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The Red Queen strikes again
Feb. 1st, 2011 07:16 pmI haven't figured out yesterday's Thing yet, but don't worry, I'm determined to keep talking until I do. So here are two things yesterday's post made me think of:
Running just to stay in place: I've talked before about how having my adrenal fatigue treated was awesome and gave me so much more energy and health. But if you looked at the state of my apartment you could be forgiven for thinking I was lying. There's two reasons for this. One, the energy went in to things like martial arts, volunteer work, actual work, and having no sense of proportion about the amount of time I was putting in to martial arts. But two: there are threshold effects to the benefits I get from cleaning. Keeping my apt clean enough to get the next quantum of benefit would require basically infinite energy, because it would mean putting everything away immediately. I don't have that kind of energy, I spent it learning the in-out crescent kick. Honestly, I'd rather just keep throwing stuff out till my place looks clean through sheer emptiness.
Positional goods: Most things get more expensive as more people want them, but most things become more abundant as they become expensive, and cheaper as they become more abundant. Eventually things settle down. But this can't happen when the supply is fixed, or nearly fixed. To take a rather convoluted example: say all the water in my village comes from rain falling in a particular pool, which each individual then moves to their own private store through various means (which no, is not how water actually works, but I could either come up with an easy to understand example or a physically possible example, and I chose understandable). Let's assume that people would like to consume more water than is available and that there's no legal authority or means to ration how much water each person gets. Instead, when it rains, everyone tries to move the water to their personal store as quickly as possible before the pool empties. In this case, what matters is now how fast you can move the water, but how fast you can do so relative to your neighbors. If everyone buys a new water pump that costs 10x as much, no one is better off. But you can't opt out of this (without some authority rationing the water) because then you won't get as much water as your neighbors and your children will die of thirst. The water pump is a positional good: a good whose value depends not on its absolute awesomeness but its awesomeness relative to your neighbors goods. This is closely tied in to the concept of a negative externality: which is a negative effect caused by an action that hurts someone other than the actor. Me acquiring a positional good hurts everyone else in the competition.
The ultimate positional goods are things designed to acquire or demonstrate status.* Since status is defined by having more than other people, any increase in my status comes at someone's expense. Status goods aren't perfectly define: buying a big house increases your status, but it also gives you more places to put stuff. Some of the cost of a BMW is the name, but some is because it's honestly better engineered.** And it depends on who owns it: I have friends who would absolutely make use of expensive kitchen gadgets and top of the line stoves, but some people buy them to show off.
People talk about the rich wasting money on things like Fendi bags and how that money could do so much good elsewhere. This is a misconception based on the conflation of cost and price. Cost is the actual resource cost of a thing, price is what you pay for it. The relevant question isn't "could we redistribute the money used to buy that handbag?", because if the supply of stuff the poor need stays constant and we throw more money at the problem, we just drive up prices. The real question is "could we redistribute the resources used to make that handbag?" And without knowing anything about handbags, I'm going to guess the answer is that this would not net us very much.. It's got some material, and some and land time went in to making it and selling it, but the vast majority of the price comes from the invisible status woven into the fabric, which will not do the poor much good.
This is just a pet theory of mine, but I like to divide status goods into three categories:
1. Genuinely valuable things. I think it's Argentina where building your house on arable land is a status symbol. This does damage the economy and the not-rich.
2. Meaningless symbols. See: Fendi bags. It's not useful per se, but it's not hurting anyone either.
3. Things that are expensive and rare due to large upfront costs. Think early cell phones, or GPS. People bought these because they were genuinely useful, but people who care about their useful traits also usually care about value and reliability and other things new technology is not known for.
I love that rich people buy expensive useless electronics, because eventually that technology gets cheap and I walk around with a phone more powerful than the computer I went to college with. And I don't mind that they buy Fendi bags, because they're going to have to do something with their money and I'd rather they not choose something that was actually rare and valuable.*** Rich people who waste their money are doing us a favor, because otherwise they'd be buying stuff we wanted and driving the price up.
But wait, you say, the target markets for Fendi bags and GPS are different. This is true, because there is more than one kind of status. There's old aristocracy status and finance guy status and tech nerd status and academic status, and you buy different things depending on which you want to acquire. This is awesome, because it lets more people be the best at what they care about. It does not actually change my point, except to note that certain status groups drive more useful innovation than others, and that something being useful does not exclude it from being a status good.
Well that failed to produce anything relevant to medieval survival rates. Hopefully tomorrow will be more productive.
*These two things are so hard to distinguish I'm just going to treat them as the same for now.
**Important note: I know nothing about cars. Feel free to substitute something expensive but well made in place of BMW
***Actually, there's a lot of fighting going on in places like Colorado which the same land is both good farm/herd land and a valuable vacation house location. I don't count this because the value of the land comes from its proximity to other rich people, not its use for farming, and America is not in any way running short of herd land.
Running just to stay in place: I've talked before about how having my adrenal fatigue treated was awesome and gave me so much more energy and health. But if you looked at the state of my apartment you could be forgiven for thinking I was lying. There's two reasons for this. One, the energy went in to things like martial arts, volunteer work, actual work, and having no sense of proportion about the amount of time I was putting in to martial arts. But two: there are threshold effects to the benefits I get from cleaning. Keeping my apt clean enough to get the next quantum of benefit would require basically infinite energy, because it would mean putting everything away immediately. I don't have that kind of energy, I spent it learning the in-out crescent kick. Honestly, I'd rather just keep throwing stuff out till my place looks clean through sheer emptiness.
Positional goods: Most things get more expensive as more people want them, but most things become more abundant as they become expensive, and cheaper as they become more abundant. Eventually things settle down. But this can't happen when the supply is fixed, or nearly fixed. To take a rather convoluted example: say all the water in my village comes from rain falling in a particular pool, which each individual then moves to their own private store through various means (which no, is not how water actually works, but I could either come up with an easy to understand example or a physically possible example, and I chose understandable). Let's assume that people would like to consume more water than is available and that there's no legal authority or means to ration how much water each person gets. Instead, when it rains, everyone tries to move the water to their personal store as quickly as possible before the pool empties. In this case, what matters is now how fast you can move the water, but how fast you can do so relative to your neighbors. If everyone buys a new water pump that costs 10x as much, no one is better off. But you can't opt out of this (without some authority rationing the water) because then you won't get as much water as your neighbors and your children will die of thirst. The water pump is a positional good: a good whose value depends not on its absolute awesomeness but its awesomeness relative to your neighbors goods. This is closely tied in to the concept of a negative externality: which is a negative effect caused by an action that hurts someone other than the actor. Me acquiring a positional good hurts everyone else in the competition.
The ultimate positional goods are things designed to acquire or demonstrate status.* Since status is defined by having more than other people, any increase in my status comes at someone's expense. Status goods aren't perfectly define: buying a big house increases your status, but it also gives you more places to put stuff. Some of the cost of a BMW is the name, but some is because it's honestly better engineered.** And it depends on who owns it: I have friends who would absolutely make use of expensive kitchen gadgets and top of the line stoves, but some people buy them to show off.
People talk about the rich wasting money on things like Fendi bags and how that money could do so much good elsewhere. This is a misconception based on the conflation of cost and price. Cost is the actual resource cost of a thing, price is what you pay for it. The relevant question isn't "could we redistribute the money used to buy that handbag?", because if the supply of stuff the poor need stays constant and we throw more money at the problem, we just drive up prices. The real question is "could we redistribute the resources used to make that handbag?" And without knowing anything about handbags, I'm going to guess the answer is that this would not net us very much.. It's got some material, and some and land time went in to making it and selling it, but the vast majority of the price comes from the invisible status woven into the fabric, which will not do the poor much good.
This is just a pet theory of mine, but I like to divide status goods into three categories:
1. Genuinely valuable things. I think it's Argentina where building your house on arable land is a status symbol. This does damage the economy and the not-rich.
2. Meaningless symbols. See: Fendi bags. It's not useful per se, but it's not hurting anyone either.
3. Things that are expensive and rare due to large upfront costs. Think early cell phones, or GPS. People bought these because they were genuinely useful, but people who care about their useful traits also usually care about value and reliability and other things new technology is not known for.
I love that rich people buy expensive useless electronics, because eventually that technology gets cheap and I walk around with a phone more powerful than the computer I went to college with. And I don't mind that they buy Fendi bags, because they're going to have to do something with their money and I'd rather they not choose something that was actually rare and valuable.*** Rich people who waste their money are doing us a favor, because otherwise they'd be buying stuff we wanted and driving the price up.
But wait, you say, the target markets for Fendi bags and GPS are different. This is true, because there is more than one kind of status. There's old aristocracy status and finance guy status and tech nerd status and academic status, and you buy different things depending on which you want to acquire. This is awesome, because it lets more people be the best at what they care about. It does not actually change my point, except to note that certain status groups drive more useful innovation than others, and that something being useful does not exclude it from being a status good.
Well that failed to produce anything relevant to medieval survival rates. Hopefully tomorrow will be more productive.
*These two things are so hard to distinguish I'm just going to treat them as the same for now.
**Important note: I know nothing about cars. Feel free to substitute something expensive but well made in place of BMW
***Actually, there's a lot of fighting going on in places like Colorado which the same land is both good farm/herd land and a valuable vacation house location. I don't count this because the value of the land comes from its proximity to other rich people, not its use for farming, and America is not in any way running short of herd land.
