Thursday, January 12, 2006

Economic Insight

There must be a chemical in the brain that reacts to an enlightening presentation the way pleasure suffuses over the entire body when one takes refuge in an English country inn for the absolutely perfect cup of tea on a wet and miserable afternoon.

There's a similar chemistry in my brain connected to the "aha!" moment that occurs when some august theory can be applied to my entirely all too ordinary daily life.

This was what occurred to me this week as I was hearing Benjamin Friedman, a Harvard professor of economics, speak about his new book, The Moral Consequences of Economic Growth, which -- in brief -- argues that economic growth brings greater social mobility, tolerance of diversity, fairness and robust democratic institutions, or what he calls "moral positives."

Challenged on that point, Friedman went on to explain that “what matters for happiness, or ‘satisfaction’ as pollsters put it, is not the absolute level of living, but the living standard relative to something else.” Research points to two powerful benchmarks of material well-being.

“Imagine that you were in Garrison Keillor’s Lake Woebegone, where everyone is better off than everyone else,” Friedman said. “Then imagine a world in which everybody has a sense of being better off than in the past. Then they would experience less urgency for economic growth personally and be willing, as some have suggested here, to let other people come along for the ride.”

It doesn't really matter if I make X amount of money by itself. What matters is the psychic reward of knowing that it's more than amount Y made by certain people with whom I compare myself. Then there's the final Oedipal victory in discovering that not only is this Not Your Father's Car, he couldn't have afforded anything this good -- or it wasn't invented back then.

This certainly explains why, living comfortably in the richest country in the world, my peers so often feel poor. John D. Rockefeller was once asked what was his ultimate financial goal. "To have just a little more," he replied.

So what do I do with this? I'm not sure. Perhaps this is one of these moments in which an insight simply needs to simmer before we know what is to be done.
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