Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Thursday, September 28, 2006

The Rain-Soaked Purple of the White Birch in Spring

Robert Frank on economic possibilities for our grandchildren:

The More We Make, the Better We Want - New York Times: Productivity growth has raised living standards in the United States more than 40-fold since 1790.... John Maynard Keynes speculated about how the continuation of such spectacular productivity growth might transform our lives. Like many other distinguished thinkers, both before him and after, he predicted that people would have great difficulty filling their days once it became unnecessary to spend more than a token amount of time working.

This concern seems comical in retrospect....

How could Keynes, the most influential economist of the 20th century, have made such an absurd prediction? It would be one thing if he had merely overlooked the possibility of boundless human desire. Yet he explicitly considered this possibility, only to dismiss it.... [H]e wrote that human needs fall into two classes: basic, or absolute, needs, which are independent of what others have, and relative needs, which we feel "only if their satisfaction lifts us above, makes us feel superior to, our fellows." Keynes granted that although needs rooted in a desire for superiority might indeed be insatiable, this was not true of absolute needs. And seeing absolute needs as more important by far, he concluded, "A point may soon be reached, much sooner perhaps than we are all aware of, when these needs are satisfied in the sense that we prefer to devote our further energies to noneconomic purposes."

Keynes was surely correct that only a small fraction of total spending is prompted by the desire to flaunt one's superiority. He was profoundly mistaken, however, in seeing this desire as the only source of insatiable demands. Decisions to spend are also driven by perceptions of quality, the desire for which knows no bounds.... When a couple goes out for an anniversary dinner, for example, the thought of feeling superior to others probably never enters their minds. Their goal is just to share a memorable meal. But a memorable meal is a quintessentially relative concept. It is one that stands out from other meals. The standards that define a memorable meal are thus elastic.

When my wife and I were living in Paris a few years ago, we went out to dinner with well-to-do friends who were visiting from the United States. The restaurant we chose had a good reputation and, by our standards, was not cheap. But although my wife and I enjoyed our meals enormously, our friends found theirs disappointing. I'm confident they were not trying to impress us or make us feel inferior. By virtue of their substantially higher income, they had simply grown accustomed to a higher standard of cuisine.

There are no obvious limits to the escalation of quality standards. For example, dinner for two at Sketch in London can easily top $500, even if you choose the least expensive offering on the wine list....

By placing the desire to outdo others at the heart of his description of insatiable demands, Keynes relegated such demands to the periphery. But the desire for higher quality has no natural limits. Keynes and others were wrong to have imagined that a two-hour work week might someday enable us to buy everything we want. That hasn't happened and never will.

I can't quite pin down why I am dissatisfied with Robert Frank's argument over "quality" and "memorable experiences," and I don't see why the equilibrium should be twelve hours a day six days a week or eight hours a day five days a week rather than (except for those of us very lucky enough that lots of our work feels essentially like play) say, six hours a day four days a week.

Maybe I'll turn the mike over to Margo Timmins:

Have you ever seen a sight as beautiful
as that of the rain-soaked purple
of the white birch in spring?

Have you ever felt more fresh or wonderful
than on a warm fall night
under a Mackerel sky,
the smell of grapes on the wind?...

Have you ever had the pleasure of watching
a quiet winter's snow slowly gathering
like simple moments adding up?

Have you ever satisfied a gut feeling
to follow a dry dirt road that's beckoning you
to the heart of a shimmering summer's day?...

Have you ever seen a sight as beautiful
as a face in a crowd of people
that lights up just for you?...

Well I have known all these things
and the joys that they can bring
And now every morning there's a cup of coffee
and I wear your ring

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