Here I will introduce five simplistic positions and attack them. These are all ‘straw men’ – weak and faceless, built to represent nobody’s argument in particular – yet I don’t feel they are entirely disconnected from things people say in the real world. The topic of this episode is: lazy economics. I doubt that anything here will come as news to even the most amateur economist. Yet we live in a world where lazy economics abounds. Lazy economics, like lazy science, must have a bucket of cold water thrown in its face. I am not an actual economist, I am just a slightly less lazy one, but I am filling up my buckets.
So why attack bad arguments? Why massacre straw men? Perhaps because we all, in our weaker moments, lean on these for support. Philosophers typically spend prodigious amounts of time and ink focusing on magnificent (nearly true) arguments (which extremely few people have ever even heard of). There is surely a place for focusing on bad (probably false) arguments (which many people hold). A Utilitarian approach to truth, perhaps.
Bring on the straw men.
1. “Your salary shows how much society values your job”
It doesn’t take a child long before they look at e.g. David Beckham and say, “But mum, he doesn’t deserve 15 million pounds, does he?” At which point the mother may retort: “No, but society is complicated, and thousands of people go to see him play, so society values him very highly.” An economist may add that the marginal revenue of David Beckham – the extra amount which David Beckham individually brings to his club – is high (because of the amount of seats that he’ll fill, mugs he’ll sell etc.), perhaps as high as £15mil per annum. So society – the football supporters in this case – show that they value David Beckham highly.
But has ‘society’ valued David Beckham in any real sense? OK, a great number of football supporters value what he does (or else they should probably stop buying his mugs). But society? Let’s say that 1 million people become David Beckham fanatics and spend all their pocket money at his games. Does that mean that the other 59 million people in the country care a jot about what he does?
Picture an unscrupulous city investor. Like with fat people on the news, you only see up to his torso. This guy invests in mergers which damage the pension payouts for the elderly, but which fattens the wallets of his clients. Let’s say he earns £15mil per annum, passed through a tax haven. Even if you thought David Beckham was valued by society, was this guy? And as much?
OK well say that this city investor quits because of the bad moral taste he wakes up to every morning. So it’s harder for the clients to find someone to do their bidding. So they offer £25mil and now a more unscrupulous city investor steps up to the plate. The clients certainly value this guy. But does society value this guy, and £10mil more?
People may reply that ‘value’ and ‘society’ are just inherently vague concepts. Perhaps so, but my point is that people in society have vastly different amounts of money, and therefore any attempt to measure a ‘value’ that society as a whole places on a job is open to gross distortions. Should the rich be more represented in how we see what society values as a whole? I can’t see a good reason for thinking this.
2. “Our nation’s GDP shows how productive our country is”
A simple joke involving dog pooh, that my school economics teacher told me, will suffice. Two economists walk in a field, call them Milton and Friedman. Milton says: “I’ll pay you £1000 to eat that dog pooh”. Friedman does. It tastes bad. They walk on a bit more and see another pooh. Then Friedman says: “OK, well I’ll pay you £1000 to eat this dog pooh!” Milton does. It tastes awful. It now dawns on Friedman that they are back to square one, but have both had to eat dog pooh. He notices Milton smiling and asks, “What’s there to be happy about? We both ate pooh!” “Ahh,” Friedman replies, “indeed, but our GDP has increased by £2000!”
The message is very simple. People can increase GDP without producing anything or ‘doing any work’ or ‘adding value’. People can also produce things (pretty much anything), exchange these things, and bring about much utility, without charging for these things – without this registering at all on GDP. GDP was, after all, never designed to measure such things.
Imagine two nations. In Nation 1, people are friendly. They cook for each other, they entertain each other, they help repair each other’s houses – and they don’t earn all that much. In Nation 2, people are more solitary. They don’t do much for each other, and they earn a lot so that they can do the very same things that the people of Nation 1 do. In fact they ‘produce’ the same things. The GDP of the second nation is much higher, but so what?
What does GDP show? It shows the total amount that the inhabitants of a country depend on the labour of strangers, and how much strangers depend on their labour. And as odd as this measurement of stranger-dependency is, we elevate it to the status of the highest marker of a nation’s success.
Someone may say, “But… it shows how much work is done in a society, overall! It’s useful!” Well it’s only useful to the extent it tracks something we care about. Let’s borrow and extend G.A. Cohen’s rather incendiary example of seeing money as increasing freedom. Imagine that overnight every pound in your pocket gets transformed into a key and every good or service provided by a stranger can now only be accessed by using a certain number of keys, and once we’ve used them the keys become owned by the provider of that good or service. I have to use 5 keys to unlock a burger, the burger guy has to use 3 keys to unlock a taxi ride, and so on. These keys in some way measure the amount of freedom that we each have to enjoy each of the things provided by strangers.
We are, in essence, imprisoned to various degrees by the locks on all goods and services (or, if you like, emancipated to various degrees by the ‘ability’ the keys give us). And how do we measure the ‘productivity’ of the nation? It’s simple: we count the keys.
3. “Your salary shows how productive you are”
See everything in (2), as most of this will apply on the individual case.
4. “Your salary shows how much society values you”
See everything in (1) and (2).
5. “A strong economy must have a high GDP per capita”
In some senses this is certainly true. If by a ‘strong economy’ you mean one that can support e.g. an expensive army, or a strong public healthcare system, then fair enough (unless the country can do this in non-monetary ways suggested in (2) ). But by a ‘strong economy’ we could mean one which is efficient, one which can sell its goods at decent rates on the global stage, one which has low rates of unemployment, or a number of other things.
Imagine that in the UK our education and technical expertise improved so that we became more efficient at making what we produced and sold. At the same time, we chose to move to 3-day-working weeks. Our GDP per capita may well decrease but we would still have a strong economy in many senses.
Two responses people could give to this:
“But higher GDP per capita means a better quality of life.”
“But it’s a silly scenario because people will always want to buy more stuff (so they’ll need to work more to do so).”
I’m not going to argue against either of these; I think that both of them are false. They are both generalisations arising from correlations, and to be honest I’d be surprised if anybody actually believed them in a strict sense. If they are straw men, then just poke them and I’m sure they will disintegrate.
NB for an entirely justified critique of this Massacre approach to argument, see this article, in which Glenn Beck is accused of doing a thing of similarly dubious worth. And if you want to counter-massacre my men (whether straw or not): bring it. The arguments will die; we will thrive.