16 January 2007

The Future of Prosperity - When More is Less

A fascinating post at http://virtualeconomics.typepad.com/virtualeconomics/ leads with this:

"Jeff Jarvis is blogging from the Davos world leaders conference, finding (amongst other things) that 53% of Western Europeans think that the next generation will be less prosperous than this one. That's compared to 37% in the US, and just 14% in China."

Why the optimism gap? It could be that the West has an intuitive sense that the model we've been using for more than a century may be appropriate for a place like China but is increasingly less so in the West. China's per capita income is about 5% what it is in Western Europe or the US and Canada, making their perspective very different.

A single scoop of ice cream is nice - two can be fine ... but at some point (3? 6?) the enjoyment turns to nausea. More is nice for those who have little but after a while more becomes less desirable. Many Chinese are only now beginning to enjoy the benefits of prosperity - getting bikes, cars, stereos, and fashionable clothes for the first time. But once they have that, what is the next stage of prosperity? What happens when more is no longer better?

For decades we have confused quantity of goods with quality of life. Given that the prosperity of the last couple of centuries was the equivalent of our first scoop or two of ice cream, this confusion has not been particularly important. But now that we're facing our third or fourth scoop, it is important to make the distinction.

Our economies are still largely geared towards more, towards quantity of goods. Walk through a Costco or a landfill to see how voluminous our appetite for "goods" is. Yet these goods to have are not the only kind of goods. In fact, philosophers distinguish between goods to have and goods to do - considering the goods to do a higher good than those we have. Quality of life is related to goods to have - it is hard to imagine aspiring to a quality of life that didn't include at least some modicum of shelter, clothing, and food - much less those delightful bits of technology like laptops, mp3 players, or cell phones. Yet the marginal utility - the additional joy we get - from more goods (to have) does gradually drop. Eventually, goods (to have) simply do less to increase our quality of life.

Those in the West may well see that we're geared for getting more even as getting more has less and less impact on our quality of life. This may be the reason for the optimism gap between the West and China. Until the West has shifted its economies to more directly go after improvements in quality of life, this sense of pessimism in the West may only get worse.


Life Hiker said...

"Shifting the economy to go more directly to improvements in the quality of life." You mean I can't have my 8,000 s.f. house or my $80,000 Mercedes?

But seriously, this is not a new topic in economics. Such a shift would require buyers to put a greater monetary value on quality of life items than they do presently. For example, choosing higher taxes to pay for hiking/biking trails or green space, or choosing to pay experts in the arts for concerts, demonstrations, or classes. Money now spent on consumer items would be diverted to these or other "quality of life" products.

What will it take to shift our attention from the things the corporations are selling to the things that really make us happy? I just don't know.

Ron Davison said...

I think that a big part of the shift will take place as companies begin to put as much empahsis on the design of work as they do the design of products. Work life has a huge impact on quality of life.

Adam Sullivan said...

Glad to see someone blogging the "meta view" on quality of life in a post industrial society.

My own opinion on the mechanism that drives mindless consumerism is co-option. Many social innovations occur spontaneously and enhance quality of life. But when they become popular they get productised and lose much of their meaning.

Music is an example. How many people listen to music that is new? Not many. The internet used to be much more egalitarian and interesting - before the web, newsgroups made the experience more intimate and interactive. Ironically, a more interactive GUI led to a democratisation that created the profit opportunity for a hierarchy dominated by the likes of google. And google intended to be socially responsible, but their experiment in China is an example of why intent does not matter - it is the stream-lining mechanism of co-option that destroys meaning.

We must each cultivate our garden.