment all the time to avoid inflation, but I can't recreate that argument now. Full employment _is_ our safety net of sorts, these days.)

Why should we expect future economists to be any better at it than those of the 18th, 19th and 20th centuries? There has never been a time when government simply left the market alone. The governments of the 19th and 20th centuries have tried every scheme they could think of to prevent recessions and boost economic growth. At this point it is clear that such approaches don't work.

We might expect future economists to have learned from the mistakes of their predecessors, the way the classical liberals learned from the mercantilists and modern economists feel they learned from the classical liberals.

And what do you mean, approaches don't work? Since WWII we've traded low inflation and high frequency, intense depressions for (at best) steady inflation and milder recessions. Monetary policy can control inflation; deficit spending in a depressed economy can restore production.

And again, gov'ts don't leave markets alone largely because people and businesses don't want to be left alone in it.

-xx- Damien R. Sullivan X-)