The Monetary Illusion

The Monetary Illusion


If money is not the enemy, if money sometimes helps us attain a safer second-best or third-best or fourth-best life, it must be acknowledged that money does contribute to our confusion. Part of the mystery of why we go so wrong in life lies in the “illusion of money,” by which I mean the illusion that the price of things tells us much about their true value.

       What is fascinating about money is that we all know that it does not offer a meaningful picture of genuine wealth. For instance, is it not indisputable that much of what is most important to us—our children, our reputation, the love of another—has no price. This is a commonplace, known to all at the first instant of reflection. Yet, the moment we get up from the easy chair, we seem to set aside our reflections. Or perhaps, even while sustain­ing them, we cannot break away from thinking about wealth in monetary terms. We use money to measure both the income and the wealth of indi­viduals and society. We use monetary measures to consider how income and wealth are distributed, and we use it to make comparisons with respect to standards of living—between different individuals, or between countries, or between two points in time—whether in our own life, or that of society as a whole.

       We suffer from at least two kinds of blindness. First, we tend to measure the value of things in terms of their price; and second, we tend not to see the value of things that have no price. Let us consider these in turn.




The Difference Between Price and Value



Economists long ago pondered what initially seemed paradoxical, that some of the most valuable commodities, such as air and water, have little monetary value, while others, such as diamonds, are worth a great deal. In struggling with this anomaly, the distinction was made between exchange value and use value. Exchange value means the value that something has in virtue of its being exchangeable for some other item of value. We make these exchanges in the market, and in market economies we exchange labor and commodities for money, and money for commodities. Since money is the common element into which things are exchanged, exchange value can be measured by the amount of money that something exchanges for. The term we give to this is “price.” When people inquire about the price of an item, they are asking, “How much money does one need to exchange in order to get it?” As economists came to greater clarity about these matters, explaining and predicting the prices of commodities emerged as a central task of economics.

       Use value, on the other hand, was seen to mean the actual contribution to human welfare that the commodity makes. Everyone realized that when diamonds are compared to water, water is low in exchange value and high in use value, whereas diamonds were relatively low in use value but high in exchange value.

       For a time, it was a challenge to economic theory to explain how this could be the case. Ultimately, the explanation was found in understanding that the price a commodity exchanges for is determined not by the importance of the commodity as a whole (e.g., water) but by its importance on the margin (e.g., one more gallon of water). Further, what was important on the margin was the cost of supplying one more unit, as well as the value to the purchaser of having one more unit.

       Thus (assume that water is the only liquid), while one might exchange most of one's possessions for a gallon of water if none were available at all, one would give very little for an additional gallon if one already had plenty. Similarly, since an additional gallon can be brought to the market at very lit­tle cost, one need pay only a small price to induce the sale of an extra gallon. Whereas, if we reached a point at which bringing the extra gallon to market was very expensive (although water as a whole may remain inexpensive to provide), unless the price of water was at that high price, the last ga1lon would not be brought to market; and the same for the next to last and so forth. So, in order for any quantity of water to come to the market, its price must rise to the cost of supplying the last gallon. Thus, despite its almost infi­nite use value, water exchanges for little because it is abundant (we have lim­ited desire for more) and because more can be obtained rather inexpensively.

       What is sketched above is the solution that economists in the nineteenth century—the so-called marginalists, such as Alfred Marshall— found to the seeming paradox that things of great value (in use) could have little value (in exchange). But what is most interesting here is this: first, both before and after the paradox was explained, no one was in doubt as to the phenomenon—­that there is no fixed correspondence between the market price and use value. And, second, explaining the paradox made no difference. We still contin­ued to view the prices of things as adequate measures of their value, even though we knew they were not. Such is the hypnotic quality of money.

       Suppose then that there are two people, and that they are in possession of exactly the same items, except that the second person has two of every item, whereas the first has only one. Thus, the second person has two houses, two cars, two blue coats, two refrigerators full of food, and so forth. The first per­son has only one house, one car, one blue coat, and one full refrigerator.

       Insofar as we are measuring the extent of a person's assets by summing up the prices paid for the various items (or the price he could get if he sold them), the second person has twice the wealth of the first person. Having no doubt as to the difference between use value and exchange value, we know that this is nonsense. Moreover, if rather than two houses the person had a house twice as big, and rather than two cars, a car twice as long, it should be apparent to us that he still doesn't have twice the wealth of the first person. We know it is nonsense to believe that he does, yet we do so nonetheless.

       The extent to which we suffer from such illusions is remarkable. It reflects something very deep about our culture, about how thoroughly our vision of things has been molded by markets and the exchanges that occur within them, and about how much of our life activity is organized around bringing things to market and bringing things back from market—most centrally, bringing ourselves (our labor, our skills) to market and bringing back home, in exchange, money or commodities.

       Permanently dispelling the idea that the price you pay for something reflects its value is almost impossible. Nonetheless, it may help to reflect on the following:


  • While the price of the physical necessities is often low and in some cases zero, their value is almost infinite. If they were in short supply, a billionaire would pay almost all he had for the food and water that you consume. Yet with these items of near infinite worth, having more than is necessary, or having fancy versions, is worth little more than having that which meets our needs.
  • With respect to many of the commodities that we have, they would in fact be fantastically valuable (in monetary terms), if it weren't the case that they can be produced cheaply. Thus, con­sider your old car. Perhaps it is worth $2,000—but if, in fact, cars could not be made cheaply, or not made at all, your old car would be worth tens of thousands. If it were the only car, it would be worth millions. The same for your camera or your mirror or a pair of scissors, or a pencil or a piece of paper. Under some cir­cumstances, these could be the most sought after, most amazing, most valuable (in monetary terms) items in the world.
  • Whenever we buy something, we are doing so because we have judged that the thing is worth more to us than the price that is asked for it. That's the whole point of exchanging the money for the item. Sometimes this gap is enormous, and not merely with respect to necessities. Consider that it may only cost you $50 to buy a dog that you would not sell for thousands. What was the value of the $1 of painkiller that relieved the worst headache you ever had? How much was the best novel you ever read worth? The bicycle you had for ten years as a child—how did its value com­pare to the $50 paid for it?



The Value of Things That Typically Have No Price


In the 1960s and 1970s the women's movement called attention to a certain blindness with respect to the value of women's labor in the home. The basic problem was that neither the existence of women's labor nor its contribution was recognized, neither within the family nor within the larger society. In response an effort was made to “price out” women's labor at home, to point out what it would cost to hire someone to perform all these tasks. To move in this direction, to focus on monetary equivalents in order to make us appre­ciative of value, is both wrongheaded and quite understandable. It is wrong­headed because the price we might have to pay for the labor is not a good measure of its value; and it is understandable because being blind to all else but monetary terms, what other language can we understand?

       Unfortunately, neither pointing out the monetary illusions we suffer from, nor placing monetary values on that which is not monetized, seems to make a great deal of difference. We are so thoroughly embedded in our ways of seeing that probably nothing short of being reborn in a totally differ­ent culture would really free us from the hold that money exercises upon our minds.

       Still, we must try.                                                                 

       Consider a familiar item without a price, the human body. What is it worth? Well, if we are talking about a dead body, then perhaps very little. Medical schools, as a rule, don't have to pay for the cadavers they teach from; they are donated free of charge.

       But this is not our question. Our question is not about the value of an extra body, but rather about the value of one's own body. We are not really con­cerned with market prices, since those reflect only: the supply and demand of that which is actually brought to market. What we really are interested in is the value of one's own body to the person himself.

       Were it possible, what would someone pay to retain one's body, or perhaps to replace it? That, of course, depends on its condition and the condition of the replacement. Would an eighty-five-year-old billionaire with a life expectancy of five years pay a billion dollars to exchange bodies with some­one who had fifty years to live as opposed to five? How many twenty-five ­year-olds with healthy bodies would rather have a billion dollars plus an eighty-five-year-old body? No doubt some, but not most people. I'd expect most people would not, for virtually any amount, exchange their bodies for significantly older, significantly less healthy bodies. I would imagine that most eighty-five-year-old billionaires would give virtually all that they own to be able to trade for a young, healthy body. Our body—our thinking, feel­ing, living body—is our natural wealth. It is our great property. It is from this property that our flow of experience emerges. It is this that enables us to enjoy all we enjoy, to feel all we feel. It is this that enables us to do and to be.

       In this wealth, with the exception of people with illnesses, we all start out relatively equal. Each of us is given a gift that is worth billions. However, we are cursed at the same time; it is a worth that starts to dissipate the moment it arrives. It flows away from us at a steady rate, like a hole in the bank account—365 days are lost every year. There are some things we can do to make it last a bit longer, but one way or another, we end our lives com­pletely broke.

       One of the reasons that very few people see things this way is the simple fact that there is no technology for exchanging bodies. Medical science can, however, replace body parts, even vital ones, but not entire bodies. Even with respect to vital body parts, markets are largely undeveloped or underground—one cannot go out and buy a young heart.

       But we are likely not far from technologies that will allow us to exchange full bodies. Let us say that we can do this, retaining perhaps enough of the brain so as to ensure continuity of memory and identity. Suppose then that body swaps between consenting adults become a real possibility. Under those conditions I expect that we would all be greatly more aware of the funda­mental equality of our present situation, as well as, ironically, of the fun­damental inequality; some will be buyers of sound bodies, and others will be sellers. Of course having (or occupying) a living body is not all much of a muchness—its, value can vary widely. Certainly a person facing only pro­longed captivity and torture might value his living body less highly than otherwise. There are always deeply troubled, saddened, and lonely persons for whom being alive has lost all value.

       Like all wealth, the wealth we have in our living body represents only the capability of what is good, in itself. Merely being alive is never sufficient for valued living. This wealth in our body is however necessary for any valued human functioning and experience. It is this dependence of all good experi­ences upon having a living body that imparts tremendous derivative value on whatever is itself necessary to sustain the life and health of that body. Thus, as noted, food, and water, and air, taken in the first increments without which life is not possible, are of extraordinary value to the individual, how­ever little they may cost.

       One implication, however, of recognizing the tremendous value of small amounts of life-sustaining necessities, and of the great wealth that we all have in our bodies, is that it seems to call into question the extent of the rela­tive differences in income and wealth of the rich and the poor. If the mar­ginal value of money declines rather rapidly, then the actual value of the goods possessed by the poor is substantially closer to that of those possessed by the rich than a comparison of market costs would indicate. (The use value of a liter of tap water that costs less than a penny may not be so vastly differ­ent than that of a liter of fine wine that cost 20,000 times as much; and that of a $50 bicycle may not be vastly different from that of a $30,000 car.) While this conclusion initially may be disconcerting, it takes on a different aspect when we realize that the transition we seek is not from poverty to wealth, but from poverty to simple living.


When Does Money Really Matter?


One clear circumstance where the income of the poor and the income of the rich differ enormously in value is when their income differences translate into differences in years of life. Clearly this is true in very poor countries where the life expectancy at birth of the rich and the poor is enormously dif­ferent. The poor may be exposed to infant mortality rates of 1 in 5 while the rich might face rates of 1 in 100. In terms of life experience, that means that if you are poor, there is a good chance that one of your babies will die, while this is a rare tragedy if you are rich.

       Consider the following table, which shows the relationship between per capita income and life expectancy for various countries in the world.


Table 8.1

   Country 1994 Per Capita                                  Life Expectancy

                                     GDP (PPP$)                            at Birth

       Luxembourg                   34,155                                  75.9

United States                        26,397                             76.2

Japan                               21,581                                  79.8

Canada                             21,459                                  79.0

Denmark                         21,341                                  75.2

France                              20,510                                  78.7

Australia                          19,285                                  78.1

Finland                            17,417                                  76.3

Ireland                             16,061                                  76.3

Israel                                16,023                                  77.5

Spain                                14,324                                  77.6

Mauritius                         13,172                                  70.7

Portugal                           12,326                                  74.6

Korea S.                               10,656                             71.5

Chile                                 9,129                                75.1

Mexico                             7,384                                72.0

Costa Rico                         5,919                                76.6

Brazil                                5,362                                66.4

Turkey                              5,193                                68.4

Poland                              5,002                                71.2

Jordan                               4,187                                68.5

Egypt                                3,846                                64.3



Table 8.1 (cont.)

   Country                   1994 Per Capita                Life Expectancy

                                      GDP (PPP$)                         at Birth

Morocco                             3,681                                65.3

Peru                                   3,645                                67.4

Congo                                2,410                                51.3

Senegal                              1,596                                49.9

Kenya                                1,404                                53.6

India                                  1,348                                61.3

Nepal                                 1,137                                55.3

Haiti                                       896                            54.4

Niger                                      787                            47.1

Chad                                      700                            47.0

Sierra Leone                          643                            33.6

Ethiopia                                 427                            48.2


Source: Human Development Report, 1997, United Nations Development Program.1


The table suggests a few generalizations:


  • Income matters. People in countries with higher average incomes tend to live longer.
  • Income isn't all that matters. There are some countries with modest income levels, such as Costa Rica, in which people live as long as in the United States, although incomes are less than one-quarter of our level.
  • Income level seems to matter less and less as income rises. Thus, comparing countries with less than $1,000 per capita income with those at about $5,000, there is a life expectancy gap of at least fif­teen years. But between countries at the $5,000 level (excluding Costa Rica) and those at the $10,000 level, the gap is around nine years, and comparing those at the $10,000 with those at the $15,000 level, the gap is only around four years. Between those at the $15,000 level and those at $20,000 it is approximately two years. Above the $20,000 level there seems hardly any relationship at all between average income and life expectancy.


       These, of course, are numbers for countries as a whole. They do not say anything about the differences within the country. Thus, we must not assume that for individuals within a country, higher income translates into longer life up to the $20,000 per year level, but no further. Unfortunately, data on the relationship between income and life expectancy are not abun­dant. One study that was done for Canada compared the life expectancy at birth of those in the top one-fifth of the income spectrum with those in the bottom one-fifth. It found that in 1986 the life expectancy difference was 5.6 years for men and 1.8 years for women.2 Income inequality in Canada is less than in the United States, and access to health care is greater. Thus, one would expect to see a somewhat bigger gap for the United States. One study of mortality in the United States for the period 1979-1985 concluded that, between the highest and lowest income groups, there was a difference for white men of about 10 years and for white women of 4.3 years.3 For all the races together, these differences would be greater. This general picture is supported by a recent study that compares life expectancy of Americans, depending on what county they live in within the United States. It found a gap of about fifteen years, ranging from a low of about sixty-five years to a high of about eighty years.4 This gap can at least be partially explained by differences in income, whether understood in its bearing on the quality of medical care available to low-income people or on the levels of homicide in the neighborhoods low-income people can afford.

       On the other hand, one should not jump to the conclusion that the only reason for the gap is that the things money can buy result in higher life expectancy. Part of the explanation for the gap may lie in lifestyle choices, such as smoking, which is more prevalent at lower income levels. In part people with certain problems (e.g., self-hatred) may be both destroying their health and destroying their careers. Sometimes the link between income and health emerges not because money can sustain health, but because people who have health problems (for whatever reason) can't earn much money, sometimes being unable to work at all. Thus, in assessing the contribution that having a higher income contributes to life expectancy, these differences in life expectancy should be viewed as somewhat overstated upper limits to the importance of income. The actual significance of higher income is no doubt less, though still quite real. 


Figure 8.1: Estimate of How Money Matters in the United in 1999



       In relating household income to life expectancy within countries, we can expect to find a structure similar to that found between countries: income matters, income is not all that matters, and there is a declining marginal benefit in life expectancy associated with each increment of income.

       While we don’t have precise figures, we can develop an informed picture of what the relationship looks like for the United States, again remembering that not all of the correlation is due to the effect that higher income has on health.

       There is a dear advantage to being born into a higher-income family. Measured in terms of life expectancy, this value is of diminishing significance as income levels rise. I would conjecture that it reaches zero somewhere around family incomes of $100,000, but is quite small well before that. This, of course, is a guestimate, but it seems plausible to me.

       That there is a declining marginal effect of income on life expectancy must be true. Thus, assume that at levels of family income of $10,000, each increment of $1,000 resulted in a gain in life expectancy of 1 year, and that at the $10,000 level life expectancy at birth was 65 years. If the incremental value did not decline, then at the $60,000 level of annual income life expectancy would be 50 years greater or 115 years long, and someone with $1,01,000 in annual family income would be living until they were 1,065 years old. Because we know that the effect of income on life span has reached approximately zero somewhere below life spans of 100, we know that the actual relationship can't look radically different than my guestimate.

       Whatever the exact relationship, it should not be viewed as fixed for all time. It might be that new technologies will emerge such that vast incomes will enable, for a select few, life spans of 100 years or 120 years. Under those circumstances, the marginal value of money at very high income levels would become extraordinarily high. One can go further and imagine a world in which very rich people simply don't die or suffer ill health at all because new, very expensive technologies keep emerging to sustain them. The point of such speculations is that it helps to remind us of what it would be like if money really did continue to matter at very high levels. In the present world, the marginal value of money in yielding a longer life rapidly declines toward zero as we reach high levels of household income.

       One way of responding to this recognition that beyond a certain point having more money doesn't significantly change life expectancy is to say, “Well that's a reasonable level to aspire to, and beyond that, perhaps it hardly pays to have more.” From the point of view of simple living, however, this might prove a disquieting conclusion-depending on what that “zero impact” level is. It is quite different if money stops contributing to a longer life span at $20,000 in family income than if it stops being useful at $100,000 or $200,000. Moreover, we know from the county-level studies that there are pretty big differences (ten to fifteen years of life) depending on where in the United States you live.

       But as stated earlier, the case for simple living does not depend upon showing that money makes no difference, any more than it depends on showing that consumption makes no difference in responding to complex human needs. Rather, the case for simple living is that high income is not necessary, either to live well or to live long. Thus, from the point of view of simple living, the conclusion is twofold: first, beyond a certain level (what­ever that is), having more money yields little benefit; and second, if one lives properly, one can attain those benefits at much lower levels of income.

       Here, what is important is the existence of the examples of countries like Costa Rica where, with an annul average income of about $5,000, people live as long as in the United States. As was noted above, in Canada, money seems to matter less when it comes to its contribution to life expectancy. We can have a society in which money stops making a contribution to longer life spans at very low levels of income. Such a society facilitates simple living, and is one of the objectives of a politics of simplicity.



The Value of Unpriced Personal Services


Beyond having a healthy body and a long life expectancy, in what else does human wealth reside? As we have seen, the Greek philosopher Epicurus identified friendship as that which was most important to human happiness. In this he was right. Clearly it is our relationships with other people that truly matter; having a loved and loving life partner, having good friends, having loved and loving children and relatives. We do not use the word “property” in these cases, nor do we speak of ownership. Yet we do some times speak of our friends and loved ones as our true wealth, or more commonly as our treasures or treasured ones.

       When we own something, we have certain specific property rights with respect to it: a right to use it as we please; a right to exchange it for something else; a right to sell it; a right to whatever of value emerges from it; a right to restrict the access of others to it; a right to give it away; a right to destroy it. These property rights are what constitute economic ownership.

       When it comes to other people, we have no such rights. Yet even with respect to physical property, such rights themselves confer little of economic value unless they can in fact be exercised. Where there is no expectation that such rights can be exercised, ownership is empty and, in market terms, will yield nothing. It is like being told that you own a million shares of stock in a gold mine, but no one will ever be allowed to mine the gold. The shares are worthless. Ultimately, what gives economic value to the things we own is the belief or expectation that such ownership can be transferred into a flow of things of value: in the first instance into a flow of income (through sale, rent, investment), and then, secondarily, into a flow of valued goods and services through the expenditure of that income. If not the second assumption, then the flow of monetary income is itself without economic value. Thus, it is the potential for transformation into a flow of valued goods and services that gives economic value to what we own.

       How then are our human treasures, our very most valued relationships, related to goods and services? To goods, hardly at all. But what we get from each other, when we have the right others is a unique flow of services. Con­sider, just three of the many things that the other, beloved and true, might provide:


  • partner: someone with whom you can act in concert, not just doing things together but having a joint project;
  • companion: someone with whom one can share the events of the day, someone who listens; who responds, who understands, who helps you see things more, clearly and more fully;
  • affection: someone who has genuine concern, someone who thinks of you, who does things that make you feel valued, who helps you see your own worth.


       The illusion of money is such that we self-blind ourselves toward these unpriced personal services, just as we do with unpaid household labor. How are we to move out of our restricted way of seeing economic life? How can we find human touchstones for thinking about political economy? How can we relate these “services” that friends and loved ones provide to the ques­tions of wealth and income? A starting point is to rethink the notion of personal services and home production.



Personal Services and Home Production


It has long been recognized that in nonmarket economies much of what is produced is never brought to market, but is intended for home consumption and thus falls outside normal income accounting. Thus, in some Third World countries one might find, as was once the case in the United States, that 70 percent or 80 percent of the population lives on small land holdings, and that most of what they produce is used by the family itself. Thus, a very substantial portion of their income comes not in a monetized form, but rather in the goods and services directly produced.

       In order to develop a more adequate picture of consumption and income and either to allow comparisons with more marketized economies or to make historical comparisons where the degree of marketization has changed, economists have sought ways of placing appropriate monetarized value (i.e., exchange value, price) on these outputs of home production. When the item in question is a good that is itself subject to market transactions (e.g., a kilo of rice, a bushel of wheat), or when it is a clear substitute for a market good, then it is easy enough to simply adjust the income and consumption figures for home production/consumption by using these market prices.

       When no market price exists, an effort sometimes is made to attempt an estimate of what such items might bring if brought to market, or alterna­tively to estimate what price the family might have to be offered so that they would place the item in question on the market.

       This all makes good sense. For most purposes our interest in income or consumption is about something more basic than the amount of money earned or spent by the household, and we can more adequately evaluate the household situation by making these adjustments for nonmarketed goods and services.

       What has not been generally recognized, however, is just how wide such a principle of admission truly is. For instance, if we have agreed, as I think makes sense, that the unpaid household labor and services of women (whether as Third World farmers or in rich country homes) are both part of the income of the household and part of what it consumes, then what basis is there for not similarly treating the very same services when members of the household provide them for themselves? Thus, if it is part of the household income when the homemaker cleans five rooms, it is similarly part of house­hold income if her husband cleans his own room, or cooks a meal for him­self. In short the entire array of household tasks that encompass housework, no matter who does them, are part of the home production of the unit, and part of what must enter into a full notion of economic well-being.

       But this only scratches the surface. When we think of housework we think of those activities that are somewhat arduous and often unpleasant. But this is not a defining characterization of work or of income-producing activities. Some people love their jobs; productive activity can be activity that would be done in the absence of external reward. Moreover, in wealthy economies much of our consumption expenditures are for leisure time activi­ties. In one society a person goes out to work, earns some money, and then provides to the family a TV for their evening entertainment, indirectly pay­ing others for a multitude of entertainment services; in another society an elder mesmerizes the children with ancient tales told around a campfire. This, too, is a contribution to family income. Once we accept the idea that goods and services produced or performed at home which substitute for market goods and services are part of family income and consumption, the range of activities that can be so viewed is wide indeed.

       Often when economists attempt to adjust income numbers for home production they limit themselves to those goods and services that have a clear market substitute. But this is a matter of convenience, not because having a market substitute is a necessary condition for having economic value. Often, the absence of a clear marketplace substitute for home activities, rather than impugning the value of the home activity, is an indication of the inability of the market to actually generate a viable substitute. The most graphic examples of this occur in the area of human relationships (e.g., spending time with friends). When the market tries to provide substitutes (e.g., escort services, prostitution), they are poor imitations of the real thing, yet their prices are often very high. The high prices paid reflect the high value placed by consumers on the real thing. And of those things for which it is near impossible for the market to provide a substitute (e.g., things that have value only when provided free of monetary motivation), one is dealing with things of the greatest value.

       Thus, the idea that a marketplace substitute is necessary to show that a nonmarketplace activity is of value has things backward. The economic history is typically that marketplace items take on their value by being substi­tutes (generally imperfect) for what is produced or done for self or others outside the market. Most of what is truly valuable are personal services, things that people do for each other or for themselves. We are drawn into market economies because of their vastly greater efficiency, even when it means that the services and, to some extent, the goods are less meaningful. Those areas that are of greatest value, or where the personal service relation­ships are unique, are typically areas in which market provision is so inade­quate that it is not undertaken at all.

       Consider then the differences between these two lists of personal services. In the first what most people seek (and need) is the engagement of a particular person who is of most importance to us:


  • intimate conversation
  • sex
  • dinner with the family
  • sitting on your father's knee
  • hearing what happened with your daughter at school today
  • having a holiday dinner
  • watching TV together
  • holding hands
  • having a game of catch with your son
  • playing chess with an old friend


       Most of what the very wealthy hire household workers to do does not fall into these categories. Rather, it is typically the case that others are hired when the personal service has some clear output that is the actual objective of importance, not the doing itself by a particular person. Though people differ, rich people hire others to do things such as these:


  • cleaning the house
  • painting the house
  • mowing the lawn
  • fixing the roof
  • paying the bills
  • cooking dinner
  • shopping for food
  • taking the car in for repair
  • driving the kids to soccer practice


       With respect to those person-centered services (the first list) in which the value of the activity resides in the fact that it was done by or with a particular other person (a friend, a parent, a loved one), the rich are no better positioned than the poor. Neither can hire someone else to do it for them. Yet it is these person-centered services, which markets cannot provide, that are of the greatest value.

       Moreover, the household is not the only nonmarket source of personal ser­vices; friends and other non household traditions also help meet our personal service needs. Thus, the market can be thought of as servicing a residue of needs that remains when we subtract those needs that are met by all non­market providers, be it oneself, others within the household, friends, and neighbors.

       With respect to simple living, the core wisdom is that the provision of person-centered services can under certain circumstances be, not a demand on a person's time, which subtracts from their ability to live well, but rather an opportunity for them to have a meaningful existence. It is to be able to do this that we need time.

       One of our deepest personal needs is the need to provide significant personal services to others. Having the psychological capacities to do that and having the social opportunities to use those capacities are among our greatest forms of wealth. Here we might remember Seneca's point that we want a friend because we need someone to sustain when he is in need. This is a major part of the contribution to our wealth that having children contributes—it gives us an opportunity to develop into our higher selves and to express those selves by giving to others.

       At bottom a successful form of economic life is one that figures out how to organize society so that we are each performing and receiving such services from each other. The existence of social roles that allow this to occur is a form of national treasure; these roles are the value infrastructure that make it possible for what is truly valuable in human life to emerge. Without know­ing what we do, we often sweep away such forms of human interaction in the name of a false efficiency.

       This may become more obvious when we remember that fewer and fewer workers are actually engaged in the production of commodities; most are providing services, and increasingly these are personal services. For the most part economic life is merely the exchange of services, whether within the marketized segment of life or outside.5

       Understanding the value of nonmarket services casts the familiar distinc­tions we make between opulence and simple living in a different light. It appears a distinction that functions only on the more superficial level of goods and marketable services. Once we reach down toward what is most valuable, the chance to give and the opportunity to receive those forms of personal services that are themselves nonmarketable, we find that the simple life can be inherently opulent if it is a life in which human bounty is con­stantly increased through giving to one another.


Simple Living: Wealth and Poverty


When a form of simple living is advocated, it is generally because it is believed that, by living simply on the material level one can live best in one or another of the nonmaterial dimensions.

       The concept of wealth can be captured within this same framework.

Being wealthy means having the diverse “assets” that allow us to live a life that partakes of diverse form of richness: material, intellectual, spiritual, aesthetic, and social.

       Once approached from this angle it becomes dear that genuine wealth resides in an extraordinarily broad range of “assets”:


  • in our social relationships, our friendships, loves, and families;
  • in our psychological capabilities, our abilities to build relation­ships, our ability to find meaning, to take aesthetic pleasure;
  • in our cognitive capabilities, our ability to read, to understand, to learn, to reason;
  • in our creative capacities, our ability to make something beautiful, to contribute something different;
  • in our political rights, our ability to be a citizen of one country rather than another, our ability to build our own life, according to our own lights;
  • in our historical and cultural legacy, in the riches of insight and experience that have been preserved from previous human lives and that are embodied in the great elements of human culture, be they forms of life and traditions, or great literature;
  • in our natural and man-made physical environments, the beauty of Florence, or the view from the back porch.


       Material wealth is not irrelevant, but its role is largely instrumental, largely in terms of how it facilitates our ability to access other forms of wealth. With clarity about genuine wealth, we may recognize how wealthy we really are (or in some cases, how poor) and, as a result, be better able to choose time rather than money, or make better use of both time and money.

       The life of graceful simplicity is not a life that one can live merely by deciding to do so. To live well is an art, and to live gracefully in time is to be particularly accomplished in that art. It involves drawing on our internal capacities for creativity, appreciation, and generosity; it involves having attained some substantial level of inner peace, of security of identity and freedom from anxiety. And it involves having the good fortune of an external environment in which there is good grass and clean water and an absence of predators, but mostly essentially having space that is abundant in beauty and friendship.





  1. The income figures are provided in terms of “purchasing parity,” which seeks to compare income levels in different countries based on what one can buy with them rather than through reliance on international currency exchange rates.
  2. R. Wilkins, O. Adams, and A. Branker, “Changes in Mortality by Income in Urban Canada from 1971 to 1986,” Health Reports 1(2)(1989): 137-74.
  3. E. Rogot, P. D. Sorlie, and N. J. Johnson, “Life Expectancy by Employment Sta­tus, Income and Education in the National Longitudinal Mortality Study,” Public Health Reports 107(4) (Jul-Aug 1992): 457-61.
  4. David Brown and Avram Goldstein, “Death Knocks Sooner for D.C.'s Black Men,” Washington Post, 4 December 1997, p. 4.
  5. We are actually well beyond the point in which most people are engaged in pro­viding services rather than growing or manufacturing things. In 1994, the num­ber of people employed in various occupations was as appears in the following table.


Total employed civilians                                                              123, 060

Managers                                                                          16, 312

Professionals                                                                     17, 536

Technicians                                                                      3,869

Sales                                                                                 14,817

Administrative support                                                                18,620

Household and protective                                                            3,066

Other service (food, health, cleaning, hair)     13,847                                                                                      

Transporters                                                                      5,316

Precision production, craft, and repair                                                     13,489

Machine operators, fabricators, and laborers     12,740                                                                                      

       Farming, forestry, and fishing                                                  3,629


It is only in the last three categories that we have people involved in making, growing, and building things. There were 29,858 (30 million) people with occupations of this sort in 1994, constituting 24.2.percent of those employed.

       When viewed by industry, independent of exactly what the people themselves might be doing, we get a similar picture.


                                                         1979                1992                                                         2005 (pro)


total                                                10,363             121,093                                                       147,484

Nonfarm wage and salary               86,491             107,888                                                       132,960

    goods prod excl agr                     26,461               23,142     23,717

       mining                                          958                    631          562

       construction                               4,463                 4,471       5,632

       manufacturing                         21,040               18,040     17,523

    service producing                        63,030               84,746   109,243

       transport, comm., util                 5,136                 5,709       6,497

       wholesale trade                          5,221                 6,045       7,191

       retail trade                               14,972               19,346     23,777

       finance, insur, real est                4,975                 6,571       7,969

       services                                   16,779               28,422     41,788

          business services

          health services




          auto repair

       government                             15,947             18,653     22,021

Agriculture                                     3,398                 3,295       3,325

Private households                          1,264                 1,116          802

Nonag self-emply/unpaid fam         7,210                 8,794     10,397


SAUS, 1995, table 654, Employment by selected industry with projection


As a percentage of the total, those employed within agriculture or goods-producing industries is projected to fall to 18 percent within a few years (from 26 percent in 1992). As recently as 1979, those in agriculture or goods-producing industries was 29 percent of the workforce. This is a totally different world than that, say, or 1920, when those in agriculture or goods-producing industries comprised 62 percent of the workforce, or 1850 when it accounted for 81 percent of the workforce (Historical Statistics of the United States Series D. 152-166 Industrial Distribution of Gainful Workers. 1820-1940).