Did you know that the first Matrix was designed to be a perfect human world? Where none suffered, where everyone would be happy. It was a disaster. No one would accept the program. Entire crops were lost. Some believed we lacked the programming language to describe your perfect world. But I believe that, as a species, human beings define their reality through suffering and misery. The perfect world was a dream that your primitive cerebrum kept trying to wake up from.
– Agent Smith, in The Matrix
In the Hurt Locker, William James (played by Jeremy Renner) defuses bombs in Iraq. The movie opens with a harrowing display of 15 bomb defusions on the screen (and the implication of hundreds more), after which the audience sees James return to his family in Texas where he is shown in an ordinary grocery store shopping with his wife and infant son.
But this is not quite the end of the movie. In fact, in the last 30 seconds, James is back in Iraq – voluntarily – defusing another bomb. He chooses to return, leaving his family behind and putting himself in mortal danger. Why? In the economic orthodoxy, this would be explained away as his preferences:1)See Nevinomics, Article 3-2: Source and Value of Our Preferences. he prefers the danger to being at home. But this “explanation” is merely a restatement of the question.
Nevinomics believes that failing to grasp this critical Reality about People – the Hurt Locker Effect – is one of the major gaps in our approach to modern economic policy. As people become richer and more productive (and advanced economies are able to fulfill most people’s basic material needs), it is not surprising that what we want from life changes.2)Many thinkers have discussed this in much more detail and much more richly than I do here (Maslow, for example, was one of the early writers about this). And, of course, we have terms from sociology (e.g. ‘the ennui of modern life’) that capture this concept very well. Maslow figured this out a long time ago.3)A Theory of Human Motivation, A.H. Maslow. Originally published in Psychological Review, 50, 370-396 in 1943. Accessed August 5, 2015. So the economy must do different things for people now than it did 50 or 100 years ago.
People are diverse. This is both wonderful and maddening.4)To which any introvert dealing with a world of seemingly shouting extroverts can attest. Yet the Hurt Locker Effect illustrates that there are 3 needs shared by most people to a greater or lesser degree (and that are integral for Flourishing). These needs are:
Purpose – as Agent Smith says, where there is Utopia, there is death. People need a purpose in life to Flourish.
Change – living creatures change. No change means death (which makes one wonder what the equilibrium concept in economics is useful for).
Edge – We can have a long debate about this from an evolutionary biology perspective, but any casual observation tells you that many people (not all) seek out situations and risks that create adrenalin – energy. In a society where going into mortal combat to protect one’s tribe is not normally required, but may be, we must find other ways to create Edge for those who need it to Flourish. Interestingly, Edge is antithetical to the the orthodoxy that combines diminishing marginal utility and utility maximization. In the latter world, you would never seek out highs and lows, nor engage in highly risky behaviour. But in the real world, we find constant striving for Edge, including the self-destruction of many people’s careers through illicit affairs. Why we would want to protect a human tendency that can sometimes be destructive is complicated, but relates to the fact that sometimes a culture/community/economy needs Edge, or some people with Edge, to survive and thrive.
These are uncomfortable topics for economics. So should we care about these concepts? Nevinomics believes we have to because Purpose, Change, and Edge are so central to Flourishing (Expansion of Flourishing) that if we ignore them in the design of our economy and society, we are ignoring what really matters. All 3 of them need to be examined in depth, and we need public policies and economic structures that allow people to find the combination of Purpose, Change, Edge (PCE) that is right for them. In this article, we make some observations about Edge.
The dirty little secret about business is that it’s not really about the money. From the outside, it can seem that way, but the money is simply a system of rules of the game and scorekeeping. For many in senior positions, business is about exactly these dimensions: Purpose, Change, and Edge. On a daily basis, Edge is particularly critical, as business at the senior levels is a complex game involving large numbers of people, money, and resources. The dimensions of play are wide, the number of potential moves infinite, the stakes – seemingly – high. This game is to chess as chess is to checkers.
For some, the game also involves building something socially useful – a product or a business. So the Edge can involve Purpose. But it doesn’t have to.
Of course, lots of people pursue the Edge on stages that do not necessarily affect large groups of strangers. Downhill skiers literally pursue the Edge, where winning requires the physical ability and courage to be on one’s ski edges at precisely the right speed, at the right part of the turn. Too little edge or courage and you are not competitive. Too much, and you will crash. Perhaps fatally. But no one else dies with you (generally).
Edge in business5)And politics, of course. is different than in skiing, however, because the captains and generals6)Of course, WWI shows dramatically the impact of people playing the Edge game with, in this case, other people’s lives. Many upper-class generals on both sides managed to have quite a comfortable war (if I read my history correctly) while an entire generation of young men serving in more junior ranks were decimated. in business control large amounts of society’s human, physical, and financial resources. The GFC (Great Financial Crisis) illustrates perfectly the potential for collateral damage.
In the 1990s, those running successful retail banks had Edge envy. They were not investment bankers. They earned a good (great) living, but not telephone number compensation. Success depended on reliability, stability, lending to stable real estate or funding working capital. Investment bankers were swaggering. Whether it was the internet, nanotechnology, massive privatizations, or the opening of cool, exciting places like Brazil and China, investment bankers had the edge in Edge. But retail bankers had one huge advantage: a steady supply of low-cost deposits with which to speculate. And with deregulation of the financial industry, they had their chance. The end results are well known and have been discussed in other Nevinomics articles and extensively elsewhere, and so will not be repeated here.
Globalization is also an outlet for Edge. We can have a long and vigorous debate about the pros and cons of globalization. But I do not think there can be much debate about the enormous amount of fun and Edge that those at the top of globalization game are enjoying (and, for better or worse, I count myself among this group). Flying from continent to continent; participating in the boom in China, Africa, India, and Brazil; hobnobbing at WEF (and all while putting an unconscionable amount of CO2 in the air, unfortunately) – all provide Edge, Change, and even (illusory or not) Purpose. But this again is a game reserved for the few. Even middle-ranking earners are generally sitting in their home countries with (possibly) rising incomes but with increasing instability from outsourcing, new competitive threats, and changing technologies; they have no ability to affect what is happening. For those at the bottom, there seems to be virtually no chance to get Edge from globalization – just uncertainty.
So what does all this mean for public policy? Simply this: perhaps even more than wealth, broad-based Flourishing requires that Purpose, Change, and Edge (PCE) are widely distributed goods. And just like wealth, we need to be concerned if PCE are more and more concentrated in a fewer hands (as might be the case with Edge). So, in a world where most material comforts are provided in advanced countries, policy-makers need to be concerned about the supply and distribution of higher-order goods – PCE. Of course, Maslow and many others told us this a long time ago.
How we might ensure PCE is more widely distributed will be explored further in articles in the Nevinomics’ other sections.
Photo: El Neill
Footnotes [ + ]
|1.||↑||See Nevinomics, Article 3-2: Source and Value of Our Preferences.|
|2.||↑||Many thinkers have discussed this in much more detail and much more richly than I do here (Maslow, for example, was one of the early writers about this). And, of course, we have terms from sociology (e.g. ‘the ennui of modern life’) that capture this concept very well.|
|3.||↑||A Theory of Human Motivation, A.H. Maslow. Originally published in Psychological Review, 50, 370-396 in 1943. Accessed August 5, 2015.|
|4.||↑||To which any introvert dealing with a world of seemingly shouting extroverts can attest.|
|5.||↑||And politics, of course.|
|6.||↑||Of course, WWI shows dramatically the impact of people playing the Edge game with, in this case, other people’s lives. Many upper-class generals on both sides managed to have quite a comfortable war (if I read my history correctly) while an entire generation of young men serving in more junior ranks were decimated.|