Here’s a letter to the Washington Post:
Reviewing Matt Ridley’s book The Rational Optimist, Wray Herbert isn’t convinced that Mr. Ridley’s optimism about both the likelihood and the benefits of continued economic growth is justified (“Matt Ridley’s ‘The Rational Optimist,’” July 18).
I pose today to Mr. Herbert the same question that Thomas Babington Macaulay posed in 1830 to the irrational pessimist Robert Southey – a question that Mr. Ridley wisely quotes as the introduction to Chapter 1 of his book: “On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?”*
Indeed, even today’s economic woes are tame and tender when considered in historical perspective. The heavy hand and sticky fingers of government might yet prove Mr. Ridley’s prediction to be mistaken. But if we somehow manage to keep markets reasonably free and private property reasonably secure, the future will shine even more brightly with prosperity and opportunity.
Sincerely,
Donald J. Boudreaux* Thomas Babington Macaulay, “Review of Southey’s Colloquies on Society.”
By the way, a good case can be made that the economic pessimism of persons who are skeptical of markets is odd – as the last part of this old post argues.
Share
Podcast RSS Feed
Full EconTalk Text
{ 26 comments }
“But if we somehow manage to keep markets reasonably free and private property reasonably secure“…
Well we're a bit late for than aren't we?
Yep.
Government has already managed to over-borrow and over-promise. Private property (as opposed to personal property) is only worth the cash flow it can generate. If more of that cash flow is to be stolen by government to pay for its profligate spending, then there will be less incentive to generate the cash flow. Add to that the increasing tax of regulation (which effects the risk reward profile by increasing risk and decreasing reward – unlike an income tax which only reduces reward), and there is little to be optimistic about.
One can only be optimistic given the past IF the paradigm has not shifted and if one considers the situation on a global scale rather than locally. If you're willing to move, you have much to be optimistic about.
“The heavy hand and sticky fingers of government might yet prove Mr. Ridley’s prediction to be mistaken. But if we somehow manage to keep markets reasonably free and private property reasonably secure, the future will shine even more brightly with prosperity and opportunity.”
Since it's unlikely that a libertarian vision will ever be realized in the United States, this would seem to make you the pessimist. If your optimism is contingent on libertarianism, it doesn't seem like there's much room for that brand of optimism.
I'm “pessimistic” for the short-run, personally, but recognizing a rocky path in the immediate future to me seems very different from expecting “nothing but deterioration before us”, presumably a long-run view from Macauly.
“The heavy hand and sticky fingers of government might yet prove Mr. Ridley’s prediction to be mistaken.”
I think this is the critical issue right now. Right now it creates a tremendous amount of uncertainty and the action could create a great amount of wealth destruction. While I agree that when left mostly free the prospects for the future should leave us very optimistic. But based on the point of government intervention I'm a pessimist.
I don't think questions like these can be answered so broadly as in yes or no.
Tyler Cowen explain in his book In Praise of Commercial Culture (1998) that there are intellectual and emotional (and, sometimes, economic) benefits to the published cultural pessimists. Maybe the same is true for economic-growth pessimists…
Now you're misunderstanding him. His point is that at least if we still have a decent institutional structure of innovation, entrepreneurship,etc. We will have the the growth and higher living standards that all of us we're optimistic about. If those things get more politicized, than it might not happen. The things that he and Ridley are optimistic about are relying on fundamental libertarian principles, not necessarily the whole thing in picture which all of us libertarians would love, but pretty close. Secondly, I think that there might be a new libertarian institutional order in the future. The sentiment is VERY widespread and if you compare it to a few years ago when you practically knew every libertarian, then we have made progress. This has jumped up after the Paul campaign and it probably will continue to jump up as long as libertarians become more vocal. Hell there are two libertarian shows on Fox Business right now, and there might be a chance that many nation states will default, so there are many reasons to be hopeful.
No, that was clear – I understood that. Perhaps I was being unclear, but it still seems to be an odd juxtaposition – one minute lamenting our economy-killing government and the next claiming optimism.
“The sentiment is VERY widespread and if you compare it to a few years ago when you practically knew every libertarian, then we have made progress.”
I suppose that's a matter of opinion
Seriously, though, most of the growth in libertarian sentiment has been a function of a reaction against Soviet totalitarianism and planning, and a recognition that a moralizing state and a nanny state aren't advisable or desirable. I'm fine with this sort of upsurge in libertarianism. The type I'm concerned about is the type that takes these insights “out of sample” and dreams of engaging in large-scale social engineering and reworking of a system that has evolved to be quite efficient.
There really is no reason to be optimistic or pessimistic about the long term. There isn't enough data to form a reasonable opinion either way. As for the short and medium term (the next twenty to one hundred years), the current trends for the U.S. look rather bleak.
Then again, it depends on what one focuses on. Ex. The growth of the national security state should frighten just about everyone, but it is being treated rather blithely.
“There really is no reason to be optimistic or pessimistic about the long term. There isn't enough data to form a reasonable opinion either way.”
Charles Darwin would probably dispute that.
“As for the short and medium term (the next twenty to one hundred years), the current trends for the U.S. look rather bleak.”
I was going to agree, until your parenthetical statement. Very individualist of you, but I think you know that's not the time scale most people on here are using – that would be long-term.
Why such a downer? I'm feeling pretty good about the next twenty years and great about the next hundred years. It's the next several that I'm more worried about.
What could possibly be “rather bleak” in the U.S. trend for the next hundred years???? The bleakest of the bleak in U.S. history (1929-1940 or so) amounted to a brief episode in the broader context of U.S. growth.
(1) More and more of the citizenry will find themselves in prison over the next hundred years (per capita and in aggregate numbers).
(2) The state will find itself involved more and more in our daily decision making (in everything from diet to sex to what we say).
(3) Growth of the national security state (as I mentioned above) – this will inevitably include a lot more domestic spying.
(4) It is unlikely that the current FP establishment position that the U.S. is the “indispensable nation” will end over this period of time. This means that we'll continue to have a large military, will continue to engage military adventures, etc.
(5) The bailouts have crossed a line we will have a hard time backing away from. The moment another politically connected industry like that autos gets in trouble, expect more of the same.
There are of course more.
The 3 pronged design of government was explicitly designed by the Founders to prevent central aggregation of power. Now that that power has been accumulated, the system acts as a brake on devolving it.
The financial and medical bills alone will significantly retard growth. One could easily argue a purely socialized health care industry would have less effect on the economy than the one now enacted. The debt ($100T and rising) is already the elephant in the room. These are all major infrastructure differences from past historical predicaments. Past debt levels were of extraordinary events.
Since there has never been an example of the federal government devolving legislation after it is enacted no matter how ineffective, most likely ten year scenarios must involve continued slow growth and relatively high unemployment (even 200k per month job growth requires 5 years to make a significant dent).
Is that pessimistic or realist?
I'm happy to “like” this post. The outlook over the next 100 years is great. I have no doubt that we would all be considered horribly poor if we could fast forward to 2110.
Things could be bleak for the US on a relative basis – over 100 years we might see the decline and fall of the American empire, especially if we get to a point where we simply can't afford our international military/industrial dominance anymore. That doesn't mean things will be worse for individual people. England lost her empire over the past 100 years but I'd much rather be an Englishman today than in 1910.
“Things could be bleak for the US on a relative basis – over 100 years we might see the decline and fall of the American empire, especially if we get to a point where we simply can't afford our international military/industrial dominance anymore.”
Definitely. And generally speaking, as you say, it's not a thing to mourn.
I would make one exception – one reason to mourn the loss of American dominance – that I think a lot of people don't talk about. Who would replace us? If we're talking about 100 years, most likely China right? I think it's reasonable to be at least somewhat concerned about the loss of American dominance because of its implications for the premium placed on human liberty. Presumably, human liberty will be less of a priority in a China dominated world than in an American dominated world. It's not a reason to stress relative growth over absolute growth by any means, but it is something worth thinking about.
“I think it's reasonable to be at least somewhat concerned about the loss of American dominance because of its implications for the premium placed on human liberty.”
That is the funniest thing I've read in quite some time. American dominance or power is not based on human liberty, nor has it ever been so. When America has been about those things it has not been because of our dominance, but despite it.
I am in agreement with the above, and I add more factors:
(6) The state will hinder private businesses more and more through increased regulations, more unfunded mandates, and a bigger, slower federal bureaucracy.
(7) Private property rights will continue to dwindle via increased misuse of eminent domain powers and increased takings of the property of “suspected” criminals without trial, arrest, or criminal charges.
(8) Part of the reason for (1) will be the increased criminalization of activities that used to be either legal or noncriminal civil court issues.
(9) In an effort to stay afloat, more and more people and businesses will resort to barter, under-the-table employment, and the gray and black markets. The concept of money will continually be weakened due to fiscal malfeasance by national governments.
Can't agree.
America became the 800 pound gorilla by unleashing human potential and it did that by getting out of the way of its own citizenry. That attracted everyone with an ounce of motivation from all over the world. It's no accident that the U.S. subsidizes every military in the Western world and parts of the Middle East. It can afford to and it can afford to do that (whatever you think of that activity) because it didn't used to do what it does now.
America dominates because it USED TO attract everyone who wanted to create wealth and America dominated for that reason. It contained people who created new things and those new things were attractive to everyone. I don't think America will dominate anything without the liberty that allowed it to grow so strong as a nation.
I've never thought of America as an empire – I guess that depends on the definition of empire. It is not an empire in any meaningful sense of the world. It is influential, which is different from empire. And it is influential precisely because it is so wealthy and it is so wealthy precisely because it gets out of its citizenry's way. Until you live in Europe, South America or Eastern Europe, you won't truly know the contrast, but it is HUGE. Unfortunately, it's getting smaller.
The world is big and complex, making it all too easy to point to negative developments as a seeming answer to optimistic analysis. However, there is no denying that humankind has achieved fantastic progress in the last couple of centuries across a broad front — and, in fact, there are powerful reasons why that happened, and can be expected to continue operating. (A more thorough analysis of these points can be found in my own 2009 book, The Case for Rational Optimism.)
America basically had the benefit of having an ocean separating it from 2 major world wars. While the rest of the world was restoring capital, it was allowed to add to its stock. That is the primary reason US attained its position.
As for this talk of empire, perhaps someone aught to provide a definition. It would seem to me an institution that surreptitiously (when not vulgarly and violently) attained as much land holding as the US aught to be considered an empire. Then there is the matter of the US having military presence in 36 other countries.
Yegor Gaidar addressed this problem of the definition of “empire”. There is no solid definition of “empire”. If you don't consider America's borders to be legitimate, then I guess it's an empire. If you think that the U.S. borders are legitimate, then it's not. But, if it's not legitimate, who has legitimate claim on that land? How far back do we go back in history? To whom does Texas belong? California? If the U.S. empire were to fall, what would that mean?
The military presence in 36 countries is such a red herring. They're there at that invitation of the countries in question. That's what I mean by “subsidizing” the military.
Not only did America add to its stock, but it also pulled out of every land it entered during the war (a military base at the invitation of the host country is not occupation). Not only did America leave, it helped to rebuild said country. Europe rebuilt much faster because the U.S. subsidized it.
Europe owes its pathetic current existence to the United States.
The Paul campaign also made and started a massive growth in the movement. Anyway, can you elaborate on your last point though? What's efficient?
I think you summarized it nicely.
“If you don't consider America's borders to be legitimate, then I guess it's an empire. If you think that the U.S. borders are legitimate, then it's not.”
The real question is, how do you ever determine that state hegemony is legitimate? There is only the actions between two individuals that are legitimate or illegitimate. By that standard, no state has ever been legitimate, though some more so than others.
Good point.
And in the realm of sovereign nations, might makes right. Our dislike of that fact does not make it less factual. I simply think that the United States was the best of all other options – head and shoulders above the others. People who complain about the United States really have no clue what the options are.
I couldn't agree more. It could be much worse. And it will be.
Comments on this entry are closed.