Against Utility-Based Economics

On a Life-Based Approach

Anastasios Korkotsides

• Publisher: Routledge
• Year: 2013
• eBook ISBN: 9781135009724
• Topic: Business
• Subtopic: Business General
• Index: Business

Utility-based theory and the fallback choice-theoretic framework are shown to be biased, irremediably flawed and misleading. A radically different theory of value and of consumer behaviour is proposed based on existential interpretations of scarcity, value and self-interest. For self-conscious mortals, only time is scarce. All other is derivative scarcity. Value is in the life, as a knowledge extract of time, which goes into commodities as direct human labour and depreciated capital, through their production. By structuring their preferences, consumers try to confiscate more of such value per unit of expended income, extending their social presence, soothing their angst and gaining power over each other. This raises output and makes gains cancel out. Negative psychological externalities preclude any well-being or social-welfare type conclusion.

These resolve a number of long-standing issues: endogenously generated growth, the micro-macro connection, the price mechanism, crises, unemployment, etc. Equilibrium is of a low-potential kind, not of a force-balancing one, and it is unique, reachable and stable. The relevant analytics involve purely economic, non-psychological entities. Consumer behaviour is grounded on a well-defined, structure-based decision criterion and on observably measurable magnitudes, only. The social ramifications of the two juxtaposed perspectives are discussed at length.

Part I

The beast

1 Introduction

The human animal is a beast that dies and if he's got money he buys and buys and buys and I think the reason he buys everything he can buy is that in the back of his mind he has the crazy hope that one of his purchases will be life everlasting!

Tennessee Williams, Cat on a Hot Tin Roof

During the Sudan famine in 1993, Kevin Carter, a photographer who was keen on recording human cruelty and suffering on film, took a picture of an emaciated child as she made a last-ditch effort to crawl towards a UN food camp, while a vulture stalked her, ready to feed on her little body. The photograph ‘shook the world’. Some accused Carter of not helping the unfortunate child. A newspaper commented, ‘The man adjusting his lens to take just the right frame of her suffering might just as well be a predator, another vulture on the scene.’ Filmmaker Dan Krauss said that, in the starving child, Carter saw Africa's suffering; in the preying vulture, he saw his own face. Carter's daughter, Megan, said: ‘I see my dad as the suffering child. And the rest of the world is the vulture.’ Carter left the place depressed and committed suicide a few months later, right after ‘the world’ awarded him the Pulitzer Prize and went on – business as usual – to prove Megan right.

Business as usual, but not for long. Circa 2008, at the peak of our euphoria, we took a spill on our slime while rushing to the nearest mall for one more round of consumerist orgy and fell flat on our faces. In our stunned state, we saw miracle economies and giant corporations going down, states paying their employees with IOUs, big companies asking theirs to work without pay and workers in havens of modern management committing suicide due to pressure from accelerated conditions of work and continuous evaluation of their job performance. We saw wages and social programmes being slashed; public health and education systems falling prey to the market; and governments giving away public wealth to gangsters, inviting them to launder their dirty money and bailing out banks and other stalwarts of laissez-faire by emptying state coffers. We saw pawnshops sprouting again, stretching lines of hopelessly unemployed seeking any job they could find, millions searching in garbage for clothing or food and seeking shelter to spend the night, hordes migrating in search for a better fate, neo-Nazism gaining support and society sinking back into a Very Dark Age. Of course, we knew about starving children or about others, aged seven, who worked in kilns or in mines; and about people who worked like slaves all their lives so that we could buy cheaply what they produced. But we never thought that these things could happen to us, the privileged heirs to the Industrial Revolution; that our own children would lick boots to find a job or would work like slaves to make a living. (Now they are paying, for having been born to parents who … never thought.)

History may not repeat itself, but it does – often as tragedy, not as farce. War is war, a Crash is a Crash, and there is no excuse for not learning. Suffering touches our hearts and when someone falls we try to help. We don't blame him for falling. But if someone takes spill after spill by chasing something, he must eventually come to wonder if it is worth chasing the damn thing; or maybe that it is not really him who does the chasing, but the damn thing is chasing him. In 1939, when the world took another great spill, with his Grapes of Wrath Steinbeck ‘put a tag of shame on the greedy bastards who [were] responsible for this’. Those were the bankers, landowners, rentiers and capitalists, of course, and he was right, as far as that went. But it goes further. The iron laws of the motion of capital would be rust now, if the Joads did not dream of becoming Hoopers. The events that followed, though, proved that they did. Along with the bastards who robbed the world then and continue robbing it now there are many more who aspire to the same. A universal life-snatching psychosis is the anvil on which economic laws are forged and value is smithed collectively into man-made things, to be claimed privately by consumers.

This is the main idea pursued in this book, expanding and expounding on Korkotsides (2007). We¹ pick it up from its psychological underpinnings, following it through to its social ramifications (Part I). Then, we proceed with its quantifiable analytics (Part II), offering a theory of value and of consumer behaviour based on new, radically different understandings of the notions of scarcity and self-interest. These provide a hawk-eye view that helps resolve a number of long-standing issues. In particular, accumulation, equilibrium or ‘simple reproduction’, the price mechanism, crises and unemployment are visited from a new angle.

In a field of human activity as purposive as the economy there must be some universal intent at play that induces people to act as they do, to be as they are. This intent must be clearly spelled out in every analysis of a theoretical or practical kind. The system would be impossible to sustain with even a minimal degree of coherence if the underlying motive and the final goal were not stable and uniform: same for all, and pertaining to all activities. In the face of scarcity, they must also induce opposition. Mis-specifying or completely evading motivation in the study of the economy defies reason and raises suspicion. Following its initiators, prominent among whom in this respect were Pareto and Wicksteed, mainstream economists claim that invoking psychology will compromise the discipline's integrity, positiveness and disinterestedness. Wicksteed (1933 [1910]: 165) was plain: ‘We are only concerned with the “what” and the “how”, and not at all with the “why”.’ So, there goes causality! Pareto (1906: 120) was even more blunt: ‘The individual can disappear, provided that he leaves us [a] photograph of his tastes.’

First, we aim to show that the opposite is true. Motivational agnosticism invites occult metaphysics and precludes finding meaningful explanations, while acknowledging envy and conflict in the shaping of consumer preferences resolves all standing issues. Second, we reject the notion that consumption, which is of all human activities the most selfish and un-sharing one, is depicted by mere chance or due to incompetence on the part of economists as non-oppositional and beneficial, providing employment and advancing the ‘general welfare’, while also being gratifying for the individual. Without making consumption into a happy religion, or opium of sorts, there would be no way of blocking people from thinking: ‘Well, if we need to work less for producing each unit of output as technology is improved, why keep speeding up, instead of exploiting improvements to give ourselves a break?’ This, in turn, invokes time, the ultimate scarce factor, our most oppressive dynast, the core issue in all human contemplating, and the one that is altogether expelled, along with the individual, from the single discipline in which it ought to be most central.

Normally, a theory's flaws do not add anything to another theory's merits. Nothing, however, has been normal about the way economics has evolved, and there is no way of launching a new approach without first razing utility-based theory and its choice-theoretic offshoot. So, reluctantly, but without qualms, we assail both as we deploy our own argument. Upon the moving sands of utility-based or choice-based theory (which, ironically, entertains no choice-making criterion!) all claims made against it can easily be ‘refuted’, albeit vacuously. Their all-inclusiveness makes them irrefutable by inception. The choice-theoretic approach, one should recall, has been a fallback position; a forced move and a fight away from the measurability/observability problems that plagued utility and from its bliss-blotted normativeness. The normative connotations, however, were retained in covered-up form, since choice implies preference and negative externalities are carefully evaded. With motivation skipped, choice becomes impossible to refute. Utility actually reverses the truth, making our coercive motive appear as salubrious, by the simple trick of equating pleasure with the allaying of displeasure and by ignoring that individual gains are mutually cancelling, because they are drawn from the same pool of produced values, so that one's gains have a negative psychological impact on others, which should be deducted. Thus, the theory draws an aseptic picture of the economy that makes it impossible to solve the discipline's critical puzzles: the logic and meaning of price changes, the nature of the steady state, the connection between individual choice (micro) and global outcome (macro), etc.

There are two things that need to be done if the discipline is to be freed from the utility stranglehold. First, the ideological bias of utility theory must be scathingly attacked. Second, a convincing comprehensive alternative must be put in its place. For both tasks, a good understanding of consumption is needed, which is presently missing. Even though much is known about its details (social drinking, dressing and dining, periodicity of consumption, inmoding, out-moding, age-specific and income-specific consumption, emulation, habit formation, etc.), its causes and structure remain enigmatic. We do not know why people consume, what end they pursue by consuming and how they structure their preferences, in ubiquitous interaction. The yield of long years of grappling with these has been a series of evasive manoeuvres: from the classical utilitarianism of cardinal, comparable and additive utilities, to ordinal such, to indifference contours, to revealed preferences and axioms of rational choice, each one aimed at dodging a specific critique in a war of attrition against opponents who believed that, by exposing the discipline's fallacies, the situation would be corrected. Gunnar Myrdal, who had for a time been such an optimist, averred, already in 1930, that

The perpetual game of hide-and-seek in economics consists in concealing the norm in the concept. It is thus imperative to eradicate not only the explicit principles but above all the valuations tacitly implied by the basic concepts. Being concealed, they are more insidious and more elusive, and hence more likely to breed confusion.

(Myrdal, 1953 [1930]: 192)

And they remain such. Standard theory remains utility-based at its core. The idea of a pleased consumer is all-permeating, precisely as it is never mentioned explicitly. Words like ‘goods’ or ‘consumer satisfaction’ find liberal use. In the next chapter we will cite Samuelson's version of ‘how consumers choose’. In the meantime, Begg et al. (2003: 55) put it thus: ‘of the affordable consumption bundles, a consumer picks the bundle that maximizes her own satisfaction.’ In the 1984 edition of the same book, they suggested that ‘of the possible consumption bundles that can be purchased out of a given income, the consumer picks the bundle that maximizes his or her own satisfaction’ (p. 90). It is this persistent, camouflaged, market-endorsing utilitarianism that we assail, which reigns and shapes the views of students and laypeople and is used as a rationalizing explanation for aggressive consuming performances. Suffice it to count how many editions the books by Samuelson or Begg et al. have gone through, or listen to what economists say when they teach students or address the general public.

So, we investigate the root cause and causal mechanism of possessive antagonism, the consensual basis of ascribing value and negotiating meaning, and the mechanism through which these take effect. To this end, we skip shades and nuances of people's behaviour, and other detail. We examine how one's self-interest is (seen as being) served, what it consists in and how it meshes with or infringes upon the self-interest of others. These may not provide complete explanation and they may not be sufficient for betterment, but they are necessary. We must begin to understand how preferences are shaped through social interaction, in proactive pursuit of a clearly specified goal. Many have stressed the need to accommodate preference intersubjectivity in any account of the modern economy but no concrete way has been put forward. The motive that drives consumer choice has not been ferreted out. Intent, which ought to be the discipline's core subject matter, is meticulously ignored. No concept, method or model has been proposed to replace utility in the study of the behaviour of consuming units; and no theory has been plain about what self-interest consists in or has put the notion of scarcity to rigorous scrutiny, beyond a fuzzy perception of general lack. This is the decisive front where intellectual battle must be waged by critics, who must answer, at long last, the obvious question: If utility-based theory is wrong, what theory is right?

To answer this, to clear up notions that remain opaque, to find the real meaning of the term ‘capitalism’, which justifies its use, to explain why and how capital accumulates, etc., full light must be shed on the temporal subjectivity of the individual, in his/her capacity as consumer. In a field of activity as purposive as the economy, intent cannot be neglected without serious cost. If capital were a plaything only of capitalists, if it did not permeate consumption in any way or form, the term ‘capitalism’ would be misplaced. If consumers did not vie for possessing capital, this would not be possible to expand, to accumulate. We argue that consumers, too, vie for capital when they make choices, as they try to expand their reach into a social niche, even though they have access only to used-up, not-further-productive forms of it. This way, capital percolates also through consumption. It is not exclusively a supply-side category. Expressions such as ‘[t]here is something about the technological orientation, the efficiency, the sheer dynamism of capitalist ways of production that makes the expansion of the system “irresistible” ’ (Heilbroner, 1992 [1953]: 203) become mere clichés, if the ‘something’ that makes it all ‘irresistible’ is not explained on the basis of agent motivation and intent.

Our critique of utility and of the kind of consumerism that flourishes on its turf does not imply any cultural bias. Capitalism is merely the latest method of investing in fear and profiting from this. It is a large-scale fear-management project, as have been others, with different characteristics. Our existential perspective applies to most, if not all, socio-economic arrangements, however differently each may pursue the goal outlined next through its distinct institutions, norms or traditions. The horrendous lives lived by the poor in previous times are impossible to ignore. We do heed Douglas and Isherwood's (1996 [1979]: xxi–xxii) prescient warning: ‘Anyone who wants to criticize rampant individualism should remember how a real community works, the censorship it deploys, the exclusions and downgradings and ostracisms.’ Having said this, though, they go on to remind us that ‘a strong group regiments the consumption choices of its members, but supports them in trouble; an unbounded social field leaves individual choices free, but the individuals are unsupported’ (ibid.: xxiv). Capitalism then is an anthropological and sociological perversity in that, for all the apparent variety of things on store shelves, it both regiments consumption choices and leaves everyone exposed and unsupported.

Being about scarcity of one or another kind, economics cannot but entail conflict. During crises, violence comes to the fore, fully blown. At better times, both conflict and violence take less discernible, more civilized shades. An economics that is honest and useful cannot turn a blind eye to this, which is one face of a coin whose other side is synergy – itself essential for materializing the goal that all agents pursue, in all their capacities. Psychology must be invoked, to illuminate the coercion that spurs us to be so fiercely possessive, to go frenziedly after man-made things and to pursue a hectic lifestyle during our short lives. And this, we claim, is precisely the haunting awareness of the shortness of our life: of our ‘human finitude as compared to temporal infinity or the “eternal” ’ (Giddens, 1991: 49). It is our existential dread: the fear of our transience and of death. But we dread this idea so much that we have expunged it from our enquiries. With few exceptions, of the indissoluble dialectical unity of life with death, Western philosophy skipped death, taking life for granted. Life, however, stands as negation of death, in which are subsumed all the oppositional aspects to the existential condition that pose a threat to existence, raise tension and incite action towards its preservation and extension. Given that man exists, one may ponder: What is his goal? What does he pursue? Plato and Aristotle sought an answer in the Supreme Good. This could be virtue or happiness, activity, knowledge, spirituality or aesthetics. Later thinkers, prominently Locke, Rousseau, Bentham and Mill, also saw the ‘good life’ as a goal, this being largely about seeking pleasure and avoiding pain. Even Hobbes – who came close to redressing the error as he spoke of self-interested cooperation in man's struggle for survival through war of all against all – failed to distinguish clearly between goals, incentives and means.

Being-in-life is the last thing a self-conscious mortal can take for granted. Life is precariously uncertain, perilously insecure and short. It can end any time; and it does, with the greatest of certainty. Pleasure and pain are just guideposts. Pleasure-seeking and pain-avoiding are strategies in the struggle for life's expansion, as a continued flow of experiences, in space-time. Social structure, primarily the economy, is a means for attaining this goal more effectively, by claiming power over nature and over humans. Participants take on enemy status, just as they group themselves in order to increase their chances against nature and against outside groups (Kondylis, 1984). Thus, the fear of death which sets things in motion becomes fear of life: fear of other-life, which the subject sees as enemy or competitor, both within his own group and outside. It becomes fear of the ‘alien’ that one tries to appropriate, injure and overpower, according to Nietzsche (1992: 393).

Selfishness always entails a deficit of other-regard. A selfish motive inevitably involves envy, malice and contention. A theory based on selfishness cannot, by any stretch of the imagination, expel from its purview conflict, opposition and the diseconomies that these entail. And yet, utility masquerades selfishness as asset, consumption as felicitous and growth as harmless. And since income is needed for buying such felicity, we must work like slaves and consume like crazy, living only by consuming what we can buy with income earned by thus sacrificing our lives: we must consume our lives away. Under such falsifying prism, our primary obligation to ourselves and to society is to make money and consume as much as we can. These we take as ‘freedom of choice’, much as we confuse political freedom with periodically visiting the ballot box. Thus we ...

Table of contents

• Cover
• Half Title
• Routledge Frontiers of Political Economy
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures
• Preface
• Acknowledgements
• Part I The beast
• Part II Its measurable footprint
• Notes
• Bibliography
• Index