The Elusive Common GoodOthers, Poverty
Contributed by: Cardus
A flawed but useful case for modest consensus.
by Judith Dean
Tyler Cowen wants to promote prosperity and human flourishing across all societies. His book Stubborn Attachments is written to help us achieve this. Cowen believes we have lost sight of “our ideals of a society based on prosperity and the rights and liberties of the individual.” We may still value these ideals in theory, but we make policy decisions that run counter to them. Growth is fundamentally necessary to achieving prosperity for all, yet we have lost sight of its importance. Disagreements over policy choices are more severe than they need to be, because we have not understood some of the underlying factors that generate them. In Stubborn Attachments, Cowen undertakes to revive our commitment to growth, and provide insights into our disagreements, so that we can move past unnecessary obstacles toward prosperity for all. While he does deliver on these two goals, his method may undermine his message.
The first chapter makes the case that sustainable economic growth matters. The rest of the book wrestles with six issues that he views as major contributors to our disagreements over actions that lead to prosperity. How do we weigh one person’s priorities over another’s (aggregation)? How do we weigh the well-being of present versus future generations (time)? Should uncertainty of the future render us unable to make any choices (radical uncertainty)? Should specific principles guide our choices (rules)? Should human rights matter for decision making (rights)? Should commonsense morality matter for decision making (morality)?
Cowen concludes that we should be more stubbornly attached to sustainable economic growth than we currently are. This is not only necessary to reach prosperity for all, but it will help us be less stubbornly attached to other courses of action that are less beneficial. Choices that increase sustainable growth will help overcome the aggregation problem, because growth promotes many co-moving plural values. It will help overcome the time issue by embodying a deeper concern for future generations. Commonsense morality and guiding rules are both compatible with this stubborn attachment to growth. Strong human rights should serve as a constraint on growth. Uncertainty, in contrast, should not prevent us from making choices that promote growth. But we must adopt an attitude of modesty and willingness to learn when advocating specific policies.
Why Be Stubbornly Attached to Growth?
Most economists would agree that growth is necessary to promote human flourishing. In many of the poorest countries the economic pie is so small that large portions of the population live in extreme poverty. There is much evidence that growth raises the standard of living for many, and contributes to reduced poverty, reduced malnutrition, higher literacy, higher life expectancy, reduced global inequality, higher capacity to care for the environment, and increased opportunities for many. The remarkable recent achievement of the Millennium Development Goal of halving extreme global poverty five years earlier than expected was, in large part, due to the dramatic recent growth in China and India.
Cowen argues that we should be looking for social choices that are ongoing and self-sustaining, and create rising value over time. He recognizes that the ideals of good and right include multiple values (justice, mercy, beauty, etc.), and he believes that no single value trumps all others in all instances (pluralism). Thus he is on solid ground when he argues that promoting growth is an obvious choice. Growth has generated many of the aspects of flourishing that we would desire. Notable among these are the ability to educate and entertain yourself, and to choose your path in life. Most important, these benefits accrue very broadly to ordinary citizens.
Yet many economists would also argue that while economic growth is necessary, it is not sufficient to achieve human flourishing. The lack of markets for some things, like a healthy environment, leads to environmental damage. Corruption, discrimination, inefficient institutions, and poorly designed government policy choices can lead to some people receiving little of the benefits of growth. Growth alone will not address all of these adequately. Cowen acknowledges this, and addresses it in part. He advocates an enhanced measure of gross domestic product (GDP) that includes environmental sustainability, the value of leisure time, and non-market (household) work. He later includes health benefits. Growth in this enhanced GDP is what we should promote.
This approach recognizes key limitations of our current measures of growth, and embeds into them important priorities that are missing. It thus better embodies some of our plural values. But this central concept of enhanced growth is continually changing as more attributes are added to it. Early on the concept switches from one of growth in enhanced income to “Wealth-Plus,” but this switch is never explained. We never learn exactly how we determine what should be included in the enhanced measure, nor who determines this. Cowen does recognize that better policy choices can distribute the benefits of growth more broadly, and he rightly argues that it is better to pursue growth than not pursue it at all. However, he stops short of discussing how we determine the “better policies” to pursue alongside it. Finally, in his zeal to show that there is a positive relation between higher income and happiness, Cowen’s argument sounds too much like money is the root of all happiness.
What Other Priorities Are We Attached To?
Throughout the book, the author never tells us why he believes we have lost sight of the importance of growth. The rest of the book turns to the examination of the six issues, with the exception of the fifth chapter. Here, suddenly, we encounter a chapter on redistribution. Perhaps this is the answer to the mystery. During the past few years in rich countries, the problem of inequality has risen to the forefront of both public and scholarly debate. As in the past, this debate often pits economic growth against reducing inequality, implying that there must be a tradeoff between the two objectives. Policy choices that promote growth are seen as antithetical to those that redistribute income to reduce inequality.
It appears that this debate is the unacknowledged catalyst for the whole book. The book’s case would be much more convincing if the author stated this at the outset. It would provide a concrete context in which to understand the major premise, and understand why these particular six issues are central to resolving our disputes.
Cowen states right up front that we should care about the poor, and the issues of unequal access to the benefits that come with a flourishing economy. But he also stresses that individuals’ hard work to improve their own well-being matters too. Will growth or redistribution be the best way to help those who are not sharing in much of the benefits of the economy? He suggests looking at this question from a different angle. The importance of growth should set limits on redistribution, rather than the other way around. Cowen argues that our guiding principle should be to redistribute wealth (income?) up to the point where it maximizes the rate of sustainable enhanced growth. Such a principle could imply higher or lower levels of redistribution than currently done. But it will most likely lead to a different kind of redistribution—a kind that enhances growth.
He makes his case well. Government taxation to supply broader access to education, for example, not only raises the welfare of those who previously had limited access, but has spillovers to broader society that enhance growth. Supporting better technologies that can help foster growth in poor countries (e.g., telecommunications, agricultural productivity) can also reduce global inequality. Interestingly, he advocates support for immigration, not only because it helps raise the well-being of immigrants themselves, but also because there is much evidence that they contribute to higher productivity in many countries. But too much redistribution can result in adverse behaviour, such as corruption and dependency, which not only impedes growth but can also undermine efforts to broaden access to benefits.
This approach to an old debate is not new, but is important. Cowen helps us see more clearly that there are policy choices on which both sides would actually agree. Such choices would promote both goals simultaneously—helping break through the incorrect notion that these two goals are mutually exclusive. Reorienting our thinking thus helps us let go of some ideas that needlessly divide us. But this is not enough. There are deeper sources of our divisions that we need to examine more closely. One of Cowen’s examples is most helpful here. Many people advocate greater state spending on education and the environment because they put a strong priority on the well-being of future generations. Yet at the same time, they advocate redistribution today in ways that conflict with growth and, thus, hurt the well-being of future generations. What underlies this kind of inconsistency in our thinking?
Why Be Less Stubbornly Attached to Our Own Favourite Priorities?
Going below the surface of policy disagreements is important. If we understand the fundamental causes better, we can better discern where disagreement was due to misunderstanding. Where disagreement is merited, we can better see how to come to resolution. Cowen begins with the aggregation problem. How do we choose among differing priorities, such as better access to education, less poverty, or improved health care? The author reminds us that higher growth has been shown to help achieve all three of these objectives, in numerous countries and time periods, and for a broad share of the population. Thus, choosing to support higher growth will give us the best chance of achieving our “plural values.” He argues we should choose the options that are likely to make most people better off—those actions that have a preponderance of benefits over costs.
Does this mean growth at any cost? No. The author describes his view as a mixture of “doing the right thing should lead to better well-being” and “sometimes we need to do the right thing even if it causes pain to many people.” Inviolable human rights should constrain our quest for growth. Cowen argues that there are some things we just should not do, and that most people recognize that (commonsense morality). He once again seems to expand his definition of “Wealth-Plus” to include “positive rights,” so his enhanced growth measure should maintain these rights. Thus it is “negative rights” (e.g., freedom from torture, abuse, murder) that should constrain our goal for higher growth. What about things like bribery or corruption that may appear small, but as a whole have insidious effects? Cowen argues that here is the place for laws (rules) that modify how we achieve faster growth, but do not limit the principle of growth.
But the effectiveness of his arguments is somewhat undermined by over-the-top rhetoric. At the end of the third chapter, he tells us to hold on to the principle of growth constrained by human rights with an attitude of “worship no other gods.” Really? How, then, do we define our set of inviolable human rights, and who defines them? It is not until the fourth chapter that he acknowledges that some values are inherently good and, thus, should never be discounted. Clearly this puts additional limits on our “guiding principle” and should have been discussed earlier.
Cowen next tackles the issue of time. How do we prioritize the well-being of future generations over people today? Cowen argues first that we make choices that undervalue future generations, in part because we don’t understand the idea of compounding effects over time. He uses numerous examples to illustrate how even a small increase (decrease) in growth today raises (reduces) future well-being, and that this impact becomes much greater over longer time horizons. Thus those who care about future generations should care more about higher enhanced growth today. A second reason we make these choices is that we rightly understand that benefits in the future are “worth less” than benefits today. But we mistakenly think this diminishes the importance of future benefits. This confusion arises from not understanding the concept of discounting—translating future benefits into their equivalent value if they were received today. Discounting accounts for the fact that benefits today can be invested to yield a stream of benefits in the future. Thus, rather than diminishing the importance of the future, discounting helps us choose wise investments today that will yield the highest future returns.
Cowen argues that while some positive discount rate is essential, market discount rates are too high, and thus undervalue future generations. But he never explains why he believes this, nor why the undervaluation takes place. The plethora of examples on compounding leads to confusion rather than clarity. The examples equating discounting with patience and impatience would make even an economist who teaches the concept begin to wonder if they actually understood it.
The next major issue is uncertainty. How can we make decisions today if we cannot know their future consequences? Cowen argues that this problem arises from confusion over the concept of benefit-cost calculations. Though our knowledge is limited, we must do our best to assess the likelihood of unintended future costs, and factor them into our calculations. We should choose policies that will generate the largest net benefits, given our best understanding of the probabilities of future events. As Cowen suggests, if the short-run good consequences of an action are sufficiently large and of sufficient value, they should outweigh the uncertain costs that may take place long in the future. However, we should hold our convictions more humbly than we do, given our limited knowledge. We should be open to learning from those who argue for a different choice.
But shouldn’t our choices be motivated by morality, and not just by consequences? Yes. Cowen sees radical uncertainty about the future as actually giving us the freedom to honour our moral convictions without fearing that this will bring about disastrous consequences. While this is likely true, the author could have provided more examples and explanation to help the reader understand why. Unfortunately, the over-the-top examples of devastating consequences of uncertainty in this chapter test the reader’s patience, and tend to undermine the credibility of the author’s arguments. For example, the discussion of the role of morality in the face of uncertainty ends with a cavalier witticism: “Making an omelette may require the breaking of some eggs, but here the omelette is small, and not very tasty besides, so I say leave those eggs intact.” Rather than bolstering the case for doing the moral thing—as the author intends—this seems to suggest we throw out morality if the omelette is big enough.
The Bottom Line
Stubborn Attachments does deliver on its two tasks. Cowen has succeeded in clearing away some of the sources of needless disagreement, and highlighting principles to help us in our choices of action. He builds a strong and interesting case when discussing growth, aggregation, and redistribution. But the effectiveness of his arguments is often undermined by missing definitions, confusing side arguments, and over-the-top rhetoric. In addition, throughout the book the author pits “utilitarianism” against “consequentialism.” Yet he gives no clear definition of either philosophy, and examples characterizing them are often extreme or contradictory. Despite these limitations, the book does help us move beyond the polarization common in the growth-inequality debate today while still taking seriously our commitments to human rights, rule of law, and morality.