GDP, Unemployment, and the ‘Quaternary Society’

By Bret Swanson
March 19, 2014
General Foundation

On February 28, the Bureau of Economic Analysis revised fourth quarter U.S. GDP growth downward to just 2.4% (from an initial estimate of 3.2%). For 2013, the economy expanded just 1.9%, nearly a point lower than the lackluster 2.8% growth of 2012. Five years after the sharp downturn of 2008-09, we are still just limping along. 

Granted, the stock market keeps making all-time highs. That is not insignificant, and in the past rising stock values often signaled growth ahead. 

Another important consideration weighing against depressingly slow growth is a critique of our economic measures themselves. For instance, does GDP accurately capture output—let alone value, technical progress, and overall well-being? Lots of smart commentary has been written on how technologies that improve standards of living often don’t show up on official ledgers, from anesthesia to the massive consumer surpluses afforded by information technology. In a new book entitled, GDP: A Brief but Affectionate History, author Diane Coyle examines some of these shortcomings of using GDP as a measure. And although income inequality is said to have grown, consumption inequality has, by many measures, substantially fallen. These are all true and interesting and important points, worthy of much further discussion at a later date. 

For now, however, we still must pay the butcher, the baker, and the aircraft carrier maker with real dollars. And the dollar economy is not growing nearly fast enough. 

We’ve sliced and diced the poor employment data a thousand ways these last few years, but one of the most striking figures is the fall in the working portion of American men between the ages of 25 and 54. Looking at this cohort tends to minimize the possible retirement and schooling factors that could skew the analysis. We simply presume that most able-bodied men in this range should be working. And the numbers are bad. As Binyamin Appelbaum of the New York Times’  Economix blog writes: 

In February 2008, 87.4% of men in that demographic had jobs. Six years later, only 83.2% of men in that bracket are working. 

Are these working-age men not working because they are staying home with children? Is it because they don’t have the right skills for today’s economy? Is the economy not growing fast enough and creating enough opportunities? Are they discouraged? Have our policies actively discouraged work in favor of leisure, or at least non-work? 

The polymathic thinker Herman Kahn suggested another possibility back in the 1970s with his book, The Next 200 Years. Kahn initially described the basic phases of economic history. First, a primary economy emerges that focused on extraction — agriculture, mining, forestry. A secondary economy of construction and manufacturing then arrives. This was followed by a tertiary economy of services, management, and knowledge work.

But Kahn went further, pointing toward a “quaternary society,” where work would be beside the point and various types of personal fulfillment would rise in importance. Whereas the primary society conducted games against nature, the secondary society against materials, and the tertiary society against other organizations, people in the quaternary society would play “games with and against themselves…each other, and…communities.” 

He said that quaternary activities would look a lot like leisure or hobbies. They would include obsessions from gourmet cooking to hunting and outdoor adventures to public campaigns. Kahn predicted that many of us in the future would see this as “stagnation.” 

If any of you have checked out twitch.tv, you might think Kahn was on to something. Twitch.tv is a website that broadcasts other people playing and commentating on video games in real-time. It appears to be an entirely meta activity. But twitch.tv is no tiny fringe curiosity. It is the fourth largest consumer of bandwidth on the Internet. 

Is twitch.tv responsible for millions of American men dropping out of the labor force? No. But the Kahn hypothesis is, nevertheless, provocative and worth thinking about.

The possibility of a quaternary economy, however, depends in some measure on substantial wealth. And here one could make a case either way. Is it possible the large consumer surpluses of the modern knowledge economy allow us to provide for our basic needs quite easily and, if we are not driven by other ambitions or internal drives, live somewhat comfortably without sustained effort in a conventional job? 

Perhaps some of this is going on. Is America really so wealthy, however, that large portions of society—not merely the super wealthy—can drop out of work and pursue hobbies full time? This is unlikely. There is evidence that many Baby Boomers near retirement, or even those who had retired, are working more than they’d planned to make up for lost savings. Kahn’s quaternary economy will have to wait. 

I say we won’t know the answers to many of these questions until we remove the shackles around the economy’s neck and see what happens. If we start afresh with a simple tax code; substantially deregulate the healthcare, education, energy, and communications sectors; and remove other barriers to work, investment, and entrepreneurship, will more than just 83% of working-age men continue choosing to work? And will GDP, as imperfect a measure as it is, limp along around 2%? (Charles Murray, presenting a new paper at a recent Hudson Institute roundtable on the future of American innovation, hit us with some seriously pessimistic cultural indicators. More on that next time.) 

I doubt it. I don’t think human kind has permanently sloughed off its internal ambition toward improvement, growth, and (indirectly) GDP generation. I think new policy and new optimism could unleash an enormous boom.