David R. Henderson  

The Friedmans and Joseph Schumpeter on Economic Progress

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My review of Alex Epstein's The Moral Case for Fossil Fuels has been accepted by Regulation magazine and will be published in the Summer issue. In my review I quote Epstein quoting a passage from Milton and Rose Friedman's Free to Choose. They make a very good point. But the further I get away from the quote, the more I think they overstate the case.

Here's the quote from Free to Choose:

Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant little to the wealthy. The rich in ancient Greece would have benefited hardly at all from modern plumbing--running servants replaced running water.

The idea that running servants replaced running water is accurate. Also, it's certainly the case that, percentage wise in dollar terms, the gain [the increase in consumer surplus] to the poor and middle class from such conveniences was greater than the gain to the wealthiest.

It's the "hardly at all" that bothers me. Now that the rich had modern plumbing, they could redeploy their servants (slaves?) to other tasks. Those tasks would, of course, be less important than carrying water was when there was no modern plumbing, but the tasks could have been important nevertheless. It's a "think on the margin" thing.

I prefer the late Joseph Schumpter's way of making the same point in his book Capitalism, Socialism, and Democracy, Schumpeter wrote:

Queen Elizabeth [the first] owned silk stockings. The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.

Note the nuance. The word "typically" allows Schumpeter to keep the idea that, indeed, QE1 or other queens would have gained from the fall in price (due to increased supply) of silk stockings. But the typical gainer was a "factory girl."


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CATEGORIES: Growth: Consequences




COMMENTS (9 to date)
Jon Murphy writes:

It's funny, I was thinking about this last night. As I was going to bed, the Brandenburg Concertos came on the radio. The legend says the Concertos were written for a duke of Brandenburg who had difficulty sleeping. Whether or not this legend is true (and I actually kind of doubt it is), it brought me to a fun realization:

Here I was listening to music that was once enjoyed almost exclusively by the nobility of the time while falling asleep with a fan blowing on me. I, a middle class guy, was enjoying the benefits of an 19th Century duke or king. I certainly had benefited from the invention of radio, electricity, and motors.

MG writes:

A thought (sad) on the first quote. Progressives and other fans of class warfare will challenge the quote from Free to Choose by saying the wealthy, now, do get wealthier from technological improvements through the supply side of technological improvement: they are the innovators, managers, and capitalists who earn Pikkety's famously high R's. They may also believe they have done so through the "privilege" of being smart, better educated, or endowed with capital. The first claim essentially seeks to dismiss the consumer value created by improvements. The second claim, justifies vilifying.

I think I've noticed a tendency for writers, including me, to use exaggerated expressions such as "hardly at all" when expressing a conjecture which seems logical to the writer — but for which no evidence is offered.

When working with data, academic writers are often very careful with their language to express extrapolations. But it is easy and common to sound certain (as I sound in this sentence!), to say "without a doubt" or "obviously it must be" when away from carefully-compiled evidence.

Lars P writes:

The rich do benefit enormously from technical and scientific progress.

Medical progress alone makes a modern pauper vastly better off than the kinds and emperors of the past. Things like air travel, movies, scuba diving etc were also completely out of reach for them.

Jose Romeu Robazzi writes:

@Lars P
Agreed. Faster travel and disease treatment are great examples of benefits of increasing wealth to the rich. But I think about this almost everyday, probably the life of an average income american is better today than that of most rulers of the 17th century, or 18th century. Wealth increases definitely improved the median citizen's life much more than that of the rich.

LD Bottorff writes:

When you are a king or an emperor, there are always people who are willing to remove you from office, usually by killing you. Even the rich of earlier days were a business mistake away from dropping out of the merchant class. By contrast, most of today's middle class are still going to be able to afford to eat three times a day, ride in luxurious carriages and have access to health care that didn't even exist a century ago.
I would rather drive a cab in 21st century America than be a king anyplace in the 19th century.

Mark Bahner writes:
But I think about this almost everyday, probably the life of an average income american is better today than that of most rulers of the 17th century, or 18th century.

And possibly most of or all of the 19th century. Here is a list of the ages at death of all 19 British monarchs from 1600 to the present:

Age at death of British monarchs

Note how Elizabeth II has lived longer than Victoria, who lived longer than Elizabeth I, who lived longer than Anne, who lived longer than Mary II. That means that every single one who died later lived longer.

And here are some notes on cause of death of various monarchs (with year of death and age at death in parenthesis)

Mary II (1694, 32 years): Died of smallpox at Kensington Palace

Anne (1714, 49 years): Died of suppressed gout, ending in erysipelas, an abscess and fever. Her 17 ill-fated pregnancies perhaps ravaged her body. (Editor's note: "Perhaps?!")

George IV (1830, 68 years): Upper gastrointestinal bleeding caused by the rupture of gastric varices. Suffered from cataracts, alcoholism, opioid dependence, obesity, gout, oedema, arteriosclerosis and possibly porphyria and cancer. (Editor's note: But other that, there was nothing wrong with him.)

Most of the British monarchs of the 17th, 18th, and even 19th centuries were in very bad shape (or even dead) by the current Social Security retirement age of 66.

Gabriel writes:
It's the "hardly at all" that bothers me. Now that the rich had modern plumbing, they could redeploy their servants (slaves?) to other tasks. Those tasks would, of course, be less important than carrying water was when there was no modern plumbing, but the tasks could have been important nevertheless. It's a "think on the margin" thing.

When I read the above quote, I couldn't help but think about how large-scale infrastructure developments (whether they be in transportation, sanitation, or communication) always have an outsized positive impact on low-income communities. One example I read about recently: the electrification of rural Texas.

For me, the "Hardly at all" part of that quote simply asks us to consider and compare the change in quality of life for two different groups, the wealthy and the poor. Given that low-wage earners make up a significantly larger percentage of the general population, it might also be worth considering the percent change in quality of life for society as a whole. I'm making a quibble out of a quibble, but isn't the whole point of having wealth the ability to enrich your life by throwing money at whatever ails you? (Gluten intolerance anybody?)

Mark Bahner writes:
I'm making a quibble out of a quibble, but isn't the whole point of having wealth the ability to enrich your life by throwing money at whatever ails you?

Indeed. Consider that Steve Jobs, at the time of his death from pancreatic cancer, had a net worth of approximately $10 billion.

My guess is that, 50-100 years from now (let alone 200 or 300), no even middle-class person in the U.S. will die from pancreatic cancer. There likely will be a blood test that detects pancreatic cancer years ahead of when it can now be detected.

Blood test for pancreatic cancer

Then some sort of immunotherapy will be instituted. The patient is cured...even before he/she even has any observable symptoms.

Immunotherapy for pancreatic cancer

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