The Values That Economics Cannot Measure
Divorced, excommunicated, 25 years old with three children, my mom never felt sorry for herself. She told me time and again during my boyhood that we should appreciate everything we had. Take nothing for granted.
Three weeks of Air Force survival training in the rainy mountains of Colorado taught me how easily I had taken the simple comfort of a dry, warm bed for granted. Watching my infant son turn blue, with nary a breath or a heartbeat, taught me how quickly I had taken him for granted (he survived). We take things for granted all the time, don’t we?
My profession of economics is especially guilty, obsessed with numbers and measures of tangible things. We like to quantify jobs, prices, and interest rates. We track their levels, growth rates, variance, and more.
But we economists haven’t figured out how to measure prosperity, not really. Income doesn’t factor in happiness or pride. There’s no accounting for the value of women’s suffrage or civil rights in gross domestic product. In 1892, the British playwright Oscar Wilde quipped that a cynic is one who “knows the price of everything, and the value of nothing.”
Economists are cynics. My mother was not.
As for fathers, I had two very different men who raised me. One was rich, one was getting by. My father was president and owner of a small manufacturing company in Michigan, which grew to be worth more than $5 million under his leadership. My step-dad worked in a grocery store. Only in retrospect do I appreciate that I grew up on both sides of the “two Americas.”
According to their wages, my father was 10 times the man my step-dad was. Let me tell you from experience: Income is not the full measure of a man.
My step-dad’s home was humble, to be sure, without air conditioning or a microwave or a computer. But what he had in spades was priceless: integrity, joy, a sense of honor. Despite their intense work ethic and frugality, he and my mom struggled to make ends meet. That’s the reason I wanted a PhD in economics and became obsessed with measuring prosperity.
This month, I am embarking on a nationwide study of how Americans value the hidden things in our society.
The traditional approach to valuing a good is simple: Its price is the intersection of supply and demand. In introductory econ textbooks, price is defined as the measure of the average consumer’s “willingness to pay,” as in: How much cash are you willing to pay for a clean gallon of water? And the answer nationwide is: Half a penny.
My study flips the question around by asking, “How much cash are you willing to accept to live without running water in your home for one month?” No showers. No toilets. No dishwasher. A survey of “willingness to accept” responses allows us discover hidden values for things that aren’t bought or sold in the market such as children’s health, clean air, and even civil rights.
I’m not the first person to ask these kind of questions, but previous surveys have been dogged by a fatal flaw. Are people telling the truth? Prices don’t lie because people aren’t making educated guesses when they buy groceries. They’re playing with real money. However, a normal survey suffers from what we call “hypothetical bias” because lazy or dishonest answers have no consequence.
I found a way to fix that.
My survey involves a cash prize of $100 for the 100 participants who provide the best answers. What do I mean by “best”? That’s a secret that will spoil the scientific rigor of the study, but anyone who is willing to participate will learn once inside the survey contest.
Will you help a skeptical economist understand hidden values? If so, all you need to do is visit this website: www.hoover.org/kanestudy. It runs all weekend, but responses can be submitted till the end of the day, Monday, Sept. 9. And when all the results come in, we are going to reveal something remarkable about not only what is priceless in America, not only about the worth of things we take for granted, but whether the two Americas are so different after all.