| Happiness | = |
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Altruism is incomprehensible to him. He weighs every action in the scales of self-interest and pursues only those that register personal gain. When on occasion his behaviour appears unselfish or co-operative, it will be found on closer inspection to be prompted by far-sighted, "enlightened" self-interest. But such behaviour is relatively rare. The beady eyes are characteristically myopic, preoccupied with the spotting of bargains close at hand. He is a nasty, egoistical little fellow, and most of us are thoroughly ashamed of him.
He has three common English names: utility maximizer, profit maximizer, and economic man; and for one so pre-eminently qualified to look after himself he has acquired a surprising number of volunteer advisers. Economists are altruists with a professional interest in selfishness. They offer their services, generally for a quite modest fee, as detached scientific advisers on optimizing strategies for other people's value judgments. As Nicholas Kaldor pointed out over forty years ago, the efficacy of their advice is crucially dependent on homunculus economicus behaving true to form: "The scientific status of the economist's prescriptions is unquestionable provided that the basic postulate of economics, that each individual prefers more to less, a greater satisfaction to a lesser one, is granted." (1)
Although the economist's diagnoses and prescriptions are often of bewildering mathematical complexity, their essence is quite simple. It is summarized by Professor Paul Samuelson in Economics, the best-selling economics textbook of all time. Happiness, looked at scientifically, is but a ratio:
He notes that Thoreau once recommended people to try to reduce the denominator, but goes on to dismiss this as old-fashioned advice that "now gives way to insistence on increasing the numerator of material real income." (2)
Happiness =
Material Consumption
Desire
Off duty most economists are much more likeable than their patrons, and occasionally embarrassment over the company they keep breaks through the hard professional facade. Keynes tried to clear his conscience in a much-quoted essay written in 1930, entitled Economic Possibilities for Our Grandchildren (3). In this essay he tried to persuade us that homunculus economicus really is hungry, and if only we keep feeding him exponentially increasing amounts until about the year 2030 he will stop pestering us:
I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue -- that avarice is a vice, that the exaction of usury is a misdemeanour, and the love of money detestable, that those walk most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pick the hour virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin.But although this end was in sight for people with vision as acute as his, the road to it, he warned, would be rough:
But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair: for foul is useful and fair is not. Avarice and usury and precaution must remain our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.Keyne's message was remarkably like that of Marx: although the means will be nasty the end will justify them. Although less dogmatic than Marx about the inveitability of the end, Keyunes nevertheless displayed great confidence in the power and momentum of compound interest:
The pace at which we can reach our destination of economic bliss will be governed by four things -- our power to control population, our determination to avoid wars and civil dissensions, our willingness to entrust to science the direction of those matters which are properly the concern of science, and the rate of accumulation as fixed by the margin between our production and our consumption; of which the last will easily look after itself, given the first three.Both Keynes and Marx, and their ideological descendants, are, unfortunately, utterly vague about the means by which all human souls everywhere will be transformed, as the culmination of the process of material accumulation, from avaricious and usurious capitalists, or from hardened proletarian dictators, into "delightful people". Lenin, some thirty years after Marx's death, had to report that no progress had been made on his side of the ideological fence towards the solution to this puzzle. Nor did he expect much progress: "By what stages, by what practical measures humanity will proceed to this higher aim -- we do not and cannot know."(4)
Such embarrassments were but a minor distraction to economists of Keynes' generation. Economists even then were in the habit of discounting future costs and benefits at the prevailing interest rate so the problem of a transformation that lay at least 100 years in the future did not loom large in their calculations. But now, fifty years on, the problem is beginning to look a little larger and is becoming, for some ecobnomists, a more central concern.
Although most of the world still leads a mean and precarious existence there is now a multitude sufficiently numerous and sufficiently affluent to serve as data for a preliminary test of the Keynesian hypothesis, that if only we feed him enough there will come a time when the homunculus will become contented, generous, cultured and delightful. The evidence thus far is mixed, or rather interpretations of the evidence conflict.
Although some people who live in castles and fly in Concordes are of the opinion that they are more delightful than people who do not, the interpretation of the majority who do not is that they are not. And since the chances of everyone enjoying a castle/Concorde life-style even a hundred years from now seem slight, there is growing uncertainty among the ranks of professional economists about how and when, and even whether, the Keynesian state of economic bliss might actually be achieved.
There is no shortage of prominent economists to be found expressing similar anexieties. There is a burgeoning literature on the topic. Perhaps the most concise and representative expression of the current economic angst is to be found in the Dai Dong declaration, "Towards a Human Economics." This is a statement sponsored by twenty-one prominent economists from seven different countries, which, the sponsors hope, will be signed by thousands of other economists throughout the world. (5) Their analysis is worth examining for the reason given in the declaration itself: "The power of the economists and therewith their responsibility, has been very great indeed."
Their broad view of the problem is set out in the declaration's first paragraph: "The evolution of our global household earth is approaching a crisis on whose resolution man's very survival may depend, a crisis whose dimensions are indicated by current rates of population expansion, runaway industrial growth, and environmental pollution, with their attendant threats of famine, war, and biological collapse."
This state of affairs, they point out, has been arrived at not through the operation of inevitable laws of nature byt through a history of decisions in which economists, particularly recently, have been influential participants. What is needed now, they argue, is "a new vision."
According to the declaration, the principal defect of the old vision is that "the economist's traditional measure of national and social health has been growth." This vision, permeated by a spirit of confident purposiveness, can be found elaborated in libraries full of economic texts and journals. The old economists knew where they wanted to go and, on the whole, were confident that they knew how to get there. The old vision is characterized by Keynes' confidence that "mankind is solving its economic problems." (6) This confidence is exemplified by the conclusion to an early edition of Samuelson's Economics (1955) written before he had begun to worry about things like existential vacuums. It describes the kind of state of which the economist could be proud to be a citizen:
We may conclude on a note of profound optimism. The American economy is in better shape in the 1950's than it ever was in the past. At the present time, possessing only 6 percent of the world's population, it produces some 40 percent of the world's income. And with all its defects, it has behind it a record of the most rapid advance of productivity and living standards ever achieved anywhere. Our mixed economy -- wars aside -- has a great future before it.
In view of the increasing publicity given to anti-growth arguments, it is easy to forget how very solidly entrenched such attitudes still are. Economists such as Professor Beckerman, author of a book entitled In Defence of Economic Growth, who are prepared to defend growth explicitly, may well now be in a minority among academic economists. But the objective of growth remains at the core of the economic policies of every major political party in this country, of the Confederation of British Industries and the trade unions, and is even enshrined, as Article 2, in the Treaty of Rome.
The purposes of the new vision economics are decidedly less clear. We are told in the declaration that we must not succumb to gloom and despair. We must not be sucked into the existential vacuum of hopelessness. We must strive, we are told, for a world in which it is possible to live with "dignity", "hope", and "justice"; we must have "a new order of priorities", "reshaped values" and "a more humane" vision. But above all we are told -- and this is the only area in which the declaration's vision is specific -- that economists, because they are important and influential people, have a major role to play in the reordering and reshaping involved in "the management of our earth home."
The distinguishing virtue of economics which, according to modern practitioners, entitles economists to such a prominent role in managing the world, is described by David Pearce, one of the sponsors of the Dai Dong Declaration: "Economics, more than any other discipline, proceeds on the basis of setting out what -- to use the jargon -- we would call an 'objective function' -- i.e. saying what we aim to maximize or achieve -- and looking at problems in this light." (7)
The term "objective function" seems to have become fashionable in the jargon of economics with the development of linear programming, but the ideal of maximizing some unitary index has been around in the subjet for some time. It is to be found in Pigou's discussion (8) of the nature and limits of the subject: economics, according to Pigou, was the study of that part of welfare that could be brought into relation with the measuring rod of money. Measured with this rod, that which was biggest and best.
Pigou conceded that economic welfare was not the whole of welfare, and that the boundary between the economic and non-economic was a murky one. He also conceded that on occasion the economic and non-economic could be in conflict. He concluded, however, that as a general rule it was safe to proceed on the presupposition that "the effect of an economic cause on economic welfare will hold good also for the effect on total welfare." Further, "in all cases the burden of proof lies upon those who hold that the presumption should be overruled." In other words Pigou was saying that economics should proceed on the presumption that God and Mammon are the best of friends and that it is up to those who feel otherwise to disprove it.
This view remains characteristic of up-to-date economics. Keynes elevated the solution of "the economic problem" to the status of a precondition of improvements in non-economic welfare; only after economic necessity had been eliminated, he argued, could society afford to abandon the measuring rod of money as its standard of progress. Only after Mammon had been appeased could man get on with the "real, his permanent problem" of how to live "wisely and agreeably and well." But most commonly the economic and non-economic have been seen as nothing but the most congenial of companions. This close friendship was viewed by Kaldor as the very foundation of scientific economics.
The statement of Kaldor's, quoted above, was offered as a refutation of Robbins' argument that the scope of that part of economics that could reasonably be called "scientific" was severely restricted by the impossibility of making ineterpersonal comparisons of utility (9) -- there is, for example, no yardstick that can be used to compare a starving refugee's enjoyment of a bowl of rice with a millionaire's appreciation of a bottle of champagne. This argument between Kaldor and Robbins took place over forty years ago but Kaldor's "refutation" remains typical of the sleight of mind with which economists still evade the problem that there are at least as many measuring rods of satisfaction as there are people. (10)
The "scientific" conclusion that Kaldor derived from his basic postulate was set out as follows: "In all cases, therefore, where a certain policy leads to an increase in physical productivity, and thus of aggregate real income, the economist's case for the policy is quite unaffected by the question of the comparability of individual satisfactions." (11)
If all satisfactions were capable of being measured by the same monetary yardstick then Kaldor's "aggregate income" might be, in some sense, "real"; but they aren't, so it isn't. For the same reason an objective function, with terms purporting to represent the satisfactions and dissatisfactions of a number of different people, is probably unreal. It is the viewing of problems in this unreal light that makes both the old and the new visions characteristically economic.
The preoccupation of economists with material welfare troubled the late Fred Hirsch. He wrote a boook about it entitled Social Limits to Growth. Although in it he makes no mention of Samuelson's happiness ratio, it is central to his analysis of society's present predicament. Stripped to its essentials, his argument is that economists, in their endeavours to enlarge the numerator of consumption, have been preoccupied with material consumption and have neglected the consumption of what he calles "positional goods." These are goods whose supply no amount of technical ingenuity can increase. They are goods whose appeal lies in their exclusiveness. Jobs that permit people to tell other people what to do (prime ministerships are an example) are goods of extreme scarcity and as a consequence are much sought after. Servants and land are two more examples of goods whose supply techology is incapable of increasing.
The problem then, according to Hirsch, is this: "The juxtaposition of growth in the material sector and fixity (stagnation without its pejorative connotation) in the positional sector induces a rising trend in the relative price of positional goods" and "Excess competition in the positional sector has been seen to involve important external costs. If these costs are allowed to become large, a point will come where the damage to society appears too great to justify the individual freedom of action that results in such damage."
Having identified the problem with some confidence Hirsch becomes rather uncertain about what to do about it: "The radical aspect of the appropriate solutions for the tensions diagnosed in this book may be precisely their imprecise, general, and evolving form. The prime need is not new instruments but a change in the climate of their use. The radical change needed is to accept that."
And he goes on to wanr his readers that his analysis is of limited use at present for formulating policies because it is "indeterminate" at two key points. "The first indeterminacy reflects the lack of a precise criterion for economic efficiency through use of collective action; we do not have a firm grasp on the full implications of collective action, so that the potential inefficiency that can be seen in its omission cannot be firmly categorized as actual inefficiency or waste. The second indeterminacy resides in the lack of a quantitative dimension of the critique: it has not been found possible to estimate over what proportion of economic activity social limits to growth are in play."
Hirsch gives principal credit for stimulating his insights into the importance of positional goods to essays by two economist predecessors, Harrod in 1958, and Wicksteed in 1910. Beyond the pale of economics the idea might well go back even farther. The three favourite games in my 3-year-old daughter's play-group at the present time are all organized around the theme of positional goods. They are "King of the Castle," "Hoarding all the Toys," and "Bullying the Little Ones" -- games that have been played ever since Adam and Eve left Eden. And, more recently, surely R. L. Stevenson deserves a mention for recognizing, in its embryonic form, the avidity of homunculus economicus for positional goods:
When I am grown to man's estate
I shall be very proud and great,
And tell the other girls and boys
Not to meddle with my toys.
Most parents know what policy to follow when the competition in positional games becomes excessive and leads to important costs -- that is, when it ends in tears. They try to interest the children in non-competitive activities, perhaps singing and dancing, in which pleasure can be taken from the pleasure of others, and not at the expense of others. And they do not seem to need a firm quantitative grasp on the full implications of collective action before intervening in a play-group riot.
Another economist whose writings manifest an ambivalence towards the materialism of his discipline is Ezra Mishan. In The Economic Growth Debate, published in 1977, although Mishan still calls himself an economist, he has almost broken free of economics. His struggle to break free has been a hard one and demonstrates the strength of the mental shackles with which economic practitioners are bound.
In 1967 he published a curious but influential book called The Costs of Economic Growth. It was curious because the argument against economic growth was confined to what he called a "dirgression" on the unmeasurable costs of economic growth. He called it a digression because it dealt with considerations that he argued lay beyond formal economic analysis. Perhaps the most persuasive section of this part of the book was his attack on "the cult of efficiency." "Today," he complained, "no refuge remains from the desperate universal clamour for more efficiency." But the central argument of the main body of the text was that conventional economics was an inefficient custodian of the public weal. It was inefficient, he argued, because it left out of its calculations "externalities," which could not, in the present state of the art, be estimated by the measuring rod of money. He admonished:
If the problem [of externalities] is to be tackled by society, the economist must persist in revealing the nature of the beast, and must suggest the circumstances under which meaningful magnitudes may be attributed to external effects. Nor should he shirk detailed description of cases wherever the social consequences that escape the pricing system appear to be so involved that a comprehensive criterion for evaluating them cannot, as yet, be satisfactorily evolved."As yet" -- he took his admonition seriously. Five years later he published Cost-Benefit Analysis in which he makes clear that his objection is not to economic growth, but to economic growth inefficiently calculated.
Economic growth comprises both population growth and growth of per capita real income. Together they contribute to the growth of benefits over time arising from any investment today. The faster the rate of economic growth, then the swifter, in general, will be the rate of growth of future benefits. In cost-benefit studies the likelihood of such growth-based benefits has to be taken into account.His determination to capture all such growth-induced benefits within the framework of his analysis led him, in Chapters 22 and 23 of the book, to attempt the cash valuation of life itself.
In his most recent book the "digression" of 1967 has grown into the main theme, and the formal discussion of economics has been relegated to the status of a digression. After introducing himself as an economist and doing a few steps around the externalities theme, he announces that he is "writing to doff my professional cap and to speak without the authority of economic analysis -- to appeal to imagination, reason, and good sense, only."
He is almost free, but not yet. He is an anti-growth economist, a flesh-and-blood oxymoron. Economics is cash-quanitified egoism. The numbers in which it deals are derived by applying the measuring rod of money to the behaviour of profit maximizers. Economic analysis presumes profits to be good and losses to be bad. Without this presumption it has no point. There may well be profits and losses that, as yet, economists have not succeeded in measuring very precisely but, in principle, by definition, the growth of profit is good.
The anti-growth economist is caught in a cleft stick. His conceptual heritage consists of mathematical models that maximize or minimize monetary indices. Having concluded, rightly, that these indices, as they have been calculated traditionally, are useless as measures of welfare, his solution is to calculate them differently. For the anti-growth economist, man remains a utility maximizer; he simply must be induced to revalue the terms in his objective function. The index to be optimized must include not only material goods but spiritual, aesthetic, and positional goods as well. Not only clean air and fresh water but things like beauty, romance, security, contentment, community spirit, and a sense of personal significance are externalities that must be included in the function.
Formulating the problems of the world in this way permits the economist to bring all the old conceptual machinery of orthodox economics to bear upon them. He can reorder consumption patterns by applying appropriate taxes and subsidies; by raising the price of material (polluting) goods and lowering the price of non-material (non-polluting) goods he can divert consumption into environmentally desirable channels. It also gets round the awkward problem of having to advocate retrenchment. "Growth" and "Progress" are still perfectly possible; they are simply redefined.
In The Economic Growth Debate Mishan appears to bave become reconciled to the idea that some profits and losses may be so involved that they may never yield to the measuring rod of money. And his message, quite eloquently argued, is that the unmeasurable losses of economic growth far outweigh both the measurable and unmeasurable profits. He itemizes the losses and it makes an impressive list.
It includes food, shelter, nature, leisure, instinctual enjoyment, love, trust, self-esteem, kith and kin, customs and mores, roles and place, the moral code, the great myths, and personal freedom. His survey leaves him in a state of helpless despair, aggravated by a case of purple prose. "It is not possible, then, to end on a note of even qualified optimism . . . Western civilization, the civilization born of high hopes and auspicious heralding [is] today frothing with power and glee -- and yet being piped gaily to the brink of the abyss. And all that yet might stay the fatal plunge lying in the mid, discarded and in decay."
The anti-growth economist is indeed helpless; he can offer nothing to fill "the existential vacuum." Does he set out to make a society's books show a loss? Anti-growth economics rests upon a contradiction. The meaning and purpose of life cannot be reduced to an objective function because spiritual and aesthetic "goods" do not have cash equivalents. They are antithetical to the very idea of cash equivalents.
The only way an anti-growth economist can give them a cash value is by relating them in a quite arbitrary way to the material goods whose consumption he proposes to discourage. The only incentives he can employ in order to induce people to become less materialistic are materialistic incentives. For these to work they depend upon the very attitudes they seek to alter. If a wealthy industrialist should take his advice and give up his wicked acquisitive ways to spend his life cultivating his garden and being friendly to his neighbours, how should this be recorded? If it is a social profit, how should it be measured?
The best the anti-growth economist can do with his monetary yardstick is to value the industrialist's new circumstances by reference to the market value of the things he has left behind. If he values all his abandoned material goods and positional chattels and adds them up he can produce an estimate of the opportunity cost of being a neighbourly gardener. But what could such a number mean, that values what is deemed good in terms of what is deemed bad?
Keynes, the most famous pro-growth economist of them all, was greatly impressed by his own store of positional goods. He suggested condescendingly, and unconvincingly, that they had been pressed upon him and he would be happy to be rid of them: "If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!"
Good advice, its suspect sincerity notwithstanding. But the principal enemy is not the pro-growth economist, whom Mishan lashes remorselessly throughout his book, but the patron of all economists, homunculus economicus. Keynes' dream of wealth beyond the ambition of avarice is as old as Mammon. And most people have always known that no amount of science and technology and clever economic calculation could ever make it come true.
I am distressed that anything what I have said should give rise to recurrent dispute which suggests to the outside world a disunity among economists which I am persuaded does not exist . . . They [his critics] think that propositions based on the assumption of equality are essentially part of economic science. I think that the assumption of equality comes from outside and that its justification is more ethical than scientific. But we all agree that it is fitting that such assumptions should be made and their implications explored with the aid of the economist's technique.
