Bryan Caplan  

Escaping the Envy Trap

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Emotionomics... Evolution vs. Intelligent Desi...

Lately I've been speculating that a high informal envy tax in primitive tribes was an important reason why growth was so slow for so long. I've also argued that this is equilibrium behavior. Jane Galt then raises the interesting question of how anyone ever broke out of this equilibrium.

I've got just-so story for this, too. Even in a setting where every tribe is in the high envy tax equilibrium, there is bound to be some variation. The result is that the tribes with lower envy taxes have higher economic growth and get richer. The richer they get, the bigger they get. The bigger they get, the harder it is to impose an envy tax. More successful people can protect themselves by increasing their physical and social distance from their parasitic friends and relatives.

If this virtuous circle endures, you eventually start to approximate a modern, anonymous society, where people no longer worry about having to share their surplus.

Even better, as the society develops techniques for convenient trade between strangers, it becomes less risky to accept immigrants. When all trade is face-to-face, it isn't worth figuring out how to sort good new guys from bad new guys. The problem just doesn't arise often enough. In contrast, when a lot of trade is between strangers, the problem is worth solving for domestic and foreign strangers alike. As a result, the anonymous society becomes a magnet for talent. The tribal brain drain has begun.

Admittedly, this is only the benign half of the story. The downside is that the richer, more powerful societies start to conquer their less advanced neighbors. What could be a process of peaceful economic growth turns into a mixed process of expanding trade and expanding bloodshed. It's not pretty, but that's how we got where we are today.


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COMMENTS (13 to date)
Dan Landau writes:

I don’t think economists, the supporters of trade, need to feel any guilt about the violence of human societal evolution. The violent conquest of ones neighbors probably predated the growth of larger scale trade. We know that emperors and kings used merchants as agents to trade. You don’t need an empire to want things the commoners don’t have. If you and you family rule 200 families when the average tribe is 25 families, you will have the demand and funds to trade over longer distances.

It is possible, though not necessarily true, that the first anonymous traders were kings agents who branched out into private trade, just like employees of the British East India company traded for the company and themselves.

Barkley Rosser writes:

I fully agree that envy (and envy taxes) damage economic growth and are also a possible equilibrium condition. Bryan is probably right that initial differences in this (along with other factors) may be the source of the eventual breakdown of those equilibria as what Marx called "primitive accumulation" occurs when one tribe/group/nation conquers and enslaves another.

However, we should be careful not to identify all income redistribution in modern societies with "envy taxes," although certainly some of it is. It remains a stylized fact that the positive correlation globally is between equality and both high growth rates and high real per capita incomes, not inequality and those presumably virtuous items. This crude global correlation is driven by such continental comparisons as Latin America (very unequal) versus East Asia (much more equal). Of course there are outliers on both ends and studies that argue that if one corrects for enough other variables one finally gets the old "equity-efficiency tradeoff."

Mr. Econotarian writes:

It remains a stylized fact that the positive correlation globally is between equality and both high growth rates and high real per capita incomes, not inequality and those presumably virtuous items.

This link suggests that initial inequality in asset allocation may reduce future growth, but initial income inequality has little effect.

I really doubt that Gini coefficient differences are anywhere as significant to long-term growth as say economic freedom measures, but I'll have to do my homework to back that up.

Barkley Rosser writes:

Economic Freedom Indexes are clearly strongly correlated with both growth rates and real per capita income levels.

Alex Tabarrok writes:

I thought the well known solution for the envy tax was to leave for Galt's Gulch.

Alex

Roehl Briones writes:

I have another explanation: Leviathan.

The emergence of a dominant extractor of surplus implies a move towards efficiency: the monopolist would desire the society to have a bigger pie, in order to more to extract. Definitely it will beat off usurpers who would not only share the surplus, but also shrink the pie from which the surplus is extracted. Hence the birth of states, which are the anonymous societies with one insitution (government, or government-priesthood) possessing a near-monopoly of surplus extraction. (No, I don't mean Marxist surplus!)

Leviathan-led societies are more efficient, hence grow bigger and displace the more tradition-oriented societies.

Pete writes:

This seems like sort of a fun topic for speculation, but as comments and/or intentions get more serious, shouldn't you/we be consulting with anthropologists or evolutionary biologists about human life going back for hundreds of thousands of years? Aren't topics like population growth, food supply, environmental conditions, transportation means, etc. likely to have had an impact on economic growth and be better reasons than an envy tax?

El Presidente writes:

I don’t think economists, the supporters of trade, need to feel any guilt about the violence of human societal evolution.

I don't think economists should feel guilty either, unless of course they're bludgeoning their neighbors and looting their houses. Come on. It's a larger issue of human morality. Economists are well trained to evaluate financial relationships within and among societies. They needn't feel guilty for observing injustice but they might have a duty to report their observations. The one positive thing about economic development I think nobody would contest is that it used to be much harder to take someone's accumulated wealth, however small, without violence. Modern economies have refined the process so that it is relatively painless, at least for most of us in the West. We have occasionally satiated greed and weaned it from its bloodlust (for want of less colorful language). Bravo! I don't know that I would call that virtuous (maybe profalactic), but to each, his own.

I tend to agree that the Leviathan concept is probably more significant in the process of economic development than cross-cultural or inter-tribal warfare. But facts are stubborn things and history suggests that the abundance of tribal warfare precedes highly developed states. I think the warfare and the Leviathan state are complimentary throughout the process of development.

Paul N writes:

Let's not forget that the richer, more powerful societies also become subject to their populations demanding more and more social welfare spending - the backdoor to the tribal system?

Mark writes:

Doesn't your conclusion refute the viability of anarcho-capitalism?

"The downside is that the richer, more powerful societies start to conquer their less advanced neighbors. What could be a process of peaceful economic growth turns into a mixed process of expanding trade and expanding bloodshed. It's not pretty, but that's how we got where we are today."

Certainly it doesn't mean that any form of government, including democracy, fares much better. But that's the point: Anarchy is simply a de facto state without offering the oppressed any legitimate means of escaping.

spencer writes:

The process goes through the step of transformation from a hunter-gather
society to an agricultural society.

In a hunter-gather society population by
necessity the population density has to much less.
But as the society shift into an agricultural
society the conditions for capital accumulation
and the creation of a surlus necessary to suport a
ruling, military, priethood, ownership class emerges.

No hunter-gather society has ever developed into the type of complex, stratified, capital accumulating society you have postulated.

Yes, some hunter gather societies have had the type of envy tax you are talking about -- the potlach indian tribes in the Northwest US are the usual example --but do agricultural societies have it?

I do not know. But if agricultural societies do not have the envy tax, why should the experience of a few hunter-gather societies be relevant?
I do not believe any advanced economy has ever evolved out of a hunter-gather economy without first going through the agricultural stage.

Tom writes:

If this virtuous circle endures, you eventually start to approximate a modern, anonymous society, where people no longer worry about having to share their surplus. Your hypothesis seems consistent with what has happened in the U.S., up to a point. That is, as Americans grew generally more prosperous through the late 1920s there seemed to be a fair amount of laissez-faire capitalism in the air. But when the going got tough, with the advent of the Great Depression, the remaining rich were weakened because they lost control of government, and government turned against laissez-faire capitalism. Why didn't the tide turn after the end of WWII and the renewal of long-term economic growth? Americans generally were loathe to allow government to release its grip on the economy, assuming (mistakenly) that government control was necessary in order to avert another Great Depression. And so we have all became used to a "mixed economy" in which government drags down economic growth, but does not seem to do so because there is still some growth. The vast majority of Americans (probably 99.9%) see the growth that the economy has eked out and are more or less content with that. They have no idea of the growth that has been forgone because of the heavy hand of government.

Barkley Rosser writes:

Tom,

It is far from obvious that for the 30 or so years after WW II that a less heavy hand of government in the US would have led us to grow more rapidly. Government did some growth-enhancing things such as building the interstate highway system.

Also, during that period, Japan, Germany, and France all grew more rapidly than did the US, and all had heavier hands of government than did the US. Since the 1970s we have tended to do better than them, especially since 1990.

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