Thursday, March 20, 2014

The Domain of Relational Value

A few hypotheticals, for the sports inclined:

- If every pitcher in baseball were as good as Matt Harvey, pitching would not be a big deal.
- If every quarterback were as good as Peyton Manning, excellent quarterbacking would not be how football teams won.
- If every goalie in hockey were as good as Tuukka Rask, goaltending would be unimportant.

A couple more, for the less-sports inclined:

- If everyone carried a Coach bag, Coach would not be a distinctive brand.
- If everyone could study to get every question right on the SAT, the SAT would be useless.

These are somewhat counterintuitive at first, but they make a lot more sense when you think about them: their value is (almost) entirely derived from their exclusivity. Peyton Manning is so valuable because no one is as good as he is. But if other quarterbacks were as good as he is, his value would decline, because its main value is in having a skillset that others do not. Football would turn on offensive scheme, defensive personnel, etc. much more than it does in today's league.

I would argue that all of those things--quarterbacks, pitchers, luxury accessories--are best described as existing in a "domain of relational value." But the domain exists even in more prosaic parts of everyday life. For example, politicians often toss off the bromide that we want everyone to go to college. But if college's main benefit is in signaling, then the more we fund college and promote people's higher education, the more we dilute the effect of the signal.

So, here is a typology: which programs and concepts have intrinsic value, and which ones have relational value?

Domain of Intrinsic Value

- Literacy
- Critical Thinking
- Agricultural knowledge
- Trade/vocational education (for skill-building)

Domain of Relational Value

- Education (signaling/credentialism)
- Trade/vocational education (for salary)
- Interview skills
- Plastic surgery
- Across-the-board wage hikes
- Fashion
- Accessories

We all benefit from increases in literacy and critical thinking skills, in terms of increased potential innovation, quality of life, etc. It's the same with scientific research to increase food yields; there is a social benefit to that, in terms of feeding the hungry and reducing the price of food.

But we do not all benefit from mandatory job interview courses or standardized test training. If everyone learned the "five key tricks to acing this job interview!" those tricks would no longer work, and job interviewers would have to look to other things to distinguish between their candidates. (Incidentally, I think this phenomenon--that humans adapt and often change their context rapidly--is the fatal problem of social science. Human nature may remain stable, but the context changes so much that our models seldom hold up.) A more trivial example would be in fashion: if everyone has the same style of dress, then that style of dress is no longer distinctive. Some things only have value because they serve as methods of distinction.

Now, you may argue that people who have those advantages do not deserve them (and in many cases, I would agree!). But what happens is that when we pursue funding and universality in an area where there is a relational value problem, the beneficiaries are not the targets of the plan; the beneficiaries are the rent-seekers who end up making a living off of the program. (A substantial portion of academia, sadly, is in this category right now, particularly in school administration.) The targets of the plan get their credential or their benefit just as the credential loses its value. By then, society has moved on, and we're all poorer for it. (I don't have any evidence of this to present here, but my suspicion is that a lot of programs that the government tailors for the disadvantaged run into this problem.) Rent-seeking is everywhere, of course, but at least when there is a social benefit, we are getting the benefit for our troubles.

My plea here, then, is to keep the relational value problem in mind when proposing something. Is some perceived benefit a benefit solely because of its exclusivity? Who will benefit from its proliferation? Will the people we most want to help actually be helped? There are lots of things we try to do with public policy; we should try to keep them away from the domain of relational value as much as we possibly can.

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