Sir Willian Petty (1623-1687) was one of the first to bring mathematics, logic, and empirical observation to economics in the aim of developing scientific laws. There is interesting coverage of the man in “A Brief History of Economic Genius” by Paul Strathern.
I was struck by a minor observation of Petty’s that if workers were paid above a certain level they did less, not more, work – preferring to spend their time in leisure and drinking instead. This was his experience as an Irish landowner in the 17th Century, it isn’t the case today. Although Paul Strathern comments that it may well be true in parts of the 3rd world – “what else would a rural coffee plantation worker be expected to do with his money” ? And taxi drivers, even in cities like New York, have been observed to work fewer hours on days when the takings are good.
So maybe this is our natural state, earn enough to buy what we want and then stop working. Sounds reasonable, yet in the modern world hardly anyone works less if they are paid more. This is because of the role that marketing plays in stimulating economic activity. I’ve often read claims along these lines, e.g. that advertising drives economic growth, but never fully understood them. But advertising, and the mass media, and education, and travel all play a combined role in giving people things to aspire to. Education in particular, seems to create a demand for more education.
So today, our wish lists are pretty long and are continuously being updated and expanded. This gives us motivation to keep working even when productivity gains mean that we can earn the same money in far fewer hours. Indeed it also enhances our motivation to seek productivity gains.
Now advertising is also accused of making people want things they don’t really need. For making them less happy, less content with what they have. There is probably some truth in this, but it is exaggerated, and advertising is given too much of the blame for what is largely part of the human condition. Yes advertising (and mass media, e.g. Hollywood) opens people’s eyes to delights such as cosmetic surgery and super-sized burgers – all things which one could easily argue we’d be better off without. However this is a subjective judgement, who is to decide what should stay and what should go ? Planned economies, where intelligent and well-meaning (and sometimes not so well meaning) bureaucrats make these decisions, rapidly shudder to an economic halt, leaving their citizens in poverty and/or starvation.
Economic growth isn’t just about numbers (% increase in GDP), it’s accompanied by qualitative change. New products and services emerge. Many of these are frivolous, but only because humans are frivolous (girls, and boys, just wanna have fun). But along with the frivolous are also life-changing new products, often things that few of our predecessors would have ever put on their wish list simply because they couldn’t imagine them – advertising helps people imagine and form their wish lists and in doing so it encourages people to work – better and smarter.
Economic growth is good. Without it we’d have far fewer scientists, medical specialists, writers and artists. “As that perceptive social critic P.J O’Rourke recommended: those who consider any previous age was better to live in than this one should first contemplate the word ‘dentistry'”. (page 140).