« Chaos? | Main | Sowell on Scarcity» Russell Roberts
May 10, 2006
Infinite Desires and Finite Means
Russell Roberts
Robert Samuelson writes on the ideas of John Kenneth Galbraith:
To Galbraith, materialism had gone mad and would breed discontent. Through advertising, companies conditioned consumers to buy things they didn't really want or need. Because so much spending was artificial, it would be unfulfilling. Meanwhile, government spending that would make everyone better off was being shortchanged because people instinctively -- and wrongly -- stigmatized government only as "a necessary evil."
Samuelson goes on to say that "these ideas have not aged well." Among other interesting observations, he points out:
It's often said that only the rich are getting ahead; everyone else is standing still or falling behind. Well, there are many undeserving rich -- overpaid chief executives, for instance. But over any meaningful period, most people's incomes are increasing. From 1995 to 2004, inflation-adjusted median family income -- for families precisely in the middle -- rose 14.3 percent, to $43,200, the Federal Reserve says. People feel "squeezed" because their rising incomes often don't satisfy their rising wants -- for bigger homes, more health care, more education, faster Internet connections.
Putting aside the fascinating, undefinable, politically ingratiating reference to the "undeserving" rich, I like that Samuelson has the gall to point out that the last ten years have been pretty good, income-wise.
But the real insight is the same one as Thomas Sowell's and the bread-and-butter of economics: we are and will always be "squeezed." We will always enjoy what we have and want more.
Samuelson concludes:
Should we be surprised? Not really. We've simply reaffirmed an old truth: The pursuit of affluence does not always end with bliss.
Undeniably true. Living in the reality, as most of us must, of infinite wants and finite means, is not blissful. But we prefer this stressful reality to the stressful reality of 1900 when more children died in infancy and mothers died in childbirth. When asked on a scale of 1-10 how happy we are, we may give no higher a number than people did 50 or 100 years ago. But most of us prefer now to then. And if people then could see now, I think they'd have the same preference.
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Comments
"Putting aside the fascinating, undefinable, politically ingratiating reference to the 'undeserving' rich . . ."
Thanks for that qualification.
Posted by: John P. | May 10, 2006 12:28:28 PM
That reminds me of my first principles class, where economics was defined as the study of "how people use scarce resources to fulfill unlimited wants." or even more basic, a study of scarcity.
Posted by: Nathan | May 10, 2006 12:58:59 PM
I was reminded of a fascinating study by Nobel laureate Daniel Kahneman. According to the study, people who desired wealth in their youth turned out comparatively miserable as adults -- but only if they didn't succeed.
To quote the BPS Research Digest:
"Contrary to the predictions of humanists, Kahneman found that, overall, the richer people were, the higher their life-satisfaction. And although, overall, dreams of wealth at university predicted subsequent reduced life-satisfaction, this relationship disappeared with financial success."
http://bps-research-digest.blogspot.com/2006/04/dark-side-of-american-dream.html
Posted by: Pietro | May 10, 2006 3:46:15 PM
The problem is that it's just not that absurd an argument that if we're not any happier, we're not any better off. Sure, I could never go back to 1900, or even 1990. But if the Internet had never existed, would I really be worse off? In an objective sense, absolutely. But if I don't know what I'm missing, can I really be said to be worse off? It's not so clear to me that this is a preposterous argument.
To me, the best measure of how wealthy we are is how much we enjoy our lives. To the extent that we can say that we enjoy them any more than people before us did, we're wealthier. But if we can't... then what?
Posted by: Adam | May 10, 2006 7:47:22 PM
It seems to me that wealth is really no more than a form of security, giving comfort that we have the ability to control our world and that we will be able to protect ourselves. Those without wealth often find ways to enjoy life without that degree of security, or find other ways to boost their idea of power. It's those who believe that wealth is happiness who are often disappointed, while those who see wealth as a means to an end are more able to enjoy the fruits of their labor.
Posted by: JohnJ | May 10, 2006 11:16:15 PM
if I don't know what I'm missing, can I really be said to be worse off? It's not so clear to me that this is a preposterous argument.
There's more to life than happiness. There is pain and physical misery for example, as well as pleasure, which is something distinct from happiness (unfortunately). The absence of poverty (third world definition anyway) definitely dramatically reduces pain and physical misery, which is a good thing, even if you have never experienced it yourself.
Posted by: happyjuggler0 | May 11, 2006 12:02:18 AM
"To me, the best measure of how wealthy we are is how much we enjoy our lives. To the extent that we can say that we enjoy them any more than people before us did, we're wealthier"
If you had a time-machine and conducted a survey of socially comparable US residents in, say, 1900 vs. 2000, they might rate themselves a 5 on a scale of 1-10.
If you then asked them to rate each other, what do you think the results would be?
Assume they are rating their *actual* respective lives, not the romantic myth promulgated by Hollywood and eco-fanatics.
Posted by: Henri Hein | May 11, 2006 1:58:38 AM
Adam,
One thing is that the people may not know that they could have something much better, but that doesn't mean that they don't recognize the misery caused -- they just may not tell you in a happiness survey, because they can't compare against the "impossible".
For example, you ask someone from pre-1900 how happy they are and they think to themselves "Well, a 10 would be if I had electricity in my home and three more cows and a better harvest - then I would have everything, at least we have our health and are generally happy, so I guess I would say I am a 6."
But then if you asked him - "what if you could live a decade longer and your daughter didn't die when she goes through childbirth and you had a computer and a chance at a better job than farming - such as electrical engineer...?"
Well, he would certainly think that this would make him much happier, its just something he thought of as impossible. But just because someone can't think of something doesn't mean that he is as happy as if he had those things. It just makes measuring happiness harder.
If you were ever dating someone that you liked but did not really love but you said you were happy - maybe even a 10. Then something happened and the relationship ends and then you are with someone you truly love - you know that the fact that you rated the first person highly at the time doesn't mean you were as happy as later with the other person. Your scale has changed now that you know what true love is. Just because you said "10" with the first person does not mean you were as truly happy, you just did not know better - but not knowing doesn't change the reality.
Posted by: liberty | May 11, 2006 2:16:10 PM
Seems to me that we should be celebrating the fact that people are not satisfied with their situation. Isn't true that our world was built by people having always asked 'how can I do this better, how can I make my life or my work easier?' I believe Toyota calls it "Continuous Improvement".
Posted by: TwoSheds | May 12, 2006 11:52:59 AM
Do you, in fact, have two sheds?
Posted by: Morgan | May 12, 2006 2:24:03 PM
Whatever happened to the theory that, if you do what you love, you will get rich automatically? That could account for the greater happiness of the rich. And there's a lot of truth to it, at least in America.
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