A sideways look at economics

“Everybody loves the sound of a train in the distance
Everybody thinks it’s true”
Paul Simon

I write this sitting on my bed in my berth on the Caledonian Sleeper train, running overnight from Edinburgh Waverley to London Euston. As many (better) writers before me have noted, there is something peculiar about train travel, particularly long journeys, particularly at night, that turns the mind towards contemplation. In my case, that is now amplified by a couple of glasses of scotch whisky. Brace yourselves: I’ve been contemplating cathedrals.

It takes a lifetime to build a cathedral — or, more often, many lifetimes. They’re massive structures, designed to astonish, and to test the limits of the materials used in their construction as well as those of the finances, the human endurance, and all the other resources needed to create them. When building a cathedral, you don’t build just a spire. To justify the spire, to support it and give it meaning, you need the rest of the structure. It’s the heavy walls and buttresses that put the spire in its proper context. The rest of the structure demonstrates how unusual and inspiring the spire is. Its impact would be much reduced if the rest of the building didn’t exist, or if the whole building were as high as the spire. The point, literally and figuratively, would be lost.

Is the same true of life? It could be, in some lives, that only one or at most a very few pinnacles of achievement or bliss can be reached. And when one looks at the whole structure, the whole life, that one moment appears to be the meaning and purpose of the whole. Very often, that is how the iconic figures from history are thought about. To pick a few names randomly: Paul Gascoigne had his goal against Scotland; Churchill had the Second World War; Magellan had his circumnavigation of the globe; Horatio his bridge; Boudicca her moment of rebellion; Cleopatra her love affair and asp; Achilles his fight with Hector; and so on.

Just as the whole cathedral can’t be as high as the spire and retain its meaning, so a life can’t be lived at a pinnacle at all times, or else it’s not a pinnacle.

In economics, there’s a theoretical ‘bliss point’, the point at which utility or happiness reaches the highest conceivable level beyond which it can’t possibly increase.

It’s a nice idea, but I don’t think it’s helpful. I don’t think we’re motivated by the pull of bliss but by the desire for change. Not by the idea of the best, but by the attraction of better.

There are many resonances of the same idea in other areas of economics, finance, politics and psychology. For example:

• Firms can experience a painful mid-life crisis when they make the transition from ‘growth’ to ‘income’ stocks. The period of time when a firm is developing its proposition, growing its market share, breaking new ground and introducing new products and services tends to be accompanied by rapid growth in its market value and low or no dividends. It’s exciting and edgy: the firm doesn’t yet know what it is going to ‘become’, and the process of becoming is fun and highly engaging for staff and clients alike. These are the firms that are building their brands. But the time comes when the becoming is over, the brand is built, and the firm is generating profits (presuming it survives that long). It’s difficult for these firms to accept that part of their life is over, just as it is for those of us on the wrong side of 50. Sometimes, businesses hang on to the past for too long, building up enormous reserves of cash, for example, with no clear idea of what to do with it, and reluctant to distribute it as dividends as that would announce to the world that the growth phase is over. Or in the individual case, wearing clothing aimed at people twenty years younger than ourselves. The dignified thing to do is to wear age-appropriate clothing and to distribute profits with panache when the time comes: to live with the brand you have built. Sounds boring, right? Firms, like individuals, want to hold onto the idea that better is always to come, because that idea makes us feel alive. The best is here: well that’s a different feeling altogether.

• Political regimes that take office through revolution find it difficult to accept that it can ever be complete. They’re so wedded to the idea of revolution, so personally invested in it, that they can’t let it go. In both Soviet Russia and the People’s Republic of China, the regimes created a narrative of ‘permanent revolution’, of which they are always in the vanguard. The utopian broad sunlit uplands never arrive: they can’t, because what would be the point of all the revolutionaries?[1] What would they do then? Where would they find meaning? Always jam tomorrow, never jam today. Jam today means my job is done: what then?

• The idea of growth is central to macroeconomics and macroeconomic policy. Economic growth arises from innovation and from population growth. It’s generally held to be desirable in its own right, and also as a means to facilitate other desirable outcomes, such as improved welfare for the poorest via redistribution from the richest. Such redistribution is achievable, given growth, in a Pareto-optimal way (i.e. without making anyone worse off in an absolute sense, though the rich in that world are arguably worse off than they would be without redistribution). Without growth, state-led efforts to reduce inequality could only be achieved at an absolute cost to the richest — something that would be spectacularly unpopular among that segment of society and which could damage their incentives to create wealth too. Some commentators now argue that the obsession with growth has passed its sell-by date; that it’s now time to accept that we’ve reached a level of income sufficient for the needs of the species if it were properly distributed. Moreover, the impact of further growth on the environment could be so damaging that the benefits that would accrue to humanity from that growth would be more than offset by the costs of environmental degradation. Perhaps humanity has reached its ‘bliss point’ — in the sense that further improvements in the welfare of the species as a whole are in practice impossible to achieve. If that is so, then the future is one of much sharper conflict between the rich and the poor — conflict that has been tolerably sharp already. And, if this is humanity’s bliss, I have to say it’s not all it was cracked up to be.

Businesses, individuals, political movements and whole economies have found that it is better to travel hopefully than it is to arrive. Travelling hopefully is what drives innovation in industry, creativity in the arts, political revolution: everything that is disruptive and interesting in life. The journey is the thing. Arriving is a bit anticlimactic. Boring, even.

Most buildings are unlike cathedrals, and they don’t usually have spires. They don’t have single, iconic, transcendent moments. And most lives don’t either: not even the iconic lives that we think of in that way. The late Sir Roger Bannister, the first person to run a mile in less than four minutes (leaving as part of his legacy that grainy, iconic television footage of a lean figure, knees and long feet kicking, head tilted backwards, straining every sinew to cross the line), did so as an amateur athlete. His profession was medicine. In a conversation late in his life, he was asked how he felt about the famous four-minute mile. He replied that in his professional life he had achieved hundreds of things each of which was far more important than that iconic event: he had saved or improved the lives of his patients on a daily basis. Those achievements don’t resonate with us in the same way as his mile, but they are certainly more important.

And the journey… let me tell you about my journey. An hour or so in a soulless lounge waiting to board the train. 40 minutes or so on a cold platform as the train was prepared. Five minutes before the doors opened, a member of the train crew walked the length of the platform to find me and inform me that my cabin was not usable, so I’d have to sit in the bar until we joined the train from Glasgow and they could put me in a functioning cabin. Once finally ensconced, duvet pulled up around me, I discovered to my delight that every time the train stopped (which was frequently), an alarm sounded in my cabin, and only in my cabin. No other cabins were available.

I mean, I made it to London on time, and of course these are tiny problems really, in the scheme of things. But suffice to say, not all journeys are imbued with the spirit of hopefulness. My spirit was: tetchy, distracted, and above all, tired. But I would probably book that train again, because I tend to think next time will be better. And maybe that’s enough. We don’t have to be motivated by grand, awe-inspiring goals like the spire of a cathedral: just by the thought that things could be better.

We love the sound of a train in the distance: it makes us think of what could be, what other people are doing and where they’re going; where, by extension, we could be going too. Somewhere more interesting. Somewhere better.

“What is the point of this story?
What information pertains?
The thought that life could be better
Is woven indelibly into our hearts
And our brains”

 

 

[1] You’ll  find more discussion of these revolutions in Episode 2 of our podcast ‘China, the elephant in the room’.