A New Economics – the economics of trivia

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Economists I feel have been missing the point for far too long, they always study the grand, society as a collective never the individual components that go to make up society. They will claim that they do so in the study of micro economics, the theory of the firm etc., however the study is so abstract that it has no connection to reality. Perhaps this is a fault I also share in with my fellow economists. Here I am sitting in my favourite coffee house, drinking coffee and quite self absorbed in my task of writing this abstract analysis. Sharing this space with me are two women, they are having a lively discussion about the events of the weekend. There is a gaiety and liveliness in their conversation that compares favourably with my brooding intensity. They live life in a different way to me. Am I as with all economists detached from the gay daily round that others enjoy. I am a poor and reluctant dancer, yet my brother in law (who is an English teacher) is a good dancer and a master of the ballroom. Is it possible that the aversion to the daily round makes economists bad dancers or do bad dancers and the most unsociable of men gravitate to the dull subjects such as economics as they mirror our personalities?

This diversion into the personality of economists does have some relevance as I think our relative social isolation inclines us to think of society and the economy in abstract. What we need to do is reorient ourselves, study the reality in which we are immersed. I want to invent a new concept for this study, an ‘economics of the trivial’. Not that I think the majority of human behaviour is trivial but I want to distance myself from the grandiose theories of the economic masters. Economics lacks humanity, I want to bring that humanity into the centre of the subject. It is in those behaviours that economists consider trivial that can give us the best insight into the nature of the economy. Can I suggest that from the behaviours of young people dancing, celebrating their break from work as much can be learned about the working and nature of the economy as from the actions of a trader in the foreign exchange market. Unfortunately economists would only regard the latter of any economic significance, so failing in their analysis because a whole set of economic behaviours are considered too insignificant to be worthy of study.

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Does the hedonist lifestyle of so many young not reveal something about the nature of the economy? I know that young people has always attracted the ire of the old because of their seemingly irresponsible lifestyle, but has there not been a change within youth culture. Sociologists now speak of adolescence extending into the 30’s. Seemingly self destructive behaviours seem to be on the increase, binge drinking and drug taking seem to be on the increase. The authorities are struggling to keep pace with the consumption of the new legal highs. The drugs culture hosts an innovative and enterprising industry whose entrepreneurs show an enterprise lacking in so much of the mainstream industrial sector. However this exuberant youth culture is a symbol of significant changes in the wider society and economy.

Youth culture was formerly limited in its nature and impact on the wider society. It was a culture adopted by young people in their formative teenage years, a transitional phrase before the emerged as fully formed adults. What youth culture represented to the wider society was a marketing opportunity for the clothing and leisure industry. The revolutionary rhetoric of the flower people and the hippies was no more than a protest against the young’s exclusion from the power and privilege of adulthood. Hippie culture with its rejection of the existing society was not a realistic alternative, it was but a magical solution to the problems of youth. No more realistic that the magic in children’s stories. Now I would suggest youth culture is representative of something more significant, it is the most visible of examples of the change in society and the economy that have occurred in recent years.

This seemingly frenetic activity is but the new economy writ small. A greater part of the new economy mirrors this frenetic social life of the young, it is an economy in which there is rapid change in turnover, so many of the new products have a limited shelf life, manufacturing industry becomes increasingly like the fashion industry, highly volatile with those being behind the trend rapidly being left behind. Market giants such as Nokia, Blackberry, Microsoft (?) merely have to miss but one change in the market and they get swiftly left behind by market rivals. While the dominance of the new market leaders is measured in years, the dominance of market leaders in the old industries is measured in decades. Exxon, Shell and BP have been dominant players in the oil industry since the late decades of the 19th century. Companies have always risen to dominance in a market only to decline and disappear, what is different today is the speed at which this happens and the much larger segment of the economy which is dominated by these ephemeral companies. In part is it explained by the rise of the service sector which includes the IT sector in which companies have a notoriously short shelf life.

Britain is the one economy in which this effervescent economy predominates. The economic and social climate from the night time economy to the ‘City of London’ is sympathetic to this frenetic economy. The trading floors of the City epitomise this new economy. Millions of rapid deals involving vast sums of money made during a day, but which at the end of the day leave the stock of physical assets that make up the economy unchanged. A monetary froth which leaves the real value of the nations wealth unaltered. Financiers have a preference for the effervescent economy, as the companies in which they invest rise quickly within the market earning the initial investors good returns but companies which have such a limited shelf life they have to be disposed of before the market turns sour. Examples are companies such as Friends Reunited and My Space which were sold when their market valuation was at its peak. A market which suits the new world of financial speculators, the private equity companies and the hedge funds. Such a market is hostile to the long term investments that advanced manufacturing industries require, which in part explains the long term decline of British manufacturing industry.

A better understanding of the financial markets can be gained from understanding the society that gave rise to them. What informs behaviour in these markets is it the culture of the social group from which they originate or the mainstream culture. Traders to use the popular term are ‘chancers’, they make bets on currency movements, what is it informs this trader culture? They come predominantly from those upper middle class groups that affected to dispose trade. Certainly there is no chance of these traders dirtying their hands in trade. Are these traders the lineal descendants of the great 18th century aristocrats who gambled fortunes at the gaming tables? The mainstream culture expresses an effervescence, things bubble to the surface in great excitement only to later burst and disappear. The night time economy best expresses this effervescence, clubs open and become the place to go, only to be surpassed by a newer club and so the process continues. Clubs rapidly change hands, the new owners giving them the frisson that pushes them to the top of the popularity stakes. Traders express the same excitement as clubbers, they get an adrenaline surge from their activities. Currency trading is a young person’s activity as with clubbing, the youthful surge of energy that makes both possible is soon lost. Currency speculation has always existed but I don’t think it would have gained its predominance in the financial services sector, if it did not reflect social reality.

Going back to my first example, the forms that the social interactions take in wider society change that plasticity that is the human society. Human personality and it’s associated behaviours are infinitely malleable. What matters most to people is their friendship groups, their out of work activities, their extended families, all of which affect and change people’s behaviour. It is wrong to assume these learnt behaviours are not carried into the workplace. Observing people in the small scale social interactions, that make up the rituals and routines of daily life can give an insight into that human construct, the economy. I shall keep observing the regulars, staff and customers in my coffee shop to give me an understanding of human behaviour and the insight which it gives me into the economy.

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