Must... not... answer... Must... read... graduate... admissions... files... Must... not... let... oneself... get... dragged... into... more... mailing... list... debates... however... interesting... the... question...
Must... resist...
Must...
AAAAUUUUGGGGHHHH!
Let me set forth a second way of approaching the issue, completely unconnected to Easterlin's. This second way is to meditate on forthcoming transformations in the properties of "commodities" as we enter the information age, and on past synergies between the deep properties of commodities and the requirements for the efficient functioning of what I will call the "market system."
Pretty much any way of organizing the production and distribution of goods and services must somehow deal with four questions: (i) What is going to be the relative distribution of goods and services across the population? (ii) How do we decide whether a particular individual is going to consume or make use of a particular good or service? (iii) How do we decide which kinds of goods and services are going to be produced? (iv) How do we decide how society's resources are going to be deployed in the production process?
The first of these questions is determined in the "market system" by the distribution of income, and indeed the system seems to function with pretty much any distribution of income--that is the major insight of social democracy, that manifesto demand #2 (a heavy progressive or graduated income tax) gets you a remarkably long way.
The other three of these questions... it seems to be a fact that the "market system's" answers to these questions have a very nice fit with what commodities were in the age of Adam Smith, for back in the age of Adam Smith commodities were "exclusive," "rival," and "transparent."
By "rival" I mean that if one individual is consuming or making use of a particular commodity, nobody else can be doing so. Thus any individual's utilization of a particular commodity reduces the opportunities available to everyone else. My sitting in this particular chair in the cafe/classical music store "A Musical Offering" (on the south side of Bancroft, half a block west of Telegraph) and typing at this table keeps anyone else from doing so. A general principle is that in a good society individuals will take account in making their decisions the effect of those decisions on everyone else. In the "market system" this principle is satisfied through the social mechanism of a "price." If I want to sit in this chair between 11 and 2, I have to order lunch and have to pay money to the proprietors of "A Musical Offering," thus reducing my opportunities to use, consume, and enjoy other goods and services which also have their prices. Thus the market system provides me with an incentive to restrict my use of this chair and table when doing so would reduce the rest of society's opportunities by more than the pro-rata share determined by the social distribution of income. (This "price mechanism" also has the benefit of enabling the proprietors of "A Musical Offering" to acquire command over the social resources they need to refinish their chairs and cook the quiche of the day.) Because goods and services are rival, determining their use by charging users a "price" solves problem (ii) in an efficient and effective way (if the distribution of income is "right").
By "transparent" I mean that the set of possible commodities is well-known, and that their usefulness or enjoyability is known as well and is not radically altered by the decisions of others. We can thus leave decision (iii)--How do we decide which kinds of goods and services are going to be produced?--to the money demand of individuals and groups as expressed in the marketplace. People will be, by and large, judges of their own best interest. They will know which goods and services will be most useful to them in their productive enterprises and most helpful and enjoyable as consumers. So the "market system's" creation of a marketplace in which producers and consumers register their money demand for commodities is an effective way of solving problem (iii). (Once again, however, only if the distribution of income is "right." If the income of those living in the tropics is extremely low relative to the income of aging baby-boomers in the north, the market system will generate little production of anti-malaria drugs and much production of anti-aging cosmetics.)
By "exclusive" I mean that it is relatively easy and straightforward for some particular individual in society to decide which other individuals will get to use or consume a particular commodity. If goods and services are "exclusive," then we can decentralize decision making: assign each commodity an owner out at the periphery of society where they are likely to know what is going on, and let the owner decide what is the best use of the commodity. This solves problem (iv)--how do we decide how society's resources are to be deployed in the production process?--and solves it effectively, relative at least to some centralized bureacratized command-and-control system in which a relatively-clueless center issues and revises increasingly unworkable and remote-from-reality plans.
Thus the market system does, in Adam Smith's day at least, a pretty good job at dealing with questions (ii), (iii), and (iv); and with the introduction of social democracy to level the distribution of income, it solves (i) pretty well too. Add in policies to correct for minor externalities, and we have a production-and-distribution system that is close to as good as we could possibly do given available productive resources and technologies.
But over the past 200 years, first slowly and then more rapidly as we enter the Information Age, the deep properties of valued commodities have been changing as well.
A smaller and smaller share of the truly valuable commodities in our society are in any serious way "rival." If I read a .pdf version of _Left Business Observer_, I cannot be said to have in any serious way diminished the opportunities of the rest of society to read _Left Business Observer_. Restricting demand by charging a price for lunchtime seats at "A Musical Offering" makes sense because lunchtime seats are scarce, and people for whom "A Musical Offering" is not especially pleasant, enjoyable, or useful should not take up space and so keep out people for whom "A Musical Offering" is pleasant, enjoyable, and useful. Restricting demand by charging a price for _Left Business Observer_ does not fulfill that same function because this interesting, useful, and valuable information-age good is not scarce: it lacks the property of "rivalry." Hence a well-functioning information-age production-and-distribution system should find a way to distribute information goods like _Left Business Observer_ for free. (Of course, there then has to be some other alternative mechanism for providing Doug Henwood with command over social resources to actually produce the thing.)
A smaller and smaller share of the truly valuable commodities in our society are "transparent." Back when I bought my first Macintosh computer in 1984, did I realize that I had doomed myself to upgrade my computers via Apple for two decades simply because of the extraordinary hassle costs of switching systems? When I bought a web-design program that used Netscape's <layer> tag to construct simple animations did I recognize that it would remain useful only if Netscape remained dominant over Internet Explorer in the browser market? Situations in which commodities are subject not just to supply-side economies of scale but demand-side economies of use may be becoming more and more frequent, and whenever it becomes the case that the usefulness of a commodity to one individual depends on how many others are using it or using compatible goods, then there is no reason to believe that individual self-interested what-good-to-purchase decisions in a marketplace will aggregate up to an effective market demand that will generate socially-efficient decisions about which kinds of goods and services to produce.
Last, it is becoming harder and harder to "exclude" people from using or consuming information age goods. The holders of the bundle of legal rights known as "copyright" have the legal system at their disposal and their command to regulate and ensure that the distribution of their pieces of intellectual property takes place only under the conditions they authorize. But 1/4 of the traffic on AOL these days is mp3 files. We know that the market system does a lousy, lousy job with commodities that are non-exclusive but rival--that is the "tragedy of the commons." We might say that it is of little concern what happens to ownership with goods that are both non-exclusive and non-rival: anyone can use them, and who cares? But the collapse of property rights then leaves us without a social mechanism for deciding on problem (iv)--how do we decide how society's resources are to be deployed in the production process?--and so seems to call for some sort of *centralized* resource distribution process.
From this perspective, the triumph of the "market system" over the past three centuries can be understood as one of success and diffusion. The market system was extraordinarily successful at boosting the volume of commodity production in Georgian England. It was extraordinarily successful at boosting the volume of commodity production in Victorian Britain. It has been extraordinarily successful at boosting the volume of commodity production in twentieth-century America. It was extraordinarily successful because of this fit between the properties of commodities and the properties of the "market system." And the system has diffused as it has attracted imitators across the globe. The system never fit perfectly--there was always the distribution-of-income question, and the "externalities" where rivalry, excludibility and transparency did not hold. But social democracy could take care of the distribution-of-income problem. And dealing with "externalities" could be thought of as second-order corrections and adjustments to an effective system.
Now there are a number of things potentially wrong with this view. The first is that it is not at all clear that these information-age changes are all that huge a deal. The second is that it overestimates the extent to which the pre-information age market economy was "natural." The transformation of land, labor, and capital into "commodities" was a long drawn-out and brutal process. The very idea of "excludibility" implies powerful courts, and a powerful and confident legal system behind them.
Nevertheless, it may well become the case in the future that the "market system" is and is seen to be a... fetter on the productive powers of humanity. And when that is and is seen to be the case, then the thesis of the market system and its antithesis will merge together, and transform themselves into something new. On that day the integument will burst asunder. The knell of private property shall sound. The "market system" shall shatter. And humanity shall for the first time confront its own productive powers and social forces not as an alien system to which it is subjected, but as a conscious object of collective rational choice in the interest of the common good.
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