Crawl Across the Ocean

Tuesday, March 16, 2010

44. Social Limits to Growth

Note: This post is the forty-fourth in a series. Click here for the full listing of the series.

The book Social Limits to Growth by Fred Hirsch, has two primary themes:

1) As the economy grows over time, more and more of our consumption becomes status oriented / suffers from positional externalities, with the result being that greater economic activity doesn't necessarily make us better off, to the extent that most of that activity is just trying to keep up with (or get ahead of) the Jones.

2) Over time our society is becoming 'commercialized' in that more and more things are treated as a matter of commerce. And this commercialization, resting on an ethical system that promotes self-interest over public service, gradually erodes the ethical basis upon which society and the market based economy itself rest.

I think I've covered the first point fairly well (although Hirsch covers it in the most depth that I have seen in any reading to date), but I think it's worth spending a bit more time on this second point. Says Hirsch,
"The market system, left to itself, tends to fill this vacuum [in social organization] in the same way it fills others [through appeal to individual self-interest]; but here it may sabotage its own foundations. An extreme but pertinent example illustrates the wider point. If judges were regularly to sell their services and decisions to the highest bidder, not only the system of justice but also of property would be completely unstable ... If everything can be privately appropriated, including the judge, then nothing can be - for who will save the system from the first entrepreneur to be able to raise enough credit to buy the judge and everything else through him. As [economist Kenneth] Arrow put it: "Thus the definition of property rights based on the price system depends precisely on the lack of universality of private property and of the price system." Some minimum area of social obligation therefore has to be held. The problem is how to reconcile this social responsibility with the opposing mainstream of the market ethos."

Hirsch argues that those who theorize that politics runs along commercial lines of self-interest are mistaken,
"Economic theories of bureaucracy and of political action, which have been extensively developed in Virginia and in Chicago during recent years, are built exclusively in the individualistic norm. Political and bureaucratic activity are seen, in the same way as market activity, as means to private ends. As such, they tend to be inherently inefficient. The inference drawn by exponents of this approach is that the sphere of political action should be minimized.

An alternative inference flowing from the same analysis is that where individual preferences can be satisfied in sum only or most efficiently through collective action, privately directed behaviour may lose its inherent advantages over collectively oriented behaviour even as a means to satisfying individual preferences themselves, however self-interested."

Finally, Hirsch links his two main points by arguing that it the increased competition for status that results from positional goods taking up more and more of the economy (competition to get into the best schools, to get the best jobs, to own the best land, etc.) drives people away from concern for the public interest and towards self-interest by increasing the personal costs to giving a little ground in the battle for status by putting the social interest ahead of the personal interest.

There's a lot more in 'Limits to Growth' than I've covered here, I'd certainly recommend it to anyone interested in the topics I've covered in this series. It's a bit depressing that it came out in 1976 and yet so little progress had been made since then in even recognizing, let alone reacting to the social limits that he describes.

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