The field of “economics” is growing more and more popular according to bestseller lists (Freakonomics), heavily-followed blogs (Tyler Cowen) and must-read columnists (Paul Krugman). Lotsa interesting and thoughtful stuff happening among these thinkers (plus an entertaining dose of snippy in-fighting to keep things lively).
I like reading all these guys (and yes they are pretty much all guys) but want to clarify a point about the field: when they say “economics,” what’s really meant is “market economics.” What everyone is discoursing on is the micro and macro levels of exchanges with the purpose of increasing wealth among all the players.
Building wealth is a very popular incentive, but it’s not the only reason for our exchanges. People also exchange stuff and money for the purpose of building goodwill among all the players.
If exchanges to build wealth are the subject of market economics, then exchanges to build goodwill are the subject of gift economics.
Neither is necessarily better, but they are different, and to try to force exchanges of one sort of economics into the theories of the other will result in only headaches. Or sad amusement: every December, economists get all aflutter over the idea that we shouldn’t exchange Christmas gifts because of “deadweight loss” (a fancy way of saying drop in wealth among all the players). They don’t understand that these exchanges are gifts, meant to increase goodwill, not market transactions meant to increase wealth.
For this reason, I’m no longer using the term “economics” when what is really meant is “market economics.” We’ll keep the confusion to a minimum if we let Stuff as Capital be discussed via theory of market economics and let Stuff as Gifts be considered through the lens of gift economics.
Ian David Moss // May 11, 2011 at 6:47 am
Hmm….you know I’m as skeptical as anyone about econ, Brigid, but I do think that most economists would conceptualize the market as one in which people maximize utility, not profit – which would in theory cover both profit & goodwill. (That changes when you add firms into the mix, though.)
Brigid // May 11, 2011 at 7:01 am
I admit I always rolled my eyes at the concept of “utility” (which if I recall was defined essentially as “happiness”). Happiness feels un-measurable to me, or at the very least, when you do try to measure it, you end up changing it. It’s something that can’t be reduced to numbers, and when you try, you change it’s very nature. (Some combination of the uncertainty principle and the observer effect).
Sidenote: Daniel Gilbert wrote a great book “Stumbling on Happiness” that gets at some of this. Essentially he says: trying to measure happiness is flawed for so many reasons, but still try to do it anyway because we need to have some sort of measurability in order to know how then to increase happiness.
Still, you’ve given me fodder for a future post. Which definitely increases my happiness
David Week // May 11, 2011 at 4:53 pm
For those interested in the nature of gifts and gift economies, I recommend the short, influential 1923 work by Marcel Mauss: “The Gift”. http://en.wikipedia.org/wiki/Marcel_Mauss
Brigid // May 12, 2011 at 4:47 am
David – thanks! I have wanted to read this but haven’t been able to find an English translation from French. Prolly I’m not looking hard enough. I also recommend to you Lewis Hyde’s “The Gift,” which draws quite a bit of Mauss’s work, too.
Ian David Moss // May 12, 2011 at 4:56 am
Actually, the way I understand it, happiness and utility are different. Happiness is more of a long-term construct having to do with life satisfaction. However, most people don’t choose to or aren’t good at maximizing happiness. Instead they maximize utility, which can be defined more explicitly as short-term preference. Its definition is a bit tautological, which is both helpful and frustrating – helpful because it relieves us of the need to measure it directly (since preferences are revealed by people’s actions), but frustrating since it doesn’t on its own give us any insight into what motivates preferences (and in fact those motivations likely differ significantly from person to person).