The positional game and the end of the age

By Razib Khan | February 20, 2013 3:27 am

By most material measures we’re doing better as a species than we ever have. That is, in an absolute sense. But a lot of human life is about relative prosperity. I recall hearing once that role playing games which emphasized egalitarianism, with no “winners” or “losers,” often had a difficult time gaining users. We are a cooperative species, but we’re also a competitive species. The idea of a rising tiding lifting all boats is appealing, but so is the idea that one needs to have a larger McMansion than the Jones’. Non-zero sum interactions are splendid, but as social organisms we evolved to a great extent in a world dominated by zero sum games. Our rationality counsels that we trust in reason’s logic, but our emotions drive us toward cognitive biases such as loss aversion.

Three articles in The New York Times prompt me to reflect on the shortsightedness of modern life in the developed and aspiring developed world. First, It Takes a B.A. to Find a Job as a File Clerk. Basically the transformation of college into the new high school. Second, As Families Change, Korea’s Elderly Are Turning to Suicide. The focus of this article is how modern economic and social tumult are tearing apart the fabric of South Korean life. But it also focuses on the mad scramble for the “best” education which drives many to penury: ‘Some parents, the “edu poor,” drained their savings to pay for cram schools that operate after regular school and on weekends.’ Finally, In China, Families Bet It All on College for Their Children. This despite the fact that there is a surfeit of graduates in many areas.

All of this can be put into perspective by this Peter Turchin piece, Return of the oppressed: From the Roman Empire to our own Gilded Age, inequality moves in cycles. The future looks like a rough ride (here is a long review of Turchin’s work, as well as an interview). Turchin’s descriptive argument is that we are looking at an age of greater inequality, where aspirant elites will be competing for fewer positions of glory and the middle class will shift downward. This is embedded in a more formal theoretical system of ‘secular cycles’ which he has developed previous in his books and articles, but which need not concern us in detail here. Rather, it is well known that in the developed world the wage gap between skilled and unskilled workers has increased since 1970, reversing the great decline after 1800. In short, the middle class society arguably ‘peaked’ in the 1960s in the developed world. Though the great lift out of poverty in the developing world has resulted in an aggregate increase in per capita health and wealth across the world, the lower half of the economic distribution in the developed world is exhibiting symptoms of immiseration. Though real absolute gains in economic productivity mean that the white American working class can purchase consumer gadgets of incredible power, their life expectancy is dropping.

The structural conditions underlying the shift are moving like inevitable forces of history. Barring a Butlerian Jihad economic productivity will continue to increase, but fewer and fewer workers will drive this growth engine. For two centuries many have falsely predicted the negative impact of technology upon labor, but over the past few decades we have seen a genuine increase in the wage gap  between the skilled and unskilled. So I think it’s time to wonder if we’re finally near the end of one cycle of broad based gains in wealth due to increased productivity, as a generation has passed and inequality has continued to increase. This is of course in the context of the fact that billions are slowly rising themselves out of grinding poverty. The pie is growing larger, but the developed segment is redistributing itself in a manner in which the elites are monopolizing more and more.

What to do about this? First, I think it is foolhardy to presume to every individual should receive higher education so as to increase their productivity, and become managers, technicians, and researchers. Not all positions require higher education. And there are only so many researchers and managers that are needed. There is the idea that the economy will diversify and consumption will start to be geared more toward services which only humans can provide, because ultimately the elites do have to consume. But this will take a cultural change in outlook. It was respectable to be a factory worker, serving the broader institution of the corporation. Will it be as respectable to be the entertainers, assistants, and household help of the elite? What we might see in the new economy is a revived form of ancient clientage, as elites accrue to themselves various dependents which provide both services and signal prestige.

This may seem fanciful and unrealistic. But what I do know is unrealistic is the idea that everyone can become a scientist, physician, lawyer, or accountant. There is a new economic order coming, and everyone is understandably scrambling for their positions toward the higher steps of the pyramid. But are expenditures to gain credentials truly beneficial to the body politic? The reality is that many students will learn little, and the credentials will be debased. The sum totality of their ‘education’ will be a transfer of payments to the university system, as well as a debt load which they will not be able to discharge.

What’s the solution? I have no fixed idea, but step one is to start talking about the problem and the likely reality that we need to radically reorient our understanding of what it means to be a successful citizen and how a society can flourish. 2,500 years ago something similar happened during the Axial Age. Philosophical and religious systems arose which synthesized the various tensions at the heart of complex post-Neolithic civilizations. The Classical Greeks, Indians, and Chinese, were a brutal people. But they smoothed over the coarseness of earlier ages, for example, the disappearance of human sacrifice as a mainstream part of the social order. Ultimate the religions and traditions which crystallized during this period were a reaction to the fact that the tribal ethos of the Neolithic could go only so far during the literate age of mass polities. Religion in particular operated at the intersection of symbolic egalitarianism, concrete hierarchy, and a synthesis of philosophy and superstition. Out of this melange arose the Whiggish sensibility, expanding upon the egalitarianism at the heart of world religions, and creating the modern liberal individualist sensibility. It seems to me that one of the primary preconditions for a robust liberal individualist polity, a middle class dominated society, is in the first stages of death across the developed. Can liberal individualism survive the death of the middle class? I have no idea.


Comments (35)

  1. Sandgroper

    It’s going to be interesting to see how population change and changes in age distribution play into this. The Chinese workforce is shrinking. If you believe population projections (which we don’t) the Japanese will be extinct by 2065.

    Peter Turchin’s analysis suggests that immigration is a really bad idea. The Japanese are currently trying to invent robots, rather than face having to import people – maybe they are right.

  2. I think about this often. The only conclusion I ever come to is that having a baby will cost more so people on the lower end will have fewer children. But that is a slow reaction and people can get by on very little.

    • In modern society the only cost of children is the opportunity cost of lost wages. If you have a child the tax deduction alone covers the entire cost of the child if you are in a middle-class or higher tax bracket and you are frugal with baby expenses. If you are poor then having children means that you qualify for more benefits and so you actually make money on children.

  3. razibkhan

    i don’t think a lot of stuff you said is strictly true though i would be curious as to fed + state revenue. do you have charts?

    • maxfrix

      I assume you are being sarcastic. Your chart sums it up nicely.

      • razibkhan

        i assume by ‘biggest piece of pie’ you meant > 50%.

        • maxfrix

          If you use the home building example, a builder would struggle to net a $40k profit per home on typical home construction. More than 40k per home in building permits alone and sales tax on all materials plus taxes on employee wages is the government’s take plus whatever I am forgetting. Chevron is reportedly the richest corporation in California and reports show they profit somewhere between 8 to 9 cents per gallon. Each gallon is taxed 67 cents. What I am saying is each transaction is burdened by the government exponentially in relationship to what it used to be like. This has an adverse effect on business being able to hire employees and actually do work. Government has regulated away all the good projects as well. You want to build the tallest building in the world, the last place you could get it approved would be in the USA. The new and interesting projects have moved offshore also. More government means less revenue to infuse the economy.

    • First, taxes are not an accurate measure of government activity. Government spending is a much better measure, because when the government spends money it pulls resources out of the economy. For example if the government taxes people and just burns the money it has only changed the relative wealth of people. Whereas if the government prints money and uses the money to buy a ton of steel the economy has one less ton of steel to work with. So government spending is the way to measure direct government activity.

      Second, government creates work. For example let’s say that the government creates a new regulatory agency and hires people (pulling those people’s labor out of the economy). Now each company in the regulated industry must hire a regulatory compliance person to ensure that the company complies with the new agency. Although these people are still in the private sector they have been pulled out of the market as a result of government action.

      I have a different way of looking at tax rates. I take 100% and subtract from it the percentage of people who are engaged in productive work. So if I see that there are two producers, one regulator compliance officer, and two regulators I view that as a 60% tax rate. Five people are supported on the work of two.

  4. razibkhan

    redistribution has always been around (e.g., ‘liturgies’ in greek democracies). i think that’s different from a middle class society….

    • I think it’s fair, but I think a “Middle Class society” comes from the middle class actually having political power. I don’t think it stems having a certain marginal product.

      I don’t think it was really the case in the 50’s and 60’s that the relative marginal products between median workers and the very rich is *that* different than it is now. That will change as automation progresses though, to be fair.

      Even then though,if you have 1960’s wages and everyone happily engaging in makework jobs while a tiny core do most of the valuable work, I’m not sure why that wouldn’t be a middle class society.

      • Spike Gomes

        I think the problem is, partially, that a lot of people (like myself) already do makework jobs. It pays the bills, and for most people doing it, they probably don’t mind. Above a certain intelligence level, it just becomes a soul-crushing grind.

  5. razibkhan

    i doubt ‘most’ would say that now. though that is an argument for a liberal arts education. high school should produce citizens. whatever happened to that idea?

    • BobbaVoo

      Highschool isn’t enough, it’s a full time job cutting through all the propaganda. I’d like to see promising and interested students get jobs with the government and have a permanent army of moral citizens ready to enforce the spirit of the law since electoral politics has clearly failed.

      So many industries are essentially unregulated crime syndicates getting away with theft on massive scales as of now because of the ridiculous laws of the past.

  6. razibkhan

    are perfect competition models even useful? i.e., firms usually make profits in a sector right, instead of competing away all profits?

    • I’m using “perfect competition” loosely, to refer to a situation where globalization and the Internet means that lots of workers can provide services of a given type (Java programming, paralegal work, whatever) and the typical worker has a weak bargaining position and little sustainable advantage, hence not likely to be able to build wealth relative to others.

      I was also thinking about Peter Thiel’s comments to the effect that competition is good for society but bad for businesses: “It’s good if you like eating in restaurants. It’s not a good thing if you’re in the business of starting a restaurant.” (And restaurants I think may be a good example of a sector where profits are in fact competed away to a large extent.)

    • Nick Rowe

      Razib: be careful with the word “profits”. It has two meanings in this context. When economists say there are “zero profits” in (long run) competitive equilibrium, all they mean is that owners of firms earn no more than they could earn in their next best alternative (earnings equal opportunity costs). It doesn’t mean there is zero return on investment, or zero profits as commonly defined.

      Which is not to say there aren’t other problems with assuming perfect competition. (Though models of perfect competition can still be useful, sometimes.)

  7. razibkhan

    and to be clear, i’m not sure that the redistributionist policies of many countries are sustainable with our current governmental apparatus/norm (as in viable for > 25 years).

    • zosima

      It may be much simpler. The problem may just be that labor purchasers have a monoposony. Something that could be resolved without unions or redistribution:

      • The only way to resolve that would be to break up the firms into tiny parts on a massive scale never before seen.

        If there are even *some* economies of scale, than unions+monosponies are more efficient than a bunch of tiny shops.

        As Razib pointed out, perfect competition is a somewhat useless model. Corporate profits are 14% of GDP and would be 0. The profit margins on Coca Cola or Corn Flakes has been persistent and large for decades. The standard macro assumption is that all mature industries are dominated by monopolistic competition.

      • One really annoying aspect of Econ 101 is how they handle the prisoner’s dilemma and perfect competition. The nash equilibrium of an *iterated* prisoner’s dilemma is cooperation! Even in the absence of outright communication between the two parties. (See the Folk Theorem of game theory).

        So you can’t just regulate your way to perfect competition, unless you break up firms to such an extent that all your firms are inefficiently run.

    • Once you get to the 25 year horizon, who knows what’s going to happen? We might see wide-scale gene therapy or real AI that puts everybody out of work.

      That said, I am interested in what you mean, and would love to see you unpack your statement sometime.

  8. chris_T_T

    Technology should have the same impact across borders, but we’re not seeing growing income equality in every OECD country.

    It should have the same impact only if all else is equal between countries. Taxes, regulatory structure, etc. all affect the incentives of pay and employment. Expecting that keeping one variable the same to produce the same outcome while varying all the others seems a little silly.

  9. zosima

    I’m not sure I agree with all of your assertions.

    Why can’t we have capital performing many/most low skill jobs and have almost everyone doing higher skill jobs like inventing, art, and research? Maybe it isn’t possible, but it doesn’t seem obviously impossible in a world with a lot of labor saving technology.(read: robots, etc…)

    Why do we need to reorient our attitudes about employment instead of enacting a set of laws that ensures wages are proportional to productivity. Productivity of all workers has grown, but wages have not…contradicting the economic theory suggesting that the marginal wage should be proportional productivity in a competitive market. This suggests the problem may be much simpler. Labor markets are not competitive.

    Characterizing this as a middle class phenomenon also seems to miss an important dimension of the change we’re seeing. The upper class seems to have peaked as well.(just in the 80s, instead of the 60s). It seems that the gains even of the high skilled are not being reflected in their incomes; but instead accruing to an even thinner crust at the top of the income distribution.

    • “Why can’t we have capital performing many/most low skill jobs”

      We can, but not today. Transitions take time. Ideally we would do this by reducing the work week gradually. We could probably cut it to 30 right now and then cut it by a year every few years.

      “instead of enacting a set of laws that ensures wages are proportional to productivity.” The only know mechanism for doing this is the free market. In fact it does too good of a job. As the value of labor drops so do wages.

      “Productivity of all workers has grown” No it hasn’t. Productivity of capital has grown. Which should be a good thing, but our society isn’t structured to take advantage of this.

      “contradicting the economic theory suggesting that the marginal wage should be proportional productivity in a competitive market.” Actually economy theory is that in a more efficient economy profits will fall to zero. For the producers of labor (workers) that means that the value of their labor will fall to the cost of keeping them alive. Due to unevenness the result should be that the average wage is below the subsistence level.

      “Labor markets are not competitive” They are, and that’s the problem for workers. If you want to see high wages you need to create an artificial labor shortage somehow. Restricting the work week, banning immigration and encouraging emmigration, reducing birth rates, etc… if you want higher wages you need to reduce the supply of labor.

  10. With regards to college it seems that for many jobs the degree is just used for signaling. For instance it signals you’re the type of person willing to stay in college and do the homework. The actual skills and education aren’t necessarily needed. You simply are more apt to get a better quality of worker with the degree.

    It’d be nice if we could figure out a more efficient way of signaling that without wasting four years for many people.

    The biggest issue is how the increasing capabilities of robotics and mechanized production will treat those with low skill capabilities. (i.e. independent of education) Redistribution is the typical answer but that has its own problems.

  11. meo fio

    I think liberal democracy will die and chinese style technocratic government will become the norm. Europe is already moving towards a technocratic government.

  12. I’ve been hella sick this week, but I finally feel well enough to comment upon this. Apologies if my residual fever means anything I’m writing is nonsensical.

    Generally speaking, I think we’re heading into an era where the policy solutions of modern left-liberalism are going to be completely discredited. As you point out, providing universal (even subsidized) access to education doesn’t really solve anything. Even if it did result in equal performance among the historically disadvantaged, and allow a new, more diverse cohort into the middle classes, it doesn’t result in an appreciable net decrease to poverty overall, only a shifting of it.

    However, I expect that in absence of contemporary left-liberalism’s arguments, people will turn to real leftism. If you know that there is little-to-no chance that you or your children will get into higher status occupations, then the calculus of self-interest changes. You no longer see yourself as an aspiring member of the middle class, but as working class. You don’t think about the next job you could have, but ways to make your current job better – either through collective action, or redistributive government policy.

    There’s also a conservative argument for redistribution in this case of course – some measure of redistribution will be needed in order to limit overall social unrest. I cannot seriously see us backing again into an era where the poor are illiterate and ignorant of government policy – the “knowledge” component of liberalism is rooted far enough universally a global decline seems impossible. Given simply enserfing the working class probably won’t be politically possible for generations, buying them off with bread and circuses will seem to be the best alternative. The only other alternative I can think of is if the rich internationalize fully, and keep retreating from any nation which engages in redistribution, but this would eventually have very nasty international consequences.

    Regardless, I can see many possibilities here with minimal pain either for the rich or anyone else. One possibility is job-sharing. Particularly if we’re moving towards a single-payer system for health insurance (which I firmly believe will be in place in many U.S. states within 20 years) there is little difference between employing three workers at 40 hours and four at 30. Some studies have suggested that those who engage in job sharing have higher productivity as well. And even though it means a real cut in pay for people, many people would value the extra time available to be spent with their families or on leisure. Indeed, if people were “time rich,” but “income poor” (so long as they could handle the necessities), I think society would be basically happier than ours today, given there would be more time to develop the circle of friends which humans pretty much need for emotional stability, but lack the time to form in contemporary America beyond the immediate family.

    • razibkhan

      “I expect that in absence of contemporary left-liberalism’s arguments, people will turn to real leftism.”

      that is my inclination too (as a descriptive matter).

      • But I know given your stance on economic issues is quite different from mine, it doesn’t fill you with any relief.

        What would you have us do Razib? If modern liberal democratic capitalism is nearing its endgame, I see three possibilities.

        1. A return to aristocracy in all but name, with government power ensuring the rich are not threatened by competition from the outside. This is, needless to say, incompatible with democratic governance.

        2. Some degree of redistributive socialism. The economic liberty of some will be curtailed, but no one will starve. Democratic governance could remain perfectly compatible, although I could see how a libertarian would argue it would be just as illiberal as the first.

        3. As 3D printing technology improves, we approach post-scarcity. Obviously money would still need to be exchanged for services, feedstock, and energy. But the amount of work needed to actually support yourself (particularly if patented products are easily pirated), would be a fraction of today. Most people could retreat to the informal economy, making the power of the wealthy all but useless.

        Do you see a scenario 4?

  13. Riordan

    “{There is the idea that the economy will diversify and consumption will
    start to be geared more toward services which only humans can provide,
    because ultimately the elites do have to consume. But this will take a
    cultural change in outlook. It was respectable to be a factory worker,
    serving the broader institution of the corporation. Will it be as
    respectable to be the entertainers, assistants, and household help of
    the elite? What we might see in the new economy is a revived form of
    ancient clientage, as elites accrue to themselves various dependents
    which provide both services and signal prestige.”

    I remember as recently as 4-5 years ago that was one of the ironclad assumptions of both rightwing and leftwing labor economists. Now in the flash of the last 2-3 years we have news of burger flipper bots, self checkout lanes, wheeled server bots, and now nursing mechs and even the portable Watson physician assistant. The advancement and thus pressure from these developments will only increase in the next 8-10 years. Considering them I don’t think the assumption of the service sector as the safe last backup for displaced workers is sufficient any longer.

    Regarding the new economy as a form of ancient clientage, I wonder about the broader social political implications of that, and what that will do to our image of a democratic society.

  14. Sandgroper
  15. I dont have enough knowledge to make predictions about what solutions will work or what disaster may come, and there seems little consensus in this comment thread either, but can we predict what society is more likely to do better in the crisis? I mean, even if we dont know what the solutions will be, can we make a guess about where the solutions are more likely to come from? I would like to think we can..that a relatively open society like the US will do better (whatever better is) than, say, China or Pakistan. Or is it more likely that solutions will actually emerge from wherever current models are NOT so powerfully rooted? Or is this as hard to predict as the actual course of events?
    Just curious.


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About Razib Khan

I have degrees in biology and biochemistry, a passion for genetics, history, and philosophy, and shrimp is my favorite food. In relation to nationality I'm a American Northwesterner, in politics I'm a reactionary, and as for religion I have none (I'm an atheist). If you want to know more, see the links at


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