Sunday, April 17, 2011

Culture as an Externality

I mentioned to Prateek in the comment section of this post that I might write some about culture as an externality. I honestly haven't had the time to put much thought into it. But here's the basic idea: culture is a context that you find yourself in and, if you are cultured, that you participate in and engage with. But culture isn't like a loaf of bread or any normal good; the extent to which you benefit from culture depends substantially on the culture that others purchase and experience. The buyers of fine architectural specimens benefit from their purchase themselves, of course, but they also provide a positive externality for everyone else by contributing to the culture of the community. Private pieces of culture - rare or important books, private art, my wine rack, etc. - are somewhat harder to talk about in these terms because they are often kept private, but they (1.) produce more cultured people who go into the world and interact with others in an cultured way, an (2.) create a market for works of culture that would be weaker otherwise.

This relates to the earlier point about Russ Roberts' post insofar as markets themselves are positive externalities. My exchanges support the existence and persistence of producers. All markets, in this sense, are a collective action problem: they require a critical mass of demand to even emerge. This is why I hesitate to be too celebratory about places like Amazon or Wal-Mart. That they can provide goods at a low price is obviously something that I acknowledge and celebrate them for. But there is a real collective action problem associated with culture-producers and preservers like small book-sellers and farmers' markets. I have my own demand for niche books and farmers' market food, and the market will satisfy that demand the way the market always does. But when we think about culture, we realize that our demand doesn't stop there - what we derive utility from doesn't stop at the level of our own individual consumption. I derive utility from the presence of a bustling farmers' market. I derive utility from the existence of a variety of small and used bookstores and I derive utility from hearing about the positive experiences that friends have there. Now, I could pay friends to go to these venues, of course. That would be the market solution. But the very act of payment for that source of utility would destroy it as a source of utility. The point is, we derive utility (and disutility) from interactions that we have no control over, particularly the cultural milieu that we find ourselves in. That is the very definition of an externality, and because it's an externality we can't expect the market to provide for it on its own - other institutions may be more helpful.

26 comments:

  1. "But there is a real collective action problem associated with culture-producers and preservers like small book-sellers and farmers' markets."

    Which is what? Are you suggesting that I fork over money involuntarily to support your tastes (and that is all they really are, your tastes - there is nothing inherently awesome or great about them)?

    Really, the world will be a better place without small bookstores IMO - that is the promise of Kindle, etc., and that is what I fully embrace, not wasting my time browsing bookshelves filled largely with pulp novels that I have no desire to read. That's my experiment in living; I shouldn't be forced to subsidize your experiment in living if that is what you are on about.

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  2. Hasn't the internet done much to nurture and cultivate niche groups and their interests?

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  3. Unrelated to this post...

    Just wanted to say I enjoy your posts on various econ blogs. Well, enjoy is not the right word. Appreciate is a better word. While I often disagree w/ your takes (and that reduces my joy), I like that your participation encourages others to sharpen their arguments and double check their presumptions of intellectual honesty. This is a service to them, as we all fall too easily into the trap of groupthink, especially when accompanied by data that's been tortured (or at least waterboarded) until it's told us what we want to hear, giving us the illusion of scientific objectivity when it's really just group-reinforced confirmation bias.

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  4. Gary - I don't know where you're getting that or where you're going with it.

    Prateek - Absolutely!

    Anyonymous - Thanks!

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  5. The point is, we derive utility (and disutility) from interactions that we have no control over, particularly the cultural milieu that we find ourselves in. That is the very definition of an externality,

    Great, I totally agree. I derive utility from looking at my neighbors flowers and talking with happy, energetic people. I have no market control over these things.

    because it's an externality we can't expect the market to provide for it on its own - other institutions may be more helpful.

    This isn't wrong per se. Maybe a religious institution would be more efficient at promoting pious, happy people (which is a positive externality) than the market would - but (for all your complaints that everyone misinterprets Bastiat) there are many negative externalities that you are not noticing. You are forgetting the Unseen.

    For instance, it is true that certain markets might not have "optimal investment," and as public goods, you can make a case for the state to stimulate their production. No problem. I just want to argue that, while "solving" the road and lighthouse problem, has created monstrous other negative externalities.

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  6. The state has created monstrous other negative externalities.***

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  7. Daniel,

    I merely asked a rather pointed question.

    Prateek Sanjay,

    To a lot of people (on the left and right) of course that is the problem - we're no longer a single culture all watching "The Honeymooners" in other words, and that is supposed to be a bad thing.

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  8. Right - I guess I'm just curious how forcing you to pay for culture you don't appreciate addresses the issue at all - I'm not sure where your pointed question is coming from.

    As for your question to Prateek... I'm confused why the right and the left would have a problem with niche interests being fostered on the internet - could you explain that chain of thought? Again, I'm just very confused about the lines that you seem to be drawing here.

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  9. Daniel,

    I think my comment was erased.

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  10. Mattheus - right - I hope I've never denied the negative externality possibilities.

    I don't believe I've ever denied that, but perhaps I have.

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  11. Daniel,

    "As for your question to Prateek... I'm confused why the right and the left would have a problem with niche interests being fostered on the internet - could you explain that chain of thought?"

    Because it is viewed as a sort of balkanization of society - we all need a grand narrative to believe in, or a shared community purpose, blah, blah, blah. The most commonly discussed book on this subject in the 1990s was "Bowling Alone" - there Putnam argues that our individualization of our what we do in our time away from work has led to a dramatic drop in what he calls "social capital." Similarly, right after 9/11, there was a lot of discussion about the need for shared sacrifice, and when that didn't happen (we kept shopping basically) there was a lot of hand wringing about how we just aren't like our countrymen were in WWII. A classic contrast between the Humean commercial virtues vs. the martial virtues of empire.

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  12. "...I'm not sure where your pointed question is coming from."

    Just establishing the ground rules.

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  13. Well I understand the point, I just don't know why you made it - when does the right or the left talk about "a grand narrative to believe in, or a shared community purpose" in such a sense that different niche groups are perceived as a threat. I mean, sure you'll hear calls to certain values... but one of those values is pluralism.

    You know, for all you tell me I don't understand libertarianism you sure are spinning some odd tales about non-libertarians.

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  14. And who doesn't make a call to certain values. Libertarians do too. That seems like a fairly natural and healthy thing to me. It hardly seems hostile to the sort of thing Prateek is talking about. You seem to want to infuse animosity and conflict where there really isn't any.

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  15. "...I just don't know why you made it..."

    Because Prateek's comment prompted that thought.

    "And who doesn't make a call to certain values. Libertarians do too."

    Not really; tolerance perhaps. Our very, very minimal and perhaps non-existant set of values is what troubles a lot of people in fact.

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  16. "...when does the right or the left talk about "a grand narrative to believe in, or a shared community purpose" in such a sense that different niche groups are perceived as a threat."

    All the time. One has to swim in it daily in fact.

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  17. "I mean, sure you'll hear calls to certain values... but one of those values is pluralism."

    With so many exceptions that it is no longer pluralism. Just as everyone believes in "free speech" until the subject is actually discussed; then vast swaths of the population are for so many restrictions that it doesn't even have the facade of free speech.

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  18. I don't know what to tell you, Gary. Libertarians aren't the only ones promoting tolerance, people do value pluralism. Certainly all sorts of people talk about how people should value freedom, "come together in tought times", etc. etc. but none of this - none of it at all - is a tendancy that is hostile to nurturing interests, creativity, difference, etc. It promotes those things. There's no need to pick a fight over this. Americans are absolutely nuts about the internet because it does precisely what you're claiming nobody likes. You tell me I don't understand libertarianism, but the way you contrast libertarianism with everyone else, you seem to think all libertarianism amounts to is being a self-righteous insular curmudgeon that's more interested in complaining about people who are different. I don't think that's what libertarianism is and I don't think you have teh slightest clue what non-libertarians think of the internet or of pluralism.

    Many different perspectives embrace tolerance and pluralism because all the ideological perspectives that are predominant in the United States today are within a broader liberal tradition. Pluralism comes with that tradition. All sorts of ideological perspectives love the internet in the United States because it encourages cosmopolitanism and allows people to express themselves.

    If you like that about the internet too, then you don't need to be such a downer about it - you're not alone, and admitting that other people share your view on this doesn't detract from the fact that you also hold that view. If you agree with people on something it doesn't make your support for it less real. Your support for things like tolerance or the internet or cosmopolitanism aren't enhanced by falsely accusing others of not embracing these things.

    ****

    Any other thoughts on culture as an externality and the implications that has for cultural dynamics and evolution? One thing I think it implies is that human culture is in a lot of ways a multiple equilibrium phenomenon - and I think that has important implications for "Golden Ages" and precipitous cultural decline... I'm going to try to write some on that tomorrow.

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  19. "I don't think that's what libertarianism is and I don't think you have teh [sic] slightest clue what non-libertarians think of the internet or of pluralism."

    I know what I've experienced and what the (obviously always limited in significant ways) polling tells me. Pluralism (and the desire to promote the internet) are as honored in the breach as they are anything else. A truly pluralistic society wouldn't outlaw internet gambling for example; yet its outlaw had broad bi-partisan support back in 2006. It is again like "free speech"; everyone is for it until they find an exception, then another exception, then another exception, then another, etc.; fairly soon the exceptions swallow the rule.

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  20. I hope I've never denied the negative externality possibilities.

    No, but you've denied that the state has negative externalities GREATER than whatever benefit they may confer on third parties (such as taxation, conscription, inflation, redistribution, regulation of private property, and other undesirables that follow as negative externalities of the growing state).

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  21. Gary

    The internet, in fact, does seem to have irritated *some* political partisans, because they are shocked - SHOCKED - that there is another point of view.

    I agree.

    Now, one of David Friedman's progressive friends runs a blog solely for commenting on libertarianism. Friedman's friend dedicates a certain amount of time every week refuting the ideas of a group comprising much less than 0.1% of the voting population in the entire democratic Western world. Why? Because this kind of dissent is unacceptable or socially unhealthy. Or something. I don't know.

    Any idea to which you pay attention is an idea that you have taken seriously. Jeffrey Tucker had a humourous post on "demonstrated preference" recently - there is great demand on the internet for certain things that everybody hates. Everybody hates Rebecca Black, but everybody keeps listening to her and can't stop making memes about her.

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  22. Gary -
    re: "A truly pluralistic society wouldn't outlaw internet gambling for example; yet its outlaw had broad bi-partisan support back in 2006."

    By this do you mean broad (but apparently fleeting) support among five-hundred odd politicians who spend all their time wrining their hands about our business? Don't make your perennial mistake of assuming that you can generalize what politicians think to say anything at all about what people in general think.

    Mattheus -
    Well that seems to be a case by case basis. You wouldn't say that under every circumstance the negative externalities of the state exceed the good the state does, would you? I typically don't make a big deal over situations where this would be the case.

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  23. How would you go about weighing the utility you derive from shopping in a bustling farmers market against the utility someone else derides from shopping in an uncrowded farmers market?

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  24. Prateek,

    +1

    Daniel,

    I don't have to (2/3rds of the American public oppose online gambling - keeping in mind the limitations of polling, etc.):

    http://www.parttimepoker.com/two-out-of-three-americans-oppose-online-gambling-poll-says

    Indeed, America is so "pluralistic" that the U.S. government (with much public approval) just spent ~$110 million (the range is $55 million to $110 million) to get Barry Bonds convicted of "obstruction of justice" - that's right, 1/10th of a billion to go after a baseball player who is accused of using steroids. Does anyone think that this will decrease steroid use? And why exactly is the government (much to the approval of the citizenry) involved in the use of steroids by adults in the first place?

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  25. You wouldn't say that under every circumstance the negative externalities of the state exceed the good the state does, would you? I typically don't make a big deal over situations where this would be the case.

    I would, Daniel. Because I'm looking at more than just crowding out effects or otherwise obvious effects of state intervention. The negative externalities of state interference are colossal, and they manifest in every example of state intervention because every example reinforces the dominant nature of the state in our lives.

    So, while state subsidies to highway funding might have a marginal negative externality effect per se, the state finances these subsidies through theft and inflation (fraud). Stealing from every American adult is a giant negative externality that you don't see simply by looking at highway funding.

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  26. I'm not refighting the tax as theft point.


    I think it's a red herring for people to bring up the state every single time externalities are discussed. It's not clear to me that the state is a solution or that there even is a "solution" to the externality I'm discussing here.

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