Economics and politics - comment and analysis
Japan’s system, capital allocation, respect, mimetic... Japan’s system, capital allocation, respect, mimetic eagerness and...
1. June 2017 I Will Denayer I Climate change, Ecology and Growth, Economic Theory, General

Japan’s system, capital allocation, respect, mimetic eagerness and sustainability. Part 2. Can mimetic eagerness be a beneficial social force?

Introduction

I explained in Part 1 that economic rewards are not the only effective incentives for economic action. A successful economy requires motivating effects, which are pay differentials and opportunities to accumulate wealth. But these financial rewards are not the end of the story and economic rewards operate in a social context that can be as effective as cash. Humiliation and powerlessness, on the other hand, always create resentment, anger and hatred and lead to dysfunction and violence. This is what the Japanese understood (as a part of their tradition): people are not pursuing money so much as the respect of people around them. Therefore, the Japanese economy is an economy of respect in addition to an economy of money. This is indeed an incredibly valuable insight: since a large part of what money-seeking individuals really want is just to spend that money on purchasing social respect through status display, it is far more efficient to allocate respect directly (see here).

This leads to questions whether if and how it is possible to allocate respect or to turn mimetic eagerness into a beneficial social force. Imagine, for example, that it would be possible for economic actors to gain social respect and status by preferring ecological products over non-ecological ones. If something like this could be engineered, at least some progress could be made. But this cannot happen on the basis of price effects (see also here). In neoclassical economics, price incentives induce people to change behaviour. Consumers are, for the most part, rational actors and will choose whatever is cheapest or most convenient. Social research says something completely different: there is the importance of social norms, peer pressure, emotions and a myriad of other factors that determine behaviour. Mimetic eagerness is one of these factors.

Stoknes provided a good example of this. A study dealing with the reduction of power consumption compared four groups of households. Each group was given a different reason for conserving energy.

Group 1: was told to save energy because it is better for the planet;

Group 2: was asked to save energy for the sake of future generations;

Group 3: here the incentive was that energy conservation saves money;

Group 4: this group was told to save energy because their neighbours do it already.

The group that realised the biggest reduction in power consumption was not Group 1. Nor was it Group 2. It seems hard to ‘make sacrifices’ for the unborn. Contrary to the neoclassical obsession with price incentives, it was also not Group 3. Indeed, those most committed to the goal of saving energy and with the biggest real savings where those who compared their efforts to the ones of their neighbours. This shows that social status and peer review are very strong motivators. The comparison with peers (close others) constitutes an emotional driver that turns out to be stronger than “mere” economic self-interest (see here).

Interestingly, this result counteracts or even nullifies the number one barrier of psychological distancing – climate change is too much of an abstraction, it is assumed to be too far away, either in time or space, ‘nothing’ can be done against it, etc. Stoknes proved that the correct emotional drivers bring the all-important problem of climate change closer to the individual, to one’s network and one’s community. It moves the focus from the distant future into the concrete here and now. It makes the urgency immediate in a real sense and puts it inside one’s locus of control, while activating potentially powerful social networks that can have a real impact (such as energy conservation rather than increasing energy efficiency or recycling). Since the perceived relevance of peer influence is both substantial and effective, it counters feelings of powerlessness and helplessness that engenders dissonance, defeatism, despair, indifference or denial, all of which are important barriers (see here).

Egeberk (2013) makes another but related point in a paper with the title ‘Can indifference make the world greener?’ His simple point is that there are a large number of nudges that can be implemented to improve the environment and fight climate change. As he writes, the amazing news is that the same factors that lead us to make mindless and polluting choices can often be reversed to help us make an equally mindless, but much better and responsible choice. Of course, no one contends that climate nudges alone are sufficient, but the much more modest suggestion is that an understanding of choice architecture can make a difference. Nudging offers a means to encourage less unsustainable behaviour, without inducing resistance and reactance that are often associated with restrictive enforcement policies (see here for more on nudges).

If the ‘object’ of mimetic eagerness can be literally everything that is connected to the economics of status, one of the most effective ways to stimulate changes in behaviour is to make people see that others are ‘doing it.’ If Egeberk is right, the same factors that lead us to make mindless and polluting choices can in some cases be reversed to help us make ‘a mindless better choice.’ If people are so interested in what other people do and compete against one another because of what others have, regardless of authentic need, then there is no reason why it should not be possible to (also) compete for socially beneficial goals. The theory of mimetic eagerness tells us that it is possible for businesses and customers to compete on the basis of non-financial incentives. The big question is then how social beneficial goals can induce respect and become symbols of status.

In politics too, image is everything. Political scientists have shown on numerous occasions that green parties have had a big electoral potential since that at least the 1980s. However, the Greens never realised this potential (see here). Today, in many countries, they are a marginal political force, at best. While the reasons for this failure are complex, the link with status is clear. The Greens made it easy for their opponents to portray (and stigmatise) them as naïve Luddites and what has more currency in our ‘culture’ than the latest technological gadget? The Greens were “tree huggers” in a no-nonsense society in which, officially speaking, efficiency is everything. It only got worse when they started to argue for “degrowth” and other illusions or delusions, such as local money. Not too slow, some of them ended up in neoliberal waters. Ecological entrepreneurs were – sometimes not (very) unrealistically – portrayed as pseudo-hippies who read The Economist in the evening and produce ecological potatoes for € 6.00 a kg during the day. The crux of the matter is that none of all of this ever had any status. So, it is possible to connect green products with societal status, apart from mere financial rewards?

Democracy on a blue planet

Some people have been breaking their heads over all of this. No clear conclusions have been reached. It is clear that as long as such a strategy is regarded as a question of “culture”, a “cultural shift” or “behaviourial change”, it will never work. The cause of conspicuous consumption and mimetic eagerness is inequality, the grandiose, utterly decadent, wasteful, unjustifiable ways in which some in our societies are getting economically rewarded. (This does not validate Krugman or Piketty. According to them, much of the increased income inequality is driven by the rise of the super-managers and their exorbitant wages and by the ‘fact’ that the rate of return of capital is greater than the growth of the economy, which leads to the return of ‘patrimonial capitalism’ (long term). The problem with this is that increasing compensation of top salaried executives in itself has had little effect on inequality  for the simple reason that there are way too few super-managers for their rising salaries to make such a significant difference. But this is not Veblen’s point (see the forthcoming article on Veblen)). This is not to say that there is no mimetic eagerness in societies that are very equal (but they all have mechanisms to tame mimetic eagerness or at least to canalize it), but the fact remains that, to speak with Veblen, if $100 bills would mean something real to the plutocrats, they would stop using it to light their cigars.

To make a long story short: for climate change mitigation to work, labour has to win over capital and restore the ‘balance’ (which is easily quantifiable – see here), because, unlike the 1910s and 1920s, these days the plutocrats are not playing with their own factories or the fate of the economy of their own country or the world economy, they are endangering the planet as a whole.

The question can be asked why we should even care about mimetic eagerness and its hypothetical potential benefits. The reason for going to such lengths lies in sheer despair. It is possible to devise and implement several policies that fight climate change. Macroeconomic change is one of such policies. The incredibly sad truth is that, in reality, this road is permanently closed. We live in the fantasy world of implementing the measures of the Paris Agreement, the emptiest agreement in history. It is an agreement for the nations to fight climate change, yet, scandalously, the words “carbon dioxide,” “fossil fuels,” “binding measures” or “sanctions” do not even occur (see here, here, here and here). In the meantime, the devastation of this planet continues unabated (see also the interview with Gregor Czisch here). According to NASA, April 2017 has been the second hottest month since measurements started, 137 years ago (see here). The world merrily continues to subsidise fossil fuels (at a rate of $10 million a minute, at the least). A whole army, many of which belong to the academic class, constantly confuses the issue, probably the greatest threat humanity ever faced, by inventing excuses and proposing impotent or even outright counterproductive strategies such as carbon markets (an article on it will be published soon). That is why Veblen’s distinction is wrong (though I am sure he would be the first to agree).

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Picture 1: Carbon budgets and different levels of warming (Source: NASA). 

The plutocrats continue to buy political power without any punishment whatsoever (see here, here and, if possible, even more outright scandalous, here). Behind the smokescreen of democracy, they make it impossible to implement rational, intelligent, decent and just policies. As the interview with Czisch makes clear, advances towards sustainability are constantly being nullified by contrary movements (see here). It is for the full 100 per cent a question of power. No one needs these people. The Japanese do not need Wall Street to allocate their capital. The nations of the world can allocate their capital themselves, on the basis of rational insight, without paying ransom to the robber barons. That would be democracy as well as rational and just economic development. Until then it is just all talk.