31 January 2019

The case for the longer term

by Tyler Cowan

Originally published by CATO.

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 summarise.

First, the fundamental problem of moral judgement 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 judgements 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 judgements. 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.

Fifth, I believe there are some absolute human rights, and in the book I present those as a constraint on policy. But I did not intend Stubborn Attachments to be a treatise on rights, as I do little more than mention their existence. I don’t try to set out their scope, rather I wished to mention that they fit into my moral framework comfortably, and the concept serves as a kind of placeholder in the argument.
More generally, I am a pluralist and not a utilitarian or even a pure consequentialist. A wealthier society isn’t just happier, it carries along many other plural values. It produces more creativity, and it gives more people access to the creativity of others. Workplace relations tend to be kinder and more tolerant, and you can find that to be a positive good above and beyond its contribution to individual happiness. Or what if you value discovery? The wealthier society gives people greater access to revelatory books, life-altering travels around the globe, and psychedelic experiences, typically without forcing those on anybody.

I would say that the utilitarian has good but still modest reasons to favour greater wealth past a particular threshold of comfort. The pluralist has strongly compelling reasons to do so. Stubborn Attachments is mostly a consequentialist book, but it is pluralist rather than utilitarian. Truth, beauty, and justice can all matter, above and beyond how much they are reflected in individual preferences, happiness, or other more mono-valued standards. That increases our obligation to make the world as good as possible.

In practical terms, a regime of maximising growth is largely capitalistic, but with government supplying important public goods, including environmental protection, which is necessary for the sustainability of civilisation. I see some forms of redistribution as being growth-enhancing (e.g., programs to combat malnutrition), but I oppose income and wealth redistribution insofar as they damage the prospects for economic growth. In many instances redistribution creates excessive implicit high marginal tax rates for the recipients of the largesse, or the background high taxes may stifle private enterprise from the wealthier parts of the economy. In part the book is arguing that the economic growth concept, properly understood, will do more for poverty reduction and other social goods than will traditional egalitarianism.

Stubborn Attachments embraces the idea of epistemic modesty on many of our particular policy views. As an economist, I would say we have a pretty good idea which policies might damage economic growth, but we are far less certain which policies will significantly boost growth. That said, in many settings we do have some idea, albeit not a firm one. So you might promote an idea to maximise growth that has a two percent chance of being right, believing that all the other ideas to maximise growth each have only a correctness chance of one percent (I am deliberately oversimplifying here for purposes of exposition, obviously the entire distribution matters as well). In that setting, you should not be very dogmatic about your particular policy views, even though you see them as the ones most likely to be right, relative to the alternatives.

I see this epistemic modesty as a feature of the argument, not a bug.

It is not easy to forecast the distant future, and it is not easy to set out to create a concrete benefit say 37 years from now, much less 80 years from now. I don’t view those realities as damaging the arguments of Stubborn Attachments. In most settings, the best thing we can do for the more distant future is to invest in quality institutions, and good norms and rules. We should in fact do that obsessively. In a wide variety of possible futures, those institutions are likely to pay off in favor of the more distant future, even if we cannot foresee the exact details of the future scenario. So Stubborn Attachments is also an argument, albeit a somewhat indirect one, for focusing on institutional quality.

Once investment in the future is understood in these terms, an extreme future orientation does not lead to absurd levels of current sacrifice or counterintuitive conclusions about our obligations toward the future. Most of my arguments and conclusions are, upon examination, pretty close to common sense morality.

That same common sense morality is not so far from what is likely to maximise future economic growth. We should work hard, save and invest, be loyal to our families and friends, and so on. Given the notions of decentralised information and comparative advantage, such a morality is likely to perform better than one of extreme material sacrifice, as is suggested for instance by philosopher Peter Singer in his writings on charity and redistribution. I also regard this as a positive feature of my theory, namely that growth maximisation does not take us too far from what we know humans are capable of, or what might find to be an attractive lifestyle. Parts of East Asia have in fact pursued growth maximisation successfully, but no society I know of has been based on Singerian principles or anything close to them.

That said, altruism still can both boost growth and serve humanitarian ends. At the margin, virtually all of us still should do more to help the future and also should do more to help other people, including with growth-enhancing charity.

With Stubborn Attachments I have tried to build a case for the rationality and defensibility of economic growth, capitalism, and a focus on the stability and sustainability of civilisation. Such a case does not require us to repudiate human nature as we know it, but still it gives useful advice about how, at the margin, we might do better than the status quo.
The classics of political philosophy deal with wealth and economic growth awkwardly at best. John Rawls, in his Theory of Justice and elsewhere, was suspicious of economic growth outright. Rawls feared that the savings rate of the first generation would lead to deprivation, and a diminishment of the well-being of the worst-off group (that first generation), and so he toyed with John Stuart Mill’s idea of the stationary state. Robert Nozick evinced a good understanding of markets in his Anarchy, State, and Utopia, but still he focused on individual libertarian rights as an underpinning for a free society. Like Nozick, I believe in individual rights, but I don’t think they settle most questions, and I don’t find modest levels of taxation under democratic conditions to be morally problematic.

In part I wrote Stubborn Attachments to respond to Derek Parfit’s Reasons and Persons, first published in 1984. In that wonderful book, Parfit wondered whether consequentialist reasoning could in fact produce coherent recommendations, for either individuals or societies. Yet there is no talk in Reasons and Persons of economic growth, or how a much better future might help resolve aggregation problems. Nonetheless Parfit did produce an important appendix on why the social discount rate should be zero, and you can think of Stubborn Attachments as trying to think through the broader implications of that argument.

Effective Altruism is a recent movement that has tried to bring – admirably – greater reason and social science to altruistic decisions and charitable giving in particular. I am a fan of that approach, but a lot of the Effective Altruism discussions I have heard have given short shrift to economic growth, and in this regard I am trying to revise and improve Effective Altruism.

You should always ask what are the weakest points of any book, including this one. For me, it is the fear that progress has a mean-reverting character and that improvements end up as temporary rather than sustainable. In that case, the idea of enduring benefits would be an illusion, and even if pursuing such benefits were a good recommendation we might end up with the empty set in terms of policy recommendations. Historical pessimism would trump my recommendations, and we would be devoting our energies to the proverbial rearranging of the deck chairs on the Titanic.

Furthermore, Stubborn Attachments gives little guidance on how to offset the claims of humans versus the claims of nature. The benefits of economic growth are specified for human beings, and it is less clear that such economic growth is good for the animal kingdom as a whole, given the encroachments of humans and also the tortures of factory farming. If it is any consolation, however, I don’t think other philosophers have solved that problem either. Utilitarians, for instance, offer no plausible guidelines for weighting the well-being of non-human animals versus the well-being of humans, nor have they shown how it might be feasible to follow such guidelines.

In the meantime, I say economic growth, full steam ahead.