The Eye of the Beholder

It's not just about price and performance. Intangibles are increasingly important.

The New York Times, "Economic Scene" , August 14, 2003

Oscar Wilde defined a cynic as someone who "knows the price of everything, and the value of nothing." To many people, that sounds like an economist or an executive.

But Wilde's witticism ignores what prices do. They convey information about how people value different goods, including the intangibles an aesthete like Wilde would care about most.

Those hard-to-count intangibles are an increasingly important part of the economy. Competition has pushed quality so high and prices so low that many businesses can no longer distinguish themselves with price and performance. To add value, they turn to aesthetics: the look and feel of people, places and things.

Today's successful restaurants do not just serve food; they create environments. Cellphones do not just communicate; they let owners swap face plates and personalize rings. Toilet brushes do not just remove grime; they come in caddies with a personality -- from Philippe Starck's sleek Excalibur to Stefano Giovannoni's playful Merdolino.

If you go to Lowe's to get a key copied, you have a choice. For $1.24, you can get a standard brass key. For $2.97, you can choose from a half-dozen colorful patterns -- flowers, American flags, tie-dyes, flames.

The more expensive key will not open the door any better. The difference is purely aesthetic.

Prices capture the relative value people put on intangibles. The price system lets individuals make trade-offs among goods, without having to articulate a "good reason" for their preferences. It rewards value you cannot easily count.

Some critics find that wasteful. "Addiction to a strict and unremitting valuation of all things in terms of price and profit" leaves executives "unfit to appreciate those technological facts that can be formulated only in terms of tangible mechanical performance," Thorstein Veblen wrote in 1921 in "The Engineers and the Price System."

Veblen's critiques still influence both intellectual opinion and practical policy. His intellectual heirs, like the economists Robert Frank and Juliet Schor, treat the intangible pleasures of style as either deceptive "salesmanship" (Veblen's term) or wasteful status competition.

Public policy often regards aesthetic value as illegitimate or nonexistent. This oversight comes less from ideological conviction than from technocratic practice. Unlike prices, regulatory policy requires articulated justifications and objective standards. So policy makers emphasize measurable factors and ignore subjective pleasures.

Take lighting. Outside the theater, lighting has traditionally been an engineering field. Guys with calculators (or slide rules) would figure out what fixtures would produce enough light for a room at a specific cost. Veblen would approve.

Over the last couple of decades, all that has changed. For retailers, restaurants and hotels -- any business that wants customers to feel special -- lighting isn't just illumination anymore. It's identity, emotion, drama.

"There is a significant difference between being able to see and being able to appreciate," said Fred Oberkircher, director of the center for lighting education at Texas Christian University. "That word 'appreciation' means a lot. It would be like asking, 'What's the difference between wearing coveralls and a designer dress?' "

Veblenites prefer lighting coveralls. So, apparently, does the Environmental Protection Agency, which has encouraged states and cities to adopt the International Energy Conservation Code. When the code is put in place, interior designers lose some of their favorite tools.

The code penalizes incandescent lighting, favoring fluorescents, which, designers complain, make dimming harder and more expensive. It penalizes rooms with high ceilings, which require more lighting. It gets rid of cove lighting, which typically uses high-wattage fixtures on dimmers.

"You have to have incandescent sources to be able to light the space nicely, softly -- to get that warm feel, even in contemporary spaces," says Granville McAnear, a senior designer at Craig Roberts Associates in Dallas. The code went into effect in September in Texas, forcing Mr. McAnear to explain the rules to unhappy clients who want traditional styles.

"No client," he says, "wants to see fluorescents or metal halide fixtures or anything industrial."

Raising the price of electricity would encourage conservation without dictating style. But in this case at least, the engineers have triumphed over the price system.

The energy code limits itself to Veblen's "tangible mechanical performance." The boards that set energy codes and evaluate their effectiveness include engineers and environmental advocates. They do not include artists or designers, much less their clients. Engineering experts tend to dismiss the concerns of designers. "I can demonstrate through research that your color perception is better with fluorescent than it is with incandescent," says Mark Rea, director of the lighting research center at Rensselaer Polytechnic Institute.

By providing a balanced spectrum of colors, he explains, today's fluorescent lights make it easier to distinguish shades that can look the same under incandescent bulbs: maroon versus violet, for instance. Interior designers, he says, just do not know what they are talking about.

But even Professor Rea admits that humans do not always want a balanced spectrum. Skin tones look better under the long wavelengths of incandescent lights. If you're designing a restaurant, skin tones are what you care about.

"Fluorescent is just not attractive," says Jan Martin, a designer of Zero 3 in Dallas, which specializes in restaurant design. "I don't care what they say."

Interior designers are not trying to pass scientific color-identification tests. They, and their profit-seeking clients, are trying to make people happy. Pleasure is in the eye of the beholder. It's subjective. But that doesn't make it any less real. Prices recognize that value, even when we can't otherwise measure it.