Three articles which first appeared on BREAKINGVIEWS.COM

I. Satiety and its discontents

Economists study the production and consumption of stuff. Stuff refers to physical things that consumers use and enjoy: food, clothing, books, face cream, electricity, computers and so forth. Industrial economies produce stuff in vast quantities and great variety. Pre-industrial economies produced much less.

Of course, economists don’t usually talk about “stuff”. Rather, they refer to “consumer goods”. But behind this choice of words lies a sort of ethical propaganda, as if it were self-evident that all sorts of stuff – from dishwashers to downloaded pornography – are in fact good. The assumption leads ineluctably to the conclusion that more stuff, more goods, is always better than less.

Is it? The question can only be answered after addressing more a basic puzzle: what is stuff good for? Or, in more traditional philosophical language: how can stuff serve the Good?

Most economists feel a bit queasy discussing anything like the one and transcendental Good. They would prefer to leave such matters to eager 18-year olds reading Dostoyevsky. According to the professionals, economics is a worldly, scientific study, and the economy’s aim is not the Good or anything similarly magnificent, but something more modest: the maximisation of utility or the optimisation of welfare.

This modesty may be fine as far as it goes, but it hardly goes very far. It vastly underestimates the true value of consumption, as well as of the other economic activities – labour, production and distribution.

The economy, like everything human, aims at more than mere utility or welfare. People want their lives, including their economic lives, to be meaningful, loving and beautiful. They want the societies they live in to be just and perhaps glorious. In other words, they strive for the transcendentally good.

So how can stuff be good in this transcendental sense? In the simplest terms, stuff is good when it serves some human good. For example, human life is good (unless Dostoyevsky’s darker characters had the right idea) and a healthy life is good, so food and medicine – which keep people alive and flourishing – are good.

Stuff and the good

Stuff can do much good. Besides promoting life and health, it helps feeds the mind and make life beautiful. It comforts and entertains. It allows travel and communication. The list is long – but it is finite. Stuff contributes little to the spiritual goods of love, justice and faith (for believers). Further, more stuff does not always make life better.

Consider food. When food staves off starvation or malnutrition, it is very good. When it delights the palate or allows a meal to be celebratory, it is good. When it leads to obesity, it is bad.

In other words, there is a limit to the good of food. Not all human desires are limited in this way, at least not in this life. People can never get enough of spiritual goods. Stuff, however, is physical and its good is constrained by what people can take in. Individuals and entire societies can have enough of any particular type of stuff – satiety. Or more than enough – super-satiety.

People often do not respect these limits. They want more of some type of stuff than is good for them. That misplaced desire can be called the moral stuff-confusion: the false association of stuff on its own, especially of more and finer stuff, with the transcendental good.

The confusion is widespread. I may think that acquiring more books will help me know the Truth, but the shortness of life gets in the way. The ravages of age limit the good of even the finest face cream. Hopes that a bigger house or a newer car will make my life more meaningful are sure to be disappointed.

Too much stuff

Here is some very good news. For consumers in rich countries, stuff does pretty much all the good it possibly can. The industrial reality is satiety, and often super-satiety. To understand this, you must ignore – for a moment – your desire for a better home entertainment system.

Instead, think about the true good of stuff. In that context, our stuff-lives are indeed very nearly sated. We mostly live for about as many years as the human body can last, eat more than is healthy, can easily support more children than we care to bear, have more education than we want, drown in information, bask in comforts, travel where we want and have friends everywhere.

Of course, there are still gaps to be filled. But in the last century these have shrunk to near insignificance. The last substantial unmet physical desire – to make distance almost irrelevant for communication and the exchange of information – is well on the way to full satisfaction. Indeed, your lingering desire for a new entertainment system sounds like an example of the moral stuff-confusion. Will the new really be sufficiently better than the old to do much good?

Economists rarely discuss what the coming of satiety means, but it should have a profound effect on economic practice. When the newest gadget was a plough which allowed the hungry to be fed or clean water which kept infectious disease away, increased stuff consumption was a worthy personal goal and economic growth was a worthy national aim.

That moral judgement still basically holds in poor countries. But when the newest gadget does nothing better than improve already good video displays, the pursuit of more and better stuff is of little value.

It may even be evil. The substantial effort dedicated to the increase of and innovation in the production of stuff might be expended better elsewhere. Also, super-satiety may encourage, as well as be encouraged by, the moral stuff-confusion. Excessive attention to stuff probably promotes greed and envy.

Critics of the “consumer culture” make these points often enough, but economists generally ignore them. They are wrong to do so. Economists should be the most careful students of how stuff helps and harms consumers. In a super-sated economy, such a study would probably lead to the conclusion that less (stuff) is more (good).

II. Labouring pains

Consumption is one side of people’s economic activity. Labour is the other. In consumption, we take from the world; in labour, we give. Like consumption – and like all human activities – labour should be analysed in terms of the good.

When economists think about the good of labour, they rarely have much to say. Basically, their “economic man” is looking for the highest paid job he can find. High pay is better than low and unemployment is bad (although perhaps sometimes necessary for the sake of macroeconomic stability).

But there is much more to labour than pay, or than paid work. Take, as a prominent example, the labour of so-called non-working mothers, or stay-at-home fathers. It is standard economic practice not to assign any value to this unpaid labour. That is obviously wrong, as any thoughtful economist will admit. The good of this labour is manifold. Children, society and the mothers themselves all benefit.

There are also goods associated with mothers working for pay, and perhaps evils associated with some mothers working as mothers. But whatever the final judgement about working mothers – whether for individuals or for social policy – the argument should be about the various goods of all the people involved. The wages which are supposed to guide “economic woman” should play only a minor role.

The analysis of the good in labour is made more difficult by the labourers’ inevitably mixed feelings. Labour is always laborious – it always has an element of grim toil. Even the most dedicated worker at the most interesting job sometimes gets frustrated. Even the happiest mother has her rough moments. This labour discontent seems to be a permanent part of the human condition, despite claims to the contrary by some management theorists.

Also part of the human condition is the labourer’s poor moral judgement. A hit-man may think a murder which is done well serves the good, but the judge will put more emphasis on other goods, most notably the lives that were so efficiently terminated. Closer to home for Breakingviews readers, it can be asked whether a hedge fund manager’s multi-million dollar pay package is good, either for society or for the manager’s own character.

Economists should accept the dislike and look though the self-deception. If they saw the good of labour clearly, at least two important conventional economic assumptions would be reversed.

First, as suggested, paid employment would no longer be considered a good-in-itself. There are many valuable unpaid labours and many paid labours of limited value. Indeed, economists should ask whether some people would be better off virtuously “unemployed” than pointlessly employed.

Second, economists should realise that labours of production are, overall, less valuable than labours of love and care. Love contributes more to the human good than consumption does, especially than frivolous consumption. Of course, not everyone can work at caring. Some people have to labour at producing stuff (roughly speaking the goods, as compared to services, of standard economic terminology). But the typical economist’s emphasis on labour productivity – a concept which only makes sense for the production of stuff – is misplaced.

Industrial labour

Industrial economies have a particular problem with labour productivity: there is too much of it. That is a total reversal from the old days, which lasted from the beginning of the human race to around 1750. For all that time, 70-95% of the adult male population worked primarily at providing the most basic stuff. Their labour was often not productive enough to keep bread on the table. The women did their part at home, but universal consumption satiety remained a distant dream.

Labour-saving technology has changed all that. If modern techniques and traditional working hours were used only to keep up the consumption lifestyles of 1700, the unemployment rate would currently be about 80%. A mere 5% of our population produces far more food than 70% of theirs did. As for non-food, an hour’s relatively undemanding work in a modern factory produces more than hundreds of hours of often hazardous and almost always hard toil did in a pre-industrial home or workshop.

By now, rich countries are mostly super-sated with stuff. All of this stuff is produced by less than a quarter of the adult population, working for less than half of the days of their lives.

That leaves a lot of potential time on the hands of the labouring population. Human ingenuity has filled the gap in many ways: longer schooling, shorter working weeks, more years of retirement, looser definitions of disability and, most significantly, the creation of many new types of labour.

Whether the time has been taken up well is another matter. Certainly, some of this new labour is very good – for example in the production of new types of beneficial stuff or in some of the newly developed skilled caring professions. Much, however, is close to pointless.

For example, while some financial labour supports the productive economy, there is little objective good in many of the labours of trading and speculation. In the modern welfare state, incessant record-keeping and detailed regulations create “make-work” labour. Is the labour of innovation and advertising really good when it only stokes excessive desires for stuff? Is there perhaps a spiritual emptiness in the time-killing but labour-intensive leisure industries?

In short, much of the labour that has been found for displaced productive workers is almost pointless, even if it is well paid. The pointlessness contributes to what sociologists call “alienation” – a purposelessness that poisons much modern labour, including many highly skilled tasks.

As far as labour is concerned, the great challenge for economists is not to get more women into the paid workforce or even to keep the unemployment rate down. It is to find ways to make more modern labour better serve the good.

III. Spurious numbers

Ev[q(w,v) [p(w,v)]] > Ev [q(w', v) [p(w', v) -w]]

Equations of this sort make most economists feel at home. Actually, that particular one, chosen from the latest Nobel-prize winning work, is not arcane enough for many of them. But whether the economic models are simple or complex, they are almost always mathematical. Equations are complemented by a profuse flow of statistics.

For those not steeped in the profession, however, the economists’ reliance on maths and measures should seem odd. In the basic economic activities of consumption and labour, hard numbers play a relatively minor role.

Obviously, many economic things – wages, taxes, interest rates, tonnes of steel, minutes of airtime – can and should be measured, but the numbers and ratios are almost peripheral to the human reality of consumption and labour. We eat, watch movies and live in our houses. We work in an office, go to school or pass the time in retirement. The value of these activities hardly seems to be countable.

Indeed, for most people economic numbers are often more confusing than illuminating. Even professionals are often fooled by randomness, as author Nassim Taleb points out. The ordinary consumer gets lost at a more basic level –understanding inflation or calculating the true cost of “free” mobile phone minutes.

Philip Mirowski, a historian of economics, thinks the professionals suffer from “physics envy”; they want to be scientists who describe impersonal forces mathematically. Whether or not he is right about the motivation, the focus on numbers and equations is misdirected.

Numbers do shed some economic light. For example, birth and death rates should help guide the investment plans of makers of pushchairs or coffins. Economists can make use of specific figures, for example electricity usage or days spent on foreign holidays. The usefulness, though, is limited. No matter how many equations they are fed through, such indices cannot answer the fundamental questions such as “is population decline good or bad?” Or “what are electricity and travel good for?”

Typically, economists avoid addressing such questions by making two assumptions. The first is practical: that a person’s or a nation’s consumption can be bundled together into a meaningful single measure of income or gross domestic product (GDP). The second is ethical: that a higher income or GDP is always better than a lower one.

The second claim is silly. More stuff often doesn’t make people happier, let alone morally better. Even conventional economists admit as much, although they usually ignore that admission in practice.

The first claim is at least as implausible. There is no meaningful numerical scale on which to evaluate or sum up the diverse goods of consumption. The good of the food which prevents starvation is incommensurate with the good of an hour of scuba diving or the good of an additional hour of parental attention (which is not included in GDP).


Of course, money provides a common measure for anything that can be paid for. The question is not whether money measures can be added up, but whether the sums give out much helpful information. The answer is “no”.

Consider a typical economic exercise, a comparison of average incomes in the US and Germany. According to one official statistic, the average American is 32% better off. Even leaving aside the question of whether additional consumption in such sated economies is actually good, the average per-capita GDP provides a poor standard for comparison.

True, in some respects the typical American consumes more than his German counterpart. Cars are bigger in the US and living space is more ample. But other significant indicators – life expectancy, disability pay, prevalence of extreme poverty – suggest that the Germans are ahead.

It is hard to claim that the US is unequivocally richer, let alone richer by exactly 32%. The precision is spurious, and the smaller the unit of comparison, the more spurious the precision. The 0.8% quarterly GDP changes typically discussed by economists have hardly any human meaning.

Some economists like to combine monetary and non-monetary indicators. For example, the UN’s Human Development Index includes life expectancy and years of education as well as GDP. But the average of a collection of indicators is clearly arbitrary. A different collection, or a different weighting, will produce a different answer.

The complaint about measures is not a dismissal of the practical value of money. As communist central planners discovered, it is virtually impossible to arrange production and allocate consumption without wages and prices. Economists concerned with the inner workings of industrial economies are quite right to study numerical interactions, whether of buyers and sellers or of taxpayers and governments.

But as a measure of value – of the good – money offers little insight. The problem is not merely technical, although there is something alarming about the use of “real” to describe monetary measures (such as real GDP or real interest rates) that are purely hypothetical.

The problem is inherent to money. The same number of dollars buys very different sorts of goods of very different values. No number can compare the good of the basic-food dollar with that of the scuba-diving dollar.

A word on finance

One industry can be described extremely well in purely monetary terms. That is the money industry itself – finance. In all financial arrangements, money is both the main raw material and the principle final product. Financial factories are operated by people and machines, but their instruments – bonds, shares, derivatives – are basically combinations of time, promises and money.

Since money can indeed be measured, numbers and equations do come close to capturing the essence of finance. That correspondence makes financial journalism reconcilable with the sort of economics I am promoting, but the reconciliation is not exactly a compliment to finance. Anything that can be so thoroughly described by equations and statistics is unlikely to offer much of the transcendental – and distinctly non-numerical – good.