Adam Ozimet quotes Felix Salmon when discussing why people pay for entry into a museum even if it’s free.
But here’s the thing about freeloaders: if they value what they’re getting, a lot of them will end up paying anyway. What happened when the Indianapolis Museum of Art moved to a free-admission policy? Its paid membership increased by 3%. When the Minneapolis Institute of Arts did the same thing, paid membership increased by 33%.
Now there are a variety of reasons for this: parents pay something and take their children, rather than not going to the museum at all. But Status plays in here too.
But then Adam goes on to talk about the consumer decision as ‘fairness’, which is a word I object to because it’s both politically correct, and is a code word for involuntary transfers.
My response follows:
This is a wonderful, simple example with which to illustrate grand ideas.
In your example, you’re attributing museum ticket purchase behavior to a supposed ‘fairness’ (which is behaviorally a guilt response), instead of attributing it to ‘status seeking’, (which is behaviorally a status demonstration response.)
At the very least, BOTH emotions (which are themselves a sensitivity to voluntary and involuntary transfers of property) are equally at play. But what does that mean? It means that people who are stronger, higher status, higher dominance, and have more objective value systems seek status, and people who are weaker, lower status, more submissive and have empathic systems operate under quilt. But we are describing the same spectrum from two ends – guilt is a means by which the weaker pursue status through empathy and submission.
The people in your example, who purchase tickets that can be had for free, are purchasing ‘status’, not fairness – fairness is a vehicle for status. If they use a public resource for free, it means that they are lower status. If they pay for it voluntarily, then the ONLY thing that they can buy with it is STATUS. (Status is as much a function of self image as are the perceptions of status by others.)
In our society, ticket prices at a museum have the same effect as offerings at a temple have had in most of history. People are more charitable where they agree upon means and ends. and less charitable where they disagree upon means and ends. Established norms are ‘charities’. And status is obtained by any individual who contributes to the charity. Status is lost by individuals who do not contribute. The way we get people to pay for things is to attach status to it – to make someone feel better about him or herself by contributing.
**Social status is the human currency. It has to be. If we didn’t pursue status humans couldn’t ‘calculate’ (in the heuristic sense) how to behave any more than they could calculate plans without using prices (in the quantitative sense). If economic calculation is impossible without prices and incentives, then human planning is impossible without status signals and incentives.**
The point here is to help quants understand why people are not acting irrationally. It’s not that they’re innumerate. It’s because STATUS is obtained only in part by money. And monetary decisions, both personal and political are made in pursuit of status. Therefore economically ‘efficient’ actions lead analysts to the wrong conclusions because people make trade-offs. Human society cannot operate without status signals (local feedback) than it can without prices (local information.)
And to relate this concept to current events, they attribute higher loss aversion to status than to money. The USA is in the closing phase of a status war driven by the twin demographic tides of immigration and changing dominance of generations, that is being playing out in politics using the economy as a lever. An opportunity that has come about because we have finally won the 500 year war to propagate our religion-cum-technology of consumer capitalism across the world, and in doing so, lost our advantage.
Economics is second to status. To illustrate this point: if the left was willing to destroy aristocratic society in order to obtain social status, why would the right not be willing to destroy socialistic society in order to retain their status? (Another example: Schumpeterian intellectuals undermine a society in pursuit of status.) Status is the human currency. Money only in part can purchase it.
The combination of communism/socialism, anti-slavery and anti-male-feminism was successful in disempowering the western aristocratic classical liberal tradition and it’s status symbols. This strategy was effective because of the Christian Guilt of the majority. But as these people become a minority, they are acting like one. And they no longer feel guilt. So the lever of the three dominant movements against the aristocratic classical liberal status symbols is weakening.
The question for a political economist,once he understands that STATUS is the human currency, is what institutional framework is possible without the prevalence of the christian classical liberal ‘habits’: the ethical system of soft institutions such as status, myths, morals, ethics, manners, fraternalism, individualism, and the hard institutions of Rule of Law (universal general rules applicable to all), and Republican Democracy.
The SOFT infrastructure of Society is paid for by the forgone opportunity costs we pay by NOT privatizing opportunities we have for personal gain. And these soft costs are codified in cultural habits, and the reason people PAY these soft costs is to gain status, and the opportunity that status affords them. Sure, we pay for the HARD infrastructure with taxes. But if we had to estimate the costs of developing the western fraternal christian republican commercial ethical system, what would they be? They are far more expensive than the taxes we pay – and they are far more difficult to manufacture than law. Demonstrably, they are nearly impossible to manufacture because privatization of opportunities is more natural to man than forgoing them for an abstract good. Creating a system of status that perpetuates the willingness to forgo opportunities is the highest social cost a civilization has.
And unless you understand that principle, you will fail to see why the broader political trend is occurring and why THEY MAY BE RIGHT. We could not create a socialistic society because eliminating the ability to calculate prices eliminated all ‘good’ incentives. If you eliminate status, what incentives do you by consequence, eliminate? You eliminate the very system that makes freedom of property and politics possible, as well as the system that rewards people for forgoing the opportunity to privatize
Small things in large numbers have vast consequences. Many of those small things we take for granted. People in my camp criticize Keynesians for believing that there is a steady state that we manipulate to improve, while being unafraid of failure, when the steady state is actually one of Somalian barbarism, that we protect ourselves from falling into using habits and incentives that are often beyond our understanding.