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Old 29.10.2010, 10:46
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Irrational exhuberance, happiness, wealth...?

Interesting article - food for thought (and debate, hehe) - courteously pointed out by those fine pens over at Alphaville (FT.com) ...:

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Does a flourishing economy depend on delusion?
Adam Smith thought so. In a famous passage in The Theory of Moral Sentiments he described a “poor man’s son, whom heaven in its anger has visited with ambition.” The young man imagines how much easier his life would be if he could live in a grand home, attended by servants and traveling by coach rather than on foot: “He thinks if he had attained all these, he would sit still contentedly, and be quiet, enjoying himself in the thought of the happiness and tranquillity of his situation.”
....
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...Nye, now at George Mason University, argues that countries become economically stagnant when their business people become too mature and rational....
http://www.bigquestionsonline.com/co...nal-exuberance
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Old 29.10.2010, 10:51
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Re: Irrational exhuberance, happiness, wealth...?

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Does a flourishing economy depend on delusion?
Delusion, or unsubstantiated optimism (possibly delusion, possibly rational expectation) creates a flourishing economy.
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Old 29.10.2010, 11:14
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Re: Irrational exhuberance, happiness, wealth...?

I'm sure lifestyle ambition is somewhat rational. After all the desire for it persists after the ambitions are attained too . . . How many Bentley-owning mansion dwellers give it all up and return to a simpler life?
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Old 29.10.2010, 11:32
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Re: Irrational exhuberance, happiness, wealth...?

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I'm sure lifestyle ambition is somewhat rational. After all the desire for it persists after the ambitions are attained too . . . How many Bentley-owning mansion dwellers give it all up and return to a simpler life?

Hmmm. Interesting.
I definitely know of a couple of UHNWIs who at a certain point needed to return to earth to some degree.
One of them does a few weeks per year in the poorer countries volunteering in engineering projects (planning schools, hospitals, water treatment plants, etc).
Another one is currently renovating a rural house (rustico) here in Ticino - sans amenities - with his own bare hands and plans to regularly disappear from the hustlebustle of board and shareholder meetings, cocktails, presentations and all the other *trappings* of wealth.

After the 2008 meltdown and layoffs in the US and UK, many discovered the joys of downshifting and of leading a more peaceful, creative, non-speculative life.

One must wonder what would happen to the consumer society and related economy if everyone where to live a frugal life.
Would this "zero growth" world be that unpleasant....?

Paul
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Old 29.10.2010, 11:49
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Re: Irrational exhuberance, happiness, wealth...?

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Would this "zero growth" world be that unpleasant....?
Many of us have experienced life zero growth economies over the last few years. It ain't that great. Actually everyone going frugal would more likely entail negative growth and that might be downright harmful.

I don't think the yearning for a simple life is irrational, I just don't think striving for material plenty is lacking rationality either.
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Old 29.10.2010, 12:32
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Re: Irrational exhuberance, happiness, wealth...?

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Many of us have experienced life zero growth economies over the last few years. It ain't that great. Actually everyone going frugal would more likely entail negative growth and that might be downright harmful.
Well it would be "negative" with respect to the previous growth levels. And of course the present macro dynamics, with the previously affluent West now having to deleverage, implies some degree of pain for the mid and lower classes, who in most instances acquired the "material plenty" via excessive indebtness......

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I don't think the yearning for a simple life is irrational, I just don't think striving for material plenty is lacking rationality either.
Yes - but what about material *sufficiency*, instead of plenty?
What is wrong, for example, in owning the same cellphone for 10 years as opposed to 10 months, and creating cellphone repair jobs instead of manufacturing bubbles (plus job dislocations)?

I would be more than happy to make do with 1mm Sfr... Yet where I previously worked we had a client so risk averse that he could not stand to lose 100k...out of 50mm Sfr bankable net worth.

How did he get to 50mm? Hard work, perseverance, absolute austerity (which he would quite logically force on his business counterparts).
But joy? Happiness...?
I never saw him smile....

P.
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Old 29.10.2010, 12:38
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Re: Irrational exhuberance, happiness, wealth...?

You may call it delusion, I call it creating desire. Obviously we don't need most of the stuff we crave and buy, but the economy would be a simple one otherwise. I am with you on too rapid turnover. I am not this way; I buy something good, what I like and stick with it for a long time. I think everyone used to be this way, but with the excessive wealth of the past 25 years, this attitude is long gone. Of course it is not sustainable, and we are seeing that now.
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Old 29.10.2010, 12:59
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Re: Irrational exhuberance, happiness, wealth...?

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What is wrong, for example, in owning the same cellphone for 10 years as opposed to 10 months, and creating cellphone repair jobs instead of manufacturing bubbles (plus job dislocations)?
I expect my phone to do far more than was possible ten years ago. I don't simply want voice calling to be reliable and maintainable . . . I want music and video playing, video calling, GPS mapping, Internet browsing, email etc . . . and whatever's around the corner.
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Old 29.10.2010, 13:39
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Re: Irrational exhuberance, happiness, wealth...?

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Hmmm. Interesting.
I definitely know of a couple of UHNWIs who at a certain point needed to return to earth to some degree.
One of them does a few weeks per year in the poorer countries volunteering in engineering projects (planning schools, hospitals, water treatment plants, etc).
Another one is currently renovating a rural house (rustico) here in Ticino - sans amenities - with his own bare hands and plans to regularly disappear from the hustlebustle of board and shareholder meetings, cocktails, presentations and all the other *trappings* of wealth.

After the 2008 meltdown and layoffs in the US and UK, many discovered the joys of downshifting and of leading a more peaceful, creative, non-speculative life.

One must wonder what would happen to the consumer society and related economy if everyone where to live a frugal life.
Would this "zero growth" world be that unpleasant....?

Paul
Perhaps it's worth pointing out that jetting off to the four corners for hands-on philanthropy, buying a second home and renovating it yourself, is not "going frugal".

Going frugal is when you stay home and don't buy stuff. Not quite as exciting or as immediately fulfilling, which probably explains why rich people looking for a hit of the warm fuzzies don't do it. (And a good thing too, say I.)
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Old 30.10.2010, 01:16
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Re: Irrational exhuberance, happiness, wealth...?

I would call it creative impulse. It isn't necessarily rational, and can be highly unpredictable. It can express itself as consumerism, but that is just one of many mediums it uses. Of course it can express itself with paint or music, or even with a hammer and saw. Humans can't really live in a permanent state of malaise. We eventually break out in a catharsis, often unexpectedly even at the lowest points. This happens on an individual basis, but also occurs on a societal level. When it breaks out on a societal level, it electrifies economy and heralds new paradigms. I can hardly wait for the next one.

Last edited by Phos; 30.10.2010 at 16:07.
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Old 30.10.2010, 02:52
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Re: Irrational exhuberance, happiness, wealth...?

You think we aint entering a new paradigm now? problem with the future is its never as good as it looked in the past.

Time is an illusion caused by the passage of history. Lunchtime doubly so

You think we aint entering a new paradigm now? problem with the future is its never as good as it looked in the past.

Time is an illusion caused by the passage of history. Lunchtime doubly so

Last edited by vwild1; 30.10.2010 at 07:27. Reason: merged 2 successive posts into 1
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Old 30.10.2010, 16:07
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Re: Irrational exhuberance, happiness, wealth...?

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You think we aint entering a new paradigm now? problem with the future is its never as good as it looked in the past.

Time is an illusion caused by the passage of history. Lunchtime doubly so

We certainly are entering new paradigms. The last paradigm was predicated on a concept of unlimited resources and time. The next will have to significatly factor the limitations of available resources, and create values that are multi-purpose and multi-layered. Many people are already operating in that mode. Lately, the concept of movable architecture has caught my attention. It's the idea of being able to transport a building to a new environment, and alter the shape of the building for that environment.

I believe there is a viable economic model based on Quality (intelligence) of goods and service VS. Quantity of goods and services.
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Old 30.10.2010, 17:16
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Re: Irrational exhuberance, happiness, wealth...?

Quantity has a quality all of itd own.

The best things come in small packages.

Ancient russian proverbs.

Im not sure there is a viable ecomomic model that allows the world to aspire to the consumption levels currently expected. Work less, consume less, more local, family owned cottage industries producing locally consumed goods and services, thats my preference. Of course, this would negate monopolies and oligopolies and supernormal profits, and reduce the wealth of the extremely rich, so it wont happen, but we can dream
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Old 30.10.2010, 17:23
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Re: Irrational exhuberance, happiness, wealth...?

Quantity has a quality all of itd own.

The best things come in small packages.

Ancient russian proverbs.

Im not sure there is a viable ecomomic model that allows the world to aspire to the consumption levels currently expected. Work less, consume less, more local, family owned cottage industries producing locally consumed goods and services, thats my preference. Of course, this would negate monopolies and oligopolies and supernormal profits, and reduce the wealth of the extremely rich, so it wont happen, but we can dream
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