Note: I do not have a solution to this problem. It’s still important.
One of the things you keep hearing in postmodern literature is about the conversion of all personal and ancient relations into economic relations. This is presented as a big deal but it never meant anything to me when I read it and I doubt it means anything to you. So allow me to steelman/quantify this issue, or at least what I think it means.
Things have value, but the more we look at things from a capitalist/economic perspective, the more we can only see the value of things from the capitalist/economic perspective. But things still have their value and there’s a real risk we’ll lose important things with high value as we adopt the capitalist/economic viewpoint because we no longer see their value.
So let me use the most ur-example I can: the enclosure of a private grazing field. This is one of the first big parts of the Agricultural/Industrial revolution: the enclosure/fencing of previously publicly used land for grazing cattle or other more structured agriculture by private owners. So let’s imagine the town of Engleborough. Since medieval times, the people of Engleborough have let their cows and sheep graze in the meadows. 100 villagers, 200 cows, 500 sheep, or 2 cows and 5 sheep per villager. Now the villagers grow their own food, they’re subsistence farmers, so they also consume most of the milk, wool, and meat from the cows for themselves but they do sell a bit, so let’s say each villager consumes $400 worth of milk, wool, and meat a year and sells $100 to outsiders.
So what happens when the meadow is privatized? Well, the villagers no longer have a field where their cows and sheep can graze but fortunately the local landholder is willing to buy up the 20,000 cattle and 50,000 sheep of Engleborough and pretty soon those same animals are grazing the same land, they’re just owned by the local landholder now. Some of the villagers travel to London to look for work but most of the farmers are farmers, this is early Agricultural Revolution so there’s no big factories for them to work in, and so they remain subsistence farmers in Engleborough except now they buy their milk, wool, and meat from the local landholder and in exchange they work part time tending to all the sheep and cows for the landholder.
I’m worried that in the situation I described, it looks like a lot of economic activity is going on but in reality little has happened. Ignore potential efficiencies or wealth concentration or anything like that and just focus on how this looks to a government official or an academic. If we’re measuring local economic activity, doesn’t Engleborough look much more prosperous? I mean, GDP is the main stat we use today to measure economic activity. And GDP hasn’t just increased, it’s at least quadrupled. The villagers still consumer the same amount milk, wool, and meat as before but now they’re buying it from the landlord and paying him with wage labor. That means where previously the milk, wool, and dairy sector in Engleborough had $10,000 a year in measurable economic activity, now it has at least $90,000 of measurable economic activity, because the government agency record $40,000 more dollars worth of goods being sold and $40,000 more of wages being paid. But put a gun to an economists head and he’ll admit that nothing has changed. The same number of cows and sheep are grazing on the same amount of land producing the same amount of milk, wool, and meat being consumed by the same people. But doesn’t it look like GDP has increased? Average and median wages have almost certainly increased, there’s a lot more wage labor going on. Unemployment is probably down, depending on how it’s measured. If you were a journalist or a government researcher with enough knowledge of Engleborough to know that nothing has really changed, what stat would you point to? Think about how we talk about unemployment or wages now.
And I realize this is a simplified example but it’s the complex real world I’m worried about. Imagine Bingleborough, which is just like Engleborough except that 10 of the villagers left to work in the city, 20 villagers kept their livestock and pay a small fee to the landholder, and the landholder raises 75 more cows but 100 less sheep. In Bingleborough the economic realignment has generated some small but real changes. Bingleborough meadows/farm animals are probably a bit more valuable (there’s an economic reason for more cows and less sheep) and there’s 10 more workers in the city producing more surplus value. How does Bingleborough look to researchers/the government? Let’s say GDP in Bingleborough went from $10,000 to $97,000. Remember the Engleborough went from $10,000 to $90,000. How would you distinguish between real growth a “fake growth”? How would the government or any other policy making body?
I think the GDP growth, the fall in unemployment, all of it, in Engleborough, is fake. It’s just economic activity that previously couldn’t be seen/quantified because the goods were produced and consumed within the family unit; they were never bought and sold on an open market. If you have issues with the Engleborough example, pretend I’m a better writer and I actually wrote the example correctly to explain this fact. In Bingleborough, the fact that there are small efficiency/productivity gains makes this illusory growth much harder to detect. As the government/researcher all we see is fantastic growth in all of our economic indicators. When we go try to explain why this growth happened, in Engleborough there’s no good explanations, which causes confusion, which gives us a chance to recognize the illusory growth. In Bingleborough, however, we find some real growth, it’s there, and so we attribute all the growth to these real factors which really happened but are small.
Grant me that private/internal economic activity exists and is invisible to the market and our econ measures. ie, if you knit a sweater, that sweater is valuable, but it doesn’t show up on GDP or any other official metric and is therefore “invisible”. Then:
#1 We, by definition, have a hard time seeing “invisible” economic activity
#2 This is doubled by the fact that largely “invisible” effects are mixed with small measurable effects.
#3 Therefore, at a policy level, when we make policy decisions, we will undervalue “invisible” economic activity and overvalue measurable economic activity. This could lead to bad policy.
Or streetlight capitalism. We’re optimizing for what we can measure, but there’s a lot of economic activity we can’t measure, therefore are we confident we’re actually optimizing our whole economy? To bring back pomo, if we can only value something as valuable in a capitalist/marketplace context, then we can lose the valuable things that don’t fit in that context.
If you want to know where this is going, here’s SlateStarCodex on Elizabeth Warren’s “The Two Income Trap”.
“When Warren does a very unofficial Fermi-estimate style breakdown of what is happening to the extra $30,000 that modern two-income families earn over traditional one-income families, she thinks they are paying about $4,000 more on their house, $4,000 more on child care, $3,000 more on a second car, $1,000 more on health insurance, $5,000 more on education (preschool + college), and $13,000 more on taxes.”
PS, in this example men make $40,000 a year and working women make $30,000
This is a bit more culture war-y than I’d like, but there’s no good way to avoid it. If you go looking for “invisible” economic activity in the 20th century, the largest effect in going to be women leaving the home and entering the workforce. Using SSC’s numbers:
The stay-at-home mom;s labor was worth about $6,500 (child care + half education (preschool))
Getting a job required $3000 of extra expenses (2nd car)
This meant the woman entering the workforce made an extra $20,500 ($30,000 salary minus cost and stay-at-home labor value)
Of this, the woman/family receives $7,500 and the government receives $13,000 (taxes)
So, extrapolate from this to society, measurable GDP would have increased by 75% ($40,000 to $70,000). If we add in the value of the labor of the stay-at-home mom and remove the wasted production (a 2nd car of little utility outside of commuting) actual economic activity increased by 44% ($46,500->$67,000). That’s a really big difference.
Let me preempt two challenges: quantitative and feminist.
I think the quants are going to challenge me that this is all very vague and there’s no hard numbers. Which is true, my challenge is how do you expect me to quantify this? I don’t think government agencies are dumb for not measuring this, I genuinely have no way to measure this and don’t know anyone who does. For example, if someone stays home and cares for a sick relative, I know that has real economic value because it’s comparable to medical care that costs thousands of dollars. I have no way and no suggestion about how to estimate the total economic value of family-provided healthcare. First, it’s really hard to know how much work people put into caring for sick relatives. Second, it’s really hard to compare personal care from relatives to professional care from specialist, especially since many sick people both consume professional services and get help from family and I’m unsure how to measure who is doing how much of what in these situations. Third, I’m sure a 30-40% marginal tax rate plays havoc with valuations and incentives on this stuff, not even counting health insurance. I get that this is pretty vague but market confidence and consumer confidence are also really vague terms for real and important things.
Second, feminists, because this can get read really easily as a call for women to leave the workforce. That’s not my argument here and although I’ll expand on this shortly, here’s the brief on feminism briefly.
#1 Let’s estimate/imagine that a stay-at-home mom’s labor is worth $10,000
#2 Let’s estimate/imagine that a working mom’s labor is worth $30,000
#3 There’s no argument that there’s a real economic benefit of $20,000 for a stay-at-home mom to enter the workforce
#4 That doesn’t change the argument that the labor of the stay-at-home mom has real economic value that we/society don’t recognize/measure
#5 Nor does it change the argument that we overestimate the benefit of the stay-at-home mom entering the workforce as $30,000, not the $20,000 it should actually be
If these distinctions haven’t been clear thus far, blame my poor writing.
But how much of US growth from 1950-1980 was real benefits of women entering the workforce and how much was “invisible” labor at home being converted into recognized labor in the workplace? Heck, before that, how much of late 19th century growth was real and how much was men being converted from independent farmers to factory workers? How would you tell?
At least in the past you could point to cars and trains for physical evidence of production. In a modern economy where most jobs and production are in services, how do you make an effective distinction?
I’m not primarily concerned with how this effects society; I’m mostly concerned with myself and, to a lesser extent, you. Because in me and you, I think this incarnates as focus on wages/income rather than overall value.
Here’s an easy example: cooking. I cook and I’ve noticed a significant savings when I cook: if I eat out regularly I spend $800 a month on food while if I cook most of my meals I spend ~$500 a month on food. Over a year, that savings is worth $3,600 a year.
But compare that to if I got a new job that paid me $6,000 more a year or $500 more a month. I’d be super excited, and I know it would be big news among my friends/family. But in financial terms, after a 30-40% tax rate, getting the new job/raise is about as financially valuable as cooking most of my meals. Why do they feel so different then? Why am I, and I guess you, so much more excited about making more money than cooking?
In real terms, someone marking $100,000 in San Francisco is about as well off as someone making $50,000 in Indianapolis. Why does the person in San Francisco seem so much higher status?
Why don’t I have any income other than my job? Check that, why don’t I count growth from stocks and bonds as part of my income? If someone makes $40,000 a year at their job and $10,000 a year renting out part of their home or a duplex or something, do they make $40,000 a year or $50,000 a year?
I don’t think my job is the only thing I do that produces value but I also totally think that.
I’m sure there’s lot of housewives who think nobody respects what they do. I’m sure a lot of them are right. Worse, I think a lot of them actually think they don’t do anything useful.
I’m haunted by part of “Nickel and Dimed” where the author relates that “There are no secret economies that nourish the poor…On the contrary there are a host of special costs. If you can’t put up the two months’ rent you need to secure an apartment, you end up paying through the nose for a room by the week. If you have only a room, with a hot plate at best, you can’t save by cooking up huge lentil stews that can be frozen for the week ahead. You eat fast food or the hot dogs and Styrofoam cups of soup that can be microwaved at a convenience store.” This is
A. Completely logical
B. Absolutely insane. If you’re making $6 an hour, you should absolutely work an hour less to turn $1 of lentils and spices into $12 of meals. I get why this situation happens but it’s still broken.
At the broad cultural governmental level, I absolutely get why the government is blind to these things. But I’m blind to these things and I suspect you are too and that freaks me out.
I want a way to refer to this, a way to refer to the method of thinking that can’t recognize the value of things or labor unless they’re traded in the market. Thus streetlight capitalism.