Fred Hirsch’s Social Limits to Growth

After my last post, reader Joe pointed out the parallels to Fred Hirsch’s classic book the Social Limits to Growth. I hadn’t read Hirsch’s book, but the similarity isn’t entirely a coincidence, since my argument relies heavily on the concept of positional goods that Hirsch invented.

I just finished reading the book, and it seems to me that he takes the the same basic idea — some goods have inherently limited supply — and takes things in a needlessly gloomy direction. Americans might have a chicken in every pot and a car in every garage, Hirsch argues, but it’s never going to be possible for everyone to have a vacation home in the Hamptons or send their kids to Harvard. For Hirsch, the growing importance of these kinds of positional goods will mean more frustration and social conflict.

But Hirsch never really makes a convincing case that we should view this as a problem we need to solve rather than just a fact of life that people should learn to live with.

One way I think Hirsch goes astray here is by adopting a definition of positional goods that’s far too broad. One of his key examples of how the struggle for positional goods is making us miserable is the growth in college education. He points out that as college educations have become more common, jobs that once required only a high school diploma now require a college degree. If he’d been writing today he might have pointed out that some jobs that once required a bachelor’s degree now require a master’s degree.

It’s not crazy to believe that the inflation of educational requirements is a problem, but it’s not clear what the positional good in this story is supposed to be. There’s a limited supply of seats at particular schools — like Harvard or Yale — but there’s no necessary limit on the number of college degrees awarded in general. And while having a degree from Harvard gives applicants a leg up in the job market, this effect becomes much weaker once you move a few rungs down the college ranking charts. Is the University of Northern Iowa more or less prestigious than the University of Minnesota — Duluth? Most employers don’t know or care, they just want to know you earned a college degree somewhere.

Hirsch also seems to imply that good jobs are a scarce positional good, and that people have to go to more and more educational effort to secure one of those scarce good jobs. But here again, good jobs are positional only at the very high end of the job market. By definition, there can only be 500 CEOs of Fortune 500 companies, for example. And there are a few professions like medicine where high barriers to entry make the jobs effectively positional.

But this isn’t really true of the economy as a whole. The number of companies isn’t fixed, nor is the number of positions in any given company. In many skilled professions, employers are constantly looking for more skilled practitioners they can hire.

That’s just one example of my broader point, which is that Hirsch sees positional goods everywhere and claims that as we get richer, human lives will become increasingly consumed by our struggle to gain positional goods. But I think that’s unduly pessimistic, because it’s almost always possible to opt out of positional competitions and still live a happy life. If you can’t afford to live in Manhattan, you can live a perfectly fulfilling life in Minneapolis or Omaha. If you can’t afford to send your kid to Harvard, she’ll do just fine at Penn State or the University of Northern Iowa. Nobody’s happiness depends on owning a Rembrandt.

People sometimes make themselves miserable by entering positional competitions they can’t afford to win. But the right lesson to draw here isn’t that positional goods are causing an inevitable social crisis — it’s that people should learn to keep positional goods in perspective. You can live a perfectly happy life without them.

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