The Pricing of Everyday Life ELI COOK (CLIMATE CHANGE WILL affect the basic elements of life for people around the world," warned the executive summary of the sevenhundred-page Stem Review, a 2006 report widely regarded as the largest and most complete economic analysis of climate change ever undertaken. "Hundreds of milHons of people could suffer hunger, water shortages, and coastal flooding as the world warms." Gontinuing, the report cautioned in the very next paragraph that "if we don't act, the overall costs and risks of chmate change will be equivalent to losing at least 5 percent of global GDP each year, now and forever. If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20 percent of GDP or more." For us modems, the report's effortless shift from human suffering to GDP probably seems entirely obvious, as we have become accustomed to the notion that GDP—a statistic which adds up the monetary prices of all goods consumed—is an accurate measure of human progress and prosperity. It is only when one takes a few extra moments to think about such assumptions that the questions begin to emerge. How do economists price hunger pangs, flood damage, and global disaster? In most instances, the answer is by means of "cost-benefit analysis." Since the 1980s, all major health and environmental regulations implemented by the US govemment must, by law, undergo a costbenefit analysis. The bureaucratic need for a balancing test that can determine whether a govemment project or regulation is worthwhile has led to the pricing of not only the future of the planet, but just about everything: the average American is wifling to pay $257 to save the bald eagle from extinction, $208 to save the humpback whale, and $225 to drop ten pounds. Each IQ point that a child loses due to lead poisoning is worth $9000. The recreational value of Hell Ganyon in Oregon is $900,000. Excessive alcohol drinking costs the American economy $185 billion each year. Surfing the web while at work costs 109 lio • RARITAN $63 billion. Finally, a human life today is worth $9.1 million—up from $6.8 million under the Bush administration. When "productivity" measures such as wages or profits are unavailable, cost-benefit analyses price everyday life using one of two valuation techniques: revealed or stated preference. Stated-preference valuations are based on a survey of people. A long list of questions, such as "How much would you be willing to pay to decrease your chance of dying tomorrow by five percent / save the spotted owl / spend a day fishing in Golorado's Blue Mesa Reservoir?" usually do the trick. Some economists, however, believe that people need to put their money where their moutli is. As a result, they examine people s revealed preferences by using price statistics instead of interviews. For example, tlie US government calculated that a human life is worth $9.1 million by comparing the wages earned by low-risk jobs (let us say garbage men) with those of a higher risk (skyscraper window cleaners). Since these wages, economists argue, were set by rational actors in an efficient labor market, they already take into account all the pros and cons of both jobs: the bad smells, the nice views, and the chance that you might die. As a result, economists believe that if you neutralize all other variables the wage difference between tlie low-risk and high-risk jobs can be used to calculate how much Americans are willing to pay for their lives. As these examples indicate, markets don't price everything— but economists do. This is, in fact, the whole point of cost-benefit analysis: in instances when noncommodified "externalities" are present, economists believe that policy makers should mimic the market, pricing even those externalities that are not directly bought or sold— like nice views or bad smells. Economists find tliis fruitful because they believe that, once externalities have been taken into account, prices can serve, thanks to tlie wonders ofthe market and the rational behavior ofthat hypothetical construct, economic man, as pieces of information that encapsulate within them all the pleasures and pains of mankind. In short, tliey believe money prices to be synonymous with value. This is also why they use GDP as an indicator of social progress and productivity. ELI COOK • 111 Numerous critics have challenged these assumptions from a range of different ethical, mathematical, environmental, pofitical, philosophical, and logical standpoints. As a historian, I'd fike to take a different approach in this essay. Instead of questioning whether money prices can or should be used as the measure of value and prosperity, I explore why economists have become so invested in the belief that they are. What stories have economists told in order to inject social meaning into prices? Why do they do SQ? While there are innumerable examples to choose from, I will focus here on Sir Wilfiam Petty's seventeenth-century "pofitical arithmetic," which was the first attempt in history to price everyday fife. In the tumultuous social dislocation, pofitical stmggle, violent conflict, and not-so-primitive capitafist accumulation that pervaded seventeenth-century England, it was the dramatic upheaval in the Engfish countryside that first provoked Petty's pricing endeavor. Due to the growing European market for grain and woolen goods, Engfish landholders had come to recognize the potential profit in transforming subsistent plots, marshy fens, and peasants' commons into privately owned, staple-producing farms. Unable to control freehold peasants' labor or their use of the commons, Engfish landholders consequendy confiscated, consofidated, and enclosed large tracts of land. In a long and complex social process that peaked in the sixteenth and early seventeenth century, miUions of freehold peasants lost their rights to the fruit of the land. In their place, a profit-oriented tenant farmer rented out and ran the consofidated farms, paying the now landless peasants subsistence wages. By the restoration of the crown in 1660, seventy-five percent of Engfish lands were enclosed in such a manner, and England was awash with pamphlets on agricultural improvement advising marketoriented farmers how best to maximize the amount of grain or wool they could grow and then sefl in the market. With a human labor force that could be hired and fired, agricultural improvers began to imagine both the peasant and the beast of burden as abstract, mobile 112 • RARITAN units of capital investment that could be allocated in different ways. In order to allocate these mobile units of labor efficiently, the autliors of these improvement tracts invented productivity measures, or as one of them put it, "a general computation of men and cattels labours: what each may do witliout hurt." Their works were soon filled with calculations as to how many acres one man could plow in a day if it was "stiff ground" (2.5 acres), "light ground" (4 acres), or a "rough uneven meadow" .(1 acre). Adamant supporters of Sir Francis Bacons empiricism, these agricultural improvers went on to form the "Hartlib circle"—an intellectual meeting group led by Samuel Hartlib and dedicated to tlie pursuit of scientific, statistic-based husbandry. Among tlieir members was William Petty, a man who would devote his life to "Political Adthmetick," which I will allow him to define: The Method I take to do this is not very usual; for instead of using comparative and superlative Words, and intellectual Arguments, I have taken the course (as a Specimen of the Politiciil Arithmetick I have long aimed at) to express myself in terms of Number, Weight, or Measure; to use only Arguments of Sense, and to consider only such Causes, as have \asible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites, and Passions of particular men, to tlie Consideration of otliers. It was this Baconian drive for cold, hard "measures" tliat would eventually lead Petty to price everyday life. At first, however. Petty did not price things very much. In fact, he was highly skeptical of moneys ability to measure intrinsic value. Asked to survey and value the lands that had been confiscated from Irish peasants following Ohver Gromwells conquest of Ireland, Petty s personal papers reveal that he did not believe that land prices or rent payments could serve as an accurate measure of a land's value. Referring to these money figures as. merely the "casual and circumstantiall" price of land. Petty sharply distinguished such market transactions from natures "intrinsic fertility," which, he argued, could only be quantified by counting. ELI COOK • 113 among other things, the increase over time in hay, grain, and animals per acre. In a later work, he even suggested that the only way to measure truly the productive value of land and labor would be to perform an experiment: a calf would be placed for one month in a field and aflowed to graze. Then, on the same field, a man would be placed to work the land for one month as well. The difference in the increased weight of the calf and the amount of wheat the man produced would reveal the true productive capacities of each. In a letter sent to King Gharles I shortly after Petty had completed his survey of Ireland, the latter requested that the crown establish a "land registry" (which Petty would naturally head) in order to conduct such experiments and measurements. In his later writings in the 1670s, Petty made clear what the main objective of his proposed land registry had been. "All things ought to be valued," he wrote, "by two natural Denominations, which is Land and Labour; that is, we ought to say a Ship or garment is worth such a measure of Land, with such another measure of Labour." Unconvinced that money should be used as the standard bearer of value—yet an admirer of money's ability to make any two things commensurable—Petty thought that finding an altemative unit with which to measure land and labor "was the most important consideration in political oeconomies" since it would allow one to be compared to the other "as easily and certainly as we reduce pence into pounds." Petty never got his land registry, nor did he ever devise an altemative unit for measuring the productivity of man and nature. Instead, in a rather sudden about-face, he began to price everyday life. In what are, quite possibly, the two most important passages in the history of classical economic thought. Petty explained in 1662 why the congealed contributions of labor and land inherent within every consumable good could in fact be measured with money prices: Suppose a man could with his own hands plant a certain scope of Land with Com, that is, could Digg, or Plough, Harrow, Weed, Reap, Carry home. Thresh, and Winnow so much as the 114 * HARITAN Husbandry of tliis Land requires; and had withal Seed wherewith to sow the same. I say, that when this man hath subducted his seed out of the proceed of his Harvest, and also what himself hath both eaten and given to others in exchange for Clotlies, and other Natural necessities; that the Remainder of Com is the natural and true Rent of tlie Land for that year. After using corn to measure the value of land and labor. Petty then went on to ask: How much English money tliis Com or Rent is vvortli? I answer, so much as the money, which another single man can save within the same time, over and above his expence, if he imployed himself wholley to produce and make it; viz. Let another man go travel into a Countrey where is Silver, there Dig it. Refine it, bring it to the same place where the other man planted his Com; Coyne it, &c., tlie same person, all the while of his working for Silver, gathering also food for his necessary livelihood, and procuring himself covering, &c., I say, the Silver of the one, must be esteemed of equal value with the Com of the otlier: the one, being perhaps twenty Ounces and the other twenty Bushels. From whence it follows that the price of a Bushel of this Com to be an Ounce of silver. Like most revolutionary ideas, Petty's was simple enough to be convincing yet just ridiculous enough not to have been thought of yet. If one used the same amount of labor and land to grow com and mine silver, he argued, then the produce each yielded would be of equal value. As a result, the productivity of an acre of farm land could be measured in silver coins. In two short paragraphs, Petty had explained why money prices could serve as units for measuring value. The rather convoluted story Petty told, however, was not the kind of empirically based case that one would expect from a man who hated "intellectual arguments" and preferred "only such causes as have visible foundations in nature." After all, Petty did not head to Bolivia with a clock to measure how fast the Indians could extract silver ELI COOK • 115 from the mines of Potosí. With no land registry or ability to quantify the world using alternative units, however, such a story had to be created, precisely because of Petty's desire for the empirical and scientific. Despite his misgivings regarding the relationship between market prices and value, in the end Petty priced labor and land because when he sought out data from which to construct his political arithmetic, what he saw around him was a burgeoning capitalist society where labor and land were being quantified into wages and rent. Like every statistician. Petty was a slave to his data, and the only information available that could make the world consistently quantifiable was price. Suddenly, the world was Petty's quantifiable oyster: envisioning England as a total market society in which all the fruit of mankind's labor had been sent to the marketplace to be sold. Petty concluded that if the English had annually consumed £40 million in goods, then £40 million of marketable commodities must have been annually produced. Anticipating the concept of Gross Domestic Product by almost three hundred years, it was the first time anyone had ever decided to measure the wealth of a nation by aggregating the prices of all the commodities consumed. Now able to equate rent prices and land thanks to his new theory of value. Petty argued that nature's contribution to the total wealth of England could be calculated by adding up all the rent payments landholders received each year. Subtracting this from the £40 million of total wealth. Petty declared that English laborers produced £25 million of total wealth a year. This came out to nine pounds a year per laborer or seven pence a day. He spent much ofthe remainder of his career using these figures to price such events as the Great Plague of 1665 (£7 million), unemployment (£2.3 miUion per year), and Sundays (£4.5 million per year). Petty even priced dinnertime, arguing that if laborers only "dine in one hour and a half, whereas they take two," the wealth of the nation would increase by £250,000 per month. Unlike his initial views, which required the creation of a land registry, Petty's new approach was easily quantifiable because it mirrored the actual income distribution between wage laborer and Il6 • RARITAN landlord in English society. By measuring the productivity of land according to the rent payments landholders received. Petty conflated what people earned with what they produced. In doing so, he presented an image of a society where laborers and landholders were naturally compensated for their contributions to the production process: landholders received their rent payment since that was the productive value of the land; workers received their wage payment since that was the productive value of their labor. Without royal decrees or parliamentary laws, the market had somehow managed to ensure that each received what he had in fact earned. Over a century before Adam Smith would speak of the self-regulating system of "perfect liberty," Petty had naturalized market exchange and prices simply by quantifying what he observed. The notion that social activity could be measured in prices was, of course, quite useful to profit-maximizing landholders, merchants, and manufacturers. But here we must be careful not to conflate economists with capitalists: even though Petty was fixated on the notion of maximizing Englands productivity, his main objective was never to accumulate capital but rather to systematically quantify the world. Yes, his pricing of everyday life and naturalizing of markets dovetailed nicely with the goals (and legitimization) of capitalism. But unlike Petty, merchants, landowners, and investors did not usually believe that prices refiected some true, intrinsic value. Men of business made their money by seeing within each worker, piece of land, or commodity two prices: the rate at which they hoped to buy and the rate at which they hoped to sell. They had a far more cynical and operational view of prices, imagining them as malleable constioicts that could be affected and manipulated. After all, if prices were to always reflect true value, then where would profits come from? The businessmen's goal was not to naturalize the market—but to beat it. They were the Machiavellian princes of this economic modernity; Petty and the economists who followed him were the priests. Speaking of medieval princes and priests, a quick glance at economic quantification in feudal England demonstrates just how ELI COOK • 117 radical Petty's pohtical arithmetic was. Not long after William I conquered Britain 1066, he commissioned a massive survey to discover "what dues he ought to have by the year." The final product was an enormous statistical survey known as the "Domesday Book," called so for its intimidating abihty to settle any pohtical dispute. A typical entry, regarding a manor in Witshire, read hke this: Vigot held it [in the time of King Edward] and it paid geld for 5 hides. There is land for 4 ploughs. Of this 2 hides are in demesne. There are 3 villans and 5 bordars and 1 slave with 3 ploughs. There is meadow 6 furlongs long and 2 furlongs broad, and pasture 2 furlongs long and as many broad. It was worth 100 shilling [in the time of King Edward], now 4 pounds. As the final hne in this entry indicates, prices existed in feudal England. But in contrast to Petty's pohtical arithmetic, monetary price was not viewed as the central unit through which society could or should be measured. Eor example, it was the "hide"—not market prices—that was used to calculate the enormously important land tax known as the "geld." Defined as the amount of land needed to support a single household, the hide measured the value of land in a quintessenüally feudal manner—according to the number of fam-' ihes it could sustain. Tbe Domesday Book was no outher. Roman common law similarly distinguished between quanti venire potest (what the article can be sold for) and venim pretium (the true price). Suspicious of the hoarding, manipulating, and asymmetrical, bargaining power that often went along with mercantile pursuits and cash exchanges, market prices were, as Petty himself had noted in his early writings, often described in antiquity and medieval times by adjectives such as "arbitrary," "accidental," "circumstantial," or "unjust." As a result, they were rarely used to measure wealth. They simply were not seen as a rehable reflection of value. In equating productivity with income, value with money, and the wealth of a nation with the aggregate prices of all commodities produced. Petty pushed market prices from the margins of society to the center. In doing so, he Il8 • RARITAN began a long philosophical process that would transform prices into evaluators of everyday life, and markets into nature. Petty priced everyday hfe because he wanted economics to be mathematical, empirical, and scientific. In a burgeoning market society where land and labor were constantly being priced, this necessitated a narrative that would align money prices with value. While the stories economists have told in the past 350 years have constantly shifted due to an array of historical and intellectual developments, in one respect their message has remained consistent: whether it was Adam Smith's theory tliat competition tugged market prices toward "natural prices" or Stanley Jevons's notion that prices were a reflection of one's subjective experiences and desires, economists have continued to create narratives (they call them "models") to fix market prices to a natural, true, real value. Today, Petty s theory of value is all but obsolete. Witli fiat money as the norm, his tale.of the silver mines is utterly irrelevant. What is more, his agriculturally inspired notion that value is determined by the amount of objective, corporeal chunks of nature and labor widiin each commodity no longer resonates in today's consumer-driven culture of abundance, individualism, and choice. When commodities were bales of wheat or bags of wool, Petty's theory seemed reasonable. In our branded world, where profit margins depend far less on a commodity's production costs than on its advertisement's production value, it is Jevons's "neoclassical" approach linking value to psychological desires diat has won the day: stated-preference valuations used in cost-benefit analyses today assume that the value of anything can be measured by calculating the amount someone is willing to pay for it. Revealed-preference valuations work from the same assumption, only in reverse: since markets are efficient and people are rational, price statistics can reveal how humanity values anything. This subjective-centered, neoclassical revolution has been approximately 150 years in the making. But, as in Petty's case, if we trace tlie history of this intellectual development we discover that at ELI COOK • 119 its heart lay the desire of economists to transform their discipline into an empirical science. In 1871, Jevons pubhshed the work that has become one of the foundations of contemporary economics. In it he wrote, I hesitate to say that men will ever have the means of measuring directly the feelings of the human heart. A unit of pleasure or of pain is difficult even to conceive; but it is the amount of these feelings which is continually prompting us to buying and selling, borrowing and lending, labouring and resting, producing and consuming; and it is from, the quantitative effects of the feelings that we must estimate their comparative amounts. Continuing, Jevons's tone shifts from hesitation to hope: We can no more know nor measure gravity in its own nature than we can measure a feeling; but, just as we measure gravity by its effects in the motion of a pendulum, so we m'ay estimate the equality or inequality of feelings by the decisions of the human mind. The will is our pendulum, and its oscillations are minutely registered in the price lists of the markets. I know not when we shall have a perfect system of statistics, but the want of it is the only insuperable obstacle in the way of making Economics an exact science. Jevons understood that if economics was to turn itself into an "exact science," it would need to create models and theories that allowed pohcy makers to use price statistics, to measure the feelings of the human heart. Thanks to efficient market theories, revealed-preference models, marginal utihty, cost-benefit analyses, and GDP, Jevons's future fantasy has become today's reahty. This pricing of everyday hfe has had, and wifl continue to have, massive ramifications in our lives. After the Stern Review priced the disastrous consequences of global warming, the executive summary offered hope: "The costs of action—reducing greenhouse gas emissions to avoid the worst impacts of chmate change—can be hmited to around 1 percent of global GDP each year." Invest 1 percent 120 • RARITAN of GDP—save tlie world. Sounds like a no-brainer, but it isn't. By pricing die future ofthe planet as if it were a capitalized investment, the Stem Review actually proved that stabilizing atmospheric carbon wasn't such a great business opportunity after all. As the economist Stephen Marglin has calculated, the rate of return on Stern's proposed investment in carbon stabilization was somewhere between 3.5 percent and 5.75 percent a year. Gompare that to, say, McDonalds Gorporation's performance the past few decades, and the Stem Revieio's conclusions become self-defeating. Based on cost-benefit criteria, society would be much better off diverting its resources to fiipping more burgers. Such a conclusion to a widely heralded, seven-hundred-page report is preposterous, but it should not be surprising. Seeing the world solely as a capitalized investment, believing tliat market prices naturally encapsulate the human condition, tliinking tliat tlie future is not only quantifiable but predictable—all these ontological assumptions are misguided, naive and extremely dangerous. Life is not a capital asset, nor do I know anyone, even among the few economist friends I have, who cares for it to be one. Prices, meanwhile, can never refiect all tliat we hold dear for an assortment of reasons this essay can only begin to consider. In Petty s case, even if nuggets of gold did somehow magically represent beads of sweat, his objectification of value still leaves no room for human individuality, spirit, or feeling. At the other extreme, subjectifying the human experience through market transactions, as economists often do today, is just as misleading, since people never fully have a say in what they choose to buy or sell. Whether it is historical inertia, cultural norms, coercive power relations, or simply a fiood of beer commercials, we are social animals—not, as Thorstein Veblen once mockingly put it, "a lightning calculator of pleasures and pains who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift about tlie area, but leave [us] intact." It is no coincidence that economists since tlie early eighteenth century have loved to use examples of Robinson Grusoe to explain their models' assumptions: in order to price everyday life one needs ELI COOK • 121 to chop up the social into atomized bits, leaving every man on his own fittle island. In what may be an apocryphal story, it is said that Alberi Einstein had a sign in his office stating that "not everything that counts can be counted, and not everything that can be counted counts." If the story was invented, it's not a very good one, since it ceriainly does not take a genius to reach this conclusion. Despite all the attention given to GDP these past few decades, Einstein's sign still seems conventional, trite, a truism. That is because most of us are not economists. In order for our day-to-day fives to be vafidated, we do not need value and market prices to be afigned. We simply do not have a dog in that epistemological fight. But economists do, whether they fike it or not. As I hope the example of Petty has iflustrated, even critically thinking economists often resori to the pricing of everyday fife in hopes of being "rigorously" empirical. Otherwise, heaven forbid, they might become sociologists, anthropologists, or historians. No, economists might not be able to change. But that does not mean we have to fisten to them. Copyright of Raritan is the property of Rutgers University, Raritan and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.