Re: [Futurework] But what is the cause? (was RE: [Futurework] http://www.glaesernemanufaktur.de/

[Keith Hudson]

Ed,

At 12:46 13/12/2003 -0500, you wrote:

Keith, it still sounds a little too focused on one or two things to me.  Yes indeed cars do impart status, but they also are, and since their invention were, a truly useful appliance

Yes, status goods have got to have usefulness, too. Of course, they have, because they could never have wide sales later unless they did. They're unlike positional goods, like diamonds and other precious stones, which only had novelty. (Though, of course, diamonds have become useful in the industrial era because of their hardness.)

, as is and was the refrigerator, which nobody seems to buy for the sake of status, though perhaps some people did at one time.  Personally, I still prefer Schumpeter's concept of innovation, major breakthroughs in production that drive the economy along for a time.  I think that, if you looked at the industrial revolution as a sequential process, you would find it to be that kind of thing.

Yes, you can look at the industrial revolution like that if you want. But "sequences" don't follow smoothly or easily. The earliest steam engine lay dormant for more than a generation before the need for it drove acceptance and further development. I think Schumpeter's description of the industrial revolution as a series of disruptive explosions is true enough -- and the effects of them were far more powerful that could have been contemplated -- but the explosions didn't occur automatically one after the other like a fire cracker.

  The steam engine was initially invented because horses could not pump enough water out of deepening mines.

The steam engine was vastly improved so that it could be used in the mines. But coal was needed to fire the initial generation of steam engines which were supplying goods or services of one sort or another. 

Steam was then applied to all kinds of other uses, then replaced by the internal combustion engine, which enabled the invention of the automobile, aircraft, etc.

Yes again, you can look at this development in this way if you want and it's very plausible. But it was consumer demand that drove the development of the internal combustion engine, and it was the (status) needs of the far flung civil administrators of the British Empire and also business executives (investing all over the world at that time) which drove the development of the airplane. (And also the needs of WWI -- one of the few instances where wartime development was in parallel with peacetime needs.) The airplane didn't simply "flow" from the car. It required the most intensive development and competition. Cities like my home town of Coventry and Bristol were full of engineers building prototype aircaft in those days. Coventry archivists reckon that there were at least 50 airplane makers in Coventry in the 1900-1930 period, as there were about 50 motorbike makers and 50 car makers. But they'd slimmed down to about 2, 4 and 8 respectively by the end of WWII. And now there's only one car maker left now (Jaguar) and that's probably going to depart soon. 

  There is a basic, driving process that leads to all kinds of refinement and adaptation, but the that process is essentially supply driven, though admittedly pulled along by demand and the manipulation of demand as it moves along.

You're suggesting that it's a chicken-and-egg problem. But I think the chicken-and-egg problem is a misnomer. There was only an egg problem -- and that took a billion years years to solve by evolution. The single-cell animal needed to make itself more efficient and it could only do that by becoming multicellular. Hence the chicken in due course. Similarly, trade started by demand only in my opinion, not because of innovation -- that came later. The earliest traded goods (over long distances) appeared to be simply raw rock ochres for bodily ornamentation (status), then followed shells and crude beads for ornamentation (status), and then gold for ornamentation (status). All these in increasing quantities which gradually made for innovation and mass production. But tools and weapons were able to be made on the spot by hand-crafted methods requiring no mechanical innovation and were most unlikely ever to have been traded for obvious reasons (at least there is no evidence of this).

Certainly innovation in the abstract came first (from our frontal lobes) -- by that I mean the imaginative use of natural materials such as charcoal and ochres enhanced into bodily ornamentation as status symbols to aid the usual behavioural methods of domination and status -- confident bearing, being the cynosure of the rest of the group, etc. But mechanical innovation (to produce status goods) appears to have followed a very long way behind trade itself (by tens of thousands of years) -- as demand grew. 

No, you've got me wrong. There are certain new types of goods which are status goods because they carry a high profit margin. Unlike positional goods (with which they have some similarities), status goods are then capable of mass production and thereby make their way downwards through all the socio-economic strata, creating bow-waves of profits and investment along the way. I suggest that the vast majority of goods produced today even if they are new ones (like 3G mobile phones which are a sub-category of a previous status good -- the telephone ) are not status goods because they carry too little profit margin to stimulate the economy. They sell widely from the start.

Innovative goods may initially carry high profit margins per unit of product because producers have to meet development and marketing costs, or so producers would typically argue.

Yes, that's generally so.

  Drug companies argue this to maintain their patent protection, even though generic drug makers have demonstrated that the drugs can be produced profitably without protection.

The original drug makers have a case in that the original discoveries involve huge investment of time in research. (But this doesn't justify protection by means of patents in my view, because that attempts to kibosh other parallel initiatives by other inventors and manufacturers. The original discoverers of  new goods already have an immense advantage and should therefore get on with marketing it. I applaud those countries such as Brazil which have been copying western drugs or Chinese car makers which have been copying western designs. They have to do this in order to get to the leading edge. Otherwise, they will always be subservient to the original makers.)

  Costs per unit and profit margins per unit will typically fall as the market begins to be saturated, but the total profits of producers may not necessarily fall.  Besides, there is always replacement once the market is saturated.  Things wear out and often, driven by advertising (status maintenance?), consumers can be convinced that they wear out faster than they actually do.

Yes, but once manufacturers are into really mass production and very wide sales their profits are wafer-thin and they've got to be on the ball constantly to keep on making their methods that little bit more efficient. It's a race that can easily be lost with the slightest lack of concentration. So far, for example, WalMart have done very well but will almost certainly falter at some stage. Sainsbury in England was in a commanding lead for quality, choice and price for several years and seemed unassailable but Tesco finally beat them into seond place by close attention to detail in everything they did to make themselves just that little bit more efficient. (In fact, Tesco is successfully holding off competition from WalMart so far.)
 

I don't deny that your concept of 'status goods' has some validity, but frankly I don't see what it really adds to the theory of how markets and the economy incorporate new and innovative technologies that then become the impetus for a prolonged wave of growth.  If there is a difference between us, it may be that I am thinking of relatively long waves, such as that produced by the internal combustion engine or the microchip, while you tend to think in terms of particular applications of these innovations.  We may both be right, each in his own way.

I see these "long waves" as being due to the particular innovative nature of the mechanical production method rather than itself automatically producing the demand for consumer goods. The essential point about status goods (as opposed to ordinary existing consumer goods) is that they (in addition to novelty and usefulness) have high profit margins *and* they are subsequently able to be mass produced. All consumer goods are either the end-results of what used to be status goods when they were truly innovative, or they are embellishments of existing consumer goods (e.g. CDs, electric toothbrushes, SUVs) or are (low-profit) infills or adjuncts of the existing product (e.g. as fishknives were to knives, forks and spoons, and spoons were to knives and forks, and forks were to knives).

Keith  

 
Ed
 

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----- Original Message -----

From: Keith Hudson

To: Ed Weick

Cc: [EMAIL PROTECTED]

Sent: Saturday, December 13, 2003 10:13 AM

Subject: Re: [Futurework] But what is the cause? (was RE: [Futurework] http://www.glaesernemanufaktur.de/

Ed,

At 09:20 13/12/2003 -0500, you wrote:

Keith, I do think that you push the status thing a little too hard.  I am the consumer of all kinds of goods and services for all kinds of reasons.  I consume bread and cereal, and have always done so, because it is part of a healthy diet.  I rather doubt that the first person to have consumed such things had special status; everybody has consumed them for a very long time.

Food is not involved. Food never had to be traded initially, nor for thousands of years. Think about it. If we'd had to trade for food, then man as a species couldn't have got started in the first place.

  I consume the services of my doctor and dentist not because I like to, or because I think the latest pills or gadgets they have give me special status, but because I need to.  I'd like to think that employers or clients have consumed my services because of the status that imparts, but I don't think that's been the case.  What about innovation?  People buy something new simply because it works better than something old.  Can openers are a good example.  What about security?  A lot of things that people did not purchase ordinarily were consumed post 9/11 because of the fear of terror.  People did not look at one another and say 'Wow! he's got the latest germ protective suit!  I gotta have one too!'  They bought because they were scared.

Well, doctors and can-openers are subsidiary to the main economy. I've never intended to say that all consumer goods have been status goods. But all new goods that are in a new category (as, surely, the car was in the last century) have been status goods (so long as they have some intrinsic interest or novelty) because they are in high demand by the well-off.

 

I think you are too focused on one thing.  I know that you are trying to make the argument that certain goods move the economy forward because of the status they impart, but the separation of status from utility, fear, fashion or fancy is never that clear.

No, you've got me wrong. There are certain new types of goods which are status goods because they carry a high profit margin. Unlike positional goods (with which they have some similarities), status goods are then capable of mass production and thereby make their way downwards through all the socio-economic strata, creating bow-waves of profits and investment along the way. I suggest that the vast majority of goods produced today even if they are new ones (like 3G mobile phones which are a sub-category of a previous status good -- the telephone ) are not status goods because they carry too little profit margin to stimulate the economy. They sell widely from the start.

Keith

Ed

----- Original Message -----

From: Keith Hudson

To: Harry Pollard

Cc: [EMAIL PROTECTED] ; [EMAIL PROTECTED] ; [EMAIL PROTECTED] ; [EMAIL PROTECTED]

Sent: Saturday, December 13, 2003 2:56 AM

Subject: [Futurework] But what is the cause? (was RE: [Futurework] http://www.glaesernemanufaktur.de/

Harry,

Just as "natural history" in Victorian times was formative in the development of botany, zoology, biology and evolutionary theory, the traditional description of economics as dealing with the "Nature, the Production, and the Distribution of Wealth" shows that it still at an early stage of understanding.

We can only move towards economics being regarded as a science when we start to examine the *causes* of economics and trade. Why did the whole business start in the first place?  If we were able to trace back the history of every single item of consumer goods -- however trivial it may seem to us today --  we will discover that, in every case (apart from food), it first made its appearance as a item desired for its enhancement of status. Status, as in every social mammal sepcies, is the means by which selection is made for sexual activity, the strongest of our instincts apart from eating, and for its only slightly lesser byproduct -- though still valuable -- of social inclusion with the group or community.

Today, the whole world of politics and business, is in a dither. Economists can give us no guidance of where we're heading. Unfortunately, the classical economists can give us no guidance. Major figures though they were, they had not yet started to ask the Why question.

Until we do so -- and in my view appreciate that economic activity is mainly driven by new consumer goods bought for status only -- then we can make no sensible forecasts of just where modern society in developed countries is heading. Until we do, economics will remain as a purely descriptive activity --  as at the 'beetle collection stage' of the biological sciences 200 years ago or, to change the metaphor, the various economic nostrums that are prescribed today are no better than the weird variety of medicines that doctors gave to their patients 200 years ago before medical science started looking for causes of diseases.

Keith 

At 23:00 12/12/2003 -0800, you wrote:

Arthur,

Wouldn't you know it?

You almost repeated - word for word - what Henry George said in

1878.

Great minds think alike!

It's the reason why Classical Political Economy is described as

"The Science that deals with the Nature, the Production, and the

Distribution of Wealth.

That "Distribution" bit is the essence of Political Economy.

Would that modern economists would start thinking about why the

distribution is so unfair, instead of devising ways to patch the

system by taking from the rich and giving to the poor.

Harry

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Henry George School of Social Science

of Los Angeles

Box 655  Tujunga  CA  91042

Tel: 818 352-4141  --  Fax: 818 353-2242

http://haledward.home.comcast.net

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-----Original Message-----

From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]

Sent: Wednesday, December 10, 2003 5:26 PM

To: [EMAIL PROTECTED]; [EMAIL PROTECTED];

[EMAIL PROTECTED]

Cc: [EMAIL PROTECTED]

Subject: RE: [Futurework] http://www.glaesernemanufaktur.de/

We have "solved" the production problem but can't seem to deal

with the issue of distribution.

Arthur

-----Original Message-----

From: Harry Pollard [mailto:[EMAIL PROTECTED]]

Sent: Wednesday, December 10, 2003 5:15 PM

To: 'Brad McCormick, Ed.D.'; 'Ed Weick'

Cc: 'futurework'

Subject: RE: [Futurework] http://www.glaesernemanufaktur.de/

Brad,

We are discussing these problems in a society where the power to

produce has reached unbelievable proportions (After many have

been thrown out of work, the industries they left behind are

actually producing more. Productivity hasn't fallen even though

there are far fewer workers employed.)

Why these "problems"?

Harry

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Keith Hudson, Bath, England, <www.evolutionary-economics.org>

Keith Hudson, Bath, England, <www.evolutionary-economics.org>

Keith Hudson, Bath, England, <www.evolutionary-economics.org>