Kudonomics

Ross Gittins reviews the book, The Economy of Esteem;

"THE three ruling passions in human life are often said to be the desire for property, the desire for power and the desire for prestige or status or esteem.

The effects of the first desire are charted in conventional economics. The effects of the second are studied in political science - and in history.

But the effects of the desire for esteem have escaped the sustained attention of social scientists. It's almost as if there were a conspiracy not to register or document the fact that we are, and always have been, an honour-hungry species.

And that's surprising because the man credited as the father of economics, Adam Smith, was a great believer in the attraction people felt for esteem. Consider this quote:

"Nature, when she formed man for society, endowed him with an original desire to please and an original aversion to offend his brethren. She taught him to feel pleasure in their favourable, and pain in their unfavourable, regard.

"She rendered their approbation most flattering and most agreeable to him for its own sake; and their disapprobation most mortifying and most offensive."

His belief in the power of esteem led Smith even to argue that the reason we seek out wealth, the reason we want to have more and to spend on what he called baubles and trinkets is that, by achieving conspicuousness in such possessions, we win distinction and esteem.

"It is the vanity, not the ease or the pleasure, which interests us," he wrote.

But this view that it's an interest in esteem that fuels the desire for material goods and services largely disappeared with the development of mainstream economics.

Most economists came to assume that people naturally sought accumulation and wealth, and only the odd renegade, such as Thorstein Veblen, stood against the trend. He argued in 1905 that in the pursuit of accumulation "the struggle is substantially a race for reputability on the basis of invidious comparison".

But now an economist, Professor Geoff Brennan of the Australian National University, and a professor of politics at Princeton, Philip Pettit, have tried to rectify this deficiency with their book, The Economy of Esteem, published by Oxford.

They propose the development of something they call "kudonomics" - the study of the laws governing the system of kudos or renown. "There is an economy in property, an economy in power and there is also, so we believe, an economy in esteem," they say.

Economies are systems where scarce resources are allocated among competing parties. In particular, they are systems of allocation that have an interactive or aggregative dimension. That is, what we all do as individuals adds up to total patterns, which then feed back into things that determine what individuals are able to do.

Most economic study focuses on goods of an action-centred kind: goods that result from the things people do or want to do. But goods such as esteem come into being because of what people think and feel about the person esteemed. That is, they're attitude-centred rather than action-centred.

Esteem can't be given away or traded in the usual way because there's no way I can buy the good opinion of another or sell to others my good opinion of them. But esteem and "disesteem" are still goods that are allocated in society according to more or less systematic determinants.

Economists may say their conventional theory takes account of esteem in the form of reputation - say, the reputation for delivering on time or for always giving high quality - which is accepted as an important resource for someone in the market.

But esteem doesn't necessarily involve market reputation because it may often be given for characteristics that are irrelevant to market behaviour. And market reputation doesn't necessarily involve esteem. It's often equivalent to brand recognition, for example, which can be purchased by a new producer or given by consumers without any connection with esteem."

Here's Tyler Cowen review of the book.