An economist has written to me to say that, in coining a new
term, status goods, I've re-invented the wheel. He suggests that
what I say about status goods has been said before about positional goods
-- as originally enunciated by Fred Hirsch in his seminal book, Social
Limits to Growth (1976). Well, Prof Fred Hirsch was certainly a
brilliant economist and it is a great tragedy that he died in his 30s.
I'm sure that, had he lived a normal span, he would have
contributed a great deal more to the 'dismal' science. However, although
the concepts of status goods and positional goods have quite a lot in
common, particularly in that they are both much sought after by the rich
or the socially/politically ambitious to show their superior position in
society (or to aspire to such), there are some important differences.
Let me dwell on positional goods first. What Fred Hirsch was saying is
that there are goods or services which are so rare and desirable that
they can only be bought by the rich. They can then be exhibited to a
greater or lesser public extent as signs of high status. However, as
general economic prosperity increases, then more and more people desire
such positional goods and can afford them. However, because
positional goods are rare, or because the pursuit of them by increasing
numbers of people actually devalues them, then the lack of desirable
positional goods will cause economic stagnation in due course. (An
example of a positional good that has become devalued is, say, Benidorm,
on the Spanish east coast. Fifty years ago it was a beautiful, secluded
fishing village to which only the elite went. In due course, however, it
was discovered by the hoi polloi, and then the travel companies, and now
its beach is choc-a-bloc with hotels, gambling arcades and burger bars.
To say that you have been to Benidorm for a holiday doesn't invite you to
many dinner parties among the middle class.)
Fred Hirsch argued that increasing affluence in the material economy
means that more people can compete in the positional economy. However,
because positional goods, by their very nature, are in limited supply, it
isn't possible for everyone to possess them. Thus, he said, the economy
will grind to a halt for motivational reasons rather than for reasons of
resource shortages. He was, in a way, responding to what was by then a
growing economic no-growth lobby of environmentalists who had been
influenced by the book, Limits to Growth (1972), written by Dennis
L. Meadows which forecasted catastrophic shortages of resources or
unacceptable pollution if it continued.
On the matter of pollution, Hirsch agreed with the environmental lobby
but he didn't agree with them on the resources issue. In a limited sense,
Hirsch was correct because, in the 1970s, oilfields were still continuing
to be discovered at a faster rate than it was used. Total resources were
also upped considerably when it was realised that natural gas was much
more abundant than was realised previously. Instead of being burned off
at wellheads, technical means were developed to tap it and transport it
to industrial users in the west. However, it is now widely agreed by
specialists in government and th oil industry alike that, from now
onwards, production of both will gradually tail off with likely price
rises as demand from Asia, particularly China, grows at a steep rate. So
the final verdict is that the environmentalists will be correct after
all. Of course, there will be new resources, such as tar sands, and
deep-mined coal as well as other alternative energy technologies but
these will not prevent large price rises unless some miraculous method is
discovered. In the futre, expenditure on energy for transport and
electricity generation will be a much larger proportion of the cost of
goods and services in future years and this will have profound effects on
the structure of the way we work and live.
Hirsch argued that that people worry about their share of the economic
pie not so much because of the intrinsic satisfactions they obtain, but
because it enabled them to score in the positional economy. This was the
main motivator of economic growth. This was a brilliant insight with
which I thoroughly agree. Since then, many sociological researches have
clearly shown that individuals at all levels are not so much motivated by
their absolute earnings but by their earnings relative to their nearest
competitors and thus their relative status in the social order. Hirsch
would also have been gratified by the more recent researches of
ethologists, anthropologists and primatologists which show the
overwhelming importance of rank order in primates -- of which we are a
prize example.
However, Hirsch tended to think almost in terms of two separate economies
running side by side -- the positional economy and the material economy
-- and he thought that shortages of supply of positional goods (or
congested/polluted supply which would devalue them) would cut in before
shortages of material resources would affect the physical economy. But
this is where I think Hirsch is wrong because although positional goods
are rare by definition -- or they wouldn't satisfy strong urges for
higher status -- there isn't necessarily a limited repertoire of them. As
they say in computer science, positional goods as a category are
scalable.
Yes, those items that are considered rare enough and desitable enough to
be positional goods are limited in number at any one time but, in fact,
the list can be extended almost infinitely as the need arises. There is
no scope for augmenting the number of authentic Georgian town houses or
beautiful parts of the countryside. They will always be in limited
supply. But new positional goods can always be invented -- and they are.
To be invited to the White House or 10 Downing Street and have a photo
taken of yourself with Bush or Blair is certainly a highly-prized
positional good these days and those who are not personal friends of
these gentlemen are often prepared to pay very highly for the privilege
by .
Then the collecting of expensive works of art -- that is, the original
creations, not copies -- is very effective measure of social standing.
However, because old masters and impressionist paintings tend to
disappear from private ownership into major art galleries or foundations,
the supply has to be constantly topped up by the skilful promotion of new
modern artists and their works even if, for many people, they are of
dubious aesthetic worth. Within ten or twenty years or so, the experience
of travelling to the moon and back will be a positional good. More and
more people will do it for status reasons -- one South African
millionaire has already been launched into space for a few circuits of
the earth. Any number of other examples could be given, and any number of
positional goods will become apparent in the future. A shortage of
positional goods is plainly not going to be a damper on economic
growth.
Now let me turn to status goods. Status goods share the property of being
highly desired and, at least initially, they are rare enough to be
expensive and a clear indication of the wealth or status of an
individual. (Wealth and status are so inextricably linked that they can
be used almost interchangeably in the context of economics.) However,
while positional goods are expensive and have a mildly beneficial
economic effect in helping to diffuse money downwards in a general way
when sold or moved or guarded, they don't induce a chain reaction of high
profits -- and thus subsequent and wider investment -- that status goods
do. Status goods are those which initially are rare and are
initially highly priced but which can be reproduced in larger and
larger quantities by mass production (and often improved at each stage),
becoming successively cheaper before finally reaching all individuals in
society whatever their status.
In fact, all consumer goods, except food and basic clothing, have
been status goods at one time or another throughout mankind's past when
they were first invented and introduced into their economies. Each time a
new status good was invented it carried such a high profit margin that
other suppliers then pour in, the good become cheaper and cheaper in
successive stages and produce, as a byproduct, waves of investment as as
a multiplier (in the Keynesian sense) of the wider economy. A status
good, unlike a positional good, stimulates the economy. In earlier times
this stimulation might take millenia to work its way through all the
potential market and all the social strata. Today, status goods can sweep
through large populations very quickly, pausing only momentarily at each
social class before moving onwards and downwards.
Pigments were probably the first of all status goods. Once one group
leader of high creativity used pigments for facial or body markings to
denote his status, the other aspirants for leadership within the group
would also want to use them. And then adjacent groups, which would
certainly see such status markings from time to time, would also adopt
the custom. The result that the promulgation of status goods would have
become widespread very early in man's past when the total population of
mankind was probably to be numbered in the low hundreds. It would have to
have been very early indeed because no hunter-gatherer group or tribe has
yet been discovered by anthropologists which did not use facial and
bodily markings of some sort to denote status. It would be difficult to
imagine that we have a gene that is specific to apply colourings to our
skin, or wear tattoos or ornaments. It is readily observable, however,
that in all primate societies status is important in the matter of the
choice of sexual partners and there must be genes that predispose us to
this behaviour.
Once status goods, like pigments, were in demand then we have the
beginnings of trade. They were very likely transacted for girls at the
age of puberty. All primates species which live in small groups, need to
outbreed in order that deleterious genes do become concentrated. So, at
around puberty, and depending on the species, either the young males or
the young females migrate from the group and join others. Our species is
a patrilocal species in which the young females leave the group. Because
girls are obviously going to receive a warm welcome from partnerless
males in other groups, then the parents of these girls will be strongly
tempted to treat them as commodities if offered goods by way of trade.
Pigments were not necessarily the very first goods to be traded --
--though it is likely from what is discovered by archeologists at early
sites -- post-puberty girls would be the obvious items that were already
surplus to requirements, as it were, and available for exchange.
Many goods that were originally status goods -- like pigments -- seem so
very trivial to us today that it is difficult to imagine their powerful
economic effects. Perhaps the best example of an exceedingly trivial
status good that was, in fact, the stimulus to long-distance trade
between Europe and Asia and the source of immense profits with large
multiplier effects was spices. To us, today, there could hardly be
anything more trivial but it was the beginning of economic growth in
western Europe that, from then onwards, short-circuited the prosperous
Mediterranean region and prepared the way for the industrial
revolution.
To begin with, spices were very expensive when they finally reached
Europe from islands in the Far East such as New Guinea and Indonesia and
were only able to be bought by the very rich for decades, and for
centuries only by what we would call today the middle classes. Spices
were very desirable in Europe because much of the live meat raised here
had to be killed and salted during the cold months when grass couldn't
grow -- and such meat didn't always winter well! Using spices to cover
malodorous and no doubt evil-tasting meat sometimes would be highly
desirable. Spices were not necessary for this purpose in their countries
of origin because their inhabitatns could always eat fresh meat. Thus,
spices were there almost for the taking! The locals would certainly have
cottoned on that spices were desirable to the merchants who visited them
but, initially, it was a buyers market because the spices cost nothing to
produce and the merchants had highly desirable goods to offer in
exchange.
Spices today are cheap and smallest item in anybody's shopping basket.
They are still desirable for novelty reasons when eating food but
certainly not sought after for status reasons. But this is the way with
all status goods. Once their desirability for either utilitarian or
novelty reasons is known, and while they are still in short supply, they
are high-priced and are status goods automatically. Later, as increasing
swathes of a particular status good becomes available, it gradually
becomes cheaper and works down the social scale -- producing decreasing,
but still useful swathes of profit.
Throughout the course of histroy and thousands of years before that
thousands of different status goods have gone through this process since
the original trading in pigments. And for many items which we use today,
such as cutlery and ornamental pottery, roughly four hundred and two
hundred years ago respectively, were prized goods bought only by the rich
in the first instance -- but which everybody else hankered for as the
price gradually came down. Vast profits were made on these items; great
industries were established in order to make them. The profits made from
one particular 'species' of status good would act as a powerful stimulus
for further investment in order to introduce the next one. Economic
growth has not been a simple arithmetical matter of consumer increasing
their consumption from year to year; rather, it has been a succession of
enthusiastic fashions -- of goods that no-one felt complete
without.
Economic growth therefore needs this succession of status goods. But, as
one becomes widespread with lower and lower profit margins, another one
is desperately needed in order to keep the momentum going. In the last
century we have had a parfticularly rich crop of status goods, the most
significant being the motor car. Initially, a car could only be bought by
the very rich indeed; today, even unemployed people need them if they
happen to live in an area without shops. Cars haven't yet reached many
undeveloped countries in any quantity but the supply of them in the
developed countries is now so great that even the largest and most
efficient of the world's automotive manufacturers find it difficult to
make a profit because teh industry is so competitive. But exactly the
same has applied to all the other status goods of the last century --
radios, TVs, fridges, personal computers, etc. The last could only be
bought by the comfortable middle class 30 years ago. Today, they are so
widely bought that they are not considered to be a status good any
longer.
However, the last item, personal computers, is a very good example of a
constraint that is increasingly going to apply to all future status
goods. Those who use PCs do so instead of watching TV. The inverse
relationship has been clearly established by consumer surveys. PC sales
cannibalise on the sales of TVs. We are now coming to the stage where
there is scarcely any time available to use use more consumer items. I
have little doubt that there'll be many more consumer goods pouring out
of the factories of the future but I'm not so sure that they will have
the same stimulaI can only think of one or two items that will be status
goods in quite the same way that has occurred up until now becaue they
will have to compete for the time, as well as the money, of the consumer.
Even if the consumer has sufficient disposable income he will not
necessarily want to encumber himself with yet another consumer good
unless it has extraordinary satisfactions that will displace the time
spent in using his existing goods.
The profit margins of all our present sorts of consumer goods is now
becoming vanishingly small and the only way forward for those who produce
them is to steadily increase robotic methods in their factories. The only
consumer goods and services that I am sure will have a certain future are
health services generally and replacement human organs in particular.
These are items which don't necessitate devoting large and regular
amounts of time to them -- time which people haven't got. I can't think
that any other sorts of items will ever have the significance of status
goods of the past and motivate the great juggernaut of profits and
investments to keep the present sort of economy going forward.
If, however, status is as genetically important in our lives as the
evolutionary scientists tell us, then it will have to be supplied by
other methods. Perhaps we will be forced back to social structures that
were the norm in the earliest days of man. This needs further discussion
and I will leave this to another posting. This one, I hope, has sufficed
to clarify the difference between the positional goods of Fred Hirsch and
the status goods that I propose and that there is much reason to think
that the economic and social structures that are typical of the
industrial era are now coming to an end.
Keith Hudson
Keith Hudson, Bath, England,
<www.evolutionary-economics.org>
