Value city (Add it Up)

I just got off the phone with a friendly/aggressive telesales agent. Successful, of course. Pushed me right over. But, like all together too many conversations, it got me thinking about economics.

The young lady on the phone spent 7-8 breathless (and thereby difficult-to-interrupt) minutes boring me with information about how much of my pension I am free to speculate with in financial markets now that the Swedish government has tweaked some minor regulation. She further talked me into a (free!) consultation (at my convenience!) to talk about how her company, or perhaps even one of their worthy competitors, might help me take advantage of the new rules.

There is of course an enormous HELLOOOOO!?!?!?! component to such a conversation. I mean, last I checked the news about 'actively managing' one's retirement money with the help of the financial service industry's finest Type A-s was not altogether good. But I found myself more interested in her cog in the economic cuckoo-clock.

Fundamentally, this person was a big economic success tonight -- she performed her task more succesfully than anyone had a right to expect, generating a 'lead' for Jack Lemmon and the rest of the boys from a customer who frankly should and does know better. At 8.45 pm. She's the winner in the game of economics. She will be rewarded, via her normal paycheck or perhaps even by a performance kicker. Who knows.

The sum of all the good economic soldiers doing their jobs is called 'value added' -- the extra money created by each worker, machine, or strategy that manages to push willingness-to-pay towards the handover of ducats. Some percentage of suckers like me turn into customers, and so the telesales agent has created value by pushing potential demand/willingness-to-pay towards transactional consummation.

How did she do this? Well, she bored and bullied a tired father at home with his 3 year old son who speaks imperfect Swedish into saying 'Ok, whatever, can I go now?' She made it so difficult for me to be honest with her ('I'm not interested') that I will now have to find it in me to be honest with her much cleverer, smoother, more subtly aggressive colleagues in sales during my lunch hour next Friday. Or else I will have to agree to pay them for something I don't really want or even believe exists, that is, their supposed ability to find better ways to use my pension contributions than the millions of other money managers in the world. Look around, OECD 2010. This is value-added.

It is value-added because it gently increases the amount of money that changes hands in the world, and that money, unlike my squirming discomfort, can be measured. The fundament (and I mean that in every sense of the word) of economic theory is 'revealed preferences', that is, the only way to know what people place a value on is through their actions, or, more specifically, their trans-actions. Anything else -- asking them what they want, for example, or measuring the things that other sciences think lead to fulfillment -- is either unforgivably inexact or the first step towards totalitarianism, or both.

Fair enough, the other options (including yours, mon President) are really unattractive. But that doesn't make me feel any better about the vast majority of 'economic growth' I see every day, and the fact that our whole socio-political system is designed to encourage more of it, as long as you can measure it.

My resignation was compounded by the fact that the call interrupted me while I was cleaning out my closet in advance of taking a bunch of clothes to Stadsmissionen, a charity that sells second hand goods to raise money for the homeless. My donation of the clothes will, should they be sold, create a tiny uptick in economic growth, but Stadsmissionen's turnover would surely get lost down the back of the leather sofa in the waiting room of any financial services firm. And no measurement will be made of the job satisfaction of those who work at their shops, or of the avoided waste from clothes that were re-used. There is something fundamentally *right* about Stadsmissionen that is not measurable, and that is hard to incentivize, and that therefore remains a marginal activity. Meanwhile, the fundamentally *wrong* strategies of high-pressure sales and high-maintenance fund-management for everybody are built on factors that are easy to measure, and therefore easy to reproduce. They multiply by masturbation.

Mostly I think we have to do our best to build good incentives and common values into the economic system that we know can grow; for all its nasty externalities, growth has gone hand-in-hand with quite a bit of progress. But sometimes it seems to me that growth in the rich societies has increasingly decoupled from the welfare of people, and that more serious interventions might be needed.

(This is not true across the board, of course... I am thoroughly enjoying drafting and publishing this missive as it comes into my head thanks to the world wide web ... while listening to 15,000 little bits of musical wonder fill the room in random order thanks to digital audio ... etc.).

In April, I hope, I will go to Oxford to meet with the 29 other people who have received the Skoll Scholarship in Social Entrepreneurship these last six years. I don't know if they see themselves this way, but I think they are the Edisons of the problem I describe, working in the socio-economic laboratory on the challenge of creating genuine, lasting welfare where it is most needed. Their work doesn't create transactional value in huge volumes, but it is fundamentally *right*, and their refusal to believe otherwise gives it a good chance of being more than that one day. My two days with them were two of the best I had in 2009. I think it's time for a little more inspiration.