Posted Monday, Aug. 27, 2012, at 3:25 PM ET
Photo by Roberto Schmidt/AFP/Getty Images.
Robert Gordon has a working paper out making some not-particularly-persuasive, super-pessimistic, speculative claims about the future of American economic growth that does include, as an aside, this very persuasive observation about consumer surplus:
A thought experiment helps to illustrate the fundamental importance of the inventions of [Industrial Revolution] #2 compared to the subset of [Industrial Revolution] #3 inventions that have occurred since 2002. You are required to make a choice between option A and option B. With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002.
Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?
The answer, obviously, is that indoor plumbing is more important than the combination of everything that's been invented in the past 10 years. Indoor plumbing is a really amazing invention.
But I think it's actually quite important to not mix and match arguments about subjective utility with arguments about GDP and economic growth. I'd gladly give up small kitchen appliances (toasters, microwaves, coffee machines, food processors, and even my beloved immersion blender) rather than Wikipedia. Giving all that stuff up would be annoying, but I could make coffee with a French press, and I'd really hate to lose Wikipedia. But the high subjective value I place on Wikipedia doesn't change the fact that the manufacture, sale, distribution, and marketing of small kitchen appliances is a substantial industry creating tons of jobs and economic activity in a way that Wikipedia doesn't. These are just different things.
Still—take a moment to sit back and try to appreciate the stupendous difference in your quality of life that comes to you courtesy of indoor plumbing.