Thursday, April 27, 2006

The politics of nothing

Often I get emails from friends who are thinking about the world we live in. I recieved this email yesterday and thought it sufficently interesting enough for it to be shared with the blogosphere.
A debate would be interesting and useful to pull this apart and see what we can find together.

More is better

Now that I am in my final year of an economics degree I am beginning to ask some serious questions about the underlying ideas of the dismal science of economics. If you have ever completed any first year economics papers, you will be well aware that every assumption that an economic model makes is utterly flawed in one respect or another rendering each model somewhat useless.
The particular model that is known most well to everyone is the one based on consumption. How does an economist know where to locate the output of his economy? At the point where consumption is maximised of course (A big thanks to Solow for this model)! That is because one of the four axioms of economics is the idea that more is better. If you consume x units of something, and if all else held constant, you then consume x + 1 units, then your satisfaction will be better greater with the secon bundle. This is a fundamental cornerstone of every economic model.

Capitalistic Tendencies

The most important requirement of capitalism is that a person can never be satisfied. Because of this, there simply is no limit to what growth can be achieved. We can keep producing more, earning more and more money, living a higher and higher lifestyle and still never really be satisfied. This is a requirement of growth under capitalism
The one great outcome from capitalism, as we are told, is choice! We have more choice now than we have ever had. More choice in food, in luxury items, and even in necessity items. Choice is one thing that we should never have to complain about in our modern societies. But for all the choice that capitalism has given us, it has failed to give us the choice of less, or further still, of nothing. For if x + 1 is better than x, how can x ever be demanded. To place demand for x in an economic system would prove very difficult because there is no incentive for an organisation to market ‘x’ (when x+1 is on the market). You don’t see too many advertisements for video players anymore. And what if instead of ‘x’, we were to suggest that we should go further, and actually market ‘nothing.’
Even if we were able to prove that ‘nothing’ did infact have some inherent value, how could we entice the great capitalistic machine to provide an incentive for firms to offer it as an option. It’s a difficult proposition for anyone to find a solution for, probably especially difficult for the modern economist, who is taught the economic cornerstones from his/her first lecture.

Option Nothing

Imagine this. You own a 1986 ford escort. Its beaten up, its green, and it aint gonna attract any girls! You watch the TV and you see advertised brand new Subaru’s with at least 10 girls in bikinis hanging off an ugly looking guy. Your lonely feeling self peers down the TV screen thinking how things could be so different, if only you had that car. What does the escort have going for it that the Subaru doesn’t? Nothing right? . . .
Don’t be so quick to fall for advertising… As chuck Blore from American advertising giant Blore incorporated admitted to, “advertising is the art of arresting the human intelligence just long enough to get money from it.” So lets start here; can you lend your brand new Subaru to your friend? Probably not . . . you’d be too scared that he would smash it up. Would you lend the Escort? Hell yes! It’s already got dents galore, what would another one harm it? This simple analogy makes the point of disconnection. Disconnection from your friends, disconnection from your neighbours, disconnection from social contact. The more possessions you have the more security you need from the very people you live beside. Car alarms, house alarms, gates, guard dogs, the list is simply endless. Whether it is self inflicted security, or external security, the result is a disconnection from the people around you!
Have we lost what really fulfils the life of a human being? Human contact is paramount to our existence and central to our happiness. How can we possibly be happy in a system that continually brings out products that will make you happier? Of course as I have mentioned, there is no incentive for the markets to make us aware of this because no growth can come from it.
(sidenote: Why is it if someone thinks they are overweight, but is of normal weight and wants to lose weight we call it anorexia, a psychological disorder; But for someone who has lots of possessions, but doesn’t feel they have much, and then buys more, we call it rational consumer behaviour? Is consumerism then a psychological disorder)

An economic model based on, well, . . . nothing

So as an economist, how can we incorporate this theory into an economic model? Firstly we would have to find a way to measure ‘nothing.’ On an individual level this could be done using a level of utility (associating utility with levels of fulfilment). However while these are helpful in MicroEconomics 101, they are somewhat simplistic and limited in that you cannot compare utilities between people (Utility levels are cardinal not ordinal). This is the very reason that growth is measured in dollar values. Its not perfect, but its all we’ve got. So how would we measure ‘nothing’ in dollar values. It seems counter-intuitive to give ‘nothing’ a dollar value. Infact it would seem to undermine the entire notion of money as a measure. But that doesn’t mean that it wouldn’t work! Rather measuring things in dollars, we could use a proxy measure, and call it something crazy like ‘cruns’ (suggestions on names will obviously be accepted). Cruns will obviously closely simulate dollars with the exception that they are slightly more abstract and therefore can give ‘nothing’ a value.

Creating Incentive

This leads me to the final problem of creating incentive for business to market ‘nothing’ as a viable choice for consumers. Surely if capitalism is “all that”, it wouldn’t struggle to incorporate ‘option nothing’ as part of its subset. The closest I have heard to an idea that incorporated ‘option nothing’ was in America (where else). Walt Disney actually charged people extraordinary amounts of money to live in a suburb that had strictly controlled advertising. In fact there was no advertising allowed. Because of this there was actually no pressure to continually upgrade your possessions. People had the option to choose nothing . . . and Walt Disney cashed in with relative success. Of course then we are back to our problem of growth, which ‘option nothing’ is not so good at accommodating. If we only thought of measuring growth differently! But that’s probably another essay.