“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Wednesday, May 16, 2007

a gloss on the political hocus pocus of our time

Back in the 70s – the era that suckled LI, and that provides the whole framework for Bolano’s great novel, which all should read, The Savage Detectives, and all should talk about, bringing an end of all talking about 300 and Spiderman, enough enough enough! – an economist named Fred Hirsch wrote a tract reflecting the time and the mores entitled The Social Limits of Growth. And then, of course, they came from nowhere – or from Pentagonia – the Reaganauts, and for the past thirty years the only discourse about Growth is how we are blessed its many wonders to behold. Meanwhile, we laid claim to another piece of the atmosphere to store our car exhaust and coal exhaust shit, destroyed the Aral Sea, depleted the Ogallala Acquifer, and etc., etc.

This week, LI is going to say some things about Hirsch’s idea of positional goods. It is an idea that has its ancestry in institutional economics and Veblen, but Hirsch was a post-World War II economist, a quantifier, and he wanted a more specific way to talk about a certain kind of social good and service.

Hirsch distinguishes between between the Material Economy and the Positional economy in order to describe the post WWII economic order in the developed world. The material economy is that one familiar to neo-classicals and Marxists. it is deined “as output amenable to continued increase in productivity per unit of labor input: it is Harrod’s democratic wealth. The material economy embraces production of physical goods as well as such services as are receptive to mechanization or technological innovation without deterioration in quality as it appears to the consumer.” On the other hand, you have Harrod’s “oligarchic wealth”: it “relates to all aspects of goods, services, work positions and other social relationships that are either (1) scarce in some absolute or sically imposed sense or (2) subject to congestion or crowding through extensive use.” The question posed by Hirsch is: “What happens when the material pie grows while the positional economy remains confined to a fixed state?”

In a sense, this problem is all around us now, the effect of the growth plus increase in inequality that describes the Reaganomic era. Hirsch had the foresight to see that the economy in the developed world was tending towards positional competition. On the one hand, unless there was robust economic growth, there would be increasing privation. On the other hand, the concomitant to growth would be increasing inequality, which would re-define the terms of affluence. To give one of a number of examples: take a social good such as education. On the one hand, for a democratic, capitalist society to continue, it must invest in human capital – it must educate. On the other hand, positional competition imposes on that education its logic – in order to be rewarded within the educational system, it isn’t enough that a person actually be educated, but it is also important that others be less certified – that others be excluded from certain institutions of education and the like, what Hirsch calls a “competition by people for place, rather than competition for performance.” Hirsch discusses a number of sectors – real estate, education, jobs – and then makes a fine, although dense, summary:

‘… material growth intensifies what may be termed positional competition. By positional competition is meant competition that is fundamentally for a higher place within some explicit or implicit hierarchy and that thereby yields gains for some only by dint of losses for others. Positional competiton, in the language of game theory, is a zero-sum game: what winners win, losers lose. The contrast is with competition that improves performance or enjoyment all round, so that winners gain more than losers lose, and all may come out winners – the positive sum game.”

And – an important point – positional competition is about scarcity: "… competition in the positional sector serves as a general filtering device through which excessive demand has to be matched to available supply. This aspect – which I seek to isolate by the term positional competition – at best yields no net benefit and usually involves additional resource costs, so that positional competiton itself is liable to be a negative sum game. Competition in the positional sector, however, may still yield net benefits if its contributions to individual efficiency and allocation of resources outweigh additions to resource costs and misallocation. But this cannot be judged from the conventional measures of economic output, since these measures gloss over the negative or deadweight elements of positional competition.”

Well… yeah. That last sentence is a gloss on the political hocus pocus of our time, friends and fiends. About which we will have more to say in another post.


northanger said...

James Comey's 15-May testimony before the Senate Judiciary Committee.

btw, Preakness Stakes, Saturday 19-May, NBC 2PM PDT.

who you betting on Roger? do we have a triple crown contender?

roger said...

Well, North, I don't think my horsey, Street Sense, is going to win. Yet, I'm betting on him anyway, out of loyalty. He did me good at the Derby, and I'm not going to desert him now that the pressure is mounting.

Of course, Street Sense, as you can tell from any closeup, has a self deprecating sense of humor. I'm sure he thought the Derby was a one off. I'm pretty sure he laughed himself to sleep that night in the stable - after, of course, singing Stewball was a ra--a--ace horse/and I wish he were mi --i-i-ne. But he'll do his damnedest for his fans. I got a good feeling about that horse.

Scruggs said...

All of us at UFOB are rooting for Street Sense.

roger said...

You don't just race for the love of your jockey, Scruggs - you do it for the fans!

northanger said...

i'm betting on the Cajun jokey.

northanger said...

ok. he's a jokey jockey.

Scruggs said...

You don't just race for the love of your jockey, Scruggs - you do it for the fans!

Those horses need to read a little Nietzsche, IMO. It's still slave morality, whether they're running for one master or many.

I'll put ten dollars on Ressentiment to place. That's as safe a bet as one could ask for.

Anonymous said...

I'm not sure you want to hear this but this "positional economy" is just lousy theorising - a naive gloss on neo-classical economics that conveniently forgets its premises

basically selective idealism for the poor - who exist only in the brain of god - society structured along the lines of a vision of piers plowman

total total bullshit

significant only for instituting a denial of man and his socio-economic system


roger said...

Hey, Luke, you really don't like the positional economy idea! But I'm not sure I quite understand your objection. Are you saying that the positional economy doesn't exist? Or that it is derivative of the material economy? I'm not sure what "selective idealism" for the poor is about - the poor are very rarely the audience for any economic theory. What I think you are objecting to is that the poor are given unreal hierarchical goals, ideals concerning advancement, but that would seem to confirm that, in fact, the positional economy is a theoretically sound framework, since the idea that the poor - and indeed all agents - are working to maximize their material goods - or in the money economy, working to make as much money as possible at all times - seems wrong to me. It lacks an aspect, and that aspect is that material goods are comparative. This isn't a matter of subjective comparison, either - it isn't just that x person decides, well, I'm not going to compete and go out and get product 2.0 when product 1.0 works fine for me. Those decisions will eventually force x person to become either a hunter gatherer to continue to make 1.0 to work, or will break down and buy 2.0. This is a small example, but I can use it for larger phenomena. Hirsch uses it for real estate and education - and as though the ghost of Hirsch was whispering in the NYT ear, there's an article today about the growth of applications to colleges that are second tier to the Ivies. The investment here is not in a product - it is in positioning power.

So, please, comment a little more, about what is wrong with Hirsch's notion. Don't, by the way, take this as a prescriptive notion. If you think traditional class based analysis can account for the many phenomena that seem to fall under the positional economy, I'd be interested in that.

Luke said...

Hello Roger,

I wasn't objecting to your analyses, which I think are very good (I wouldn't read them otherwise). I read a very similar thesis to Hirsch's in Hayek and it irritated the hell out of me. Hayek, I think, is just speaking ex cath while Hirsch goes into more detail, though I haven't read his book. I'll have a go at restating my thesis, at least with reference to Hayek.