social.outsourcedmath.com

I'll say it, Adam Smith is wrong!

I'm extremely fond of the hosts Kai Ryssdal & Molly Wood as well as the content of the show even though I'm about to criticize a moment of Wednesday's show below. Their work is great, their humanity is exemplary.

Something triggered a visceral & bad feeling when I heard the quote of the venerated Adam Smith

Adam Smith wrote:

"Consumption is the sole end and purpose of all production."

Here's the gist of the content of the show before the quote:
  • audience question about the work-from-home market ...
  • high pay workers moving to low-cost locations ...
  • Apple can not/should not pay American level wages in China ...
  • can't have the same labor wage across the globe ...
  • why not?
  • WORMHOLE ...
  • some distracting banter ...
  • audience question Can has Economy not based on Consumerism? ...
  • Kai says no, then quotes Adam Smith...
  • Molly and I simultaneously have our brains go into skeptic mode and Molly's went too fast ...

There is a lot to unpack, and I'm going to come back to why I reacted to the spurious idea inside the quote later.

If Silicon Valley people move to rural places with big money flowing to them because teleworking, some of the excess money will drop on the scene, it's going to splash off onto the people that live there. Like Yacht's are disgusting opulence, but the people who built them got paid. You won't have a lot of friends in town if you tip small but they find out you are earning 1,000x the local wages. If you ask the local builders to make an ice-ring addition on your 2,000 square-foot home, you will be charged more than if the town commissioned the job for public use.

Molly, if you are reading this, write labor is not an invasive species on the chalkboard 100 times. the population of high paid people is small and if they do diaspora it's not going to change much. The place they leave will feel it more than the place they go to.

Geography dependant wages have a plethora of reasons behind them. For one, Silicon Valley with all their secrets and espionage wouldn't be able to secure their ideas if people could work from everywhere; e.g. the CIA will not move their headquarters to China. Also, the biggest players need the best people to stay ahead of the competitors, so the talent moves to where the geography pulls it to (depending a lot on the economic and moral value system of the talented). In the type of labor that requires the production of goods, or the performance of in-person services (think factories, mechanics, carpenters, lawyers, doctors, and so on), the topography of wages across the Earths surface will be dependant on supply and demand of the thing adjusted for the population density and some other factors. Land is a scarce resource and that's why in cities you have to manufacture land by creating taller buildings. Too many people want the same land, so you take the footprint of the land and multiply it by the number of floors you set on top of it to try making the footprint cheaper per square unit. This base cost of doing business raises the ask for all goods and services and has to be higher as a consequence where the population density is higher. Density decides the price of the wages, not the wages deciding the price of the land. The more economic engines a location has to attract people the higher the density gets. If your product can be delivered from afar, the owners of the company get a bigger share of the selling price, this is because they can absolutely underpay but relatively overpay a worker in Flint to build an item they sell in NYC for full price; build in low density, sell in high density. The ability to move to where things are produced to a location where people are more disadvantaged and/or the cost of living is lower can only lower the wages, never raise them. Where it moved away from becomes more desperate so asks for less to do something. When the production moves again is when the new place becomes skilled and has enough money and power to ask for more. The wages will not go up till industrialists without morals run out of downtrodden people on the Earth; better pack a lunch.

So now, what if a person is a factory unto themselves who can build in one place and deliver in another place? They are the owner and the labor of their system. If their product/service is unique enough and has value to more people than it can be produced for, they can ask whatever they want to make it wherever they want and deliver it to wherever they want. That type of person/product/service is rare indeed. Most of us and our abilities are commoditized, so if we say we won't do it another person will replace us fairly quickly. Most of also can't leave an area because we are emotionally attached to people places and things in an area and languages, and foods, and so on. We can't move like a factory and that is a disadvantage for labor.

I'm finally circling back to Adam Smith and Kai. When he said it, it sounded like it was right; like truthiness. But it bothered me like to me it felt like a broken clock that is right twice a day and close to right a lot of time in the day depending on how accurate you need the time to be. I also feel like I'm hearing a man tell me that he saw a cart pushing a horse up a street. I think Molly started to do the mathematical thing where you generalize the statement testing for counterexamples by asking questions, like what is "production", like does a mom produce babies.

I think it would be more accurate to say, extending one's life and culture is the sole purpose of all human activity and most human activity is the production of goods and the performance of services. I could be easily taking Adam Smith out of context, but I don't think I'm taking the way Kai used it out of context. Kai just finished reading parts of a nuanced question and called TLDR then quoted Adam Smith. The word "consumerism" which the audience questioner used is nuanced, the ideas of production & consumption stated in the Smith quote are nuanced, but it got whipped out there in a declarative way that was intended to stop discussion on the topic. I know nearly nothing about producing a radio show, time constraints, and so on, so I'm not assembling a posse to right this wrong, yet it compelled this post and the things linking to it.

Is a metal tool with a lifetime guarantee that you have multiple generations using ever consumed? Do I consume art when I look at a painting? Do I produce smiles for the consumption of others? Has nobody ever failed at trying to produce something? Like built something they thought was great but nobody bought/consumed it? You can't consume what has yet to be produced so consuming can't start the production.

How about this instead? Solving problems and making life easier is the sole driving force behind all innovation/invention, and popular inventions have a strong calling, so production must be done to satisfy that demand, and if the invention is difficult to make or scaling it up can lower the cost it will be produced in mass, and if the product doesn't last long it will be consumed repeatedly.

Let's think about food & shelter. We consume food, but we don't really produce it, the Earth produces it and was doing that before us, we just sort out the bad planning of nature in order to have the Earth get more made per square foot (I'm not saying that's healthy for us though.). And we do produce shelter, though we don't really consume it. Sure we use it, but the intention is not to make it deteriorate from us using it so not a consumed good. This one is for Molly, we produce babies, but not to consume them, we do it because we are compelled to.

Regarding the specific thing about consumerism from a listener, think about the parallels between illegal drugs and all other products. Illegal drugs have almost no lasting value, and if they were never introduced into the world, we would all have been better off. They are marketed in a way that people who shouldn't consume them do, and the value they cost the world is greater than the value they give their consumers. Many legal products fit that form. Advertisers, like Steve Jobs hacked brains and forced people to think they needed something they didn't, overcharged for it, and left a lot of environmental degradation in the process of doing that. So very many products would not be consumed if they weren't marketed with psychological hacks, they cost much and they deliver little. They warp culture into something it doesn't need to be and it makes the majority of people worse off for the benefit of the few.

Kai, you should have said, "yes, we could have an economy without consumerism, it just would be a different one than what we have now. I don't know if it would be better or worse, but it would probably be better the way you asked the question."


This is the embedded audio player for the show attached at the bottom of the post.


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