Wednesday, October 26, 2005

The Make Work Society

Recently, I've been thinking a lot about economics, the dismal science. In particular, I've been thinking about the creation and distribution of wealth. Of course this question has been analyzed countless times before, most notably by Marx, but I'll add my take anyway. Let's define the wealth of our society as the sum of everything we create. More precisely, we create wealth at a given rate and it dissipates at another rate. Some things like a restaurant meal or a pop tune, dissipate rather quickly, and others like a gold figurine can last a long time. For the most part, we only get a share of this wealth if we work.

As time goes by, we get more efficient and increase the wealth creation rate (or decrease the dissipation rate). While that seems to be a good thing it does generate some problems. One of them is quite simple. If you get more efficient at making something and you work the same amount of time, then you'll make more of that thing. However, unless someone wants to buy more of your thing, the extra stuff you've created will just sit around and not be of much use. They way around this problem is to either convince people they need more of the same stuff (i.e. marketing) or to produce other stuff. That is why thirty years ago you had a pair of dress shoes and a pair of athletic shoes but now you must have running shoes, basketball shoes, tennis shoes, squash shoes, mountain biking shoes, climbing shoes, light hiking boots, heavy hiking boots, and so forth.

However, even the best ad agency can only convince us to consume so much of one thing. So, once a market is saturated, increased efficiency means fewer people are required to make that product. These people must then find new ways to work to get a share of the wealth. Some can either make new stuff for you to buy like iPods, digital cameras, gourmet food, and storage crates to put all this stuff in or create new services like personal chefs, dog walkers, and fitness instructors. Most likely, they'll work at a low paying jobs like fast food server.

More efficiency means we will be inundated by more stuff and services we don't really need or want. Many of the new jobs will not be well compensated so the gap between the rich and poor will grow. In some sense, our solution to distributing wealth is to create a "make work" state where most of the people support themselves with artificial or menial jobs. I don't really see this as being much better than a welfare state.

One solution is that we could choose to keep wealth creation per capita fixed so as our efficiency increased we would simply work less for the same pay. So if a factory can make the same shoe in half the time then people could just work half as long. Cutting the work week even just a little bit could solve our unemployment problem. The US has twice the wealth of most western European countries. As I wrote before, we are already more than rich enough. What we now need is the time to enjoy some of this wealth.

3 comments:

Anonymous said...

Of course this question has been analyzed countless times before, most notably by Marx, but I'll add my take anyway.

But Marx had it mostly wrong, as Henry George showed.

A lot of what you wrote smacks of the "lump of labor" fallacy.

Carson Chow said...

Actually, I was calling for something entirely different. I was arguing that we should halt all economic growth because it leads to a more complicated life. I just think we will never stop and finally say, let's just enjoy what we had. Eventually, all human activities will be automated. The question is how to transition to such a world.

The George's system seems to force development, although in a way that rewards skills rather than luck. If you are sitting on an empty lot and your neighbours suddenly discover oil. You will be forced to also dig for oil or develop the land in an equally productive way because you will be taxed at that rate. You couldn't just sit on the land and hunt rabbits.

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