Who receives high status in society? Cultures can vary. We may assign high status to the brave warrior, to the gifted athlete, to the talented artist, to the holy priest, to the martyr, to the politician, to the craftsman, or to the intellectual. Because relative status is a zero-sum game, the more status points we assign to merchants, bankers, and entrepreneurs, the less status points are available for other categories.
There is much more. This essay was stimulated by one of the questions Erik Torenberg sent me to prepare for our podcast.
Do capitalist societies really assign so much status to bankers and merchants though? I don’t think so. Academics, journalists, celebrities, and politicians seem to be doing alright in the status department. In fact, artists arguably enjoy more status than in precapitalist societies. Capitalism, by enabling people to consume more luxury goods, likely shifts status toward producers of such goods – artists, intellectuals, actors, singers, bloggers, etc.
To the extent that certain economic classes like merchants and bankers enjoy more status, I think it’s largely at the expense of other economic classes, like craftsmen, farmers, landed gentry. The reason merchants were looked down upon in the Middle Ages most places was in part because trade was a small fraction of the economy, while agriculture dominated it, so noble arable landowners were the highest status. Inasmuch as capitalism displaced the landed gentry in terms of social status, I’m not sure that’s a problem.
Perhaps your broader point is that capitalism cannot solve the problem of fixed social status. Though I’d state it rather as a problem that capitalism – and any other economic system – cannot solve because status is a positional good by definition, and more of it just cannot be created, whether by entrepreneurs, politicians, or priests.
It’s impossible to separate status from power and influence (via prestige and/or domination). Having lots of wealth and the legal freedom to use it for a wide variety of ends means one has power, and thus status.
But that’s not the only source of power, and there are several industries / sectors in which the top folks all have influence over mass audiences without necessarily having lots of wealth of income themselves, or having to deploy the wealth of others: journalism, entertainment, academics, and clerics (though this latter example is much diminished these days). Judges and bureaucrats can both wield power directly, and also exert influence through the persuasive character of their publications and issuances.
To build off these, I would think about
1) Can capitalism survive without materialism? It seems the hardest point on capitalism is the only to induce people to do something is only economic incentives which leads to materialism. For instance, in past local communities, it was the middle class unpaid (or underpaid teachers of 1960) housewives that performed a lot of the non-economic duties to ensure.
2) A thriving capitalism needs cheap labor to maximize creative destruction and how do you induce cheap labor into a system that needs materialism. The US capitalism has used immigration over the centuries to find the cheap labor but that leads to society tension. (This idea is based around the correlation of new firms and labor supply which shows that after 1955 the highest increase in new firms is ~1978.)
3) To build on Point 3 about decline of community is the slowness of family formation. I believe one reason why young people are so Progressive today is they are not forming families until past the age of 30. The best to convert young people more conservatives have them married, with kids and paying a mortgage which is not happening today until 32. (So the education system has not changed that much the last several generations but young people are avoiding families that is making young Progressive so true.)
Isn’t the ultimate millennial Alexandria Ocasio-Cortez who is not married at this point?
If I were to say the biggest problem post modern capitalism we are seeing with troubled youth is they are behaving a lot better in High School but having issue transitioning from HS to full adulthood of married, kids and a career.
Arnold,
Your conversation with Erik Torenberg is a cornucopia of insights. The discussion (now essay) about problems of capitalism is a highlight. At the risk of being unwise, I would like to push back a bit here and there on this topic.
A) Re: Elevating material values:
• Does capitalism require elevation of material values? Or merely economic freedom?
• Robin Hanson argues that politics is largely a contest over status:
https://www.overcomingbias.com/2008/09/politics-isnt-a.html
• Healthy societies have many dimensions of status. Most individuals can achieve status in some dimension. Aren’t there many dimensions of status in modern, prosperous societies? Is it really the case that people only keep score by income?
B) Re: Growth in inequality:
• Phil Magness makes a case that income inequality has grown much less than Emanuel Saez & Gabriel Zucman (and mainstream discourse) claim:
https://www.aier.org/article/new-evidence-soaring-inequality-myth
• Gary Becker makes a case that competitive markets reduce discrimination (i.e., increase social equality):
http://review.chicagobooth.edu/magazine/winter-2014/how-gary-becker-saw-the-scourge-of-discrimination
• My intuition is that economic inequality was greater in the ancien régime. The have-nots lived on the brink of starvation. There was little overlap in consumption bundles of rich and poor. Today, in prosperous nations, most people have mobile phones, access to air travel, air conditioning, and so on.
C) Re: Loss of community:
• Robert Ellickson has sketched and analyzed the history of efforts to create “intentional communities.” Most communes don’t persist. Members exit, or not enough strangers join.:
https://digitalcommons.law.yale.edu/fss_papers/411/
• Community often turns on conformity, which may be stifling. See, for example, the Law of Jante:
https://en.wikipedia.org/wiki/Law_of_Jante
• By contrast, modern technology enables individuals to sort into more congenial ‘communities,’ online or by migration.
I should add that David R. Henderson et al. (“The Hidden Inequality in Socialism, 2005) make a case that socialist countries (USSR etc.) in the 20th century had massive inequality that was hidden by official statistics:
https://www.independent.org/pdf/tir/tir_09_3_5_henderson.pdf
Upon reflection, I strayed in comparing inequalities under capitalism, the ancien regime, and socialism (communism).
Perhaps the critics’ benchmark for equality is social democracy, as found in small nations, such as Denmark and Sweden.
Indeed, the debate between Bryan Caplan and John Marsh,”Socialism versus Capitalism” (Troy U., 10 April 2019), eventually boiled down to a debate about Denmark (universal welfare programs) versus the USA (means-tested welfare programs):
https://www.youtube.com/watch?v=can36kWVCVc
Kling claims that merchants and entrepreneurs have elevated status? Relative to “the politician, to the craftsman, or to the intellectual.”? What planet is Kling living on? This strikes me as grossly out of touch with both reality and popular consensus.
A common merchant + entrepreneur job is a real estate agent. They often make very good money, but they are very low prestige. Many formal rankings of occupational prestige list real estate agent as dead last. Obviously, I can think of less prestigious occupations that aren’t even included in the rankings: fast food worker, checkout clerk, janitor, clerical assistants, guys who mow lawns for a living.
Two quick rules of thumb: Generally, people seek out friendships with higher status people and ignore and exclude lower status people. Observe who excludes whom. Secondly, women generally select higher status men for sex. Which occupations do they choose.
Professors, even mediocre professors, are very high status in today’s society. I watch young beautiful women eager to have sex with mediocre professors in their 30s and 40s and have zero interest in normal adults of that age in successful high paying desk jobs.
Kling claims that merchants and entrepreneurs have elevated status?
I wasn’t not sure that merchants and entrepreneurs are elevated compared to other professions but we often comparing .001% of a profession to maybe 10% of profession.
In terms of entrepreneurs, there are some that have elevated status: Elon Musk or Jeff Bezos or Bill Gates have loads of status in society. Koch Brother have high status with certain circles as well. Look at Howard Schlutz getting media coverage for his possible Presidential run. And I would agree that is .001% of the entrepreneurs in our society but we can think the status impact of Taylor Swift or Katy Perry as being exaggerated as well. (They are .001% of professional musicians.)
So in terms of status I believe Real Estate agents have a good status overall and probably the main thing that diminish this is their endless gimmies that use to market their name. (So everybody has a pad of paper with the Real Estate agent picture on it.) Probably not higher than doctors or College Professors, but higher than most citizens in the city or community.
It also depends on the level you’re looking at. On the national level, yes, the national-level arts or intellectuals have high status.
But if you just look at the town or local community level, there’s a good case that highest status people are the local business owners. Basically, “big fish in a small pond” types are predominately merchants in a capitalist society. “Big fish in the sea” come from many sectors, but there are very few of them, and it’s very difficult to become one.
I’m not sure even this is true though. Being a professor of basically anything will get one regarded as highly intelligent in most circles; teachers enjoy a great deal of social status relative to their actual economic value. Doctors and lawyers are considered more the epitome of ‘success’ than small business owner I think.
It seems to me that our society awards the most status to anyone who signals the most concern about the three issues Arnold raises. The evidence is at the margin. I reckon this is how materially successful people differentiate themselves. (Try running a head to head contest of equally successful — materially — entrepreneurs, business person, athletes, actors, etc. with antipodal views on capitalism and how admired/criticized they are.)
None of the three listed problems are exclusive to capitalism nor are they more pronounced in capitalist society than in the non-capitalist world.
However, they are more much less pronounced in small, pluralist countries and in countries with proportional representation. You have previously written convincingly on the advantages of small countries, and that writing answers a good part of your question.
People can treat each other as individuals when they are equal before the law and to be equal before the law you must have a voice in government.
Winner take all electoral systems exacerbate the winner and loser problem and deny individuals a voice in government. In contrast, multiple relevant political parties increase acc0untability and creates ocial opportunities making life more meaningful by giving many more people opportunities and roles.
Unfortunately the movement by libertarians to supplant local governance and democracy with authoritarian supranationalism undercuts efforts to improve rule of law and reign in cronyism. Localized deregulation is a much better alternative.
Perhaps we should consider too whether more and more specializaton is always an unalloyed good. There are tradeoffs such as how the extremely specialized are most vulnerable to technological shifts. Consider too how much specializaton is a byproduct of extreme regulation. By deregulating, perhaps a better balance can be achieved between hyper-specialization and longer term relevance.
Overspecialization is what makes excellence possible. Malcolm Gladwell says that what we call genius is just the result of a whole lot of practice making perfect.
Question: is excellence worth the price we pay? There’s a correlation between creative genius and insanity. Which is cause, and which is effect?
Not everyone agrees with Malcolm Gladwell. Range too can lead to excellence.
In his book Range, David Epstein, leads off with what he’s called the Roger versus Tiger problem, contrasting the widely divergent childhoods of Roger Federer whose tennis pro mother refused to give him tennis lessons and insisted he play a wide variety of sports growing up and Tiger Woods whose father indulged his son’s intense desire to play gold. The ‘hyper-specialized “deliberate practice’” model tused by Woods is not successful for most people. Most of us thrive on a little variety. We’ve all heard the admonition to put in 10,000 hours. Epstein convincingly argues that Federer’s route to success is a better option for most people.
Epstein takes this contrast into many other fields but I would say contrast the traditional Humboldtian Model of education still used in Europe that integrates the arts and sciences with research to achieve both comprehensive general learning and cultural knowledge, and the hyper-specialized occupational degree programs in the US organized around the idea of maintaining faculty departments and making a hyper specialized college degree with licensure requirements the portal to all employement. The former produces an adult population that is much more literate and numerate than the US adult population.
Of course it doesn’t work for most people. It doesn’t have to. You make it up on volume. All the frustrated failures out there pay the price for the handful who get the fame and fortune.
It’s not that the geniuses don’t earn it. They do. It’s that lots of others earn it too and get gypped. But society benefits, because geniuses come up with the technological breakthroughs we need to progress as a species.
So let’s have some respect for failures. They make genius possible.
But generalization? That’s a great way to avoid failure. Is avoiding failure worth the price?
Here’s something of a middle position: the talent stack. If you’re just good enough at each one of the right collection of abilities, they can add up to a kind of excellence. But you have to choose the right abilities to put together.
There’s plenty of status to be had if you know where to look for it. No status on Wall St.? Try the bowling alley. Can’t bowl? Join a gardening club. Be your own status entrepreneur.
In other words, there are other markets to choose from.
“You may have lived life in happier ways, but there are other mountains to climb” – Van der Graaf Generator
Interesting, except for the craftsman, those in the first status list are those who seek wealth through political means, while the businessman, entrepreneur, and to an extent, the banker build wealth through economic means. Ironically, capitalism is what enables more to build wealth by political means. In feudal times, the nobles were afforded the liberty to generate wealth for themselves through participation in markets and enterprises, while those beneath them were prevented, with exceptions based on their utility to the nobles. These nobles, in turn, supported artists, writers, priests, warriors, etc., who pleased them or offered useful services.
“In the precapitalistic ages writing was an unremunerative art. Blacksmiths and shoemakers could make a living, but authors could not. Writing was a liberal art, a hobby, but not a profession. It was a noble pursuit of wealthy people, of kings, grandees and statesmen, of patricians and other gentlemen of independent means. It was practiced in spare time by bishops and monks, university teachers and soldiers. The penniless man whom an irresistible impulse prompted to write had first to secure some source of revenue other than authorship.”
–Mises, Ludwig von (1956). The Anti-Capitalistic Mentality
Even at the height of the Industrial Revolution (from 1890) we have the contrast below :
“For example : The question being propounded, What is the value of the combined services to man of Mr. Gladstone and Mr. Disraeli, as compared with those of Sir Henry Bessemer? Ninety-nine out of a hundred men of sound judgment would doubtless say, ” The value of the services of the two statesmen is quite unimportant, while the value of the services of Mr. Bessemer is enormous, incalculable.” But how many of these ninety-nine men of sound judgment could resist the fascination of the applause accorded to the statesmen? How many of them would have the moral courage to educate their sons for the career of Mr. Bessemer instead of for the career of Mr. Disraeli or of Mr. Gladstone?* Not many in the present state of public sentiment. It will be a great day for man, the day that ushers in the dawn of more sober views of life, the day that inaugurates the era of the mastership of things in the place of the mastership of words.”
—Charles H. Ham, Mind and Hand: manual training, the chief factor in education (1900)
Disraeli and Gladstone’s empire was a shell within 50 years. Bessemer transformed and ushered in the modern world, but only because he was afforded the liberty to keep and retain his earnings and use them to generate wealth for himself. (but not before being cheated by the British government on several prior “prizes” used by the state to encourage innovations)
If anything, Capitalism reduces the role of status.
The main problem with capitalism is that it rewards marginal value much more than absolute value. Some of this is good, as it encourages problem solving. Too much of this is bad.
Relative status is of course by definition a zero sum game. But that does not mean that status generally is a limited commodity. There are countless types of status and not everyone is looking for each and every type. We should all be equal before the law and the differences in types of status one person may enjoy versus another does not mean that we should not treat each as individuals.
I am usually much more motivated to comment when I see something I disagree with but I found the entire podcast, the essay, and most of the comments to be quite excellent. Thank you for this.
I think society is entering a new era in which the equalization of status will become a primary concern. Or at least the elimination of status inequality due to wealth inequality, and other seemingly non-merited reasons (i.e race). People want a classless society, which if it can’t be achieved via wealth equalization, at least can be achieved by making wealth not automatically confer status. They also want less hierarchical, more collaborative workplaces – sort of an across the board flattening of social hierarchies.
I think this process may help resolve the intrinsic conflict between free market systems and humans instincts towards social communal living. It’s easier to tolerate wealth disparities if they don’t mean anything in terms of your status in the community. If status is independent of wealth, then the relatively poor can still find opportunities to be afforded respect in their communities, which leads to less envy. A community in which rich and poor socialize together also means that the amenities that the well off afford tend to be shared more broadly (i.e. the family with the big house and the swimming pool invites everyone to their kids birthday party). In other words, you can operate pure free market without it generating envy and social friction, if status is shared equally.
I think to some extent it’s already the case – and has even been in the past – that wealth wasn’t necessarily the driving factor behind status. Having noble blood and a genealogy going back to Charlemagne; having won a great battle or two; or being a charismatic figure; or just having the right friends could confer more status than being one of the richest persons in the country. And relatedly, I think people are naturally hierarchical. We are not all equally interested in each other’s writings, equally attracted to each other, or equally inclined to follow each other, and never will be. There will this always be elites, and many of those not among them will always envy them.
People may be most civil and most satisfied if they are encouraged to accept a small and humble role in society, as most people play such roles. The baker should be content that he creates a small part, but a part nonetheless, in everyone in his town’s life in providing it bread. Cultivating the expectation that he treated the same by everyone as Lebron James or Stephen Hawking will only cause disappointment and strife.
Cultivating the expectation that he treated the same by everyone as Lebron James or Stephen Hawking will only cause disappointment and strife.
I think the way to approach it would be to cultivate a norm for people like Lebron James to be humble and to not assert superior status overtly. I agree that some people will always have higher status because that is inevitable to some people to earn more respect through good works. I’m not sure that it needs to be coupled to things like a culture of celebrity or exclusivity. Higher status people should display humility, be unassuming, and should socialize with average people rather than shield themselves off in private clubs, with other rich/famous people.