Wednesday, March 16, 2005

Why Markets Promote Shallow Appetites and What Can Be Done to Solve This Problem

First, unlike most free marketeers, I do think that there is a propensity for markets to reward shallow appetites rather than deeper ones, and that we should be concerned by the trend towards shawllower appetites.

Unlike those who criticize markets for this, it is clear to me that the reason that this is the case is because government controls health, education, and community formation. If we had a free market in health, education, and community formation, there would exist a significant and growing market in communitarian living experiments that would cultivate an ever deeper and more extraordinary range of human capacities and appetites.

Often market criticisms are based on the existing faulty markets that we have. Because of the political tribalisms that we all feel, there is a tendency for market advocates to reflexively defend existing market outcomes.

But at the same time they are aware that existing markets are often grossly distorted. One example as I understand it: There are laws in the stock market that constrain selling short. These laws are based on a primitive moralistic impulse that believes that it is somehow bad to bet that stocks will go down. An unintended consequence of these constraints on selling short is increased market volatility: If the stock market is viewed fundamentally an information exchange, limits on the ways in which information can be exchanged will create distortions. In this case, the market is not receiving the optimal flow of information on when investors believe that the stock of a particular company may be about to decline. As a consequence, there is an unnecessary "jerkiness" to stock prices that increases overall volatility. Insofar as this is the case (I have no idea of the magnitude of this effect - I'm not sure if anyone does), complaints about stock market volatility, as well as "efficient market" defenses of the existing market that claim that it is not overly volatile, are both misguided.

In the absence of freedom, we don't really know what the outcomes would be. If communism had successfully defeated capitalism, and every nation on earth had become communist in the 1920s, we would be entirely ignorant of almost all technological, social, and cultural developments since 1930. The world would be grey, dark, and Stalinesque, with a few Tito-esque and Castro-esque shades of grey for variety. Mountain bikes, color television, computers, cell phones, the sexual revolution, the counterculture, tai-bo, Nikes, economical air travel for the masses, etc. would all be simply unimaginable.

Historical counterfactuals are difficult to imagine, but to understand the way in which existing markets favor shallow appetites, it will be useful to imagine a counterfactual history.

Humans evolved in tribal circumstances in which there was a coherent culture: Everyone in the tribe held the same cosmological beliefs, everyone adhered to the same morality, everyone respected the same gods, elders, and leaders, everyone had the same manners, everyone ate a similar diet, everyone followed the same rituals, everyone was told and re-told the same myths, everyone raised children in the same way, etc. I am not claiming that in tribal cultures everyone did everything exactly the same way - there was certainly some variation. But compared to our present circumstances, the variation in, say, cosmological beliefs, was truly miniscule compared to what it is now. In a sense that was so deep and fundamental that we can't even imagine it, life had a communal meaning and purpose.

I think that there are good reasons to believe that our evolutionary psychology reflects these tribal appetites for communal meaning and purpose. Today many people use the verbs "crave" and "long for" with respect to the search for meaning. Numerous 20th century artists and philosophers have devoted their lives to, in Jung's phrase, "Man's search for meaning."

In any normal distribution, some will have greater appetites for meaning and some less. I suspect that the artists and philosophers who have devoted their lives to a search for meaning are the "canaries in the coal mine" at one end of the distribution. The economists and business people who seem oblivious to these needs are at the other end of the distribution.

Until the 20th century, Christianity was the accepted framework for meaning in western civilization. While not as coherent as our original tribal structures, Catholic Christianity, at least, in many respects provided the combination of cosmological belief, moral system, and set of rituals that satisfied many of our visceral impulses for a coherent meaning system (the first significant empirical discovery in sociology was that Protestants committed suicide at a much higher rate than did Catholics).

In the 20th century, however, Christianity increasingly collapsed as a common framework for meaning. Anomie and existential angst among intellectuals, and hedonism and selfishness among more practical people, began to spread as any set of common norms vanished. Since the 1950s, for instance, teenage pregnancy, violent death rates, addiction, suicide, and other adolescent pathologies have increased dramatically. "Capitalism," the Marxist term for the free enterprise system, was blamed by many. Communists believed that they could provide the sense of meaning that had been lost.

"Creative destruction" is the most succinct and insightful description of the free enterprise system. Intellectuals, technology, and markets did destroy traditional ways of life and traditional norms, and continue to do so.

But, when allowed to do so, free enterprise can also create. Indeed, it is a fundamentally creative endeavor. By contrast, governments cannot create. Governments can slow down the process of destruction. But slowing down the forces of destruction is not in any sense a substitute for acts of creation. The result of government control over many decades is merely a dull, ugly reality in which that which is good in the past disappears more gradually, but is still not replaced by anything better.

This is precisely how I would describe the effects of the government education monopoly. As traditional cultures of meaning were increasingly destroyed by secular intellectuals, by technological innovation, and by market forces, culturally-innovative schools, which should have been the locus of new cultural creation, were prevented from coming into being. In the absence of the government education monopoly, as coherent cultural norms and meanings vanished in the 1920, 30s, 40s, 50s, 60s, 70s, parents would have created new forms of education and new communities in which new cultural models would have come into existence. Many of those parents would have created traditional schools to preserve the past as best they could; though even those attempts to preserve tradition would have been far more adaptive than our public schools have been.

There would also, however, have been some entrepreneurs, whose work would appeal to some parents, who would have created new cultural models. Initially, these cultural models might have been not too dissimilar from existing ones. But as the pace of life quickened, in a sufficiently large market, very interesting experiments would have come into being.

It is a basic truism of economics that, in choices between two goods, if the cost of good A decreases relative to the cost of good B, a larger quantity of good A will then be consumed. Alternatively, with costs constant, if the quality of good A increases relative to the quality of good B, again a larger quantity of good A will be consumed.

Assume, broadly speaking, that "good A" above represents those goods the appetite for which does not depend on a deep, culturally coherent upbringing, whereas "good B" above represents those goods for which one's appetite does depend on a deep, culturally coherent upbringing.

We live in a circumstance in which goods which do not require training of the appetites, such as sensational television, fast food, internet gambling and porn, video games, virtual reality, etc. are rapidly become more intensely stimulating, more widely available, and cheaper. In contrast, because of the government school monopoly, it is virtually impossible to create the kind of deep, culturally coherent upbringing that would develop the appetites needed to sustain a market that is supportive of wisdom, love, kindness, truth, beauty, intimacy, etc. Relatively speaking, "good A" has become dramatically cheaper, largely due to technological change, whereas "good B" has been virtually outlawed by government control of schools. So of course consumption of good A relative to good B has been increasing - and will continue to do so until we liberate schools.

Happily, human beings are resiliant, and so certainly good things do continue to exist in our world. But on the assumption that some goods require no significant training of the appetites whereas other goods to do require precisely such a training, then the economics of the situation clearly and unambiguously predicts a steady trend towards shallow appetites.

The irony of the situation, which the Left has utterly failed to understand, is that government is completely impotent to alter this trend. Indeed government control of education, health, and community formation exascerbate this trend far, far more than anyone realizes.

Because of our evolutionary psychology, and because I am among those who have an appetite for greater "meaning" than the market at present provides, I am an entepreneur who is deeply confident that if education, health, and community were liberated, that we entrepreneurs of meaning and purpose would win in the marketplace. This is confirmed by the widespread craving for meaning as exemplified, again with the Whole Foods phenomenon. Quite aside from the characteristics of the groceries that they sell, I think that Whole Foods is so successful because they sell groceries with meaning. Smith & Hawken tools, Ben & Jerry's ice cream, Rumi's poetry (best selling poet in America), are just a few other examples of strong markets in "meaning products."

Those, like Nevitt, who are dissatisfied by these examples, in my view rightly long for deeper meaning. And my reply is: That is precisely why we urgently need to eliminate all government involvement in education, health, and community formation. Indeed, there is an inexorable logic to the parable of "good A" and "good B" above (I would be grateful if someone could convince me otherwise).

My greatest goal is to wake up those people who do care about meaning and show them that hostility to markets, and reliance on government, has been a lethal miscalculation on their part. They are unintentionally abetting and accelerating the destruction of that which they love.

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