Keynes on productivity and leisure

A few weeks ago, I wrote on our (collective) problem of people turning productivity gains into additional consumption rather than additional leisure. This is a collective problem because more consumption is bad for sustainability but also because everyone loses if there’s more (zero-sum) competition for position goods such as houses in good neighborhoods or places in good schools. 

In that post — which I sometimes summarize as “hipsters can save the world” — I mentioned Keynes’s 1930 essay “Economic possibilities for our grandchildren” [pdf] which I had not read. Now I have, and I have a few thoughts to share.

  1. Keynes is very aware of the long term benefits of productivity.
  2. He attributes most of the gains from the industrial revolution to technical improvements and capital accumulation. Under technical improvements, he includes coal, steam and petrol, but he does not pay much attention to their nature as “non-renewable” resources. This oversight is expected in 1930, just as is the problem of missing the long-run impacts of burning fossil fuels.
  3. By “capital accumulation,” Keynes refers to the treasure and revenues from colonialism and other ventures abroad. He appeals to the “miracle of compound interest” in explaining British wealth, while completely ignoring the fact that most of this wealth was from theft rather than forming or growing capital.
  4. Keynes refers to the “economic problem” of finding enough food, clothing and shelter for everyone, and that progress has put the solution to this problem within sight. His assumption that people will enjoy more leisure when the “economic problem” is solved turned out to be  wrong, as most people (even the poor) used the gains from productivity to compete for positional goods rather than settle for an acceptable level of economic goods such as food and shelter. He also ignores the ongoing problem of colonial/social systems that exploit the poor for the benefits of the rich.
  5. Keynes assumes that our prosperity will accelerate as population stabilizes (in 1930, it was just over 2 billion), as there will be no need for more children. He was obviously wrong there. (Keynes was gay bisexual and perhaps underestimated the desire of “breeders” to have children.)
  6. He guesses that output per person will be 4-8x higher in 2030 than in 1930. The jump from 1929 to 2016 was about 4x.
  7. Keynes labels consumption of positional goods as “non-economic” consumption, and then dismisses such demand as a distraction from our achievement (food and shelter) and better uses of our time (leisure), on these terms:

    The love of money as a possession — as distinguished from the love of money as a means to the enjoyments and realities of life — will be recognised for what it is, a somewhat disgusting morbidity, one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard.

  8. They were not discarded, as Keynes was over-optimistic:

    I look forward, therefore, in days not so very remote, to the greatest change which has ever occurred in the material environment of life for human beings in the aggregate. But, of course, it will all happen gradually, not as a catastrophe. Indeed, it has already begun. The course of affairs will simply be that there will be ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed. The critical difference will be realised when this condition has become so general that the nature of one’s duty to one’s neighbour is changed. For it will remain reasonable to be economically purposive for others after it has ceased to be reasonable for oneself.

  9. Alas, instead we get this reality (from The Atlantic this week):

    Helping consumers figure out what to buy amid an endless sea of choice online has become a cottage industry unto itself. Many brands and retailers now wield marketing buzzwords such as curation, differentiation, and discovery as they attempt to sell an assortment of stuff targeted to their ideal customer. Companies find such shoppers through the data gold mine of digital advertising, which can catalog people by gender, income level, personal interests, and more. Since Americans have lost the ability to sort through the sheer volume of the consumer choices available to them, a ghost now has to be in the retail machine, whether it’s an algorithm, an influencer, or some snazzy ad tech to help a product follow you around the internet.

My one-handed conclusion is that Keynes was right in predicting how prosperous we’d become but wrong in assuming that humans would use prosperity for personal development and neighborly relations. Instead, we’ve seen ongoing (and unsustainable) competition for status via conspicuous consumption 🙁

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.