Keynes predicted everything except how greedy people are

Here’s an interesting book review in New Yorker by Elizabeth Kolbert regarding Overwhelmed: Work, Love, and Play When No One Has the Time. It turned out that Keynes was remarkably prescient regarding the economic growth that would result from technological progress, but he predicted that people would work fewer hours per week, not grow in their greed for consumption to match economic growth.

I read this New Yorker piece during the same week that I saw Shakespeare’s “The Tempest” (my review) and Alexander Payne’s Nebraska. Both the 1610 play and the 2013 movie take the position that if you are rich you’ll become a fat target for thieves and grifters and that even blood relation/family feeling is not nearly as powerful as greed. If reasonably comfortable people are willing to cheat and even kill for greater wealth, why wouldn’t they be willing to work longer hours?

At the same time, it does seem odd that people work so hard. My parents were Harvard graduates and my father had a great job with the Federal Trade Commission. The five of us shared a 1500 square foot house in Bethesda, Maryland with a black and white TV. My dad rode the Metrobus to work. Mom drove a dark green 1970 Chevrolet station wagon with black vinyl seats and no air-conditioning that broke down on the New Jersey turnpike every few trips to see the cousins. Putting a kid wearing shorts into the car on an August afternoon was bona fide child abuse that could result in first degree leg burns. (Note to youngsters reading this blog: the car did not break down due to advanced age; even fairly new cars in the old days were not as reliable as a 12-year-old Honda Accord would be today.) We attended public school and read books from the library. Our cavities were filled by a dentist who didn’t use novacaine for pediatric patients because it was too expensive and time-consuming. Kids in our (prosperous) neighborhood generally took between 0 and 2 commercial airline flights through high school graduation. We all shared a rotary-dial telephone. I don’t remember any family discussions over why my Dad didn’t take a second job or my Mom a full-time job so that we could have fancier stuff, a bigger house, or elaborate vacations like the lobbyists took their families on (even then lobbying the government was a great way to make money for all concerned!).

The material lifestyle that we had back in the 1970s could be achieved today with either zero work (i.e., collecting welfare of one sort or another), by reasonably skilled individuals with the 15 hour/week schedule that Keynes envisioned as becoming typical, or with the profits from a one-night encounter that produced a child (top of the Massachusetts child support guidelines is over $40,000 per year for a single child, i.e., more than the median after-tax household income in the state). Yet how many content themselves with what today we would call “the simplest life” and that back in the 1970s we called “the good life”? Welfare recipients, perhaps responding to “the welfare cliff”, tend not to pursue jobs that would reduce their benefits, but they often work for cash. People who get high hourly wages 15 hours per week find it tempting to take on an additional project and work 25 or 40 hours per week. According to their attorneys, at least, people who have found it profitable to collect child support on one child oftentimes have second and third children with additional co-parents, thus increasing their income (in New York and Texas, for example, it is exactly twice as profitable to have three kids with three different co-parents than to have three kids with the same co-parent; in Massachusetts, three kids with the same $250,000/year co-parent would yield child support of $55,390, but three kids with three $250,000/year co-parents would yield a tax-free revenue stream of $120,413, i.e., more than twice as profitable).

I don’t think it is reasonable to blame technological progress for our lack of contentment, as Kolbert does to some extent. The computer applications that people love the most (Web, Facebook, Gmail, etc.) are free and run on ridiculously cheap hardware. A reasonably good smartphone voice+data connection can be obtained for about $40 per month. The stuff that seems to have Americans spinning on the rat wheel is non-technological, e.g., a McMansion and the energy to heat/cool it, a monster SUV or pickup truck for day-to-day transportation instead of a car, a cruise around the Caribbean, etc.

If I had to pick one factor I think it is population growth. This has been a boon to politicians anxious to collect as much tax revenue as possible, but a bane to the would-be-slacker citizen. In the 1970s the roads weren’t nearly as clogged so you didn’t spend so many extra hours in a car essentially parked in the middle of the road relying on the air-conditioning for a breeze and the audio system for entertainment. In the 1970s there were fewer people demanding theater tickets, rides at Disneyland, sporting event seats, etc. Therefore you didn’t need to work 60 hours per week to earn enough to seat a family of 5 at a professional baseball or football game (and parking was a lot cheaper because there were fewer cars competing for the same real estate).

But could it be that the answer is as simple as “Why didn’t Keynes remember his Shakespeare?”

More: Read the New Yorker.

14 thoughts on “Keynes predicted everything except how greedy people are

  1. I grew up at the same time as you a few hundred miles west, but basically had the same experiences.

    I often ask the same question as you and have come to a terrible conclusion; we work, because of the 70’s. The loss of so many good jobs to those willing to work longer/cheaper, scared those of us who lived through it. We know those in power don’t care about “our country” but only, the bottom line. We worry that if we slowed down, we couldn’t control the downward spiral and all would be lost.

    I’m not saying Americans aren’t bauble chasers hooked on spending, only that we got here out of fear, not greed.

  2. Harvard and Bethesda are a lot more expensive than they used to be. It’s about who your kids go to school with, and that can get very expensive. Of course, you would think that higher ed and nice neighborhoods would expand with the population. But that’s not really happening, or if it is, people still don’t want to suffer downward mobility.

  3. I grew up in a suburb north of Boston and started the first grade in 1970; and I recall 1970s family life similarly to Mr. Greenspun. I recently voluntarily reduced my work week by 20% by taking every Friday off without pay. Every weekend a 3-day weekend!

  4. “Anyone who believes that exponential growth can go on forever in a finite world is either a madman or an economist”, particularly a Keynesian economist.

  5. We /must/ work more hours. To pay for necessities — clothes, food, public utilities and the like — we have to have a lot of money. The only “luxuries” we have are little more trinkets in the modern world: smart phones, cable TV, and nice cars. While clothing costs are mostly reasonable, food and utility costs, especially, are always going up, even though the quality of what we get doesn’t. But we certainly don’t consume more food that we did in Keynes’ day. We might consume more clothing — but that’s a good thing. When something wears out, we throw it away.

    But a mobile workforce has additional communications costs even for families. Internet communications cannot be considered a luxury, and the service quality that Americans get is not as good as in most of the industrialized world even though it costs more. Or try to buy fresh, healthy food instead of industrial food that’s full of fat and salt and god-only-knows-what-else that’s killing us. Good food costs a lot. But that’s not the worst of it: The bad food that’s cheaper off the shelf (with equally cheap/lousy ingredients formulated to make us think we’re getting good food) also incurs extra costs for health care. And lets not mention the astronomical health care costs that American’s pay. Our national health care bill is far above what other industrialized countries pay — even though we definitely do not have better outcomes.

    We might have a few more trinkets than we had in Keynes’ day. But, overall, we live in a world designed by oligarchs for their benefit, and it costs a lot to live in that world.

    After all, money for those CEO bonuses and yachts and palaces doesn’t grow on trees.

    Or was it the greed of the oligarchs you were talking about?

  6. It is interesting reading Mr. Money Mustache or similar people who essentially kept their lifestyle more like your parents while earning current wages, and retired before 40 (in much the same sense as you). They have taken Keynes’ path with concentrated work for young years, and then less afterward.

  7. So, was it a mistake to open the country to immigration post 1964? It’s true the country is more crowded than it was in our childhood, but it’s also a more interesting place. Today I was in a run down 1950’s shopping center in a distant fringe suburb of Philadelphia. Part of it was occupied by a small Chinese supermarket and part of it was occupied by an Indian grocery store. I guaranty that there were things in those stores that you could not have gotten ANYWHERE in the US in 1965 for any amount of money. In 1965 a grocery store in a fringe suburb would have had a bunch of white bread and canned peas and such. In 1965, 99.9% of Americans would not have known what saag paneer was. Was this worth making the country crowded? I dunno.

  8. If I had to pick one factor I think it is population growth. This has been a boon to politicians anxious to collect as much tax revenue as possible, but a bane to the would-be-slacker citizen.

    Not really, although arguably that’s a portion of the issue, but the deeper part is a combination of things; see Matt Yglesias’s The Rent is Too Damn High and Tyler Cowen’s The Great Stagnation for more.

    Some places in the Sunbelt facilitate the “slacker lifestyle” much more than others, and not surprisingly those are also the places experiencing the fastest population growth.

  9. bjk, jseliger: What you’re saying about housing costs makes a lot of sense. On the other hand, I checked Craigslist to find out what a crummy 4BR house in Bethesda would rent for these days. It seems that between $3000 and $4000 per month is the market rent. If we use $3500/month, that’s $42,000 per year. Not cheap, certainly, but it seems as though it should be affordable for a skilled worker with a half-time job and certainly affordable for a family with two skilled adult workers, each working half-time.

    (Yet in fact we see those two skilled adult workers choosing to work full time instead so that they can live in a NICE 4BR house in Bethesda instead of a crummy one and drive a new BMW instead of an old Honda.)

  10. In the 1970s there were fewer people demanding theater tickets, rides at Disneyland, sporting event seats, etc.

    You ignore the supply part of the equation here. Supply of theater tickets, etc. has gone up.

  11. >that’s $42,000 per year. Not cheap, certainly, but it seems as though it should be affordable for a skilled worker with a half-time job and certainly affordable for a family with two skilled adult workers, each working half-time.

    House rental would not include heat and utilities, so figure another $8,000 per year – that’s $50K. Rent should not exceed 1/4 to 1/3 of gross income so that means a gross income of $150 to $200K. For a 1/2 time job, that would mean the equivalent of a $400K full time job. How plentiful are $400K jobs (where the employer is willing to take you 1/2 time for $200K)?

    BTW, here is the type of palatial 3 bedroom home you get for $3,195/month in Bethesda:

    Even by 1970’s standards, that’s pretty modest.

  12. When I was growing up, in the 70’s, 80’s and 90’s, we appreciated what we had. One modest care for a family, one modest TV, one modest refrigerator, one modest bathroom, etc. Not to mention, one modest toy (name your toy) for ALL to use.

    Those days, each family member very much has his own “stuff” (you name “stuff”) such as bedroom, TV, phone, car, and the list goes on. What’s more, back then, you hanged on to whatever you have for much longer then we do today. Not only that, we didn’t go crazy for the “next cool thing”. Oh, and did I mention that we hanged on to our cloths and food for much longer than we do today? We hardly threw away anything until when it was truly useless.

    What caused this change? I blame it on over production, smart marketing and the parents; as parents, we want the best for our kids but we forgot the word “no”.

  13. Security is a big part of it. When you live in high-end neighborhoods, you end up with the kind of neighbors that live in high-end neighborhoods. Both petty and serious crime are much more rare. Who cares if you can live in a $400k house versus an $800k house if you can’t go out in the yard? (Also, the schools will be better)

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