Pragmatic Utopia #31

Casino construction in Singapore. Tyler Cowen argues that the East Asian economic “miracle” was the most moral episode in human history.

This week Tyler Cowen released the link to a free ebook he’d been working on for 15 years. Titled Stubborn Attachments, it presents the philosophical foundations for all the rest of Tyler’s thinking. This is rare access to the earnest version of Tyler who says what he means. FT’s Cardiff Garcia did a podcast interview with Tyler, which I recommend as the most efficient way to cover the main arguments in the book. In one sentence, the book argues that the main conclusion of moral philosophy should be: “We should push for sustainable economic growth, but not at the expense of inviolable human rights.” At first this might seem like a pretty standard thing for an economist or policymaker to say. And perhaps it is,  but it’s more novel as a point of philosophy.

Tyler observes that much of moral philosophy since Rawls is about trying to determine fair rules for redistribution of resources. But in his view, there should be less focus on redistribution and more on production. This is because, in the long run, our well-being will vary enormously depending on what level of growth has been compounding for centuries or millennia. The long-run view is essential to this argument: Tyler builds on Derek Parfit (and on his own collaboration with Parfit) to argue that we should value the lives of future people just as much current people. The only appropriate discounting rate is for the risk that there won’t be any people left, not diminished moral importance of those who are.

If you’re tempted to dismiss the focus on economic growth as materialistic philistinism, I’d urge a closer look. Following Amartya Sen and others, Tyler is working with a conception of value he calls “Wealth Plus,” which entails normal GDP but also leisure time, household production (stuff you do at home for free), and environmental amenities. And a concern for the far future implies some traditionally “left-wing” priorities. In particular, Tyler’s view of the moral good suggests three questions should be raised in importance: (1) What can we do to boost the rate of economic growth? (2) What can we do to make our civilization more stable? (3) How should we best deal with environmental problems?

One common objection to all this comes from the literature on the relationship between income and happiness, where you’ve probably heard that happiness stalls out after $70K/year, or something. Tyler has pretty withering criticism for this view. It seems obvious that people recalibrate their use of language based on baseline expectations, so “even a constant level of reported happiness implies growing real happiness over time, because the “happy” word is taking on more ambitious meanings.” I was also pleased to see Tyler dismiss the importance of “satisfying preferences,” which he thinks is a bad way to conceptualize well-being  because it’s not sufficiently pluralistic and it doesn’t value long-term interests (especially not those of future generations). Economics would be a very different discipline if it demoted “satisfying preferences” from its role as a decisionmaking heuristic.

Another objection might be that Tyler’s moral philosophy isn’t sensitive to disagreements between people who have different interests or priorities. He basically acknowledges this and argues that long-term economic growth is so good for everyone that it eventually swamps any short-term disagreements. In this way he (amusingly) throws out Arrow’s impossibility theorem, which he finds relevant only to static situations. But precisely because of this power for long-term considerations to swamp short-term ones, Tyler insists that we draw some lines in the sand and refuse to make certain sacrifices for growth. This is where “inviolable human rights” must become part of the theory. What exactly the rights should be is up for discussion; conceptually they are akin to Robert Nozick’s notion of “rights as restrictions on the choice set of an individual or an institution,” (i.e things we just can’t do) though they need not line up with Nozick’s specific libertarian rights. Note that this is a purely negative vision of liberty; positive liberties are already included in the appeal of sustainable economic growth.

So if you feel like you should disagree with Tyler, what are your options?

  • Deny some of his starting premises, like that “right and wrong” are real concepts, or that consequences matter.
  • Hold out that there is no meaningful relationship between growth and wellbeing. Argue that whatever the apex of human flourishing is, it was perfectly attainable in pre-modern societies. Tyler seems to agree with this objection in a static context but not over time: “Poorer societies from the past have collapsed repeatedly through military weakness, eco-catastrophe, famine, tyranny, and natural disasters, among other factors.”
  • Alternatively, hold that our present level of development is the perfect balance between opportunity and stability.
  • Argue that future people matter less than he thinks.
  • Argue that the proper list of inviolable human rights is so extensive as to make economic growth practically impossible. I sometimes worry that this is the unstated implication of a political leftism to which in other ways I subscribe. A signature feature of Tyler’s writing is that he asks us to specify the limiting conditions on otherwise platitudinous positions we hold. In this case, “What is the right balance between growth and inviolable rights?” is a hard question that people seem reluctant to answer.

Personally, I think my agreement with Tyler’s view hinges on whether economic growth is the right way to characterize the creation of conditions for human flourishing. In other words, is growth as good for pluralism as Tyler thinks it is? He argues that wealthier societies bring greater access to the arts and education and minimize the tyranny of birth position, location, and class. “We are more mobile, more able to shape our selves, more able to choose our friends, and more able to weave together diverse cultural traditions when constructing our personal narratives.” I agree with this characterization of progress, but I am open to the idea that further such progress could take place largely through political and cultural innovation and need not necessarily have a technological component. Tyler and I both recommend The Moral Consequences of Economic Growth for thinking more about this issue.

1. Flight to the bottom
This is a bit late, but of all the essays about what’s wrong with the airline industry in the wake of the United fiasco, my favorite was this one by Steve Randy Waldman. He cuts through the debate about whether the airlines should have been deregulated with this: “By its nature, a sustainable air travel business is going to be regulated by something other than straightforward price competition. The question isn’t whether the industry will be regulated, but how and by whom, whether the state or a tacit cartel is more likely to do a better job.” He argues that one key benefit of federal airline regulation would be to guarantee robust service to small cities which airlines do not find profitable to serve. He even gets you thinking this issue of Midwestern airline service is pretty relevant to the “ways that we find ourselves fraying as a nation.”

Finally, I really enjoyed his takedown of this common argument that flying sucks because we as consumers have made it clear we don’t care by relentlessly shopping for the cheapest flights. First, consider whether comparably priced European air travel is much better. Second, “Aggregate outcomes are not in general or even usually interpretable as an aggregation of individual preferences.” We don’t interpret the prisoner’s dilemma as evidence that both players want to go to prison. He points out that the quality of a flight is highly uncertain, so we “rationally discount small, extremely uncertain quality differentials to near zero” and shop on price alone. Competitive races to the bottom are of course quite common. In other arenas, we solve them by coordinating, like through regulation.

2. Risk, seeking or not
Jonathan Levy’s book Freaks of Fortune: The Emerging World of Capitalism and Risk in America is one of the best books about the origins of our financial sector. It’s a mostly 19th century story about how financial risk engineering evolved from being purely a matter of maritime insurance to something that affected every household through life insurance policies, mortgage-backed securities, and agricultural commodity futures–all of which were widespread by 1900. Although the New York Stock Exchange (or at least its precursors) is older than most of these financial products, it didn’t directly affect the lives of regular people until the 1920s.

I was particularly struck by how this financial history is essential to understanding the history of American agriculture, and why in the late 19th century farming began to shift from a way of life to a business. Farm mortgages exerted disciplinary pressure on farmers, forcing them to switch from subsistence production to market-oriented monoculture, especially exclusive wheat production in the West. This had all kinds of bad consequences in the long-run like the Panic of 1893 when the wheat market crashed, and later the Dust Bowl, of which monoculture was probably one cause among several.

Levy also has some fascinating financial perspectives on slavery and emancipation. The profit motive could get slaveholding Southerners to say the damnedest things. Like after a slave insurrection on an inbound ship, the insurance company’s (Yale-educated, Confederate official 🙁) lawyer argued that the slaves were humans and had made themselves free, so the loss of property was due to “act of man” rather than “act of God,” and thus the insurance company was not responsible. After the War, Levy tells the story of the Freedman’s Bank, where Northern abolitionists convinced former slaves to pool their savings in a federally chartered bank. Because this was the 1870s, you shouldn’t be surprised to learn that the bank’s chief investor turned around and spent that money on railroad bonds marketed by his own brother, America’s leading railroad speculator. Half of the deposits at the time of the bank’s failure in 1873 were never paid back. If by ’40 acres and a mule’ you meant sharecropping and stolen savings, right on.

3. The American dream is to get ripped off by a stockbroker
I promise there are reasons I’ve been doing so much financial history. Julia Ott’s book When Wall Street Met Main Street continues the story of household financialization up to the Depression, focusing on the origins of the idea that everyone should be a stock owner. It’s not really a story of why the 1929 crash occurred so much as a cultural history of this idea of a “shareholder democracy” that was popular in the 1910s and 1920s.  In the early 20s, America’s hottest economist was Thomas Nixon Carver, whose “New Proprietorship” ideology espoused widespread stock ownership. He thought if everyone owned stock, the lines between capital and labor would blur (which was desirable, I guess, in the context of the Red Scare). In reality, small shareholders of the 1920s had much less power than Carver promised they would. The most common holdings were employer-based stock ownership plans, which largely served to keep workers tied to one company and disincentivized to form a union. Buying one’s own shares in public companies was risky in the time before the SEC. One common move was to merge two companies and in so doing transform their voting shares into non-voting ones.

An interesting theme in this book is how the origins of libertarianism can be found on Wall Street in a time when business opposition to government regulation had not yet been stoked to its modern levels by the New Deal. The “shareholder democracy” people felt really strongly that transparency regulations would ruin individual freedom and ambition. Our friend Thomas Nixon Carver started the nation’s first libertarian think tank, with charming posts today like “MIT Is Making Kid-Friendly Communist Propaganda” and “It’s Never Been a Better Time to Be Poor in America.”

4. How to cook
Ok, something completely different. I enjoyed this essay about what makes a good cookbook. I’m on the same page that most celebrity chef cookbooks are beautiful but mostly useless, because you’re never going to cook the exact dishes some world-class restaurant made famous. I much prefer cookbooks that give intuition into how to think about cooking from a particular perspective and empower you to improvise on top of a baseline understanding of techniques and ingredient combinations. In this light, the author agrees with me that Kenji Lopez-Alt’s The Food Lab is one of the best. But his top recommendation was the newly released Salt, Fat, Acid, Heat by Samin Nosrat.  So I bought it, and it’s pretty great so far. It’s an illustrated guide to the basic techniques that apply to any cuisine. So far I’ve only read through the Salt section, and I’ve basically learned that I should be salting stuff more–more salt in pasta water, more salt to brine meat a day ahead of time. It doesn’t feel advanced at first, but I think if you really internalize these lessons and apply them to everything you cook, quality can compound over time in a way that doesn’t happen with isolated recipes. There are also awesome diagrams, like which kind of oil to use with which kind of food, and a matrix of vegetable x cooking method color coded by proper time of year.