Paul Krugman writes:
Today, David Brooks suggests that economic growth has slowed because these days the affluent are more into self-improvement and life quality than they are into money. In effect, we’re suffering from a decline in materialism. My immediate reaction was that this is all wrong — that people like David’s hypothetical Jared are actually rare, that the reality is that we’re more into the rat race than ever before. What I always think about is the commuter trains. When I was growing up on Long Island, there was a clear social hierarchy in terms of when people went to work: take a 7:30 train and it was full of blue-collar workers, take a 9:00 train and it was full of men in good suits, heading in to spend a couple of hours pushing papers around before taking their three-martini lunches. Today, the highest-paid also put in enormous hours — and you can find plenty of them on that 7:30 train, or even earlier.
But dueling anecdotes only get you so far. What about data?
Jared wasn’t really drawn to the brake-systems business, which was withering in America. He works at a company that organizes conferences. He brings together fascinating speakers for lifelong learning. He writes a blog on modern art and takes his family on vacations that are more daring and exciting than any Sam experienced.
Are the Jareds of the world in the top wage decile? Some might be. But I think the point is that Jared is choosing more leisure over more market production, and the form of market production he has chosen is not revenue-maximizing but rather novel-, interestingness-, and stimulation-maximizing.
If Krugman really believes that people like Jared are rare, I’d urge him to look around the economics faculty at Princeton or another elite research university. Many faculty members could command higher wages in, say, the financial sector, yet the mix of prestige, intellectual stimulation, and leisure proves more attractive. It helps that many elite economists can increase their consulting income when they see fit. But even in that scenario, they’re potentially earning less than they would have in some other domains.
Consider Michael Aronson’s anecdote about the great Daniel Bell:
After Dan left Fortune for academia, Henry Luce, the legendary Fortune proprietor, called him into his office, asked him to come back, and offered him a salary of $12,000 a year, which was three times what he was earning as a college teacher. Dan was appreciative but refused. Luce, thunderstruck, asked why. Dan said he had four reasons: June, July, August, and September.
It’s also not clear that we are suffering from this decline in materialism. This is an artifact of a diverse, free society. What this does mean, however, is that we can’t necessarily afford a universalistic welfare state as opposed to a more targeted, cost-effective welfare state, which is why David and I and others feel so strongly about reforming the public sector. By scaling up good ideas and winding down bad ones, we can sharply improve the cost and quality of public services, benefiting everyone. Alas, many of Paul Krugman’s allies are resistant to this approach.