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Overconsumption

March 20th, 2005

There’s already been a bit of blogospheric response to the latest study on wasteful consumption (PDF) by Clive Hamilton and others at the Australia Institute . As Andrew Norton notes in the comments to Jason Soon’s post, the study reflects Clive’s rather ascetic wordview, one not shared by the majority of Australians. And, no doubt, waste is in the eye of the beholder. To take one of Clive’s examples, I must admit to buying books and not reading them, at least some of the time, but I can find excuses for this, whereas I’m scandalised by the idea of throwing out perfectly good clothes because they’re out of fashion.

That said, I think that, unless you are willing to take a completely agnostic view of social trends of all kinds, it’s hard to avoid the conclusion that the present period is one of generally excessive consumption. There are underlying economic causes of this, including low interest rates, easy credit and an economy that rewards successful speculation more than effort[1]. This in turn produces a demand for cultural celebration of consumption which reinforces the whole process. The wheel must turn and I think Clive is right to give it a bit of a shove.

And, leaving aside the fact that an excessive focus on consumption is bad for us, Tim Costello was spot-on on TV pointing to the moral obscenity of allowing children to starve while we making strenuous efforts to acquire trivial items for ourselves. No-one is perfect here, but, as I’ve said before, we all seemed a lot happier when we were putting a bit of our spare time into the tsunami aid effort. If we could keep this up, the world would be a much better place.

Such things are cyclical: material prosperity was just as eagerly celebrated in the 1950s, and this produced the anti-materialist reaction of the 1960s.

fn1. And even where wealth is produced by effort, it commonly takes the form of a capital gain, on the sale of a business, a renovated home, or whatever.

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  1. harry clarke
    March 20th, 2005 at 16:26 | #1

    Its always struck me that in standard economics a consumer optimises their desires subject to budget. But with a bit of effort — at some effort and cost in terms of determining what it is you really want — a consumer can generally do better than this.

    In the limit the issue of constraining what you want — part of the Buddha’s middle way –can be as important in getting you to your ‘blissed out’ consumption level as buying that CD or new car.

  2. James Farrell
    March 20th, 2005 at 16:59 | #2

    Clive is only stating what any sensible person notices all the time, that buying shiny new stuff from shops, whether it’s gadgets, clothes or books, gives us a temporary hit, but tends not to make us much happier. Part of the problem is that most our expenditure (present company excluded) is on stuff designed for very passive consumption. But in fact humans are happiest when we are being creative, using our imaginations, developing and using skills. When I defended Ross Gittins against Andrew Norton a few weeks ago regarding the destruction of the weekend, he made a snide reference to singing songs around the piano. Actually, I think people got a lot more fulfillment from singing around the piano than from browsing through DVDs in a Westfield mall in between McDonald’s and ice cream. The problem is not consumption. Consumption could be in the form of services drawing on skills and giving people a sense of self and community. Speaking of community, community theatre always struck me as the perfect vehicle for this; it should be heavily subsidised until it has a chance to take off.

    Clive is on to something, but it’s handy for everyone, especially the left, to have someone to bag as ‘extreme’, ‘ascetic’, or just generally loopy so that they can seem moderate, not to mention working class in tatses and outlook, by comparison. J’accuse.

  3. March 20th, 2005 at 18:15 | #3

    It’s not so much being creative as being autonomously active that cheers people up. Just imagine how happy football rioters are.

  4. Andrew Norton
    March 20th, 2005 at 20:51 | #4

    James – The central dispute here is not over what can make people happy (or whatever; the idea that happiness is all that counts is very shallow), but between authoritarians like Hamilton (or Gittins on a bad day) who want to impose their view of the matter on others, and liberals who want to maintain or expand free choice.

    As for commmunity theatre, it is much better for the actors than the audience.

  5. 2dogs
    March 21st, 2005 at 08:18 | #5

    The argument between libertarians and social democrats on this issue is to some extent caused by what the libertarians might regard as a psychological misconception; that a person’s income constitutes an allocation of resources to be spent on them personally.

    Libertarians would be more inclined to regard it as a person’s total power to obtain outcomes that they desire in the world; be they personal or political.

    Social democrats would be more inclined to regard this perception as either legitimate, or, at least, a given, and would excise a person’s income down to what might be regarded as an appropriate level for self-expenditure.

    While the social democrats may be right in their assessment of human psychology, I’ll side with the libertarians in being very distrusting of anyone who presumes to know better and decide how the excised income should be spent.

  6. Paul Norton
    March 21st, 2005 at 09:25 | #6

    One of the weaknesses in the libertarian position here is that much product advertising (and design of new products) is aimed not at rationally self-interested utility-maximising adults, but at children and early adolescents whose critical faculties have usually not been developed to the point where they can resist emotionally seductive and manipulative messages from the ad quacks who operate a secular version of Ignatius Loyola’s “give me a child for the first seven years. . .”. The consumption habits (and the habit of consumption in general) which are developed at an early age persist for much longer. And there is the “pester power” impact on adult expenditure patterns. To paraphrase a certain jingle:

    My kids watch the ads that make them nag me
    To buy the take-aways
    That make them fat

  7. Ros
    March 21st, 2005 at 10:28 | #7

    Can never make up my mind whether Clive Hamilton is a total wowser or one of the great fire and brimstone preachers of our age. But this latest does remind me of the eat your brussel sprouts just think of the starving chinese of my parents in the fifties, but I guess they weren’t suffering from material prosperity.
    Ah to live in an age when science looks at why children don’t like the taste of broccoli. Couldn’t remember broccoli in my early youth, maybe it was only affordable by the materially prosperous
    Anyway it is probably George Bush seniors fault, all those American children that would have wasted the broccoli on their plates on the grounds that the President wouldn’t eat it.

  8. Jason Soon
    March 21st, 2005 at 13:10 | #8

    the problem with clive is that he is dishonest. he is lumping together as waste various things that strictly speaking wouldn’t seem to involve much waste. for instance gyms don’t presume 100% utilisation of their facilities, books and CDs find their way into a 2nd hand market or get donated to a public library and what does ‘credit card debt’ as such have to do with waste? this he conflates with issues that would seem to have environmental repercussions such as landfill. i think the latter and what to do with packaging is a legitimate issue of the costs of wasting but the rest is ultimately just Clive’s view that being overly focused on commodities is spiritual pollution. otherwise what does excessive mean in this context? where is the market failure? is it in the idea of positional externalities (i.e. keeping up with the Joneses, etc)? but are all positional externalities really bad? if, like the guy in the story, someone is pressured into buying Dostoevesky because he feels he should read it, that, according to Clive, is bad. what an utterly joyless philistine! what does the man do for fun?

  9. James Farrell
    March 21st, 2005 at 13:30 | #9

    Andrew, what exactly is authoritarian about saying people are wasteful to a dysfunctional degree? The question whether people engage in wasteful consumption, i.e. whether they systematically buy stuff they know they don’t need and later wish they hadn’t, is an empirical one. It seems to me that Clive is an authoritorian in the same sense that Noam Chomsky is a conspiracy theorist: everyone knows he’s just a zealot and an extremist, so there’s no real need to read anything he writes. (By the way, speaking of empirical research, I didn’t get around to thanking you for the reference on work hours and life satisfaction. I’m still mulling over those issues.)

    2dogs, I didn’t understand your distinction. Could you try again? In the meantime, for what it’s worth, I think the relevant difference between libertarian and social democratic thinking is the greater willingness of the latter to prescribe cultural or attitudinal shifts, whereas the former regard individual tastes as irreducible primary data as in the neoclassical textbooks. It’s all about whether there’s any such thing as society.

    I’m pretty confident, for example, that a net increase in aggregate utility would result from banning traffic from the Sydney CBD and constructing a much better network of cycle ways. However, very few people would take the initiative in abandoning their cars, improving their cycling fitness, fitting decent panniers on their bikes, and subscribing to a fund for construction of the bike tracks, unless they were confident that everyone would be doing the same thing. The whole transport shift would need to be undertaken in a coordinated way, with a touch of friendly pecuniary coercion here and there. This is certainly a bit paternalistic by libertarian standards, but no more so than proposals, popular on the right, to rescue people from welfare dependence. Nor would it be authoritarian, if carried out by elected governments. At least, no more authoritarian than insisting on the status quo, that enslaves us to traffic jams and vistas of concrete.

  10. Paul Norton
    March 21st, 2005 at 13:45 | #10

    A good point, James. It is surreal to defend the freedom to consume in situations where one is *not free* to *not consume* (or where one’s freedom to not consume is heavily circumscribed and carries considerable risks and social sanctions). Urban passenger transport is a paradigm case of such a situation. Another example relates to dress codes and expectations in both work and social contexts (although I have the good fortune to work in a genuinely libertarian workplace on this score).

  11. James Farrell
    March 21st, 2005 at 13:53 | #11

    Jason, I agree that he’s muddied the waters by dragging environmental pollution into the issue, but is that really the most important point to make about the whole exercise? I must say I find it a bit depressing that, although we’re forever reminding economics undergraduates that GDP does not equal well being, when someone actually makes the effort to examine alternative indexes and thier policy implications, he just gets lampooned and dismissed a puritan, wowser, wet blanket etc. As a matter of interest, who, in your view, is addressing these isssues and not ruining the party?

  12. 2dogs
    March 21st, 2005 at 13:54 | #12

    James, my point is that people have both personal and political values. For example, a person might desire to eat lunch, so they go and buy themselves lunch – lunch is something they personally value. They may also want their society to care for its poor, or run a space program, etc. Such things would be things they politically value.

    Libertarians would say that a person should meet the cost of both sets of values from their income. Obviously, they would need to associate, combine and contract with others to satisfy political values.

    Social democrats would acknowledge the tendancy for people to regard their income is to be used only for personal values (in my opinion, this is more due to social context than selfishness). To address this, the social democrat would be inclined to remove the political values portion of a person’s income and arrange a separate process for determine how it is to be spent.

  13. Paul Watson
    March 21st, 2005 at 14:15 | #13

    “Such things are cyclical: material prosperity was just as eagerly celebrated in the 1950s, and this produced the anti-materialist reaction of the 1960s.”

    Err, no. The 1950s (and 1960s) were a decade of full employment. Celebrating consumerism (or rebelling against it) during times of plenary material prosperity is one thing; a middle-aged, school drop-out big-city home-owner (= windfall untaxed gains) flexing his/her newfound economic muscle, as against a minimum-waged (if lucky) uni graduate who is their waiter today is quite another.

    For this reason John, I am puzzled as to how you can surmise, re “the government’s only economic policy is to promote speculative investment in housing, and the [consequent] consumption demand” that “As short-term economic strategies go this isn’t a bad one”:
    http://johnquiggin.com/index.php/archives/2005/03/19/investigation/#more-2266

    Do you really believe that a policy that has seen almost 1m highly-educated young Australians emigrate to countries where real knowledge work is still being done, so as to avoid the life on the dole that awaits their stay-behind peers, is even remotely defensible?

    Also, the rapid price deflation of electrical goods has further sped up the consumption cycle. And FWIW, I am the polar opposite of being a Clive H fan, see: http://paulwatson.blogspot.com/2004_05_09_paulwatson_archive.html#108440253367172452

  14. Paul Norton
    March 21st, 2005 at 15:15 | #14

    “Do you really believe that a policy that has seen almost 1m highly-educated young Australians emigrate to countries where real knowledge work is still being done, so as to avoid the life on the dole that awaits their stay-behind peers, is even remotely defensible?”

    Paul, I thought briefly about this matter on the weekend in a different context. Namely, what effect would the movement offshore of almost 1 million highly educated young Australians have on election outcomes? Granted that these people (if enrolled) would be able to vote postal, absentee or at Australian consultates overseas, their expatriate status must nonetheless have some effect on their voter turnout. Perhaps more significantly, their absence from Australian workplaces and neighbourhoods would have some effect on the levels of political awareness and discourse amongst those left behind. Can anyone produce some studies or statistics on this issue?

  15. Razor
    March 21st, 2005 at 15:19 | #15

    Obviously Clive wants me to consume the excess wine I have stored up in my living room. I shall print a copy of his article and stick it on the fridge. Then when my wife asks me why I am opening another bottle of red I will point out that I am avoiding wasting precious resources. I have quite few bottles of spirits that I have built up over the years, not being a spirits drinker – obviously I need to sacrifice myself in order to avoid unnecessary waste. Thank You Clive!

  16. Jason Soon
    March 21st, 2005 at 15:57 | #16

    James
    If the welfare issues in his expansive definition of waste are trivial, then what does any of this have to do with construcing alternative indexes, and more importantly, useful ones?
    One welfare implication is the waste disposal issue but as you’ve acknowledged, that doesn’t seem to be his real agenda. His real agenda is that this overconsumption is inherently bad. Alright, one way to put a spin on this that is consistent with economists’ agnostic attitude to revealed preferences is to say that some of this overconsumption may be a result of prisoners’ dilemma – to wit, keeping up with the Joneses. So everyone rushes out and buys Stephen Hawking’s latest book because they want to be known as smart pants. Of this some percentage read the book and some don’t. So Clive goes and identifies this bandwagon/Veblen effect (call it what you want) as’ waste’. But this is neither here nor there. All the trodden rubber soles of people walking or driving to the shops to buy stuff may also be identified as the cost of the system but we tend to see that overall there are mutually beneficial opportunities to be captured from allowing people to buy and sell stuff. There are similarly also benefits from bandwagon effects. So some people who rush out and buy Hawking’s book don’t read it. But the bandwagon effect may also induce more people to buy the book *and* read it than otherwise. I think of other examples. People want their children to be smarter than other children. As a result, everyone invests more in their children than otherwise and IQs rise (as they seem to be according to the Flynn effect). Clive seems to be presuming these bandwagon effects which induce some part of our consumption is all bad.

  17. Jason Soon
    March 21st, 2005 at 16:09 | #17

    2dogs
    to some extent you’re confusing the issue here.
    i don’t really see this as a libertarian vs social democrat thing. i’d rather the likes of john quiggin tax a big chunk of my income and give it to the poor to spend on whatever they want (beer, ciggies, the TAB) than some latter-day Grand Inquisitor like clive hamilton take the same amount and tell everyone how they should spend it in order that everyone attain their aristotelian self-actualisation or whatever the hell it is he’s after.

  18. Paul
    March 21st, 2005 at 16:11 | #18

    I’m sympathetic to the idea of building alternatives to GDP as a measure of welfare – but Hamilton’s “does this make you happy, how about this, what would you give it out of ten?” approach to reporting welfare both lacks serious psychological foundations and provides a great deal of room for him to pick and chose in order to support his conclusions. Revealed preference is imperfect, but I don’t think he’s improved on it in any meaningful way.

    More generally, excess consumption can be at least partially explained by people making inaccurate assessments about their future activities. When chosing to buy a book, CD or food item I have to decide whether I’m likely to use it within the relevant time frame. If I purchase it and don’t use it then I’ve wasted the amount I spent, but if I don’t buy it and later want it I incur the expense of replacing it and/or have to turn to an inferior alternative (canned goods or those from a corner store, an extra trip to the shops) so there should be an individually rational level of excess consumption which you would expect to be positively correlated with income.
    It’s probably not a complete explanation, but I think its a little sly of Hamilton, who questions rational actor models when it suits him, to take as his baseline a consumer who is able to purchase exactly what they need.

  19. Tom Davies
    March 21st, 2005 at 16:17 | #19

    Paul W, I don’t think John is enough of a Keynesian to use ‘short-term’ as a compliment!

  20. Andrew Reynolds
    March 21st, 2005 at 16:30 | #20

    I think this is one of those issues where the problem is easy to spot, but any of the suggested solutions is going to be worse than the initial problem. Humans are not always inherently rational, but the attempt to force them to be rational according to one person’s worldview is bound to be worse than the initial deficiency in rationality.
    A good test for this is to look to the proposed solution – if it is absent then you are dealing with idle thoughts and they should be treated as such. If they involve force or other coercion then they should be viewed very sceptically.

  21. Andrew Norton
    March 21st, 2005 at 16:35 | #21

    James – I haven’t seen this Hamilton paper, but Growth Fetish spells out some of his policy agenda. This from my review of it:

    “Growth Fetish no more than outlines how growth will be cut and priorities re-oriented. Heavier taxation would reduce demand for consumer goods.Hamilton proposes a more progressive income tax, plus luxury taxes, speculative taxes and inheritance taxes (p.222). Limitation on working hours would be imposed (p.218), reducing what people could earn. Most advertising would be banned, reducing our demand for goods we don’t need (pp.91, 219). (Ironically, much of the advertising for Growth Fetish was stickers placed on poles, ATMs, post boxes etc., which is already banned. This is perhaps a forerunner of the samizdat advertising that would emerge under Hamilton’s regime.) This would be backed up with a reduction in TV broadcast hours (p.220).The supply of goods would also be restricted. The use of fossil fuels would be reduced ‘until fossil fuels are largely phased out’ (p.181). Ecological taxes would be imposed, and ‘ecodesign’ principles would aim to eliminate pollution (p.222).”

    It sounds pretty authoritarian to me. The whole thrust of Hamilton’s research – this, his work on happiness, on the environment, on materialism, on pornography – is to say that the individual choices we make are bad. Admittedly his prescriptive agenda is under-developed and not emphasised. But combine the thrust of his arguments with the remarks about the restrictions he’d impose and it is pretty clear which direction he would take us in.

  22. John Quiggin
    March 21st, 2005 at 16:49 | #22

    Paul, Tom D put my response more neatly than I would have. My comment was meant to damn with faint praise.

  23. John Quiggin
    March 21st, 2005 at 16:55 | #23

    Andrew, it doesn’t seem to me that your examples of authoritarianism stand up very well. Progressive income taxes and inheritance taxes would reduce the choices available to those with high incomes and wealthy parents, but would increase the choices available to others.

    Most of the other restrictions you describe apply in the first instance to corporations and only indirectly to individuals. Admittedly, from a dogmatic libertarian point of view, all of this is terrible, but not obviously more so than our existing institutions.

    As far as I can see, when it comes to direct effects on individual choices, Hamilton relies more on moral suasion, and less on government policy, than the average economist. A lot of the adverse reaction to his work comes from people who don’t like being the subjects of moral suasion.

  24. James Farrell
    March 21st, 2005 at 22:28 | #24

    Luckily for him, the bastard stopped just short of trying to ban black coffee.

  25. March 21st, 2005 at 23:10 | #25

    James Farrell has already made most of the points I may have made. Would just like to reinforce the point that the contempt with which Clive is routinely treated by many is because he touches a nerve. We don’t like it.

    My kid has recently gotten into the habit of standing up and shouting at me “Don’t be rude”, when I rebuke him. He is offended by my cheek in pointing out his failings. He’d shoot the messenger if he could.

    As for these formulaic and hollow protestations grounded in libertarianism and market worship, spare me. The day you fundies get your own planet to live on then you are free to consume as much as you choose. Until then and while you still live on mine, you will just have to learn to get along wth the rest of your species. And if that means rationing of desire, so be it. The capacity of our poor old planet is something that really is an absolute. So called liberty ain’t.

  26. Andrew Norton
    March 22nd, 2005 at 07:34 | #26

    John – Sure, taxes on the rich would not affect the poor much. But restrictions on fossil fuels, working hours, TV broadcast hours, and advertising (since it pays for free-to-air TV and radio and keeps magazines and newspapers cheap) would have massive effects on the capacity of all Australians (except Clive and his followers) to live the lives they choose.

  27. Paul Norton
    March 22nd, 2005 at 07:56 | #27

    The key question about restrictions on fossil fuels is whether they would have more massive effects on the capacity of all Australians to live the lives they choose than would the consequences of current unrestricted or minimally restricted fossil fuel use. If Andrew lived further from his workplace than next door in Carlton he might be noticing these consequences already.

  28. Ian Gould
    March 22nd, 2005 at 09:36 | #28

    Paul,

    what about the massive effect unlimited fossil fuel use has on “the capacity of all Australians to live the lives they choose”?

    Fossil fuel use is hugely subsidised, mainly because its users aren’t required to pay for the environmental externalities associated with its use.

    Low-level ozone, primarily from car exhausts, contributes to thousands of deaths in this country every year, somehow I think the victims and their families would probably choose to stay alive if the option were available to them.

  29. Paul Norton
    March 22nd, 2005 at 09:46 | #29

    Ian,

    That was my point, more or less. I was also making the point that untrammeled exploitation of a non-renewable resource will, in the long run, restrict its use far more radically than will controlling its exploitation for environmental and resource-conservation reasons.

  30. Paul
    March 22nd, 2005 at 10:35 | #30

    wbb, it’s usually appropriate to prove your opponents wrong before psychoanalysing them, rather than using one as a substitute for the other.
    As for the limited resource points, they’re valid, but they’re being lazily conflated with the more general “young people these days consume too much what with their DVDs and CDs and hip hop fashions” argument – the resource implications of which are pretty tenuous. I don’t think environmentalism really helps itself when it allows itself to be tied to a largely irrelevant and unappealing sackcloth and ashes agenda.

  31. March 22nd, 2005 at 13:03 | #31

    Paul,
    Normally I’d agree with you about addressing the argument rather than delving into the murk of my interlocutor’s mind.

    However in this case, I find it apposite as the dominant criticism of Clive Hamilton is to ridicule him as a moralistic ascetic who wishes to deny the rest of us Epicureans our most enjoyable pleasures out of pure spite or from jealousy that he is unable to obtain similar satsfaction.

    How do you manage to obtain the impression that Hamilton advocates sackcloth and ashes by advocating reduction of waste? He defines waste in the context of the books example which has certainly ignited most interest in the blogosphere as books that don’t get read. How can a book that don’t get read contribute to pleasure? I can find no suggestion here of a reduction of pleaseure – only of waste. Perhaps you are projecting your guilt over your own profligacy onto poor old Clive.

  32. Paul Norton
    March 22nd, 2005 at 14:22 | #32

    One of Clive Hamilton’s recent papers (titled, I think, “The Disappointment of Liberalism”) raises the question of whether constantly increasing material consumption (at least at the levels most citizens of Australia engage in) is necessary for, or even consistent with, the good life. In this connection he discusses the question of different conceptions of freedom, and whether people who feel compelled to consume (by socio-cultural expectations, addictions, weakness in the face of temptation, etc.) are free in the sense of “inner freedom”, i.e. being free to decide to do what is genuinely in one’s own rational interests and what is consistent with one’s conception of the good, rather than being a slave to all one’s desires. It seems to me to be perfectly legitimate to raise these issues and to expect them to be engaged with seriously rather than to be caricatured as a coercive ascetic who would have us all on a diet of cold water and raw vegetables.

  33. March 22nd, 2005 at 14:58 | #33

    Wbb at 25 – you are starting and stopping at the idea that the world as is is fixed in certain respects. But the libertarian/anarchist approach recognises these practical limits as underlying problems and wants those restrictions engineered out too, precisely in order to make their goals practically achievable.

    Ian Gould at 28, I don’t think it is correct description to call unadjusted free rides subsidies. I mean, sure there are gains, but on the one hand they aren’t being “given” – there is no cash or funds flow, or benefit in kind actually being conferred as opposed to taken – and on the other hand it is taking governments as central, asking why they do not stop something rather than why theyu do something.

    The serious reason for not calling it a subsidy is that it confuses the effect achieved with the means producing it. After all, a Pigovian subsidy is still a subsidy, even though it is actually a tactic for reducing inappropriate gains. There is a lot more to be said on the subject, but that would be over-egging the pudding.

  34. Paul
    March 22nd, 2005 at 15:15 | #34

    Again with the psychoanalysis. I’ve suggested a couple of responses to Clive’s concerns: first that over purchasing is a rational result of incomplete information about the future and/or about ones own preferences, and second that they don’t really have much to do with the “limited resources of our planet”. I think unread books fit rather well into my paradigm and rather terribly into yours, such as it is.
    The problem here is not that there is no reasonable basis for looking behind people’s revealed consumption preferences, or their environmental impact. It’s that there little in the piece to which I’m responding that deals with those points in a serious way. The piece on liberalism sounds interesting, but acting as though a certain subset of the population admiting to an unwanted purchase proves, or even usefully contributes to the thesis you say he advances is pointless.
    Similarly, there’s a discussion to be had on fossil fuels and limited resources. It is not best advanced, I submit, by unfocused complaints about materialism. To the extent Hamilton and his supporters are using the data to make some sort of point of about save-the-planet environmentalism, it’s pure hot button bandwagonism. If you’re concerned about the underpricing of fossil fuels, let’s have that argument, and propose either a policy or individual actions designed to deal with it, but don’t pretend that, by some happy coincidence, the needs of the environment happen to fit exactly with a general prejudice against capitalism and consumerism, because they don’t.

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