On Necessity
Picture by Eric Pouchier
As we are being told that global warming looms, fossil fuels are running out, people are starving all over the world, and a global recession may not be over for a while; encouragements to only take for oneself what is really necessary are becoming increasingly common. On the surface, this sounds nice. If we only consume what is necessary, then there will be more of everything left for those in greater need, we won’t pollute as much, and so on.
Nevertheless, whenever I hear someone urging others to restrict themselves to what is necessary, I can’t help but think: “necessary for what?” Necessity, by definition, means something you can’t do without. However, in order for such a word to make any sense at all, one needs to define what something is necessary for. For example, gasoline is necessary for most cars to drive. It is not, however, necessary for bicycling. And so on.
Now, when we are urged to only take what is necessary, then what are we really imagining as whatever we take being necessary for? The “good life”? In that case, how is “what is necessary” different from “what we want”? Perhaps it is necessary for a lot of us to have a summer house in Tuscany and drink expensive red wine for dinner every day. Or are we talking about what is merely necessary for survival? In that case, pretty much all conveniences that have been discovered during the last hundred thousand years are not necessary. Forget about needing a cellphone, you don’t even get a house – your ancestors did just fine in a nice, warm cave. Is it necessary to live beyond age 80? Is it even necessary to be alive at all?
By all means, conserve all you want. But all this talk about restricting ourselves only to what we need is – at the very best – both quite absurd and a little intellectually annoying.
By Stephan Andreas Jensen
7 comments
There ain’t many caves around, though.
It appears the guy in the picture above manages just fine without one.
I miss the next step in the analysis: a comment on the level of optimal consumption? Should the community induce reduced consumption, to foster savings or redistribute? Do the individual have some kind of moral obligation to give money away if he observes that his marginal utility of consumption is borderline zero, and all thats left is pure hedonistic, conspicuous consumption?
Thank you for your comment, Mr. Stochastic.
To begin with, I think it is worth arguing that it is not necessarily the case that pure hedonistic conspicuous consumption has borderline zero utility. Perhaps for some, Veblenian conspicuous consumption has more marginal utility in an economic sense than many other things you or me might perceive as more “useful”.
This brings up an important point which perhaps deserves a blog post of its own at some point. In a very strong sense, I think the term “utility” as used in economics is very misleading in terms of what we really mean by the concept. The dictionary definition of utility is “usefulness”, but when we talk about marginal utility in economics we don’t really mean what is more “useful” on the margin, but what we want more. As such, it can be perfectly rational to spend one’s entire income on marshmallows instead of replacing one’s broken computer, or knowingly getting a much more expensive mortgage because one thinks the girl working in the less affordable bank is really cute (see my previous post on rationality). A simple reason why this is the case is that the concept of usefulness is as empty without an object as the concept of necessity is. That is, it makes no sense to talk about something being useful without defining what it is or might be useful for. A swiss army knife, for example, is not very useful for drinking coffee out of. Because of this, the norm in economics is to think of utility as useful for whatever we want (eating marshmallows, for example).
Now, with regards to the question of optimal consumption and redistributional policy, the argument i make in the post above can really be used to defend opposite cases. On the one hand, one could make the point that since nothing is really necessary as such, nobody should complain about any large or small part of their income or property being redistributed. On the other hand, one could argue that since any standard for what is necessary must be arbitrary, it becomes absurd to impose such an arbitrary standard on others – especially by force – and that because of this a libertarian position is the only logical one.
Personally, I do not subscribe to either of these extremes. There are many reasons why one would want to employ redistributive policy in a country or an economy – moral ones in particular (yes, I am from Scandinavia) – but I do not think one should base these on presumptions on what is necessary per se, but rather on a consensus around what is good. In a sense, this follows logically from the need for an object of necessity. Why would we argue that it is necessary to have an excellent educational system with free access to everyone? Because we think the effects of such an institution are good. Without the latter or its equivalent, necessary means exactly nothing.
Thank you for a great answer Sthephan.
Few more questions:
What is the utility drawn from veblenian consumption? Is it the case that since individuals would like to consume, then they must yield utility from it? Or, is your argument more along the lines of the classic argument that rich people wasting money on fancy computer equipment benefits innovation?
I am also a bit skeptical of your way of defining utility: If A is beneficial for B, and B is good, then A must generate utility. First, it can in many instances be hard to define the endstate (think of buying a car: it kills people on the road, pollutes, but takes you from home to work, which is good). Second, the concept of utility is introduced in order to attempt to rank different choices, and youre definition fails somewhat to do this (unless I misunderstood)?
Returning to the question of distribution and your idea that the scandinavian system is pretty good. The rationale for this system seems to be that equality matters. This view derives from a belief that poor people get more (marginal) utility from than rich people. So, argueing that income should be redistributed, is, in essence, to say that marignal utility should be equalized (to some extent) across society. Am I right? Is this your view?
Let me begin by answering your second question. Indeed utility is introduced in order to provide a (highly theoretical) framework for ordering preferences. That is, what one prefers the most is defined as what provides the most utility; what one prefers the second most as what provides second most utility and so on. This is perfectly consistent with the way I outline the concept above. If one thinks A is very good, B is kind of good, but one doesn’t really care about C; and X will bring about A but make C impossible, while Y will bring about both B and C, and Z will bring about only C; then a X provides more utility than Y, which again provides more utility than Z. Given the endstate preference ranking A > B and C > C, the utility ranking is X > Y > Z.
Two important caveats are worth pointing out with regards to your very important point about the difficulty of defining the endstate. Firstly, we are talking about the utility to the decision maker. So, if Bob is the one deciding whether or not to buy a car, it is his utility we are interested in, not that of all the people who will be affected by the pollution caused or whoever might get killed when Bob drives home drunk from his office Christmas party.
Secondly, we are necessarily talking about perceived and future utility. This is perhaps the most critical in making statements about the endstate so difficult. When Bob makes the decision about whether or not to buy a car, he is doing it based on a heuristic prediction of what sort of utility he will gain from it and what risks are involved. Here, he operated in a world of uncertainty as opposed to probability. That is, unlike the roll of a dice, where the probability of a given number showing up is known and measurable; Bob operates in a world where the probability distributions are largely unknown. As such, you are completely right that “it can in many instances be hard to define the endstate”. I would actually go as far as to say that it is almost always impossible to accurately define the endstate.
Nevertheless, Bob arguably imagines a variety of endstates depending on his decisions, and can arguably rank these endstates according to his preference and adjusting for price.
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As I understand Veblen, his theory of conspicous consumption is that consumption is used as a means of asserting social position or power. That is, Veblen theorizes that if Bob decides to buy a really expensive car, part of the endstate imagined by Bob is “increased social status”. That is, he appears strong and powerful because he can afford to “waste” money on conspicuous luxury. Certainly, if Bob desires the increased social status he believes he will get from owning a very expensive car, then there utility can percievably be gained from attempting to satisfy this desire.
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The marginal utility equalization/social utility optimization argument may be used to support income redistribution, but this is not how I would justify such policies.
From a utility-theoretical perspective, it is not sound. Because utility – mathematically speaking – is ordinal (first, second, third), not cardinal (one, two, three), one cannot talk about “amounts” of utility that are comparable between people. That is, one can say that Frank prefers apples to oranges and Anne prefers oranges to apples, but one cannot say that Frank gets 9 utils from Apples while Anne only get 3. Attaching money prices to the goods does not abate this problem either, both because Frank and Anne may have different incomes, but also because they may have different prefenences and rates of diminishing marginal utility when it comes to work, income, and leisure. As such, from a naively neoclassical standpoint one could argue that if Frank is very poor it is because he prefers hard work and luxury less and leisure and cheap pleasures more; while rich Anne, on the other hand, prefers leisure less and luxury more. In this world their income inequality is merely a symptom of their individual utility optimization.
This argument, of course, is deeply flawed. However, it is not flawed because it makes sense to try to look at individual utility in quantifiable, measurable, comparable amounts – it doesn’t. It is flawed, however, because Frank and Anne may have any number of different (and unmeasurable) circumstances outside of their control aid or hamper their success. That is, who knows why Frank ended up poor? Maybe it was because he was strongly encouraged by his parents to heavily specialize in typewriter-repair, and that when this industry was totally wiped out he developed a depression and turned to alcoholism. Or maybe it is because Frank is a lazy degenerate. Anne, on the other hand, might be rich because she is a hard-working and morally upright; or because she has been very undeservedly really lucky. The point is that there is a lot of stochasticity in individual fortunes that is out of there control, so it’s better to stay on the safe side and make sure that everyone has access to free high quality healthcare and university education – still making sure that the hard-working Annes are not taxed so much that they stop working or move abroad. Other benefits from a greater degree of socioeconomic may for example include lower crime and more inclusive, warm, society with less general worrying. For instance, while in the U.S. people tend to be told the same day if they are fired from their job and then escorted out of the office by an armed security guard, the norm in Norway is for employees to be given two months notice before they lose their job. No security guard is necessary to monitor uncontrolled socioeconomic anxiety, fear and anger.
One this note, it should also be mentioned that Scandinavian governments do not tend to redistribute a lot of money directly. A lot of public services, such as healthcare, are provided more or less free, providing some effective redistribution. However, the high degree of equality is mostly a result of very high labor productivity and powerful unions making sure labor benefits from that productivity. Also, (correct me if I am wrong) the private sector is regulated to a much lesser extent than in for example France, and the Scandinavian economies are heavily globalized with a large share of the economy being connected to international trade.
Hi Stephan, you made good points at the comments above. As for the necessity question we can make assumptions on only material, tangible things and in this sense most people in pre capitalist society had capacities to provide for themselves. We can measure basic necessities like food, shelter and normative/redistributive economic values like free education, healthcare. Thus subordinating markets to other social institutions is essential in curbing the insatiable wants and “needs” of human beings. When people buy things on the market for only their use values as opposed to exchanging things for only its sakes and making profit, we can talk about sustainable consumption and etc. As for the problem of defining marginal utilities, I think it is an inherently subjective system of measuring utility. What do you think about this? You are correct that Scandinavian economies rely on international trade advantages(both comparative and absolute) and high productivity in private sector and thus highly dependent on free trade of goods and services.
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