It may sound to the uninitiated as though science fiction conferences are bad places to go for insights into economics, but the uninitiated would be wrong. One of the more interesting sf phenomena of the last fifteen years or so has been the creation of a more economically literate science fiction, which gets away from the libertarian ‘competent man’ certitudes of much of the early writing in the genre. It seems to me that the Brits have pioneered this – Iain Banks, Charlie Stross, Ken MacLeod, China Mieville, Justina Robson, Paul McAuley come to mind – but notable Americans too (Steven Brust, Cory Doctorow and Neal Stephenson) have been guilty of economically sophisticated literature on occasion.
This came home to me at Torcon, where a well-attended and intelligent panel discussed the economics of abundance – if future scientific progress allows us to produce material goods effectively for free (as some sf writers postulate), then what happens to society? Iain Banks’ ‘Culture’ series is perhaps the best known sf take on this question; Banks sneakily describes a Communist utopia in terms which might well mislead the uninitiated into thinking that he’s a gung-ho libertarian. And Banks got frequent and deserved namechecks at the panel. Charlie Stross gave the standard take that economics is the science of choice under scarcity, and then launched into a discussion of what economics might have to say under conditions where scarcity didn’t apply (answer: not much). The panel, after some meanderings, more or less agreed that material abundance would lead people to displace their energies to achieving social status through positional goods and the like.
Which got me thinking about the difficulties of applying economic analysis to these phenomena – while economic reasoning can lead to some interesting insights about people’s struggle for social status, it also has some very clear limitations. Certainly, Gary Becker’s ‘strong’ programme of applying marginal analysis to social phenomena across the board hasn’t had enormous success. Even if people behave in a self-interested fashion in their efforts to grab status, this self-interested behavior doesn’t lend itself well to standard economic analysis. Why?
Both the late Mancur Olson and the still-very-extant Doug North 1 have remarkably similar takes on this. Social goods and political goods are difficult to analyse using economic tools, because they’re not easily measurable. As Olson points out, political and social goods tend to be indivisible. That is, it’s hard to divide them up into discrete amounts without changing the quality of the good in question. As Olson says, friendship (as against acquaintanceship) and marriage (as against prostitution) involve a certain amount of indivisibility – beneath a certain level of provision, the good becomes qualitatively different. This means both that it’s difficult to impossible to translate these goods into money, and that it’s bloody difficult to measure them. As North argues, this has rather fundamental implications for neoclassical economic theory, which tends to assume that it’s possible in principle to measure what it is that actors are exchanging. To put it bluntly, neo-classical theory can’t tell us much about choice under these circumstances.
What does this tell us about situations where material (measurable) goods are abundant? I reckon that two implications follow. First: as the Torcon panelists argued, human beings are dissatisfied sorts by nature – if they’re getting enough in the way of material wants, they’ll find other unrequited (social) needs to squabble about, so that they can vie for position. Economists and sociologists like Thorstein Veblen and Fred Hirsch would likely agree with this assessment. Second, the economists of the future aren’t going to have much that’s useful to say about choice under these conditions, unless they radically change their assumptions and tools. Someday far hence, the dismal science may be a thing of the past.
1 Olson, Mancur. 1990. Toward a Unified View of Economics and the Other Social Sciences. In Perspectives on Positive Political Economy, edited by James E. Alt, and Kenneth A. Shepsle. Cambridge: Cambridge University Press. North, Douglass C. 1993. What Do We Mean by Rationality? Public Choice 77: 159-62.