DOING THE RIGHT THING

Erwin Dekker Vizier Blog Leave a Comment

Op 22 september presenteerde Arjo Klamer zijn nieuwe boek ‘Doing the Right Thing’ in het prachtige gemeentehuis in Hilversum, waar hij momenteel wethouder Sociale Zaken is. Ik was gevraagd om iets over het boek te vertellen, hieronder de tekst.

In an attempt to improve rational choice theory in the 1970’s, Gary Becker and some of his fellow Chicago school economists made a radical proposal. Although they presented it as only a minor tweak. They proposed to no longer think of individuals and households as consumers, but rather as producers. They argued that goods bought on the market, are really only an input to whatever we hope to produce: health, social distinction or pleasure. A bottle of wine in other words is not consumed to quench our thirst, or from our desire for some alcohol, but rather it is one of the inputs for the production of a romantic movie night, or a dinner party with some friends. Becker and his colleagues did not do much with this idea at the time or later, they had very different things on their mind. But in my reading this is the fundamental starting point for Arjo’s book: Doing the Right Thing.

For him the insight that market goods are, almost always, only an input for some other social activity, private practice, or joint project fundamentally alters how we think about economics. He, although he doesn’t like me emphasizing this similarity with Becker, takes his insight to its logical conclusion, and a little bit further. This fundamental insight is how the book starts, you can buy a house, but not a home. In other words you can buy some of the inputs for the production of a home, but the production of a home requires your own time, your own effort, and of course that of the people with whom you share the home.

That same sentiment is captured by Jay-Z, the rapper, when he raps about the aftermath of Katrina:

Sure I put up a mill[ion], but I didn’t give my time
So in reality I didn’t give a dime

What he is conveying is what money can’t buy, and what we can only jointly produce. Jay-Z compares his gift to a band-aid, on sale in the market. But we cannot buy the rebuilding of communities that was required. Last year I studied at George Mason, where they had done a big research project on the aftermath of Hurricane Katrina, and they found that the strength of the communities, of civil society, was the main determinant of whether people returned to New Orleans. That is the second major insight of Arjo’s book: many of the goods we strive for can only be attained within a community. That is true at the local level, but that is also true of any profession. The quality of my research is only meaningful when it is shared in seminars at conferences, and appreciated by peers. That is what the book calls the realization of values.

By doing so we also start to realize why in the book the market is primarily an instrumental domain, and why most of the action is happening in the social sphere. Markets, might provide inputs, and they might provide them very efficiently and cheaply, but they are hardly ever able to produce what is meaningful to people. In fact most sophisticated economists understand that market transactions presume no shared goals, while for Arjo the most important goals are shared, and they are realized, or co-produced, in communities, clubs, societies, and in homes.

If that was the only contribution of the book I would have been very impressed. But the book provides more than an alternative way of thinking about markets, goods, and consumption and production. It contains what I would call a therapeutic side. This therapeutic side of the book probes the reader to ask what he is really striving for, what his goals really are. It is terrain that Gary Becker and his fellow economists would never touch. For them individuals have their mind made up, their preferences are given, and we study how they most efficiently satisfy those preferences. For Arjo, this is where all the action is.

For what is the right thing to do? The book offers numerous ways of finding this out, probing questions, thought exercises, examples of choice situations, and a wide variety of values. It provides guidance to formulate clearly what our values are. It is here that the book runs the risk of being paternalistic, and some readers will find it that at some points. But ultimately it is up to the reader to decide what is most important to him or her. Don’t read the book to find out what is really important in life, use the book to find out what is important to you.

If I can offer one criticism of the book, it is that the book over-corrects a little too much in my eyes. It is a joy to read Arjo taking his fellow economists to task for focusing on the means only, on efficiency only, while never caring about what we are attempting to achieve. But I as an economist feel that Arjo perhaps underestimates the extent to which the market has enabled us to ask the important questions in the first place. As the economist Robertson once put it: the market economizes on love. That is a deep insight. It shows that if we are required to find people who share our goals and values to get anything done, we want to get done, then we might not get very much done in the first place. In the market, instead, we can buy our wine from the store, where they don’t much care what I will do with it. Let alone, that I have to invite the salesman to my dinner party. Unlike in the social sphere, where it would be logical that somebody who helps me with the preparations for the party, will stay to join. On markets, we don’t have to rely on the benevolence of others, nor on some shared purpose, to get the collaboration of others, as long as we pay them.

So when Arjo draws his picture about the four or five spheres in which we realize our values, I do not disagree with him for one moment that the important values are realized in the social sphere and the oikos. But the fact that we get to spend much time in the oikos, that children don’t have to work at a young age, that one, or both, of the partners can afford to work part-time, that we can take out some time to volunteer, that we can take holidays to share time with the people around us is all due to markets. And that all of those things are now available for most of the households in society, and no longer for the happy few is also an achievement of well-functioning markets. Arjo’s quest to do the right thing, is a return to the question that occupied the ancient philosophers of Greece, but in their society it was a luxury that the happy few could afford. Without markets, and a well-functioning government, the question that motivates Arjo’s book, would have remained a luxury, for all but a few of us. But even here, I think his book ultimately tells us that perhaps, we now have enough income, enough stuff. Let us use that stuff to realize our values, to realize what is really important.

Erwin DekkerDOING THE RIGHT THING

Leave a Reply

Your email address will not be published. Required fields are marked *