The Joyless Economy: Roubini is Our Scitovsky

♠ Posted by Emmanuel in , at 7/19/2008 01:11:00 AM
I have followed Nouriel Roubini's rise from a well-regarded academic whose speciality is international economics to one of the world's "Top 100 Public Intellectuals" according to Foreign Policy. Although economics blogs can be somewhat dry, Roubini's has always been a pleasure to visit with its incorporation of rich cultural references and its unabashed crankiness setting it apart from most. It is not much of a stretch to think of the American economy in terms of a Greek tragedy. Like all good stories, the relative decline of the United States which he catalogues has the ingredients of a good tragedy according to Aristotle: Plot, Characters, Diction, Thought, Spectacle, and Melody. What sets Roubini apart from your humdrum econo-blogger is his incorporation of these elements in his blog musings. Some may fault him for implying that the parlous state of America's finances is a moral failing as Americans rack up onerous future obligations to buy goods and services that don't seem to make them happy, anyway. I say he's right: unsustainable deficits, whether on a personal or a national basis, are welfare-reducing.

In his most recent post, Dr. Roubini looks upon the current follies of the American lifestyle with unconcealed contempt. Among other things, he takes aim at investment in huge McMansions that require excessive heating bills and are located too far away from urban centres; SUVs that consume way too much gas; and, of course, IOUs piled up from here to eternity on consumer debt, housing loans, auto loans, educational loans, and what else have you. The sad part of it all is that this glorious overspending hasn't resulted in many--if any--sustainable gains in consumer welfare. To the contrary, declining prices of McMansions and SUVs coupled with rising gas prices and heating bills are foreseen to end this subprime iteration of the American dream. In the end, what was the point of it all, really?

"Money can't buy happiness" is an adage that is generally well-understood. However, one of the things that has never been adequately explained by social scientists, psychologists, and the rest is why so many people still act as if money can buy happiness. Nouriel Roubini's latest missive is, in searching for clues as to why Americans engage in a seemingly endless jihad on consumer sanity, reminiscent of the earlier work of the late Tibor Scitovsky on The Joyless Economy. Here is a blurb on the book that I found which captures its pre-Roubini essence:

Scitovsky's book, The Joyless Economy (1976), received scant recognition when it first appeared, but some now are hailing it as a prophetic masterpiece. It is among "The Hundred Most Influential Books Since World War II," according to a survey of prominent scholars by the Times Literary Supplement (Oct. 6, l996). More recently, in Critical Review (Fall 1996), seven sympathetic critics and Scitovsky himself revisited the book's critique of consumer capitalism.

"Drawing on research in physiological psychology," Scitovsky began with the human inclination to avoid discomfort and seek pleasure, note Jeffrey Friedman and Adam McCabe, Critical Review's editor and research assistant, respectively. But he contested the notion that the dynamic is so simple. "In Scitovsky's view, there are two sources of displeasure: not only too much stimulus--pain, but too little--boredom." Affluent societies had produced widespread comfort--but too much comfort resulted in ennui. By seeking excessive comfort rather than stimulation, or by turning to such fleetingly satisfying types of stimulation as TV or shopping, people made "wrong" choices and got less enjoyment than they could out of life. "The remedy," Scitovsky said, "is culture" and the stimulation provided by music, painting, literature, and history. Consumers must be educated to make wiser choices.

Scitovsky's book was written in 1976, but his indictment of a consumer-driven economy built upon the edifice of sloth is as relevant now as it was then. The combination of cheap credit provided by foreigners with a desire for creature comfort has culminated in the subprime mess whose fallout will have far-ranging consequences on the American political economy. It is indeed ironic that this illusory quest for comfort has culminated in more pain as the value of these acquisitions declines further due to changes wrought by excess consumerism. Some may chafe at Dr. Roubini's flourishes on a theme by Scitovsky, but he is merely making the tragedy of it all realistic: You bought all this stuff and they only brought you misery in the end. In his own way, Dr. Roubini tries to redress the balance noted by Scitovsky with rich cultural references that only reinforce my belief that he is the heir to Scitovsky.

One of the critiques of the so-called "Anglo-Saxon" model of governance is putting consumer credit and consumption on a pedestal. It is of no mere coincidence that Anglophone countries such as the UK, Australia, and New Zealand which have modeled themselves on the US are similarly afflicted by such problems: gaping external imbalances, housing bubbles, and rising consumer indebtedness. Many other countries chafe when Americans try to lecture them about how to run their economies in an "Anglo-Saxon" way--why exactly would they want to be like America with the attendant problems noted above? Take heed: the path to ruin may be comfortable, but it leads to ruin nonetheless. If not necessarily providing the answers as to why Americans continue to act as if money can buy happiness, Scitovsky and his heir, Dr. Roubini, are at least asking the important questions about our existence in consumer-driven societies.