Bryan Caplan  

Balan's Challenge

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Here's the noble David Balan's reaction to my review of Gonick's histories:
This probably goes without saying, but it's perfectly possible to believe Bryan's basic point (modern economic growth has led us to have it better than anyone ever had it before, and that markets and trade had a great deal to do with that) without at the same time agreeing that no opponent of capitalism ever had a point. Lots of places in the world enjoy the full fruits of modern economic growth (and don't kill anyone or ship them off to gulags) and yet have some significant socialistic elements.
My reply:

1. If you just said "Lots of developed countries have some significant socialistic elements," your last sentence would be an understatement.  Every developed country has some significant socialistic elements.  But being developed isn't the same as "enjoying the full fruits of modern economic growth."  David, don't you think it's at least possible that, say, the EU would have had 1% higher growth over the last thirty years if it had more free-market policies?  If so, the full fruits of economic growth have not been theirs.

2. There's a big difference between 19th-century socialist critics of industrialization and the broader category of "opponents of capitalism."  The former really were damning the greatest thing that ever happened in human history, Marx's left-handed compliments to capitalism notwithstanding.  The moderate critics of capitalism are a different story.  I still think they're wrong.  But as long as their admitted goal is to marginally improve upon a great system, I take them seriously, as I do you, David.

3. Question for David: Suppose you gave your favorite historical opponents of capitalism a choice between (a) the welfare state, or (b) modern rates of economic growth.  (I'm not saying that the trade-off is really this stark; it's just a hypothetical).  How many of them would have chosen (a)?  Don't you think this reflects extremely negatively on their priorities?


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COMMENTS (15 to date)
RL writes:

BC: "Question for David: Suppose you gave your favorite historical opponents of capitalism a choice between (a) the welfare state, or (b) modern rates of economic growth."

I must say, I'm confused by the choice. Haven't we HAD a welfare state throughout the period of "modern rates of economic growth?"

steven writes:

Logical hypothetical. I'm interested in his response. Please publish a follow-up post. I'm wondering if he'll disagree with the (leading) conclusion, or argue that "b" would be chosen, or take a different tact.

gary writes:

RL, read the sentence that came after the one you quoted.

RL writes:

Gary, Bryan's followup sentence doesn't really help. Are you interpreting him to mean: choose between the welfare state and EVEN BETTER THAN modern economic growth...economic growth as it would have been without the welfare state?

Gary writes:

RL,

No, that's not my interpretation. Bryan knows he is posing a false choice question. The question remains answerable, and the answer tells us something about the answerer's priorities.

Have you ever played the deserted island possession game? It's a false choice because you're not really on a deserted island and you don't really have to choose between Michael Jackson's Thriller album and an espresso machine, but you can still answer the question as if you faced that choice. And then we get to laugh and talk about why you could live without caffeine but not without rocking to Beat It.

Kurbla writes:

I'm not David, but still...

    Bryan: "David, don't you think it's at least possible that, say, the EU would have had 1% higher growth over the last thirty years if it had more free-market policies? If so, the full fruits of economic growth have not been theirs."

In previous post you described how *actual* modern world is better than everything done before and that Gonick doesn't see that well. David's answer was that actual world is partly socialist. Now you say that hypothetical, 100% free market world would be at least 1%/year better. Maybe yes, maybe not. But it is not the same argument you gave in previous blogpost.

    Bryan: The former really were damning the greatest thing that ever happened in human history, Marx's left-handed compliments to capitalism notwithstanding.

Damning ... yes if that means that they thought they can do better. But, if you said that Gonick "makes snide references to free trade, without even considering that free trade might really be an important reason for rapid progress." both main currents in 19th century socialism - Marxists and anarchists - were aware of that.

    Bryan: Suppose you gave your favorite historical opponents of capitalism a choice between (a) the welfare state, or (b) modern rates of economic growth. ... How many of them would have chosen (a)? Don't you think this reflects extremely negatively on their priorities?

I think all important socialists believed the same thing you do: that economic freedom leads to economic efficiency. Just their concept of economic freedom is not capitalism, but socialism. Economic freedom leading to economic efficiency in the sense of J. K. Rowling.

If they, hypothetically, realized that it is impossible to have the both in the same time, they'd be forced to deeply rethink their position. I guess that they'd chose at least some welfare over efficiency - like I guess that majority of libertarians would chose capitalism, even if someone proves that sophisticated model of slavery is more efficient. There is a different example, however: Arnold was "far left" (I guess it means socialist) before he switched on libertarian. All that is really guesswork.

Steve Roth writes:

>"Lots of developed countries have some significant socialistic elements," ... would be an understatement. Every developed country has some significant socialistic elements.

Brian, yours is also an understatement. Every thriving, prosperous country in the world has major, massive elements of socialism. Even in your favorite poster child, Singapore, 80-90% of residents live in public housing.

I've asked you before: if the principles of libertarianism and small government were as economically efficient as you believe, wouldn't at least one prosperous country have emerged that is governed by those principles, and wouldn't those countries that have done so have left all the others in the dust?

In fact, over those decades you describe, in developed, prosperous countries,

Countries with more generous social programs and redistribution regimes grow at least as fast as those with less.

http://www.asymptosis.com/europe-vs-us-who%e2%80%99s-winning.html

Countries with more progressive tax systems grow faster than others.

http://www.asymptosis.com/want-prosperity-tax-the-rich.html

Countries with more wealth equality grow much faster than others.

http://www.asymptosis.com/wealth-equality-and-prosperity.html

More-equal countries provide more opportunity for people to climb the economic ladder.

http://www.asymptosis.com/republicans-create-opportunity-yeah-right.html

(It's worth noting here, by the way, that Lane Kenworthy and many others have demonstrated conclusively that equality in prosperous countries is achieved through various methods of redistribution--from education to infrastructure to social support--not through market mechanisms.)

>don't you think it's at least possible that, say, the EU would have had 1% higher growth over the last thirty years if it had more free-market policies?

Since the two regions' growth rates over those years have been the same, you're effectively asking, "would the EU have kicked our ass?" Certainly an interesting question.

>(I'm not saying that the trade-off is really this stark; it's just a hypothetical).

This parenthetical disavowal, it seems me, deserves just as much attention as "Marx's left-handed compliments to capitalism."

RobbL writes:

Byron writes;

"There's a big difference between 19th-century socialist critics of industrialization and the broader category of "opponents of capitalism." The former really were damning the greatest thing that ever happened in human history, Marx's left-handed compliments to capitalism notwithstanding."

Marx said that Capitalism had done great things. He thought that this would not continue to be true. Time will tell. It clearly had more to give than Marx thought...although it also gave us WWI and II.

There are some signs now that the overall prosperity rises of the past will not be continued in the future. The production workers I have working in my department are less well off than people working the same jobs 30 years ago.

Well off people remain well off, and maybe their lives are improving, but that is not what is happening at the median and below.

After all, why should a company pay workers here in the states more money than someone in India or China, if they can do the same work?

SydB writes:

Question for Bryan: Suppose you gave your favorite historical opponents of socialism a choice between (a) a socialist state that found the means through a quantum computer to hyper-optimize economic growth beyond levels seen in the real world to date, or (b) modern rates of economic growth. (I'm not saying that the trade-off is really this stark; it's just a hypothetical). How many of them would have chosen (b)? Don't you think this reflects extremely negatively on their priorities?

Gary writes:

The production workers I have working in my department are less well off than people working the same jobs 30 years ago.

You could have said that for any number of reasons, but I'm sure one of them wasn't that their purchasing power has fallen right? Because they would have to have taken a heck of a pay cut for that to be true.

I'll leave that odd WWI/II comment for someone else to tackle.

Gary writes:

SydB, was there really so little evidence back then of the wonders that capitalism could produce? (I ask because I don't know.)

SydB writes:

Gary: I don't know. Let's face it: my question is stupid, pointless, a waste of bits on the internet (from a communications and storage perspective), and a waste of human consciousness and attention. Hypothetical questions often are.

(I won't judge whether Bryan's hypothetical is similarly useless. He can be the judge of that.)

RL writes:

Gary, I've never played the game you mention, but the choice scenario Bryan offers seems different to me. Try this:

Would you prefer a) your last 20 years of marriage, or b) your income for the last twenty years, evenly divided between your wife and yourself?

You may think, but what's the choice? My income for the last twenty years, evenly divided with my wife, is a direct result of my being married. My income would have been different had I not been married. I wouldn't have to share it equally with my wife if I had not been married. This alleged choice is just two sides of the same coin.

Similarly, Bryan asks that we choose between a) the welfare state, and b) modern rates of economic growth. But modern rates of economic growth were what they were, for good or ill, in part DUE TO the welfare state.

Thus my confusion.

Gary writes:

SydB, I thought you might have a better point.

RL, Modern rates of economic growth are not solely a function of Western growth rates. They are pushed up by a host of developing countries, most of which have relatively light welfare states. Also, keep in mind that some welfare states are more equal than others. You and Bryan may be thinking about different things.

In any event, the question would still have some punch if modern growth rates were inextricably linked with welfare states. Just suppose the only choices offered are: welfare state and whatever growth rate falls into place or no welfare state and modern growth rates (whatever those are). Hn, hn... no objections! Just suppose!

David J. Balan writes:

A lot of my thoughts have already been touched on in the earlier comments, but here goes anyway:

1. In those circumstances where there is a tradeoff between growth and other things of value, you have to make a choice. Because of the power of compounding, growth is really, really important for human welfare. This means that one should generally be willing to pay a high price in terms of other values in order to avoid any significant slowdown in growth (though how high would depend on how much of the growth will go to the poor). A corollary of this is that any system that is really bad for growth is almost certainly a bad system, no matter how high it scores on other criteria. How much harm to growth is actually caused by the socialistic elements in successful modern countries is something that people argue about, and it is indeed possible that growth in some places would have been substantially faster without those policies. But there seems to be a decent case to be made that that growth cost of contemporary socialistic policies is small or even negative, at least when the policies are chosen intelligently.

2. I don't know enough history to know what Marx and other critics of capitalism did or didn't want. But my understanding is that they wanted widespread material prosperity. They just thought that capitalism was not going to deliver it and so should be replaced with socialism. They were badly wrong about this, and nowadays most people people rightly reject their conclusions. That said, I think there are a lot of criticisms of capitalism that have a great deal of merit and that amount to much more than merely a wish to "marginally improve upon a great system." A lot of people have viewed and do view "capitalism" as a system in which the interests of the rich and powerful are celebrated as the highest possible good. They (we) believe that this leads not only to vast inequality of consumption, but also to inequality of political power which causes the distortion of the political system, unnecessary wars, and much else that is bad. Such people (including me) think that to the extent that our system is "great" it's largely because those criticisms have induced significant improvements, mostly in a socialistic direction, and that to the extent that it's not great, it's because more such changes are necessary.

3. I would have to imagine (though I'm not sure) that Marx, or just about anyone else, would choose modern Denmark over full socialism at 19th century levels of income. I still suspect (but my relative ignorance of history prevents me from being sure) that the main issue was differences of opinion about what was likely to work, not about goals. But I could be wrong. If they really thought it would be better for everyone to be poor and equal and free than for everyone to be rich and equal and free, then they were just evil or crazy. But I kind of doubt that. It's possible that the source of their error was that they figured that anything good for rich people must be bad for everyone else. This turns out to be a very serious error, but it's also kind of understandable: what's good for rich people very often is bad for everyone else, and rich people were the main cheerleaders for capitalism. This strikes me as another argument in favor of widespread sharing of wealth.

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