Scarcity of Positional Goods is the basis for Aesthetic Socialism

Aesthetic Socialism is the concept of viewing politics with aesthetics as one of the basic principles. I discussed the concept at length in my essay Aristocratic Aesthetic Socialism and show with Matthew Pegas and Giovanni Dannato. Aesthetics signifies one’s class and social status and influences and manipulates peoples decisions and economic output. Extreme inequality in aesthetics shapes the core foundations and social mechanisms of a society.

In politics the debate about the distribution wealth is primarily about the distribution of monetary assets and how to make basic needs widely available. Due to mass production and future trends in automation we are now entering a Post Scarcity Economy where many goods and services can be provided to a larger segment of the population.

We have the wealth, resources, and technology to provide basic services such as food and electronics that can be mass produced. In the future healthcare could be provided cheaply due to automation but the goods that are positional will remain increasingly scarce.

Positional Goods according to Lion of the Blogosphere “are goods and services that people value because of their limited supply and they convey a high relative standing within society.” These resources are positional because they are ranked in value to other resources.

WILL KENTON explains in Investopedia that “if economic growth were to grow to the point where positional goods became affordable and widely available, the positional goods would lose their exclusivity, and likely their value. These would fail to become positional goods, and other positional goods likely would take their place.”

These goods don’t just function as ways to signify one’s status but are unique in value because of their aesthetic qualities.

Examples include architectural characteristics of communities, the culture and demographics of a neighborhood, and goods that are scarce because of  their unique aesthetic quality or high level of craftsmanship.

The objective of Aesthetic Socialism is to increase the supply of positional goods and make them less positional. It is not socialism in the sense that it would distribute positional goods evenly among the masses but rather incentivize the production and manage the usage and distribution to dis-incentivize waste.

Without the increase in supply of positional goods “the cost of desirable positional goods have been increasing faster than the rate of inflation and faster than the rate of growth of the median person’s income. This is a consequence of the top 1% (and other topmost percents) getting a larger share of the wealth, which they then use to buy up the best positional goods,” as Lion points out.

The main reason why trickle down economics fails to work is because “if everyone becomes richer, then the price of positional goods go up proportionately. Tax cuts or economic growth will never make positional goods more affordable” says Lion.

Revenue from tax cuts is usually not invested in creating positional goods but rather buying up goods such as real estate, only increasing the costs and contributing to other issues such as wasteful land usage. Extra homes sit empty much of the time and the dependence upon a large underclass to maintain them also places a burden on positional goods.

At the same time, the call to redistribute wealth does not address the problem either if it does not address the supply and distribution of positional goods.

John V.C. Nye is correct that “rising incomes and population growth will disproportionately drive up the price of such homes, frustrating those with dreams of upward mobility but ultimately causing the wealthiest to pay more for locations.”

However Nye’s point of positional goods as taxation because “the richest (or most ambitious) must work harder and pay more for virtually the same goods as yesteryear while their productive investments (necessary to stay on top of the income distribution) benefit the entire economy” does not take into account the impact that elite consumption for positional goods drives up the costs for the middle class and upper middle class.

Lion adds “that the majority of money spent by the middle-class (which I generally consider to be the class of people who have at least a college degree) and above is on positional goods.”

Management and incentivization of the production of positional goods are more important than taxation levels. Even if middle income to moderately wealthy people see their income levels rise, there is a high level of economic strain caused by competition over scarce positional goods.

Lion points out that “Economic growth” and tax cuts are of no benefit to people who can’t afford to move to “good” neighborhoods, such things just increases everyone’s nominal wealth and the cost of the “good” neighborhood goes up proportionally and remains just as unaffordable as it was before.”

In major urban areas where positional resources are either scarce or there is high competition, middle class and moderately wealthy people will either pay a premium for these resources or leave the region for a place where positional goods are more accessible.  The only way to address the strain on the middle class is to increase the supply of positional goods.

Real Estate is a scarce good in a post-scarcity economy Lion points out that “there is a fixed quantity of land. So if other people get richer, but your income stays the same, the price of land will go up and become less affordable to you.”

John V.C. Nye’s statement concurs that  a “good location is the quintessential positional good because it is important both for its relative prestige and its irreconcilability.”

Amelia Josephson writing about severely cost-burdened cities for Smart Assets points out that “20.3% of LA households spend 50% or more of their income on housing costs,”  and in New York City ” 17.7% pay between 30 and 50% of their income in housing costs. In New York, the supply of housing, particularly affordable housing, hasn’t been keeping up with the influx of new residents.”

While land is a finite resource, Lion adds that “housing shouldn’t be that scarce (as long as there are enough natural resources to build houses) because you can always build more and squish them together and build vertically. But the reality is that in many places in the United States, whether because of zoning or because of a long lag between increased demand and the creation of housing to meet that demand, houses behave more like a fixed-quantity good just like the land beneath them.”

Lion gives an example of “an 11-unit brownstone in Brooklyn Heights being converted into a single $18 million-dollar mansion.” His point is that “Eleven families of more modest means are prevented from living in a desirable neighborhood because of a single rich family,” and most likely most of those extra rooms will sit empty most of the time.

While land itself is a scarce resource in many urban areas the quality of architecture is also a position good because people pay a premium for a certain aesthetic. Historic architecture is positional because it is of limited supply and people will pay a premium for a brownstone in Brooklyn or Victorian in San Francisco.

Highrises are desirable and zoning severely limits the supply of new construction. Other aesthetic qualities include access to walkable urban communities as well as parks and open space that are limited to certain locations.

Aesthetically pleasing and innovative architecture and urban planning is a positional good. If restrictions on new development, zoning policies, and overall lack of creativity in urban planning limits the supply, then what remains will continue to be in high demand.

Besides real-estate, the demographic factor of living in a “good” neighborhood is also a positional good as Lion states that “the worst part about being poor (in modern-day America) is that you are forced to live in the same neighborhood as other poor people, and send your kids to schools full of other poor kids.”

The subject of demographics is usually not listed in economic articles about Positional Goods but a major factor, even more so than geography or architecture, is people strive economically to make it into certain demographic groups.

Factors include striving for social status, having access to economic opportunities,  a preference for a specific cultural or demographic group, and overall high quality of life. The inhabitants of an area are as much of the aesthetic as the natural and man-made surroundings.

Lion Points out “that people cluster together, and where people cluster together (like in cities), the price per acre of land is a lot higher. And where rich people live, land is more expensive than where poor people live.”

In large urban areas such as New York or LA where real estate is scarce, large portions of the metropolitan region are taken up by a large under class. The economic model of late capitalism is dependent upon a large supply of cheap labor to exploit.

This benefits the wealthy economically but also takes up large amounts of real estate and overburdens public schools. The increased size of a large under class acts as a tax putting added pressure on the middle class and moderately wealthy to pay a premium to live in a limited number of desirable locations. Therefore wealth invested in real estate is used to escape rather than innovate.

The limited supply of nice neighborhoods and schools creates a limited number of slots for the middle and upper classes. Because class is more dependent on access to positional goods rather than monetary wealth, the shortage of positional goods leads to, not only extreme income inequality but a demographic decline among the middle and upper middle classes. As those people will either have less children or leave the region.

The issue of NIMBYs restricting housing in desirable urban and suburban areas only further exacerbates the issue. There are legitimate aesthetic reasons to be concerned about development but the impact of restricting new housing in desirable locations limits a crucial positional good. While the growing underclass puts further strain on the limited number of desirable areas.

Lion points out that the reason Liberal California the poverty capital of America is a combination of “massive immigration” increasing the size of the underclass and “zoning policies that prevent more housing from being built.”

The end results of these policies is the growing income inequality combined with demographic decline of middle to upper classes. The scarcity of positional goods leads to declining birthrates as well as people leaving urban regions for the suburbs creating more sprawl. Suburban sprawl is aesthetically unappealing and lowers the overall quality of life.

This creates a never ending cycle of demographic decline with the more people striving to join a limited number of desired demographics groups,  the added scarcity of slots causing more demographic decline which further limits those demographics people strive to join.

Besides economic inequality being shaped by the scarcity of positional goods the current economy disproportionately rewards Values Transference rather than the creation of positional goods.

Lion explains that “traditional economics assumes that people get paid for creating value. But in the real world of the present, if someone makes a lot of money, it’s most likely that they are not personally creating value themselves, but rather they are in a position to transfer value created by other people to themselves. For example, the CEO makes a huge amount of money based on value created by other people, even though many CEOs actually make stupid decisions that drive their companies into bankruptcy.”

Lion adds that “one of the reasons why libertarians oppose taxing rich people is because they say we are “punishing” them for creating value, and the taxes might discourage their value-creating activities. But if they are really just transferring value, then who cares if they are punished for doing something that’s actually of negative value to society, and who cares if they are discouraged from doing more of that activity?”

Those who profit off of Value Transference are also those who disproportionately consume positional goods rather than create. The free market is not sufficient because it rewards value transfer and those who tap into the largest market, such as Walmart, rather than those who create positional goods of aesthetic value.

The objective of Aesthetic Socialist policies must be to look into ways of incentivizing the production of positional goods of aesthetic value. All policies in regards to economics must take these factors into account when it comes to rewarding aesthetic creation as well as policies that impact demographic trends.

The goal of Aesthetic Socialism is not just about improving the aesthetics of a society. But also addressing the supply of positional goods which take up a large portion of one’s income and will continue to become more scarce in a Post Scarcity Economy. As these factors are taken into account, society will become more aesthetically dynamic and more cohesive as positional goods are shared among a larger portion of the population.