For although possession [la possession] may sometimes make something that was once pleasing no longer attractive to us, it is more striking still that in a simple and natural life, possession increases something’s value [le prix]—for it brings together the present and the future, the current pleasures and those derived from reliable expectations [une esperance qui ne sera point trompée].--Sophie de Grouchy (1798) Letters on Sympathy, Letter 5. Translated by Sandrine Bergès.
Yesterday I turned in the proofs for Sophie de Grouchy's Letters on Sympathy: A Critical Engagement with Adam Smith's The Theory of Moral Sentiments (which can be pre-ordered here). During proof-stage all kinds of features may jump out at you that you had hitherto had missed. For example, the quoted passage is taken from a context in which Grouchy discusses the nature of the "pleasure from contributing to others’ happiness." But the point in the quoted sentence is about what Adam Smith would call use-value. In Smith this is contrasted with exchange value.
Most economists today are not fond of discussing use value distinct from exchange value. They like revealed preference which is mediated by prices. The consequence is that use value is kind of ignored if not outright displaced. But because I just spent a month visiting with the widely read, experimental economists, Vernon Smith and Bart Wilson, who are very interested in the distinction and also focused on the nature of property, the sentence suddenly jumped out to me.*
Grouchy asserts that possession of an entity changes the use value of it. Sometimes (a) possession makes makes the use of it less valuable to us, but (b) most of the time it makes it more valuable to us. Grouchy has little to say about (a). But we are all familiar with the phenomenon that some toys we/our kids initially adore playing with, but after time, interest is lost in them. That Grouchy has nothing to say about (a) is unfortunate because one would like to have a firm distinction between (a) and (b). One way to capture the distinction by definition is to call (b) a durable good, and (a) a non-durable good. It's possible that (a) and (b) are person relative, but for now I ignore that.
A key feature of (b) is that possession adds value to the use of the good. We may even say that it is added beyond the actual deployment/consumption of the good. The nature of the value added is made explicit by Grouchy: we can form reliable expectations around it. This is a distinct benefit. It means that other things being equal, one is secure against certain down-side risk (i.e., the inability to use the good again).
The benefit is, in part, psychological. In the French, Grouchy says this literally: possession generates "a hope that will not be deceived." That is, the use value of some X may be different depending on whether, say, one owns or rents it and one's attitude toward future use.
Now, being able to form reliable expectations is a key feature of the origin (a) property (right) for Grouchy. In her core example explaining thus (in Letter 6) in the state of nature the initial, cultivation of a field is only useful if and only if one has an expectation to the harvest. (I have analyzed this here.) And the initial right to property secures this consequence for Grouchy.+ So, the point is not that one received a right to property in virtue of mixing labor, but rather that the labor wouldn't be sensible/intelligible if one couldn't rely on being able to keep it. To what degree this is persuasive I ignore for the present purpose. So, Grouchy's comments in Letter 5 hook up with rather fundamental features of her political philosophy.**
There are more important points here (again I am indebted to Vernon Smith): possessions are themselves a means toward coping with down side risk. The loss of a $100 bill is a big deal if you lack wealth; it's merely annoying if you are a billionaire. In The Theory of Moral Sentiments (which Grouchy had translated) Smith captures the interplay between possession and down-side risk in terms of security and prudence:
We suffer more, it has already been observed, i when we fall from a better to a worse situation, than we ever enjoy when we rise from a worse to a better. Security, therefore, is the first and the principal object of prudence. It is averse to expose our health, our fortune, our rank, or reputation, to any sort of hazard. It is rather cautious than enterprising, and more anxious to preserve the advantages which we already possess, than forward to prompt us to the acquisition of still greater advantages. The methods of improving our fortune, which it principally recommends to us, are those which expose to no loss or hazard; real knowledge and skill in our trade or profession, assiduity and industry in the exercise of it, frugality, and even some degree of parsimony, in all our expenses.
It's easy to treat prudence as Scottish frugality. But the key point is that prudence is associated with avoidance even elimination of downside risk (exposure "to no loss or hazard"). Such security is the main aim of prudence. As Grouchy notes possession is a means by which such security is extended from the present into the future.
So the (marginal) use value attached to possession of a durable good (or savings) adds value to the good because it provides a kind of psychological calm about being able to use it in the future. In addition, it makes it possible to prevent or be less hindered by small losses.
Let me close with two observations. First, of course, there may be costs or foregone opportunities attached to possession, and these may be non-trivial. So, I am not claiming that the use value of possession is always worth the opportunity costs. (I am not sure what Grouchy would have to say about this.) Second, the institutions that secure property may, thus, have use values that are not properly priced into the exchange values of these possessions. (The regime of property rights may also have effects unrelated to the use values (and exchange values.)) This second point, I think helps explain one reason why Grouchy thought it would be good that given a system of property rights, it would be good to create incentives such that everybody had some property. But that's for another occasion.
*This post has benefited from their comments on Grouchy's text.
+I am simplifying a bit because Grouchy also thinks that being able to oversee the harvest matters.
**To be sure the state of nature in Letter 6 is need not be identical to the simple and nature life of Letter 5. The simple and natural life the one in which institutions of society have not corrupted are compassionate human nature (recall the post earlier in the week).
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