Progress on Tiptoe

To AN ECONOMIST, the phenomenon is a paradox. Modern societies have become increasingly concerned with distribution--with dividing the pie--when it is clear that the great majority of people can raise their living standard only by producing a larger pie. Certainly, this development seems to contradict the basic economic precept that people desire to simply increase the amount of material goods they possess as their primary economic motivation.

In Social Limits To Growth, economist Fred Hirsh contends that this paradox illustrates a profound change. In a modern affluent society, biological needs for life-sustaining food, shelter and clothing are easily met. People instead become preoccupied with status. Incentives, Hirsch, claims, become social, not material, in nature.

Hirsch's argument is not earth-shattering, especially when you consider that Thomas Hobbes said nearly the same thing some 350 years ago. But the fact that more and more economists today claim that increased production does not automatically lead to increased happiness is bound to disturb their more neo-classical colleagues.

Economists traditionally assume that people want material goods and that each individual will do whatever is necessary to achieve this. Refining this premise is the basis for much of the development of economic theory, resulting in enormous advances in our ability to understand social phenomena and history. Consequently, economics established its primacy among the social sciences. In the past generation, big economic numbers--gross national product, personal disposable income and the rate of growth--have dominated electoral politics throughout the industrial world.

But alas, Hirsch contends, the sun may be setting on the field of economics. As the link between material goods and human happiness deteriorates, the discipline diminishes in importance, although Hirsch, an economist himself, never goes so far as to say that the link has been totally severed. But the more affluent a society becomes, the less people care about material goods as an end in themselves. Instead, people desire goods primarily as a way of acquiring status.

The pillar of economics--the belief that people are preoccupied with improving their material existence--is now a hindrance to understanding key contemporary problems. The analytical framework that the economist has for so long taken for granted--but that the sociologist has long disputed--may now be ineffective.

The meat of Hirsch's argument is simply this: In the pas' people desired shelter, clothing and good to protect themselves from such easily definable physical discomforts as cold, hunger and death. In that non-modern world individuals acted in very predictable fashions. Homo sapiens would do whatever was necessary to avoid the basic physical discomforts that incessantly plagued them.

But look at people today. They do not got to expensive French restaurants to ward off starvation. Movie stars do not build huge mansions merely to escape the cold. Nor does the businessman wear patent leather shoes to protect his feet from the hot pavement.

Hirsch believes the ingredients of these twentieth century pleasures are much more difficult to figure out and analyze. Today' incentives and motivations are more complex than a caveperson acting simply to quell hunger. Hence, he predicts, economists will become less proficient social phenomena and individual actions.

The pleasure a Cadillac or a $400 three-piece suit bestows on its owner is inextricably tied to status. Status and its effect on individuals and societies is not something the tools of traditional economics can easily cope with.

But now we get to the shocker. Or to use Hirsch's gobbledygook, we confront the "overwhelming implications of this status factor on social and economic policy."

The limits to growth--that is, the limits to society's ability to continue to increase human happiness--are social in nature, not physical. There just isn't enough status to go around.

Hirsch says the concerns about limits to growth that the Club of Rome has voiced are off target. This informal group of scientists and economists warned of such Malthusian type of world disasters as starvation and over-crowding in the famous Limits to Growth.

But no, Hirsch says, these disasters can be combatted. The ultimate problem is social-status scarcity. Material goods today are valued for the status gratification that comes with them, which is itself relative to what other people have. The latest dress from Paris is worth very little if everyone else sports one too.

Hirsch's argument brings to mind the ultimate paradox of the man who, in a larger crowd at the circus, decides to stand on his tiptoes to get a better view of the show. Soon, everyone is standing on tiptoes too. Nobody is any happier as a result. (In fact, people are probably less comfortable having to stand on their tiptoes.)

What good is it, Hirsch asks, to continue to produce goods--and by producing them ravage the environment--when the end result is not an increase in happiness. The man at the circus ends up with sore calf muscles. People pollute their environment. Nobody is any better off.

Hirsch summarizes:

The key to personal welfare becomes the ability to stay ahead of the crowd. Generalized growth increases the crunch by increasing expectation. Social scarcity tightens its grip. What they get, in the growing sphere of social scarcity, depends to an increasing extent on their position in the social hierarchy. Hence, the paradox of affluence.

OF COURSE, HIRSCH would have a hard time convincing a lot of poor people in industrial societies that what they really want is the status and not the material good itself. One doesn't see much glamour in transportation, decent nutrition, heating and a myriad of other needed goods. It is much easier for someone who lacks nothing or very little to say that material goods themselves do not breed happiness.

The culmination of Hirsch's arguments is an overall critique of Adam Smith's fervent belief that his hidden hand and enlightened self-interest could be an effective social organizing device. The principle thing people desire--status--is intrinsically scarce. The only way to circumvent these limitations is to overhaul social mores and values--to reject Adam Smith and create new motivational forces in society. Unfortunately, Hirsch, like too many other polemicists, is better at describing the nature of the problem than at posing viable ways to solve it.