One of my favorite libertarian economists is the director of the Koch-financed Mercatus Center, and Bloomberg columnist, Tyler Cowen. He’s a truly inspired troll in the model of an Ayn Rand or a Milton Friedman, constantly asking important questions like “what if the things you think are good are actually bad?” and “what if the things you think are bad are actually good?”
Recent gems include:
- Calling people who are worth billions of dollars “billionaires” is dehumanizing
- The poor need to save more money
- Freddie Gray’s death proves Baltimore needs more police
He also has an excellent interview podcast where he asks guests bizarre leading questions and they often answer, “I have no idea what you’re talking about.” But more relevant to today’s post, he has also been on tour lately promoting his latest book, “Stubborn Attachments.” I listened to enough interviews to pique my interest, so when I discovered my local library didn’t have a copy, I bought one to review and donate. In Stubborn Attachments, Cowen makes 3 basic arguments:
- Wealth matters;
- The future matters;
- Therefore our principal moral duty is to take actions that lead to the highest possible level of future wealth, all of which happen to align with Cowen’s prior political intuitions.
Let’s look at each of these in turn.
Does wealth matter?
Since Cowen prides himself on his empiricism, this banal argument is the one where he recognizes himself to be on the shakiest ground. You see, there’s a problem an empiricist runs into when arguing that human welfare requires maximizing economic output: in one of the most consistent social science findings, above certain levels of wealth, people do not report statistically significant higher levels of happiness, except in certain relative status situations (you are likely to be happier as the richest person in a poor neighborhood than the poorest person in a rich neighborhood). If you took this research at face value, you would conclude that the happiness-maximizing economic policy would be a moderately high level of per capita wealth (sufficient to maximize average happiness), distributed relatively equally (to avoid relative status effects).
But since Cowen is a libertarian economist, he needs to find reasons why unequal distributions of wealth are good, rather than bad, even if they leave some people much less happy than others. Since all the empirical research contradicts this view, he resorts to speculation about reasons why he’s right and the empirical research is wrong.
- Language is a poor gauge of absolute happiness. If people calibrate their use of language around their lived experience, then they might be answering a different question than researchers are trying to ask. A researcher may want to know “on a scale of 1 to 10 of conceivable levels of human happiness, with 1 being the least happy a person is capable of being, and 10 being the happiest a person is capable of being, how happy are you?” But a subject might be answering a different question: “all things considered, how happy are you?” If you’ve just lost a beloved parent, partner, or child, you might owe the researcher a “1” on their ideal scale, but if you’re holding up better than your neighbor who experienced the same tragedy you might in fact answer a “6” based on your own internal scale. If this were the case, people might in fact be happier under conditions of higher wealth than lower wealth, even if we cannot produce survey instruments that accurately detect this, in the same way we can be confident even very small objects produce gravitational fields, despite not having instruments sensitive enough to detect them.
- Fleeting moments of extreme happiness may not show up on surveys (because people forget about them or don’t take them into account when measuring their overall happiness), but morally should still be considered, and fleeting moments of extreme happiness are more likely to occur under conditions of higher wealth than lower wealth.
I don’t think these are very convincing arguments, not because they are false, but because they’re irrelevant: I don’t think human happiness is a particularly interesting or instructive moral value. The moral problem with Flint’s poisoned water supply is not that drinking poison makes people “unhappy,” the moral problem is that it kills them. The moral problem of doctors telling people that smoking is a safe and healthy habit is not that smoking makes people “unhappy,” the moral problem is that doctors have a duty to protect the health of their patients.
Cowen cleverly tries to address this issue by saying what he’s really interested in isn’t wealth, per se, but wealth “properly measured,” which he refers to as “Wealth Plus.” Wealth Plus starts with economic activity, but adjusts it to include “measures of leisure time, household production, and environmental amenities, as summed up in a relevant measure of wealth.” The problem with this trick is that it doesn’t resolve any moral questions; instead it begs them. If I place a high moral value on biodiversity (“environmental amenities”) and Cowen places a low moral value on it, then we’re going to start with vastly different estimates of our current wealth. But what’s worse, in a book concerned with growth, is that over time our estimates will grow further and further apart! My high weighting of environmental amenities means that my value of Wealth Plus might stagnate or fall while his happily compounds over the centuries, until our descendants are standing on a barren rock hooked up to coal-powered happiness engines. To me this is a nightmare, to Cowen a triumph of moral reasoning.
In other words, rather than his policy views naturally following from a proper focus on Wealth Plus, he’s simply moved the moral argument backwards from “what policies are moral?” to “what is the moral method of calculating Wealth Plus?”
Does the future matter?
Speaking of our descendants, the middle part of Stubborn Attachments is a lively discussion of a problem that has long vexed both economists and moral philosophers: how much weight should we give to the well-being of people in the future, including the very distant future? The technical term for this is the “discount rate,” which is derived from the idea in economics that a dollar in the future is worth less than a dollar today, because a dollar today can be invested to grow into more than a dollar in the future.
By analogy, moral philosophers ask how we should discount the effects of our actions on future beings. A very high discount rate would imply that we should have very little concern for the well-being of people in the future, and almost no concern for people in the distant future (the same way a dollar today is worth many thousands of times the value of a dollar in 500 years), while a low discount rate implies we should consider the welfare of people in the future very close in value to the welfare of people living today, and even people in the distant future should be seriously considered.
Cowen summarizes the debate neatly, and argues that the correct discount rate is very low or zero: we should consider the well-being of people in the very distant future to have virtually the same moral weight as people living today.
I found this section lively and interesting, and for what it’s worth, I agree with Cowen that zero or near-zero discount rates are the most appropriate.
If Wealth (Plus) matters, and the future matters, what should be done?
Cowen sets up his argument to neatly lead into his preferred policy outcomes:
- Economy activity is a principal input into Wealth Plus, an inclusive measure of human well-being;
- The future should be given moral weight equal or near-equal to the present;
- Therefore we should very strongly prefer policies and actions that will put the world on the highest sustainable path of economic growth, subject to the constraint of near-absolute human rights (I didn’t discuss his view of human rights because it’s uneventful, you just need to know he thinks they should be treated as near-absolute).
Fortunately, Cowen isn’t coy about what he thinks those policies and actions should be:
- “We should redistribute wealth only up to the point that it maximizes the rate of sustainable economic growth.”
- “An overly generous level of wealth transfer harms economic growth. Many people end up working less, or working less hard, and the associated higher tax rates discourage entrepreneurship and can lead to economic stasis.”
- “Excess or poorly conceived welfare expenditures may create urban cultures of dependency and crime” (yikes).
- “Non-infrastructure government spending is correlated positively with lower growth rates.”
- “Excess transfers…make it harder to absorb high numbers of immigrants from poorer countries…too high a level of benefits is likely to mean…a lower level of migration.”
- “Rather than redistributing most wealth, we can do better for the world by investing in high-return activities like supporting immigration and producing new technologies with global reach.”
- “Utilitarianism may support the transfer of resources from the poor to the rich. A talented entrepreneur…can probably earn a higher rate of return on invested resources than can a disabled great-grandmother. Indeed, a common complaint in the literature on inequality is that the rich get richer while the poor get poorer, or at least more or less stay put. If this portrait is to be believed, then the rich earn higher returns on their accumulated wealth” (emphasis mine).
What does Cowen think we are doing when we argue over politics?
I think it is fine and good for Tyler Cowen to write down for his superfans and for posterity his thoughts on wealth, happiness, growth, and policy. I also enjoy writing down my thoughts on those subjects. Cowen’s mistake, however, is in thinking that he has an unusually clear-eyed, unusually empirical, unusually ethical answer to these questions. Instead, he appears to me to have an unusually dull and muddied view.
Take, for example, the current political debate over whether the United States should adopt a single-payer healthcare system, where people stay on the same federal health insurance plan from pre-natal care to cradle to grave. Such a plan would have a number of positive and negative effects. On the one hand, over the long term federal taxes would likely need to be somewhat higher to finance the increased federal expenditures on health care, and those higher taxes might have a negative effect on long-term economic growth if they discourage work and investment. On the other hand, the increased ease of switching between employment, independent contracting, and self-employment might have a positive effect on entrepreneurship and matching between employers and employees, and lead to increased economic growth. Moreover, reducing the share of the workforce, office space, and financial capital dedicated to unproductive private health insurance activities, and increasing the share dedicated to productive activities, might have an additional positive impact on economic growth. Finally, providing consistent lifetime healthcare to the entire population, including the currently uninsured, might increase the overall health and productivity of the population, another positive impact on economic growth.
My point is not that the benefits of universal national health insurance will outweigh the costs, although it should come as no surprise that I think they will. My point is that everyone involved in the debate knows that we are already arguing about whether the benefits will outweigh the costs! That is, to a first approximation, what it means to say a policy is “good” or “bad,” that you support it or oppose it.
Consider as another example the recent controversy over the construction of the Dakota Access Pipeline. Proponents argue that the construction of the pipeline is a productive investment that might be expected to increase long-term economic growth. Opponents of the pipeline argue that on the contrary, easing the extraction and combustion of fossil fuels will accelerate the warming of the climate, reducing the long-term quantity and quality of “environmental amenities” and actually reducing “Wealth Plus.” Moreover, the native residents of the area assert a “near-absolute” rights claim that they don’t want to expose their ancestral waters to the risk of environmental catastrophe. These are complicated arguments, but they are arguments that we are already having. Tyler Cowen contributes nothing to the argument except insisting that the moral stakes are very high that we make the right choice instead of the wrong choice.
But we already know the moral stakes are very high — that’s what the fight is about!