a gloss on the political hocus pocus of our time

Back in the 70s – the era that suckled LI, and that provides the whole framework for Bolano’s great novel, which all should read, The Savage Detectives, and all should talk about, bringing an end of all talking about 300 and Spiderman, enough enough enough! – an economist named Fred Hirsch wrote a tract reflecting the time and the mores entitled The Social Limits of Growth. And then, of course, they came from nowhere – or from Pentagonia – the Reaganauts, and for the past thirty years the only discourse about Growth is how we are blessed its many wonders to behold. Meanwhile, we laid claim to another piece of the atmosphere to store our car exhaust and coal exhaust shit, destroyed the Aral Sea, depleted the Ogallala Acquifer, and etc., etc.

This week, LI is going to say some things about Hirsch’s idea of positional goods. It is an idea that has its ancestry in institutional economics and Veblen, but Hirsch was a post-World War II economist, a quantifier, and he wanted a more specific way to talk about a certain kind of social good and service.

Hirsch distinguishes between between the Material Economy and the Positional economy in order to describe the post WWII economic order in the developed world. The material economy is that one familiar to neo-classicals and Marxists. it is deined “as output amenable to continued increase in productivity per unit of labor input: it is Harrod’s democratic wealth. The material economy embraces production of physical goods as well as such services as are receptive to mechanization or technological innovation without deterioration in quality as it appears to the consumer.” On the other hand, you have Harrod’s “oligarchic wealth”: it “relates to all aspects of goods, services, work positions and other social relationships that are either (1) scarce in some absolute or sically imposed sense or (2) subject to congestion or crowding through extensive use.” The question posed by Hirsch is: “What happens when the material pie grows while the positional economy remains confined to a fixed state?”

In a sense, this problem is all around us now, the effect of the growth plus increase in inequality that describes the Reaganomic era. Hirsch had the foresight to see that the economy in the developed world was tending towards positional competition. On the one hand, unless there was robust economic growth, there would be increasing privation. On the other hand, the concomitant to growth would be increasing inequality, which would re-define the terms of affluence. To give one of a number of examples: take a social good such as education. On the one hand, for a democratic, capitalist society to continue, it must invest in human capital – it must educate. On the other hand, positional competition imposes on that education its logic – in order to be rewarded within the educational system, it isn’t enough that a person actually be educated, but it is also important that others be less certified – that others be excluded from certain institutions of education and the like, what Hirsch calls a “competition by people for place, rather than competition for performance.” Hirsch discusses a number of sectors – real estate, education, jobs – and then makes a fine, although dense, summary:

‘… material growth intensifies what may be termed positional competition. By positional competition is meant competition that is fundamentally for a higher place within some explicit or implicit hierarchy and that thereby yields gains for some only by dint of losses for others. Positional competiton, in the language of game theory, is a zero-sum game: what winners win, losers lose. The contrast is with competition that improves performance or enjoyment all round, so that winners gain more than losers lose, and all may come out winners – the positive sum game.”

And – an important point – positional competition is about scarcity: "… competition in the positional sector serves as a general filtering device through which excessive demand has to be matched to available supply. This aspect – which I seek to isolate by the term positional competition – at best yields no net benefit and usually involves additional resource costs, so that positional competiton itself is liable to be a negative sum game. Competition in the positional sector, however, may still yield net benefits if its contributions to individual efficiency and allocation of resources outweigh additions to resource costs and misallocation. But this cannot be judged from the conventional measures of economic output, since these measures gloss over the negative or deadweight elements of positional competition.”

Well… yeah. That last sentence is a gloss on the political hocus pocus of our time, friends and fiends. About which we will have more to say in another post.