Institutional Constraints on Choice
Vinod Anand | 23 Feb 2012

Since economists make rather free with the word 'choice', the reader may excuse some rather obvious remarks that serve to remind us how existing institutional restrictions influence and, indeed, reduce effective choice.

OVER THE decision most vital of all to his well-being, the epoch and society wherein he lives, the individual alas is unable to exercise any choice whatsoever. Born into a certain social and physical milieu, born into a certain home, much of the pattern of his life follows as a matter of course. Many of the consequences that arise from nature and nurture, from inherited natural endowments and from upbringing, he will be powerless to influence.

Within limits determined by these consequences he is, later, free to choose an occupation but, having adopted it, the material choices that he exercises through the market are thereafter somewhat narrowly conscribed. If, for example, he becomes a stockbroker or bank manager in the city, his choice of clothes, car, residence, even his choice of food and entertainment, will not differ markedly from that of his colleagues.

The conventions followed by friends, associates, and customers will continually weigh with him unless he is ready to forfeit their good opinion of his character and soundness upon which his success depends.Such trite observations take on significance as the cost of keeping in fashion increases with economic growth. Women's fashions are only a more familiar case in point. Popular articles assert that women positively enjoy being in the fashion, though their pleasure, one imagines, may sometimes be traced to a dread of being seen out of fashion.

But for most women it would surely be less costly and less exacting to be subject to fashions that changed less frequently. The choice of the pace of fashion, surely a crucial choice, is not open to the individual, only to society as a whole where, at present, it is left entirely to commercial interests to exploit to the limit of technical feasibility. The fashion industry is the prime example of an activity dedicated to using up resources, not to create satisfactions, but to create dissatisfactions with what people possess ? in effect to create obsolescence in otherwise perfectly satisfactory goods. Though it has been doing this for ages, it is the increasing frequency of fashion change, and its extension to many articles other than clothes, that is disturbing.

Following the lead of United States manufacturers, we are extending the pace of fashion to automobiles, furniture, hardware and electrical goods. Any practical proposals to regulate the rate of change of fashion in clothes and in durable goods may attract a great deal of public support. The would-be pace-setters would, of course, be deprived of approved opportunities for self-display, but the potential saving in national resources should more than suffice to compensate them.Turning to the range of goods in the economy, though producers use up resources in creating markets for their goods, they are not permitted to produce any goods they wish for which a market might be created. Existing institutions place limits also on the kinds of goods that will be demanded.

A wide variety of drugs, weapons, pornographic literature and entertainment, at present illegal and therefore costly, would be readily available at competitive prices in the absence of existing prohibitions. Men and women might agree to sell themselves or their children into slavery for certain tangible benefits if the law permitted the institution. In a country having a conscript army, the government would have no difficulty in promoting a flourishing market in draft tickets, the richer young men effectively buying their way out of national service to the ostensible benefit of both buyer and seller. Again, if speed limits on our roads were limited to a maximum of 15 miles per hour peoples choices would change radically not only in respect of automobiles used, and mode of travel, but also in their choice of residence, in their use of time, and in our design of towns and cities and roads.

If the penalty for accidentally killing pedestrians were not merely a fine, as at present, but hanging by the neck, one could predict with confidence a vast change-over to public transport, a voluntary though drastic diminution of speeds, and a quite magical reduction of deaths through traffic accidents. Too much attention has been paid to the concept of expanding choice and too little to the power of continuously changing legislation. In altering, for better or worse, the kind of choice that people make.Finally, let us turn to the restrictions placed on a man?s choice of occupation by existing technology and institutions. In seeking to establish the optimal properties of a perfectly competitive economy the traditional liberal economist would argue that just as the individual chooses, as consumer, to buy various amounts of the goods offered by the market, so also, as the owner of productive services, he is guided by market prices in offering various amounts of his services in different occupations.

This symmetry is obviously forced on the analysis in the interests of elegance and mathematical convenience. It may be that in some imaginary economy a person could spread his work among a variety of occupations on the familiar equi-margjnal principle in the same way as he is deemed to spread his income among the goods offered to him by the market. But modern industry is not so accommodating, and for the superficially good reason that if a man were allowed to choose in this way ? choosing each day to put a few hours in this occupation and a few hours in that ? the productivity of the economy could not be maintained. The employee has therefore to choose his work subject, for the most part, to the condition that he conform exactly to the working week of the firm.In the narrow growth sense, one in which social welfare is measured directly by output, such a constraint on working hours may appear necessary.

But if the economist is interested in social welfare rather than in physical output he must concern himself with the burden of this constraint on the worker's choice in a modern economy that is almost wholly consumer oriented - and, indeed, the private enterprise system is generally vindicated by reference to the individual's satisfaction qua consumer while neglecting his satisfaction qua worker. It is, of course, easy to forget that the individual may have occupational wants independent of technical progress since, over time, he is seen to adapt himself to whatever technological means are available. Though we suppose him, at any moment of time, to have a set of preferences among existing occupational opportunities, there is no use in comparing his preferences between newly adopted and obsolete methods inasmuch as he is rapidly deprived of any choice of the latter. The economist has no means of discovering what changes in welfare, if any, result from a change-over from one technology to another.Yet something may be said. The tedium of repetitive work in modern industry, even that of watching a screen and turning knobs, is easy to underestimate by those fortunate to escape such tasks.

One has only to reflect on the efforts and the expenditure incurred by large numbers of people in combating the monotony of their daily occupation, their growing eagerness to engage in all manner of hobbies in their spare time, their desire to recapture a feeling of craftsmanship or creativity ? one has only to reflect on these things to discern opportunities for social gain in making existing industrial arrangements more flexible. Nor need one contemplate a clear choice between the existing highly organized system of production and the extreme alternative of uninhibited choice in respect of hours of work and variety.

One need only admit the clear possibility of social gain, after full allowance has been made for the consequent reduction in physical output, of extending to people of all ages a much wider choice in the hours of work, a wider geographical choice in the location of smaller units of industry and, above all, a wider choice in the methods of production. Experiment on such lines is obviously inconsistent with any criterion of technical efficiency: some material remuneration would have to be sacrificed in the conscious pursuit of ways and means of deriving positive enjoyment, stimulation, and companionship in one?s daily occupation. Indeed, this proposal may be recognized as an instance of the separate facilities concept for promoting welfare. Not everyone would wish to sacrifice efficiency, and therefore earnings, in exchange for more of these other desirable factors.

But there should be enough people capable of enriching their lives by such arrangements to justify the experiment.Measured by the conventional index of finished goods, the implementation of such proposals may well involve negative economic growth. That an increase in social welfare ? an increase in the range of effective choice - may be brought about by negative economic growth may appear paradoxical, if not infuriating, to some growthmen. But that is because they are interested in social welfare only in so far as it seems to justify economic growth, and not the other way about, as they sometimes pretend.