January 13, 2019


The Case for the Longer Term (Tyler Cowen, January 9, 2019, Cato Unbound)

In Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals I argue that we should have two and only two "stubborn attachments" in our social philosophy:

Sustainable economic growth

Absolute human rights

Of those two concepts, economic growth is the focus of the book, and the key point is that economic growth has ethical value. More broadly, I argue for a perspective which is more forward-looking, more oriented toward investment, more respectful of common sense morality (which I see as growth-enhancing), calling for more epistemic humility on the small questions and questions of implementation, and also more utopian in the sense of asking people to focus their attention on how we might make the future a much, much better place, most of all through the medium of economic growth.

If you find it useful to ask whom a book alienates, I would say the emphasis on growth runs contrary to much of the discourse amongst left-wing progressives and egalitarians, and the focus on sustainability might turn off many of those on the current political right.

Behind all that are particular pieces of argumentation, a few of which I will try to summarize.

First, the fundamental problem of moral judgment addressed in the book is one of aggregation. If a choice or policy makes some people better off and others worse off, how are we to weight those competing interests? I respond by finding one case where aggregative judgments are relatively unproblematic. In particular, I believe that life in a much wealthier society is better for virtually everyone. It is much better to live in the United States than Albania, or better to live in Denmark than Burkina Faso. Alternately, you might say that Denmark today is a much better place to live than say Denmark in 1930.

Second, I work backwards from those judgments. If significantly greater wealth is indeed a positive social good, which choices can we in fact endorse? We can endorse choices that bring us to the much wealthier state of affairs, namely higher rates of sustainable economic growth.

As an aside, but an important one, my concept of wealth is broader than most current measures of GDP. We need to adjust GDP for instance to take into account environmental sustainability, the value of leisure time, and the value of possibly unmeasured social indicators, noting that many of the latter are in fact indirectly reflected in GDP. For instance, health matters above and beyond wealth, but still a healthier population is likely to be more productive.

Third, the power of compound returns remains underrated. In the early 1960s, South Korea was as poor as much of sub-Saharan Africa, but since then compound returns have made for a huge difference. Or considering the years 1870 to 1990, if the United States had grown one percentage point less per year, the country would in 1990 have had the same standard of living as Mexico. More abstractly, if you can boost the growth rate by two percentage points a year (by no means a utopian scenario for many emerging economies), after a time horizon of 55.5 years income will be three times higher than it otherwise would have been. Compound growth truly matters.

Fourth, we should not discount the future well-being of humans and also future humans. Significant gains or costs in the future should not dwindle in moral importance simply because they are distant in time. You don't have to believe the discount rate on future well-being should be exactly zero in all circumstances; it suffices to regard the ability to bring about a much, much better and sustainable future as having decisive weight in our current choices. Furthermore, you can believe in this treatment of well-being without denying the appropriateness of the positive discounting of financial flows in a variety of settings, including corporate decision-making.

Mr. Cowen was recently on The Remnant with Jonah Goldberg and I find little to disagree with him about. If anything, I would argue that he blunts his own arguments by not framing them well enough.

Suppose we begin an examination of the proper economic system by simply asking what the point of an economy is, the end, rather than the means.  It seems incontrovertible that the point is to maximize and preserve social wealth.  

Once we establish this first principle, it follows that the means we use to guide that economy should be geared towards efficiency, rendering the greatest value at the lowest possible cost.  Because costs include externalities we capture the concerns for sustainability and future well-being--for example: environmental impacts.

Importantly, the maximization and preservation of wealth suggests the means a tax regime should take: it should punish the consumption of wealth rather than its creation and investment/savings. [The end of taxation being to fund the operations of government.]

But here the rainbows and buttercups end, because of a fundamental reality that we are failing to reckon with: there is nothing instrinsic to an economy that dictates how the wealth it creates should be distributed/redistributed.  And while over the long course of human history we have found it efficacious to use labor as a means of accomplishing that redistribution, labor is just a cost and a system aimed at driving costs down is destined to eliminate the labor cost altogether. Ultimately, this is going to be a political question rather than an economic one and our politics is ill-equipped to deal with it right now. Both parties are still trying to maximize employment.  Neither is even remotely concerned with the economic value of those jobs.  Neither are they concerned with the question of how much spiritual satisfaction can possibly be derived from a job that has no value. Of course, both parties give lip service to the idea that our economic selves are not only not our entire selves but not even our most important selves.  We hear about family, friends, neighborhood, church, voluntary associations, civic groups, parties, etc. but suggest that we should redirect wealth to encourage and enable these superior institutions and folks get their knickers in a twist. 

This, I would argue, is the attachment that Mr. Cowen, perhaps inevitably given his libertarian focus on the individual, misses: enduring social capital.   

Posted by at January 13, 2019 11:17 AM