Experiential Economics
Experiential Economics
What are the laws of economics really about? We know they concern supply and demand, but supply and demand of what? The orthodox answer is “goods and services”—material things in effect. A consumer consumes material things (services also involve material things, including actions). When the demand for certain material things is high prices tend to go up under constancy of supply of those things. But this can’t be right as a formulation of the underlying laws. It is neither necessary nor sufficient to explain economic behavior. Not necessary because there could be a virtual economy: producers and consumers living under brain-in-a-vat conditions. You do mental work to earn an income that you use to purchase things—but not material things, mental things. Instead of buying a material disc to listen to music you buy musical experience itself fed directly into your brain. In this economy you don’t buy material goods but mental goods—for example, tastes not foods. You may know this or not, but it is what is really going on. Not sufficient either because material goods by themselves are not enough to produce anything you value. No one wants material goods as such but only what they can do for one, and this is ultimately experiential. Suppose everyone went deaf: the demand for musical technology would plummet. Musical instruments would become worthless, as would stereos and the like. The art market would collapse if blindness became widespread, as would the movie and television business. Restaurants would go under if everybody lost their sense of taste. These things have value only in so far as there are experiences corresponding to them, because they are the ultimate things of value. Everything else is instrumental. Thus, supply and demand are experiential not physical: we demand (desire) experiences (states of mind), and producers supply them—sometimes in the form of material goods, but not necessarily. Productivity is productivity of experience—this is what we buy and sell. Saying that economics is about physical goods and services is like saying it is about atoms: the physical things are mere means not ends. Sure, atoms get delivered to me when I buy a TV set, but that was not the point of the transaction. Goods are like drugs: the point is the mental effect not the material composition. The orthodox approach to economics is therefore misguided; it confuses ends and means, the contingent with the necessary. Goods and services are correlated with certain experiential states, but they are not the same as such states—and they are what really matter in the economic world. You are rich if you can buy a lot of good experiences. Wealth is a mental thing.
This has a direct bearing on the nature of economic science. First, it will bring all the vagaries of consciousness into economics. Second, it will require attention to the inner life of economic agents. Third, it will connect economics directly to ethics, since ethics is also about the value attaching to experience. But fourth, and most important, it changes economics from an objective science into a subjective science: it isn’t about actions in a public material world but about events in a private mental world. It is up to its neck in phenomenology. It isn’t like physics. Is it even a science? That depends on your definition of science: no if science must be concerned with objective things, but yes if we can have a science of the experiential. People are motivated to engage in economic transactions by a desire to experience certain things (including the desire to keep on experiencing things—hence healthcare), so we need a science of such desires, which includes a science of experience. Behavioristic science won’t do; it has to be the real subjective thing. Economics is thoroughly mentalistic. Producers must figure out what experiences people want and then stimulate desire for such experiences. Internal goods not external goods. Economists describe and explain these kinds of preferences. A bank is a place where experiences (or the potential for them) are stored. Inflation is when the price of experiences keeps rising. International trade is the exchange of experiences between countries. And so on. Economics is the study of experiential transactions.[1]
[1] What you spend your hard-earned money on is determined by your expectations of the experiential return. If we are hedonists, we will equate this with pleasure; but we could also value knowledge or experiences of beauty (not consisting in pleasure). These questions will impinge on economics.
Economics is indeed a special science, to borrow a name from your RIP acquaintance Jerry Fodor’s widely influential 1974 paper. This paper effectively dismantles the “Unity of Science” movement of Hempel and company.
Indeed.
I think that your proposition is near of the concept of utility in micro economics.
Unfortunatly, micro économists never draw the consequenses of this (as you do)
Yes, the concept of utility is tacitly experiential, but it is more closely tied to pleasure than my concept.
Two observations:
1. I’m not sure that it is as clear as you make out that it is about mental *experience* rather than the (no less mental, but surely distinguishable) phenomenon of desire-satisfaction. It’s surely not true that the (visual) art market would necessarily collapse if blindness became widespread; people might continue to wish to be the owner of unique artistic works that were admired by the few capable of seeing them, and/or that had been widely admired in the past. The example of the art market, indeed, seems to be particularly suggestive of the view that it isn’t experience, or certainly not visual experience, but something else, that is most importantly or fundamentally of value. Many people, after all, want, and would pay, to possess works of art that they do not themselves enjoy looking at, simply because they are regarded by others as pinnacles of artistic merit. A person could easily hate Picasso’s works (for example), but nonetheless be willing to pay a lot to possess one. This might be for investment purposes, but it might easily not be: it might simply be that my desire is to be the owner of such-and-such unique, or rare, object.
2. Even if it’s correct, as I think I agree, that the things of fundamental value are mental rather than physical, I don’t see that this represents a significant departure from ordinary economists’ thinking. Yes, of course, economists tend to speak of good and services as the key things whose price is affected by supply and demand; but it is true that they are! It takes a philosopher as opposed to an economist to ask the question what is *fundamentally* of value. I suspect, in any case, that many economists would subscribe to the view that the fundamental truth in economics is simply that *people respond to incentives* – which leaves it open what, exactly, incentivises them, and why. It will no doubt often be the experience that they get from some material thing; but it might equally be that, without the prospect of any relevant experience, something piques their desire.
(I am assuming that I don’t have to argue against the kind of opponent who would claim that the only reason we value the satisfaction of our desires is the experiential pleasure we get from having them satisfied. I think certain kinds of plainly altruistic choices make such a position deeply implausible.)
I see only a verbal disagreement here: I am using “experience” to include the satisfaction of desire. I was assuming that everyone goes blind, so that there is no one who enjoys looking at pictures. My general point is to locate what is fundamentally of value; of course, many things can be instrumentally valuable. There is no general term for “mental” goods, so we resort to talk of “experience”.
Thank you. Very well – that clarification resolves point (1), and is helpful. But that leaves point (2) untouched, I think – so that the question whether your insights – valuable and interesting as they are (otherwise I would not be joining in) – really suggest that Economics has got it wrong in any important sense, or that any re-direction of economic thinking is required as a result. I cannot see it yet. As I suggested, I doubt whether economists care (or wonder) what the *fundamental* thing of value is; they are primarily concerned with the imprecise science of working out how incentives affect real people’s behaviour. Yes, that means that their subject is ‘about’ mental things, in a way, And, yes, people’s preferences and desires are affected by their ethical opinions, so that, in a way, Economics is also ‘about’ morality. But I’m not clear why such observations would be controversial, or would affect the subject as actually practised.
Actually I think economics is about goods and services as it actually exists (not about what it would be about for brains in vats). My point is purely philosophical, though it could affect how economic laws are formulated.