Thursday, December 3, 2009

Capitalist and Communist Fictions

When I was a scruffy grad student at Harvard earlier this decade, Marc Zuckerberg was a gawky undergrad at the same school. As I put the finishing touches on my recondite treatise on the German workforce, young Zuckerberg (whom I never encountered) was creating Facebook, which just booked its 350 millionth user. What an accomplishment, to have thought up such a transformative social medium! The user-milestone has gotten me thinking about just what Zuckerberg wrought. Has he really created value? Before suggesting that any positive answer, at least the standard, obvious one, likely involves what we might call a “capitalist fiction,” let me set the stage by recalling what Gunnar Myrdal termed the “communist fiction.”
This had nothing to do with Marx, Lenin or Stalin, but rather with how we thought about, compared, and aggregated measures of individual well-being. After having “solved” the problem of value by means of subjective utility, neo-classical economics wrestled with the problem of interpersonal comparisons: if subjective taste or utility truly is the measure of value, how could one ever construct an aggregated, collective measure of an entire society’s well-being? How should one compare and add together, say, my enjoyment of a chocolate ice cream cone to your preference for a peach? Weren’t these really fundamentally subjective, and hence incommensurable, valuations? Thoughtful, philosophically-curious and informed economists around1900, above all those in the Austrian School around Carl Menger, wrestled with this problem. Later economists, less given to doubt and less broadly educated, “solved” the problem by means of measuring well-being in terms of the dollars (yen, pounds, etc) we are willing to pay for something. These units of currency are standardized and hence commensurable. One can build on them measures of national well-being such as GDP. This is what Myrdal termed – and criticized as – the “communist fiction.” In fact, he suggested, we can’t really measure collective well-being.
In addition to this communist fiction, it seems to me that we also face what might be called a “capitalist fiction.” This relates not to the problem of comparison and aggregation, but to that of personal, inter-temporal choice. How much value has Facebook created? The simple answer is to measure Zuckerberg’s and his share-holders’ wealth, and say his creation has generated this much additional value. (The number must run into the billions.) But for the individual users of FB, how much has it added to her well-being? Again, we could refer to the communist fiction and respond that we simply can’t come up with an aggregate number. But even for the individual user him or herself, can we really say? Like so many of these social media, FB is or can be addictive. How does one assess the value of an addiction? Addictions typically involve discrepancies in individual inter-temporal preferences. In simpler terms, that means that one and the same individual may well enjoy using Facebook, when he is actually logged on, but afterward he may regret all the time he spent on trivia, time which could have been better used on some other activity. His own preferences vary depending on when you ask him about them. So, how should we even begin to assess FB’s contribution to the individual user’s well-being? How – when (from which temporal vantage point) – should one begin to estimate the “value” of heroine to an addict?
If you add this “capitalistic fiction” to the “communist fiction,” there may well be less to celebrate in Zuckerberg’s announcement of his 350 millionth user. Of course, I doubt this is disturbing the party he’s throwing for himself. At least at that one time, that one (very, very wealthy) pioneer will most likely not be suffering much from either fiction.

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