When Colonial America Rose from ‘Albion’s Seed’ – The British Roots of the U.S.A.

During the colonial period in the 17th and 18th centuries, North America was predominantly shaped by four major waves of migration from England or Britain.

The United States of America is commonly considered ‘a nation of immigrants’. For a few centuries countless people from various different countries have been streaming into the U.S.A. to leave their old lives behind and to live the American dream. Indeed, from the point of view of many immigrants, this ‘land of opportunity’ has always been an object of desire.

Because of the coexistence of several groups from different cultural, ethnic and religious backgrounds, some famous concepts or ideas have emerged over time. One of them, in particular, stands out – namely the idea of ‘the melting pot‘. With respect to this notion, the U.S.A. is – in the words of the online dictionary Merriam Webster – “a place where a variety of races, cultures, or individuals assimilate into a cohesive whole.”

But both this idea (or myth) of the melting pot and the aforementioned commonly used phrase ‘nation of immigrants’ may distort that in the 17th and 18th centuries North America was predominantly settled by people from Britain (mostly from England) as well as their descendants. Their traditions and views, to a high extent, proved influential in shaping colonial American culture.

The historical impact of the British or English on America is described in detail by the American historian David Hackett Fischer in his book Albion’s Seed: Four British Folkways in America (1989). According to Fischer, the first of the four waves of British migration roughly started in 1629.

Prior to that, some people from England, needless to say, had already come to the Americas. By, in metaphorical terms, slowly planting ‘Albion’s Seed’ in the New World, they laid the foundations for the four major migration waves from Britain.

‘Albion’s Seed’ Was Slowly Planted – The Early English Ventures and Attempts at Settlement in the New World

After Christopher Columbus had ‘discovered’ America in 1492, English ships occasionally embarked on voyages to the New World. Despite these early voyages of explorations, there was apparently not so much enthusiasm for oversea expeditions to the Americas in the first years of the 16th century. However, during the second half of the 16th century England decided to venture into the New World, where the Spanish and Portuguese colonialists had found gold and silver.

Especially English merchants were interested in breaking the Spanish overseas monopoly since the vast land of America provided important resources and goods like sugar, tobacco, timber or tropical fruits. The merchants’ efforts received support from the English crown under Queen Elizabeth I (b.1533, 1558-1603).

Moreover, Queen Elizabeth I commissioned the famous English sea captain and privateer Sir Francis Drake (c.1540-1596) to attack Spanish ships and Spanish settlements at America’s Pacific coast. It should be added here that Drake as well as the English naval commander Sir John Hawkins (1532-1595) engaged in the slave trade in this period.

The queen also granted the explorer Sir Humphrey Gilbert (c.1539-1583) a patent to plant overseas colonies. Eventually, in 1583 he claimed Newfoundland for England. Therefore, Newfoundland became the first English possession in North America. Nevertheless, his attempt at colonization finally failed because he and his ships were lost at sea on the return journey.

Later, another famous Englishman, the explorer Sir Walter Raleigh (c.1554-1618), Gilbert’s half-brother, established an English settlement on Roanoke Island in 1585, which is today part of the U.S. state of North Carolina. Historical sources point out that this new area was named ‘Virginia‘ in honour of Elizabeth I, the ‘Virgin Queen’. Ultimately, the settlement only lasted a few years.

Although England’s early attempts to colonize parts of the New World failed, thirty English settlements were set up from 1580 to 1630. Among them was the first permanent English or British colony in North America at Jamestown (in present-day Virginia), which was founded in 1607.

Notwithstanding that the English population in the New World constituted only one of several groups there, the English people there paved the way for England’s future settlements and the migration waves from Britain. Metaphorically speaking, these English people slowly planted ‘Albion’s Seed’.

‘Albion’s Seed’ Began to Grow and Developed into ‘A City upon a Hill’ – The English Pilgrim Fathers and the Puritans

Quite a few textbooks about American history usually emphasize the Puritans, Reformed English Protestants. As their name ‘Puritans’ indicates, they intended to ‘purify’ the Church of England from – in their view – ‘Catholic’ practices. Their migration from the eastern counties of England took place between about 1629 and 1640. Subsequently, the Puritans settled Massachusetts Bay.

We should not equate these Puritans with the Pilgrim Fathers, as they were called, even though they also held Puritan beliefs. In general, the Pilgrim Fathers were religious ‘Separatists’ who broke away from the English state church, the Church of England. Hence, their main aim was to gain religious freedom.

Roughly speaking, they had exiled themselves to the Netherlands, before they sailed on the famous ship Mayflower to America. Finally, they arrived in Plymouth, Massachusetts, in 1620 – that is, prior to the start of the above mentioned Puritan migration wave. By the way, the ‘first Thanksgiving‘ can be traced back to the feast or harvest meal, which was given by the Plymouth settlers in 1621. Yet, in regards to this event, myths, legends and facts blur.

At any rate, the Puritans, by contrast, were still members of the Church of England. Only during the reign of King Charles I did they leave England in masses. From their viewpoint, the king felt attracted to the Catholic rites they hated. Alongside social and economic issues, the king’s attitude towards religion certainly was a contributing factor for the Puritan migration to America.

Adhering to the doctrines of Reformed Protestant Calvinist Orthodoxy and the belief in predestination, the Puritans were determined to establish a deeply religious and God-fearing community without interferences by outsiders. Furthermore, they strove to create a new Zion. To achieve their goal, the people in Massachusetts (or other parts of New England) followed strict religious rules as well as codes of law and order. Within the community,  the law was supposed to reflect biblical principles.

One of the leading figures of the English Puritan community, John Winthrop (1588-1649), alluded to the determination to establish a new Zion in Massachusetts by mentioning for the first time the well-known phrase “city upon a hill” in his sermon ‘A Model of Christian Charity’:

“For we must consider that we shall be as a city upon a hill. The eyes of all people are upon us…” (This quotation is derived from a few passages from the Sermon on the Mount in the Gospel of Matthew 5. 14-15.)

Winthrop, a longterm governor of Massachusetts Bay, wanted the Christian colony to serve as a model of order and morality for humanity.

Ever since, the phrase has been referred to the U.S.A. as a whole. It is an example of expressions concerning American exceptionalism. Unsurprisingly, several US politicians / Presidents have employed this phrase in their speeches.

If we use our metaphor again, through the migrations of the Pilgrim Fathers and the Puritans ‘Albion’s Seed’ began to grow. Until the end of the 18th century it continued to grow because of three other waves of British migrants.

‘Albion’s Seed’ Kept Growing, or the Other Major Migration Waves from Britain – the Aristocrats, the Quakers and the Immigrants from the British Borderlands

On the one hand, when the English Civil War(s) commenced in 1642, a number of  Puritans retuned to England to support the Parliamentarians in the fight against Charles I and the Royalists. On the other hand, a second major migration wave to America occurred from roughly 1642 to 1675. This wave carried royalist aristocrats and gentlemen mainly from England’s south and west. Most of them were younger sons of English aristocratic families.

Their American destination was Virginia. Here the aristocrats and gentlemen formed an elitist and hierarchically organized society. They also had particular ideas of liberty and government such as the concept of freedom as a condition of independence and the conceptions of minimal government and self-government. After all, during the founding period of the U.S.A. at the end of the 18th century, several descendants of these gentlemen or, more precisely, their ideas exerted a huge influence on the U.S. Constitution.

Other characteristics of this society encompassed an allegiance to the Anglican faith and a strong sense of honour. Interestingly enough, the majority of the white population in Virginia consisted of indentured servants as well as landless or poor whites.

Afterwards, two additional major migration waves from Britain brought many English Quakers and a high number of immigrants from the Northern British borderlands to America. From about 1675 to 1715 the Quakers – who had lived in England’s North Midlands before their migration – resided in the Delaware Valley (around Philadelphia), while later, from roughly 1717 to 1775, the people from the borderlands of northern Britain moved to the Appalachian backcountry.

Fischer Albion's Seed
Statistics regarding the four major migration waves from Britain to America. This table is taken from page 787 of David Hackett Fischer’s Albion’s Seed (1989).

For instance, the Quaker community was founded on a remarkable work ethic, a Christian notion of spiritual equality and a pluralistic idea of reciprocal liberty. The latter  represented a Christian concept, embracing all humanity.

It entailed religious freedom or “liberty of conscience”, as the Quaker’s most prominent member, William Penn (1644-1718), worded it. Notably, for the Quakers, liberty of conscience even applied to ideas they believed to be false. Suffice it to say, in this context, that these conceptions were or have been influential in American society.

As a result of the other migration waves from Britain to America, ‘Albion’s Seed’, so to speak, kept growing besides, for example, other migrants from Britain, German Pietists in today’s state of Pennsylvania, Dutch settlers in ‘New Netherland’ (i.e. areas of the present-day states of New York, New Jersey, Connecticut and Delaware as well as outposts on Rhode Island and in Pennsylvania), French Huguenots and African slaves. Yet, trouble loomed among the British colonists.

Big Trouble among the British (Regions) in Colonial America

Undeniably, these groups of colonists shared striking characteristics. That is, they migrated from Britain, spoke English and were Christians. In spite of these shared characteristics and their familiarity with traditional British or English rights like trial by jury, the protection of property rights and the right of representative government, the British groups of migrants were culturally different from one another. Each of them highly influenced the cultural identity of the respective settlement region.

Nonetheless, even within the settlement regions internal crises arose occasionally. Apart from these internal crises, the major cultures in British America did not get on with each other from the beginning. We may infer the early British colonists’ hostile attitude towards one another from the following statements:

In 1651, a Puritan judged Virginians: “I think they are the farthest from conscience and moral honesty of any such number together in the world.”

Many years later, in 1736, a Virginian, William Byrd II, viewed Puritans with contempt, as some passages in one of his letters show: “They have a great dexterity in palliating a perjury so as to leave no taste of it in the mouth, nor can any people like them slip through a penal statute…A watchful eye must be kept on these foul traders.”

Judging from the Puritans’ and the Virginians’ stated opinions, they hated the Quakers who were said to “pray for their fellow men one day a week, and on them the other six.”

The Quakers, in turn, despised the Puritans in New England. At the end of the 18th century, a Pennsylvanian Quaker labled them as “the flock of Cain.”

Additionally, the Quakers, Puritans and Virginians alike expressed their dislike of the borderers from the north of Britain by calling them savages, barbarians, ‘Vandals of America’, an “unlearned and uncivilized part of the human race” and “a spurious race of mortals.”

The settlers of the backcountry equally disdained the aforementioned groups. (These statements can be found in Fischer’s Albion’s Seed on pages 821 and 822.)

All in all, there was high potential for big trouble.

On many occasions, their mutual antagonism deteriorated into violent regional conflicts. Correspondingly, as far as the regional cultures of British America were concerned, during the colonial period America neither resembled ‘a cultural melting pot’ nor ‘a United States’, even though the migrants came from the same part of the world and had striking characteristics in common. Regardless of these conflicts, the British roots of what became the U.S.A. are indisputable.

Sources and Further Reading:

Cannon, John. Ed. Dictionary of British History. Rev. ed. Oxford: Oxford University Press, 2009. 

Fischer, David Hackett. Albion’s Seed: Four British Folkways in America. New York, and Oxford: Oxford University Press, 1989.

Hannan, Daniel. How We Invented Freedom & Why It Matters. London: Head of Zeus, 2013.

McDonald, Forrest. Novus Ordo Seclorum: The Intellectual Origins of the Constitution. Lawrence, KS: University Press of Kansas, 1985.

Unger, Irwin. These United States: The Questions of Our Past. 3rd ed. Upper Saddle River, NJ: Prentice Hall, 2007.

Popular history books by freelance editor Emma Marriott and the libertarian historians Thomas E. Woods and Brion McClanahan can also be very helpful.    

 

 

The Impact of Digital Transformation on the National and Local Economy

Digital Transformation significantly affects our market economies in the West – on a national and local level. The resulting changes have an impact on the media and communication sectors, the industry and business models.

Digital Technologies, digital devices and digital infrastructure have transformed our lives at the end of the 20th century and at the beginning of the 21st century. High-performance computers, the Internet, numerous apps, intelligent machines, 3D printing and other innovations, in a way, enable us to transcend physical and geographical boundaries. Correspondingly, digital transformation proceeds inexorably. The resulting changes open the door to innovation opportunities.

Alongside the term digital transformation, we (or you ;)) frequently employ the word digitization in English. However, as some sources point out, we may distinguish between (digital transformation,) digitization and the similarly sounding word digitalization, even though they are often used interchangeably.

Digitization basically means the process of converting analog information or signals of any form (i.e. texts, sounds, voices, images etc.) into a digital form or format. Here information is encoded in bits or binary digits. A bit contains only one of two single binary values. Accordingly, it can either have the “binary value 1” or the “binary value 0”. These values, in turn, represent two distinct states (e.g. on / off, right / wrong, yes / no).

Ones and zeroes can be regarded as the ‘native language’ of computers and related devices. Simply put, computers operate or perform calculations on the basis of binary codes, in which information is processed by sequences of the two binary digits 0 and 1.

In contrast to digitizationdigitalization, at least judging from sources like Gartner IT Glossary, refers to “the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business.” Similar to digitalization, according to i-SCOOP and Techopedia, the term digital transformation is predominantly associated with the business world:

“Digital transformation is the profound transformation of business and organizational activities, processes, competencies and models to fully leverage the changes and opportunities of a mix of digital technologies and their accelerating impact across society in a strategic and prioritized way, with present and future shifts in mind.” (This quotation is taken from i-SCOOP.)

Yet, digital transformation additionally entails changes in society as a whole.

Appropriately enough, the aforementioned ‘IT education website’ Techopedia comes up with this basic definition:

“Digital transformation is the changes associated with digital technology application and integration into all aspects of human life and society.

It is the move from the physical to digital.”

To a certain extent, digital transformation affects every group in society on a national and local level. Likewise, it has, of course, a huge impact on the national and regional economy.  This is due to ‘unique’ economic properties that are linked to digitization or digital information.

Other Laws Apply to Digitization

While our lives and all physical objects are subject to natural laws, ‘normal’ or ‘classical’ laws do not really apply to digitization. As opposed to everyday commodities or goods, digital information is, so to speak, “not used up” and can be reproduced very cheaply.

The economists Erik Brynjolfsson and Andrew McAfee illustrate these as well as other properties or aspects of “the digitization of just about everything” in their acclaimed book The Second Machine Age (2014). In this context, they rely on Gordon Moore’s Law. With respect to this law, the amount of computing power doubles every two years.

If we follow the two authors, computing power has increased exponentially (or incredibly fast). For the last decades, Computer devices, thus, have been having a higher processing speed, storage capacity, download speed and energy efficiency. Simultaneously, they have become smaller, lighter, denser, cheaper and, ultimately, affordable to the general public.

Considering the prospect that in the future the limits of miniaturization will be reached, experts (including Moore himself) have been expecting the end of Moore’s Law. Moreover, a drying up of computing capacity has been predicted. However, Brynjolfsson and McAfee make us aware of particular “engineering detours”. That is, people in the computer industry have found ways to circumvent possible physical limitations or boundaries.

At any rate, the exponential growth of computing power results in far-reaching consequences for our market economies in the West. Already now the effects are more than evident, when we look especially at the communication, media and service sectors.

New Ways of Economic Transactions – The Effects of Digital Transformation for Our Market Economy

We can infer from the previous part and other statements by scholars that because of digital transformation ‘economic transactions accelerate’, while, at the same time, ‘the transaction costs drop‘. Since today’s mobile or digital communication also provides the opportunity to retrieve information at any place within seconds, supply and demand meet each other in digital media with increasing frequency.

Broadly speaking, many of us nowadays not only read the news on the Internet but also carry out banking and purchase transactions online. As a result, at present, new markets emerge that, in a sense, transcend traditional geographical boundaries. These emerging markets lead to a continuous ‘displacement’ of work. Apart from these markets, modern forms of work develop besides new business models and ways of transactions.

Through file-sharing sites, services via app, a variety of online offers and, for example, the possibility to produce an item with the help of a 3D printer, certain social and economic boundaries are currently blurring. Among them are the boundaries between consumers and producers, dependent work and self-employment as well as between public and private goods. All these issues emphasize the ongoing changes in the economic world, which, needless to say, also encompasses manufacturing or the industry.

Another Industrial Revolution ?

The manufacturing sector is now adapting to a combination of production methods with highly modern information and communication technologies. Precisely this fusion of production with state-of-the-art technologies and the computerization of manufacturing take centre stage, for example, in connection to the project and platform Industrie 4.0, which is part of the high-tech strategy of the German government.

With reference to the name Industrie (or, in English, Industry) 4.0, what is forecast is nothing less than a fourth Industrial Revolution. But is another revolution in the industry imaginable in the very near future ? Answers to this question may give promising ideas concerning modern industrial manufacturing and concepts of a smart factory, as it is called.

Such concepts particularly play a significant role for the traditional industrial locations in the West. According to IFS – a multinational provider of enterprise software -, main features of a digitalized factory of the future will include a changed culture of manufacturers, a more flexible adaptation to shifts in the market and growing collaborations with universities.

Interestingly enough, future factories will distinguish themselves by increasing localization. Hence, they will divide into more and smaller facilities, so that local resources can be accessed faster.

The Chances of Regional or Local Areas in a Digitalized World

Despite a continuous displacement of work and a shift of economic activities into digital networks and digital media, regional areas including municipalities remain important in a digitalized world. A few studies, for instance, indicate the still existing significance of the distance between places and the importance of local or regional locations in online trade.

Furthermore, some economists and reports suggest that, as far as economic activities are concerned, there are opposite trends to an ever-growing globalization – regionalization and urbanization. These processes pose great logistical challenges.

To increase their attractiveness, regional or local areas require flexible, future-oriented framework conditions for the development of new job opportunities, services, and business models as well as for the founding of startups. Other determining factors are the willingness to new collaborations of companies and cooperations between economic organizations and specific social groups.

Means to foster such cooperations are digital platforms. Such digital platforms – in addition to network activities on and offline – allow for exchanges of ideas, further education and self-improvement.

In general, regional or local companies should lay the foundations of good working conditions for employees. At this point, it is worth mentioning, for example, possibilities to reconcile work and family responsibilities and to work from home. Regional or local companies should also aim to create a productive working atmosphere / environment (e.g. coworking spaces). Prerequisites are creative strategies, digital literacy, an adequate physical / technical infrastructure and an easy access to high-speed internet.

Sources and Further Reading:

Bell, David R. Location Is (Still) Everything: The Surprising Influence of the Real World on How We Search, Shop, and Sell in the Virtual One. Boston, New York: New Harvest, 2014.

Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York, London: W. W. Norton & Company, 2014. 

German Sources: 

Cole, Tim. Digitale Transformation: Warum die deutsche Wirtschaft gerade die digitale Zukunft verschläft und was jetzt getan werden muss!. Munich: Verlag Franz Vahlen, 2015.

Kaczorowski, Willi. Die smarte Stadt: Den digitalen Wandel intelligent gestalten. Stuttgart (et al.): Richard Boorberg Verlag, 2014. 

Oermann, Nils Ole. Wirtschaftsethik: Vom freien Markt bis zur Share Economy. Munich: Verlag C.H. Beck, 2015.

Ritter, Helge. “Möglichkeitenräume der Oberflächenwelt.” Interview. Wachstum im Wandel: Chancen und Risiken für die Zukunft der Sozialen Marktwirtschaft. Ed. Bertelsmann Stiftung. Gütersloh: Verlag Bertelsmann Stiftung, 2016. 116-127. 

 

 

 

 

Die digitale ‘sharing economy’

Die digitale sharing economy oder share economy bietet die Möglichkeit für neue Geschäftsmodelle, die aber auch Probleme erzeugen können.  

Durch den digitalen Wandel in der Marktwirtschaft ‚beschleunigen sich die Transaktionen’, während gleichzeitig ‚die Transaktionskosten sinken’. Folglich treffen sich Angebot und Nachfrage immer öfters virtuell oder in digitalen Medien. Zum Beispiel erledigen viele von uns heutzutage unzählige Bank- und Kaufgeschäfte online. Außerdem ermöglicht es die mobile, digitale Kommunikation, Informationen aller Art in Sekundenschnelle sowie an verschiedenen Orten abzurufen.

Im Zuge der Digitalisierung werden auch die wirtschaftlichen Akteure häufig zu sogenannten Prosumenten, die Konsumenten und Produzenten zugleich sind. Daneben entwickeln sich neue Geschäftsmodelle und Formen der Wertschöpfung. Eine von diesen trägt die Bezeichnung share economy oder sharing economy.

Die digitale „Ökonomie des Teilens”

Den Begriff sharing economy definiert Prof. Dr. Oliver Bendel im Gabler Wirtschaftslexikon als „das systematische Ausleihen von Gegenständen und gegenseitige Bereitstellen von Räumen und Flächen, insbesondere durch Privatpersonen und Interessengruppen”. Mit anderen Worten nutzen Konsumenten im Sinne der „Ökonomie des Teilens” meistens das Eigentum eines Anbieters oder von Anbietern vorübergehend. Zentral im Vordergrund steht dabei der „Gemeinschaftskonsum”.

Für die Verbreitung solcher Wirtschaftsmodelle sorgen die elektronischen Plattformen, die sozialen Medien oder allgemein die digitalen Vernetzungen. Dementsprechend ist die „Ökonomie des Teilens” auf die Digitalisierung angewiesen. Insgesamt hat die digitale sharing economy jedoch das Potential, die nationale und damit auch die regionale Wirtschaft zu transformieren. Einen Vorgeschmack geben neuartige Unternehmen.

In den letzten 10 Jahren kamen beispielsweise in der Immobilien- und Mobilitätsbranche neue digitale Angebote hinzu – die 2008 gegründete Online-Plattform Airbnb und der 2009 ins Leben gerufene US-Fahrdienstleister Uber. Letzterer vermittelt Kunden in mehreren Ländern mit Hilfe von Apps private Fahrer. Hingegen bietet Airbnb  Vermittlungsdienste für Privatpersonen an, damit diese ihre Wohnungen anderen Personen vorübergehend zur Verfügung stellen können. Beide nehmen für ihre Dienste nur eine Gebühr und fungieren somit in der digitalen sharing economy als Vermittler oder ‚Mittelsmänner’.

Uber sozialstaatliche Regulierungen hinweg

In der flüchtigen Onlinewelt ist aber die Besteuerung von solchen Unternehmen äußerst schwierig. Eigentlich agieren die Akteure der digitale sharing economy potentiell frei von sozialstaatlichen Regulierungen, weil für Kunden das Zahlen der Mehrwertsteuer und sonstiger Beiträge wegfällt.

Zudem entstehen arbeitsrechtliche Fragestellungen und Schwierigkeiten mit Versicherungen – zum Beispiel durch die nicht vorhandenen Bescheinigungen der privaten Uber-Fahrer. Indem Unternehmen wie Uber oder Airbnb infolgedessen Dienstleistungen zu wesentlich günstigeren Konditionen und jenseits der traditionellen Regeln des Sozialstaates verrichten, erzeugen sie – abgesehen von einer problematischen Wettbewerbssituation – einen unangenehmen Konkurrenzdruck für reguläre Taxi-Unternehmen und Hoteliers.

Letztendlich wurde unter anderem UberPop mit privaten Fahrern in Deutschland verboten. Probleme hat auch Airbnb in Berlin. Doch sind Verbote angemessene Maßnahmen, um den Herausforderungen der digitalen sharing economy zu begegnen? Wenn man sich vergegenwärtigt, dass die Digitalisierung unaufhaltsam ist und anderen Regeln folgt, muss man Zweifel an diesem Vorgehen anmelden.

Der Möglichkeitsspielraum der sharing economy und des „KAppitalismus”

Obwohl die Gefahr des mangelnden Kundenschutzes, der Selbstausbeutung oder Schwarzarbeit besteht, ebnen diese Geschäftsmodelle neben neuen Arbeitsmöglichkeiten den Weg zu einem effizienteren Umgang mit existierenden Ressourcen. Das trifft besonders für Menschen in dünn besiedelten Regionen zu. Angenommen dort wäre es schwer Hotels oder Transportdienste zu finden, hätte man aufgrund der Angebote der sharing economy einen größeren Möglichkeitsspielraum. Ergänzend dazu erlauben möglicherweise Online-Rankings Kundenschutz und Qualitätssicherung.

Es existieren darüber hinaus noch zahlreiche andere Formen der sharing economy wie Carsharing-Modelle und Musiktauschbörsen, die von Online-Plattformen oder der Kommunikation via App abhängig sind. In Anspielung auf die Vermittlung von Dienstleistungen via App verwendet der medial präsente Vorsitzende der Ludwig-Erhard-Stiftung Roland Tichy den Begriff „KAppitalismus“.

Es bleibe mal dahingestellt, ob sich der Begriff zusammen mit der sharing economy eignet, um die Entwicklung im Zuge der Digitalisierung zu fassen. Dennoch werden damit die digitalen Veränderungen der Wirtschaft angedeutet.

Quellen:

Weitere umfangreiche Beiträge zur sharing economy finden sich hier  oder hier

Dieser Blog-Artikel stützt sich u. a. auf ein Kapitel des folgenden Buches:

Oermann, Nils Ole: Wirtschaftsethik. Vom freien Markt bis zur Share Economy. München: C.H. Beck 2015. 

Die Auswirkungen des digitalen Wandels auf die nationale und regionale Wirtschaft

Die Digitalisierung wirkt sich erheblich auf die gesamte Wirtschaftswelt aus. Infolge des digitalen Wandels ergeben sich – sowohl auf nationaler als auch auf regionaler Ebene –  zahlreiche Veränderungen und Innovationschancen für den Dienstleistungsbereich, die Industrie sowie die Marktwirtschaft insgesamt.   

Digitale Technologien, digitale Medien und eine digitale Infrastruktur verändern unseren Alltag. Hochleistungscomputer, das Internet, zahlreiche Apps, intelligente Maschinen, 3D-Drucker und andere Innovationen ermöglichen uns Menschen im 21. Jahrhundert die Überwindung von physischen und geographischen Grenzen. Entsprechend schreitet die damit einhergehende Digitalisierung unaufhaltsam voran. Sie eröffnet dabei ungeahnte Innovationschancen.

Vom technischen Standpunkt aus versteht man unter Digitalisierung den Prozess der Umwandlung von analogen Informationen oder Signalen jedweder Art (d.h. Texte, Laute, Töne, Bilder etc.) in digitale Formate. In diesem Zusammenhang sind die Informationen als Bits bzw. binary digits codiert. Ein Bit enthält nur einen von zwei binären Werten. Folglich hat ein Bit entweder den Wert „binäre Null / 0” oder den Wert „binäre Eins / 1”. Diese Werte repräsentieren wiederum zwei unterschiedliche Zustände (z.B. wahr / falsch, ein / aus etc.).

Einsen und Nullen kann man sozusagen als die ‚Muttersprache’ von Computern und verwandten Geräten bezeichnen. Einfach ausgedrückt operieren oder ‚rechnen’ Computer auf der Basis von Binärcodes, bei denen Informationen durch Sequenzen aus den zwei verschiedenen Binärziffern 0 und 1 dargestellt werden.

Neben der Umwandlung von Informationen in digitale Formate oder der digitalen Modifikation von Geräten, Instrumenten und Fahrzeugen umfasst der Begriff Digitalisierung noch eine weitere Bedeutung. So bezieht sich Digitalisierung auch auf die digitale Wende oder den digitalen Wandel. Allgemein lässt sich der digitale Wandel folgendermaßen definieren:

„Die digitale Transformation (auch „digitaler Wandel“) bezeichnet einen fortlaufenden, in digitalen Technologien begründeten Veränderungsprozess, der als Digitale Revolution die gesamte Gesellschaft und in wirtschaftlicher Hinsicht speziell Unternehmen betrifft.” (Quelle: Wikipedia; eine ähnliche Definition findet sich im Gründerszene-Lexikon.)

Somit erfassen die durch die fortschreitende Digitalisierung in Gang gesetzten Veränderungen sämtliche Gesellschaftsgruppen auf nationaler wie regionaler Ebene.

Gleichzeitig wirkt sich der digitale Wandel erheblich auf die nationale und regionale Wirtschaft aus. Dies hängt mit den ‚einzigartigen’ Eigenschaften der Digitalisierung in unserer ‚Informationsgesellschaft’ zusammen.

Für die Digitalisierung gelten andere Gesetze

Während unser menschliches Leben sowie alle physischen Objekte natürlichen Gesetzen unterworfen sind, folgt die Digitalisierung keinen herkömmlichen Regeln. Im Gegensatz zu normalen Alltagsgütern sind nämlich digitalisierte Informationen „nicht aufbrauchbar” und ziemlich billig bei der Vervielfältigung.

Die Wirtschaftswissenschaftler Erik Brynjolfsson und Andrew McAfee verdeutlichen diese und einige andere Eigenschaften der „allumfassenden Digitalisierung” in ihrem Buch The Second Machine Age (2014). Ihre Überlegungen basieren unter anderem auf Gordon Moores Gesetz, wonach sich die Computerleistung alle zwei Jahre verdoppelt.

Demzufolge steigert sich laut ihnen die Computerleistung exponentiell (oder besonders schnell), so dass Computer samt Zubehör eine höhere Download-Geschwindigkeit, Speicherkapazität, Prozessorgeschwindigkeit und Energieeffizienz aufweisen. Zudem werden sie kleiner, dichter, wesentlich kostengünstiger und damit für die Allgemeinheit erschwinglicher.

Vor dem Hintergrund der irgendwann erreichten physischen Grenzen im Falle weiterer Verdichtungen prognostizieren allerdings Fachleute (einschließlich Moore selbst) ein Ende des Mooreschen Gesetzes. Ebenso wird ein Versiegen der Rechenkapazität prophezeit. Jedoch ist Moores Gesetz laut Brynjolfsson und McAfee deshalb so langlebig, weil man ständig neue Umgehungsmethoden entdeckt hat, um den physischen Limits oder Grenzen auszuweichen.

Jedenfalls bringt das exponentielle Wachstum der Computerleistung für die gesamte Marktwirtschaft weitreichende Konsequenzen mit sich. Bereits jetzt sind die Folgen des digitalen Wandels für jeden mehr als offensichtlich. Sie betreffen vor allem den Kommunikations-, Medien- und Dienstleistungsbereich.

Neue Wege des Wirtschaftens – Die Folgen des digitalen Wandels für die Marktwirtschaft 

Sowohl gemäß den vorherigen Ausführungen als auch den Worten des Ethikprofessors Nils Ole Oermann führt die Digitalisierung der Marktwirtschaft im Zuge des digitalen Wandels zu einer „Beschleunigung der Transaktionen” bei gleichzeitiger „Senkung der Transaktionskosten”. Da sich ferner durch mobile, digitale Kommunikation die Möglichkeit ergibt, Informationen aller Art in Sekundenschnelle an vielen verschiedenen Orten abzurufen, treffen sich Angebot und Nachfrage immer öfters in digitalen Medien oder virtuell.

Aufgrund dessen lesen viele von uns heutzutage nicht nur die Nachrichten im Internet, sondern erledigen außerdem unzählige Bank- und Kaufgeschäfte online. Hierbei entwickeln sich grenzüberschreitende Märkte, die eine Art ‚Entörtlichung’ der wirtschaftlichen Aktivitäten nach sich ziehen. Zusätzlich entstehen neue Wirtschaftsformen, Geschäftsmodelle und digitale Wege des Wirtschaftens.

Durch Internet-Tauschbörsen, Dienstleistungen via App (neben einer Vielzahl weiterer Onlineangebote) und zum Beispiel durch die Aussicht, mit Hilfe eines 3D-Druckers eigene Produkte zu fertigen, verschwimmen die Grenzen zwischen Produzent und Konsument, abhängiger Arbeit und Selbstständigkeit sowie zwischen öffentlichen und privaten Gütern. All diese Aspekte unterstreichen die sich infolge des digitalen Wandels vollziehenden Transformationen in der Wirtschaftswelt. Selbstverständlich haben die Veränderungen auch das verarbeitende Gewerbe erreicht.

Eine weitere ‚Industrielle Revolution’ ?

In der Industrie stellt man sich zukünftig auf eine intensive Verknüpfung von Produktion mit hochmodernen Informations- und Kommunikationstechniken ein. Genau um diese Verzahnung und die Automatisierung der Produktion drehen sich das von der deutschen Bundesregierung initiierte Zukunftsprojekt und die gleichnamige Forschungsplattform Industrie 4.0.

Mit Blick auf den Namen erwartet man nicht weniger als eine vierte ‚Industrielle Revolution’. Doch ist eine Revolutionierung der Industrie in absehbarer Zeit vorstellbar ? Antworten auf diese Frage geben möglicherweise einige vielversprechende Konzepte für eine vernetzte industrielle Fertigung und eine so genannte smart factory.

Solche Konzepte haben insbesondere für den Industriestandort Deutschland eine große Bedeutung. Merkmale der digitalisierten Fabrik der Zukunft sind laut IFS – einem global operierenden Anbieter von Business Software – eine veränderte Unternehmenskultur, eine flexiblere Anpassung an neue Marktanforderungen und Kooperationen mit Universitäten. Interessanterweise zeichnen sich zukünftige Fertigungsunternehmen daneben durch eine stärkere Lokalisierung oder Ausdifferenzierung in mehrere, kleinere Standorte aus, damit lokale Ressourcen schneller zugänglich sind.

Die Potentiale der Regionen in einer digitalisierten Welt

Trotz einer voranschreitenden Entörtlichung der Arbeit und einer Verlagerung der wirtschaftlichen Aktivitäten in Netzwerke und digitale Medien bleiben Regionen einschließlich Kommunen in einer digitalisierten Welt wichtig. Beispielsweise verweist Tim Cole in seinem Buch Digitale Transformation (2015) unter Einbeziehung von Studien auf die noch immer existierende Bedeutsamkeit der Distanz und des lokalen oder regionalen Standortes beim Online-Handel.

Cole erwähnt darüber hinaus die zunehmende Regionalisierung sowie Verstädterung der Wirtschaft im Kontext einer gegenwärtigen Urbanisierungswelle. Diese Prozesse sorgen für große logistische Herausforderungen.

Um die Attraktivität der Regionen zu steigern, benötigt man flexible, auf die Zukunft ausgerichtete Rahmenbedingungen für die Entwicklung von neuartigen Berufsbildern, Dienstleistungen, Geschäftsmodellen und innovativen Start-up-Unternehmen. Andere entscheidende Faktoren sind die Bereitschaft zu neuen Kollaborationsformen zwischen Unternehmen untereinander sowie Kooperationen zwischen wirtschaftlichen Organisationen und gesellschaftlichen Gruppen. Als förderlich erweisen sich sicherlich auch digitale Plattformen zum Austausch oder zur Weiterbildung und Netzwerkaktivitäten in der realen wie virtuellen Welt.

Schließlich sollten die regionalen Unternehmen günstige Arbeitsbedingungen für die verschiedenen wirtschaftlichen Akteure schaffen, so dass es möglich ist, gegebenenfalls Familie und Beruf miteinander zu vereinbaren, sich den (langen) Arbeitsweg zu sparen und / oder vom Wohnort aus zu arbeiten. Zu den Zielen sollte außerdem die Erzeugung einer produktiven Arbeitsatmosphäre (z.B. Coworking Spaces) gehören. Grundvoraussetzungen dafür sind – abgesehen von kreativen Strategien und veränderungswilligen Menschen – eine adäquate physisch-technische Infrastruktur und ein schneller Zugang zu leistungsfähigem Internet.

Zitierte und weiterführende Quellen:

Brynjolfsson, Erik u. Andrew McAfee: The Second Machine Age. Wie die nächste digitale Revolution unser aller Leben verändern wird. Kulmbach: Börsenmedien AG 2014. 

Cole, Tim: Digitale Transformation. Warum die deutsche Wirtschaft gerade die digitale Zukunft verschläft und was jetzt getan werden muss!. München: Verlag Franz Vahlen 2015.

Kaczorowski, Willi: Die smarte Stadt – Den digitalen Wandel intelligent gestalten. Stuttgart (u.a.): Richard Boorberg Verlag 2014. 

Oermann, Nils Ole: Wirtschaftsethik. Vom freien Markt bis zur Share Economy. München: Verlag C.H. Beck 2015. 

Ritter, Helge: Möglichkeitenräume der Oberflächenwelt. Interview mit dem Koordinator des CITEC an der Universität Bielefeld. In: Wachstum im Wandel. Chancen und Risiken für die Zukunft der Sozialen Marktwirtschaft. Hg. v. Bertelsmann Stiftung. Gütersloh: Verlag Bertelsmann Stiftung 2016. S. 116-127. bes. S. 121.

 

‘Scientist’: Der englische Begriff für ‘Naturwissenschaftler’ – Eine Wortschöpfung aus dem 19. Jahrhundert

Im Jahre 1833 prägte der englische Universalgelehrte William Whewell den englischen Begriff für (Natur-)Wissenschaftler scientist in Analogie zu dem Wort artist (dt. Künstler).

Bereits im Mittelalter lässt sich der Begriff science im Englischen nachweisen. Der Begriff  science – den man ja heute mit ‘(Natur-)Wissenschaft’ ins Deutsche übersetzt – leitet sich vom lateinischen Wort scientia ab, was soviel wie ‘Wissen’ bedeutet.

Im Gegensatz zu science erschien das Wort scientist als Bezeichnung für ‘(Natur-)Wissenschaftler’ erst relativ spät in der englischen Sprache – nämlich im 19. Jahrhundert. Verwendet wurde es erstmalig von dem englischen Universalgelehrten William Whewell (1794-1866). Er war Astronom, anglikanischer Priester, Autor sowie Wissenschaftshistoriker und Wissenschaftsphilosoph. Der Begriff fiel zum ersten Mal auf einem Treffen der British Association for the Advancement of Science (BAAS) im Jahre 1833.

An diesem Treffen nahmen unter anderem Whewell und der Dichter Samuel Taylor Coleridge (1772-1834) teil. Einer der Diskussionspunkte war der merkwürdige Umstand, dass noch keine geeignete Bezeichnung für ‘Männer’ existierte, die sich dem systematischen ‘Studium’ oder der Untersuchung der Natur widmeten (Anmerkung: Zu dieser Zeit gab es nicht so viele ‘Studentinnen der Natur’.).

Whewell berichtete von diesem Treffen und dieser Diskussion in seiner anonym erschienenen Rezension zu Mary Somervilles Wissenschaftsbuch On the Connexion of the Physical Sciences (, welches sich im 19. Jahrhundert übrigens sehr gut verkaufte):

“Es gab keinen allgemeinen Begriff, mit dem sich diese Herren selbst in Bezug auf ihre Aktivitäten beschreiben konnten. Der Begriff ‘philosophers’ wurde als eine zu weitreichende und zu hochtrabende Bezeichnung empfunden, und dieser wurde von Mr. Coleridge, sowohl in seiner Eigenschaft als Philologe als auch als Metaphysiker,…untersagt;…ein geistreicher Gentleman schlug vor, dass sie in Analogie zu ‘artist’ die Wortneuschöpfung ‘scientist’ bilden könnten,… wenn wir schon solche Worte wie ‘sciolist’, ‘economist’ und ‘atheist’ haben – doch dies wurde nicht allgemein angenommen…” (Anmerkung: Whewells Rezension erschien in The Quarterly Review 51.1 (1834): 54-68. Der zitierte bzw. übersetzte Teil findet sich im Original auf Seite 59. Die Anführungsstriche bei den englischen Begriffen stammen von mir.)

Der erwähnte ‘geistreiche’ (oder ‘erfindungsreiche’) Gentleman war William Whewell selbst.

Laut diesen Zeilen prägte er das Wort scientist in Analogie zu artist (dt. Künstler). Interessanterweise kann diese Analogie – bis zu einem gewissen Grad – im Zusammenhang mit den Schauerromanen des 19. Jahrhunderts wie Mary Shelleys Frankenstein (1818) hergestellt werden.

Wenn man berücksichtigt, dass man einen Künstler generell als kreative Person oder manchmal sogar als eine Art “Schöpfer” bezeichnen kann, scheint der Hauptcharakter Victor Frankenstein durch sein ‘Geschöpf’ – Frankensteins Monster – das Motif des ‘Wissenschaftlers als Gott’ anzudeuten. Schließlich verkörpert Frankenstein nicht nur den ‘verrückten Wissenschaftler’, sondern auch den ‘tragischen Künstler’ oder den ‘Gott, der keiner ist’.

Kehren wir aber zu Whewell zurück. Obwohl sein Vorschlag auf dem Treffen nicht auf allgemeine Anerkennung stieß, verwendete er den Begriff scientist in seinen Büchern. Bald darauf setzte dieser sich dann durch.

Quellen: 

Gimbel, Steven (Hg.): Exploring the Scientific Method. Cases and Questions. Chicago u. London: The University of Chicago Press 2011.

Hannam, James: God’s Philosophers. How the Medieval World Laid the Foundations of Modern Science. London: Icon Books 2009. 

Harrison, Peter, Ronald L. Numbers u. Michael H. Shank: Introduction. In: Wrestling with Nature. From Omens to Science. Hrsg. v. ders.: The University of Chicago Press 2011. S. 1-7.

Haynes, Roslynn: From Faust to Strangelove. Representations of the Scientist in Western Literature. Baltimore: Johns Hopkins University Press 1994.

Wagner, Sven: The Scientist as God. A Typological Study of a Literary Motif, 1818 to the Present. Heidelberg: Universitätsverlag Winter 2012. 

The English word ‘Scientist’ – A Nineteenth-Century Coinage

In 1833 the English polymath William Whewell coined the term scientist in analogy with the word artist

As early as the Middle Ages, the term science came into English. Science is derived from the Latin word scientia, which means ‘knowledge’. In contrast to science, the term scientist appeared relatively late – namely, in the nineteenth-century. Actually, it was used for the first time by the English polymath, astronomer, Anglican priest, notable author and historian as well as philosopher of science William Whewell (1794-1866) during a meeting of the British Association for the Advancement of Science (BAAS) in 1833.

At this meeting Whewell and the poet Samuel Taylor Coleridge (1772-1834) took part among others. One of the points for discussion was the curious fact that there was no suitable name for ‘men’ who were committed to the systematic study of nature. (Note: In those days, there were not many female ‘students of nature’.) Whewell reported on this discussion in his anonymous review of Mary Somerville‘s best-selling science book On the Connexion of the Physical Sciences:

“There was no general term by which these gentlemen could describe themselves with reference to their pursuits. Philosophers was felt to be too wide and too lofty a term, and this was very properly forbidden by Mr Colridge, both in his capacity of philologer and metaphysician;…some ingenious gentleman proposed that, by analogy with artist, they might form scientist, and added that there could be no scruple in making free with termination when we have such words as sciolisteconomist, and atheist – but this was not generally palatable…” (Note: Whewell’s review was published in The Quarterly Review 51.1 (1834): 54-68. This part is on page 59.)

The mentioned ‘ingenious gentleman’ was, of course, William Whewell himself.

According to these lines, Whewell coined the word scientist in analogy with the term artist. Interestingly enough, this analogy might be seen, to a certain extent, in some famous works of Gothic fiction of the nineteenth-century like Mary Shelley’s Frankenstein (1818).

If you take into account that an artist can be regarded as a creative person or a ‘creator’, the main character, Victor Frankenstein, seems to indicate “the scientist-as-God motif” because of his ‘creation’, Frankenstein’s monster. Eventually, Frankenstein, in a way, embodies not only ‘the mad scientist’ but also a ‘tragic artist’ or ‘god that failed’.

However, let’s return to William Whewell. Although his suggesting was not generally accepted at the meeting of the British Association for the Advancement of Science, he employed the term scientist in his books and it soon gained acceptance.

Sources:

Gimbel, Steven. Ed. Exploring the Scientific Method: Cases and Questions. Chicago and London: The University of Chicago Press, 2011.

Hannam, James. God’s Philosophers: How the Medieval World Laid the Foundations of Modern Science. London: Icon Books, 2009. 

Harrison, Peter, Ronald L. Numbers, and Michael H. Shank. “Introduction.” Wrestling with Nature: From Omens to Science. Eds. Peter Harrison, Ronald L. Numbers, and Michael H. Shank. Chicago and London: The University of Chicago Press, 2011. 1-7.

Haynes, Roslynn. From Faust to Strangelove: Representations of the Scientist in Western Literature. Baltimore: Johns Hopkins University Press, 1994.

Wagner, Sven. The Scientist as God: A Typological Study of a Literary Motif, 1818 to the Present. Heidelberg: Universitätsverlag Winter, 2012. 

Subjectivism and Marginal Utility Shouldn’t Be Marginalized in Economics

This entry will illustrate the subjective value theory and the theory of marginal utility, which are very important in economics. 

“Oh, you’re subjective! Be objective.”

“This is just your subjective opinion.”

These or similar statements are commonly used expressions. In this connection, the word ‘subjective’ has a negative connotation.

When we, for example, accuse a person of having a subjective opinion, we think that this person’s judgement is affected by personal views, feelings, prejudices and/or non-factual interpretations. The opposite is, of course, an objective opinion that is perceived to be based on facts or factual observations.

The term ‘subjectivism’ can be found in relation to philosophy and ethics. Among other issues, we come across the following definitions in The Cambridge Dictionary of Philosophy (1995/1999):

“‘Ethical subjectivism’ usually means the doctrine that ethical statements are simply reports on the speaker’s feelings (though, confusingly enough, such statements may be objectively true or false).” (p. 284)

In terms of “relativism, the denial that there are certain kinds of universal truths…subjectivism…maintains that individual choices are what determine the validity of a moral principle. Its motto is, Morality lies in the eyes of the beholder.” (p. 790).

“(S)ubjectivism, any philosophical view that attempts to understand in a subjective manner what at first glance would seem to be a class of judgments that are objectively either true or false – i.e., true or false independently of what we believe, want, or hope.” (p. 885)

Judging from these quotations, subjectivism in philosophy and ethics emphasizes the individual’s feelings as well as his/her (subjective) perspective concerning moral principles, ethical statements and judgements. Unlike these ethical judgements, subjective, aesthetic judgements are triggered by individuals’ responses of pleasure or displeasure.

In economics the term refers to the ‘subjective theory of value’ / ‘subjective value theory’. This theory was first developed by the Austrian economist Carl Menger, the English economist William Stanley Jevons and the French mathematical economist Léon Walras in the late 19th century.

‘It’s Up to the Consumers’ – The Subjective Theory of Value

According to the subjective theory of value (-> here is another article about this theory), acting subjects or individuals carry out assessments, which are, in turn, expressed by their economic (trans-)actions. As consumers we are, of course, acting subjects.

We as consumers or acting subjects, thus, assess the value of a good. Correspondingly, we conceive of its utility as subjective, deciding for ourselves what is useful.

That means, determining factors for the value and the utility of goods are primarily neither any amount of labour that is required for the production of the good nor any third party observers who declare one good to be more important or useful than another. Likewise, a good’s inherent quality only plays – if at all – a subordinate role. What is crucial for the subjective value theory are the consumers’ subjective views and demands.

Besides a variety of demands, we as consumers generally have numerous and subjective goals. In order to achieve our desired ends, we choose means and evaluate the suitability of the chosen means. Such an evaluation depends on how much we value particular aims.

‘Why Do People Dive for a Gold Treasure ?’ – The Importance of a Market System

However, the means do not determine our goals as the following example demonstrates: a hidden gold treasure in the sea is not valuable because humans or a particular person  dive for it but because gold is valuable for many people. At this point, we need to be aware of the basic principles of a market (economy).

We can basically define a (free) market economy as the ‘collection of (voluntary) exchanges between buyers and sellers’. The famous Austrian economist Friedrich August von Hayek suggested the neologism ‘catallaxy’ as a name for ‘the order of the market which spontaneously forms itself’. It comes from the Greek verb ‘kattallattein’ and means in English ‘to exchange’, ‘to admit into community’ and ‘to change from enemy into friend’.

Accordingly, economic phenomena, in the narrower sense, emerge, when people on a market interact with each other or with strangers and, in this way, prefer exchange to violence since they recognize exchange as an activity for their mutual benefit. People, strictly speaking, expect to gain (subjective) benefits from exchanging their property and other goods with one another.

Let’s return to our example of the gold treasure. Although this person might have various different reasons to dive for the treasure, within the framework of a market or an exchange system he/she is certainly driven by an additional motivation. Because of the fact that many other people subjectively value gold, the possession of the gold treasure enables him/her to offer it in the expectation to receive an appropriate compensation or a valuable consideration.

‘It All Boils Down to the Resulting Product’ – The Priority of Production Results and the Prior Relevance of Judgements by Acting Subjects

Moreover, within the framework of a market the utility we expect of a good or service is normally independent of production costs or efforts. On a market – where we usually encounter strangers – we rather prioritize production results. For instance, when you do not like a particular dish, your are hardly interested in how long the cook took to prepare it and how many ingredients he/she used.

Taste is subjective but not arbitrary. Despite various moods and other unpredictable/unknown factors we can frequently predict what human beings like or need since our predictions are based on experiential expectations. Nonetheless, the only primarily relevant judgement of taste is the one the acting subject makes.

This subjectivity/subjectivism makes economics difficult. We cannot look into people’s mind. Yet, we have one advantage: We can look into our own mind to see that we are not objects that are controlled from outside but subjects that are in control of our actions.

As mentioned above, the basis for each consumer’s demand is what he/she subjectively needs and subjectively considers useful. Apart from this, consumers not only make subjective judgements about goods and services as such but also about goods and services in particular situations. For the consumer a specific good or service is in some situations more useful than another good (or service), though he/she regards the latter in general as valuable.

Consequently, the subjective judgement about utility varies, even for the same consumer, whose judgement is affected, amongst other aspects, by what and how much he/she already possesses. In this context, we will now address related issues – marginalism and marginal utility. Like subjectivism, marginal utility should not be marginalized in economics.

‘Everything But Marginal’ – The Meaning of Marginal Utility

Marginalism is an economic theory or perspective that centers around the ‘margin’ of economic activities, changes and dynamics. The theory, roughly speaking, tries to explain the difference in the value of goods and services by pointing to their incremental or marginal utility.

With regard to this theory, the total utility does not take centre stage. Instead of comparing, for instance, entire classes of goods against one another, people rather value goods unit by unit. Hence, marginal utility represents the subjective amount of satisfaction or the subjective enjoyments you get when you possess, consume or use an additional unit of a good or a service.

Marginal utility, to put it more precisely, is actually the utility of the relevant unit of goods that is decisive for an economic action. Mostly, this relevant unit is the last one that is added to a particular volume of goods or the first one of a specific volume of goods that is given up.

Regardless of whether we place a high value on water as such or have never thought about this, the marginal utility of your first or sometimes another glass of water is higher, if you are thirsty. By contrast, after the first glass of water diminishes your thirst, the marginal utility of additional glasses of water is, needless to say, lower.

Broadly speaking, marginal utility decreases dependent on how much we have of a specific good. To clarify this with another example, imagine a farmer who harvests wheat. If he/she is not in possession of any wheat, the first sack of wheat has a high significance for the farmer because it might save him/her from starvation. Then, if the farmer’s survival is guaranteed, he/she can use the rest of the wheat for other purposes.

Whereas the first sack of wheat helps the farmer survive (or, in other words, achieve the most important aim), additional sacks of wheat give him/her the possibility to reach less important goals. For instance, by storing the other units of wheat, the farmer can make provisions for the future. Or, he/she might decide to exchange the last unit/s of wheat – which is/are added to the total amount of wheat – for a unit of a new and different good that has a higher value for him/her.

These examples of the bottles of water and the farmer’s sacks of wheat illustrate the law of diminishing marginal utility: if the total quantity of a good increases, the marginal utility of a successive unit or the last added unit of this good diminishes. As early as the 19th century the German economist Hermann Heinrich Gossen (1810-1858) summed this up in the first of his laws of economics:

Gossen’s First Law: “The amount of one and the same enjoyment diminishes continuously as we proceed with that enjoyment without interruption, until satisfaction is reached.”

After the presentation of the law of diminishing marginal utility or Gossen’s First Law, we will turn to the ‘water-diamond paradox’ which is repeatedly brought up in relation to marginal utility.

‘Where Are Our Priorities ?’ – The Water-Diamond Paradox

The water-diamond paradox deals with the different values of water and diamonds or a diamond. At first glance, questions regarding their value in use and questions of where our priorities are seem easy to answer. In contrast to mere luxury items like diamonds, water is vital for life.

Paradoxically, as far as their value in exchange is concerned, a bottle of water has a low price tag and water is served for free in restaurants, while diamonds are very high-priced. Simply put, the water-diamond paradox results from the difference between two ways to ‘measure’ the value of goods and items – the distinction between value in use and value in exchange.

Economists explain this paradox by means of water’s and diamonds’ marginal utility. That is, in normal life we do not face the tradeoff of the total utility of water versus the total utility of diamonds, or we never have to choose between all the existing water and all the existing diamonds. If this was the case, our priorities would be clear: we would undoubtedly pick the water.

The point that matters is the incremental or marginal utility of, for instance, having either another bottle of water or another carat of a diamond, irrespective of their value in use. When we look at the real world, there is a plentiful supply of water so that a bottle of water can be replaced easily.

A different situation appears in terms of diamonds since, as opposed to water, these objects are far, far more scarce. It is altogether tremendously difficult (and costly) to replace a diamond ring. Therefore, compared to another bottle of water the marginal utility of another carat of a diamond is greater. Simultaneously, the scarcity of diamonds accounts for diamonds’ high value in exchange or their high market price.

We can also apply these principles to the ‘value’ of products and the ‘value’ of labour. Some people might complain about the fact that the latest gaming console is far more expensive than, say, a copy of the Holy Bible or the fact that a professional athlete often earns millions, whereas, for example, a math teacher receives a much smaller salary.

Such people might additionally ask the question of where our priorities lie. This question refers to moral values and/or the ‘social value’. Nevertheless, it leaves out the value in exchange as well as the concept of marginal utility.

All in all, it is easier to replace copies of Holy Bibles and math teachers than gaming consoles and professional athletes, who may be responsible for boosting ticket sales or increasing advertising revenue. Our choice in the real world is not between the total utility of gaming consoles and the total utility of Holy Bibles or between all the professional athletes and all the math teachers. We all should take this into account.

Sources:

I used introductory books by the American economists Robert P. Murphy and Thomas Sowell as well as books by the Austrian economist and philosopher Rahim Taghizadegan. The examples are taken from their works. Apart from these books, the above mentioned The Cambridge Dictionary of Philosophy and a book by Stephen Gaukroger about objectivity were helpful.