Best. Decade. Ever.

In a provocative Foreign Policy article, economist Charles Kenny cuts through the gloom:

...[I]n 1990, roughly half the global population lived on less than $1 a day; by 2007, the proportion had shrunk to 28 percent -- and it will be lower still by the close of 2010.

Global capitalism is awesome.

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In a few decades, everyone will be a gazillionaire and starve

Yay inflation.

Frankly, stop spewing nonsensical figures in dollars. Are the numbers in any way "inflation corrected"?

Now, tell me about people living on a 1200 kCal diet, or about the rise of expected total lifetime, or something like that. The article itself had plenty of actually interesting figures.

Yay, neomercantilism.

Personally, I would like to drill down beyond a simple average so that I could see which sectors the income increase had occurred. Growth in the non-observed economy and in government payrolls could hardly be considered a moment to jump up and shout "yay capitalism".

Keeping perspective: What to measure? What to value?

I LOVE that article.

To me, the world always seems to be going to hell. But honestly, how bad are things really if median life expectancy keeps going up? I have a hard time keeping perspective; more accurately, I have a hard time GETTING perspective. I'm preoccupied with my concerns, and the concerns of my friends -- a pretty narrow slice of the world, in the grand scheme of things.

For example, both Ronald Reagan and George W. Bush promoted policies of financial deregulation. Various commentors warned that their policies would result in massive governmental deficits, scams, huge income disparities and speculative crashes. And these commentors were proved right. Yet world wealth experienced EXPLOSIVE growth under these administrations. Was the cost worth the benefit?

Specifically, what data should I consider? If we wanted to design public policy to maximize something, what thing would it be? If we wanted to maximize "freedom" or "happiness," say, how would we measure it? For example, is median life expectancy a good proxy?

Or is the effort to measure aggregate consequences simply a fools errand? Is reality ultimately subjective? Should optimization efforts be inward-focused rather than outward-focused?

A few nuts to chew on in the New Decade.

Try this on for size

I split the world into two main camps--voluntary associations between individuals and coercive relationships where one person dominates the other to take their property. The voluntary associations are beneficial to both parties, otherwise the parties would not consent to them. The coercive relationships coalesce into a hierarchy of dominance, with the meanest, slickest bad-ass in charge of a kiss-up, kick-down pyramid.

Voluntary associations create wealth, and coercive relationships destroy it. Accumulated wealth (capital) and division of labor in the voluntary economy give individuals the ability to meet their desires ever easier. But it also makes them more attractive targets for plunder.

Society today is a global struggle between the central control of the most sociopathic rulers humanity can bring to bear on the one hand, and billions of distributed individuals interacting to fulfill their subjective wishes on the other.

The voluntary/coercive elements of human nature have always been there, but the environment upon which these forces play out has changed. Given the current environment of global communications, encryption, accessible knowledge, and cheap technology, my money is on the distributed voluntary society to dominate.

On the proxy hunt

I split the world into two main camps--voluntary associations between individuals and coercive relationships where one person dominates the other to take their property. The voluntary associations are beneficial to both parties, otherwise the parties would not consent to them. The coercive relationships coalesce into a hierarchy of dominance, with the meanest, slickest bad-ass in charge of a kiss-up, kick-down pyramid.

Voluntary associations create wealth, and coercive relationships destroy it….

The voluntary/coercive elements of human nature have always been there, but the environment upon which these forces play out has changed. Given the current environment of global communications, encryption, accessible knowledge, and cheap technology, my money is on the distributed voluntary society to dominate.

The “Best. Decade. Ever.” article suggests that the poorest of the poor are better off than ever. What accounts for the change? Indeed, perhaps the poor are getting better at generating wealth. And perhaps the poor are getting better at hiding wealth. But perhaps the meanest, slickest bad-asses in charge of a kiss-up, kick-down pyramid are becoming less efficient at squeezing wealth from the poor. Or perhaps they’re becoming less mean and slick. It’d be cool to have something to measure to test these hypotheses.

As we’ve discussed before, I find the voluntary society/coercive society distinction to be less stark than some other people do. As far as I can tell, the things that people do “without coercion” are heavily influenced by their environment – an environment that is shaped by coercion (or lack thereof). In 1800 people were getting cholera without coercion and the women in Jane Austen novels were marrying boors without coercion. Today, however, I live in a world in which the state coercively deprives me of unsanitary water supplies and coercively sends women to school, rendering them less dependent on a spouse for support. Damn the oppressive hierarchy!

But this is a pretty old argument. Can we think of think of some way to test this theory? Could we identify some measure of social wealth and some measure of voluntariness/coerciveness, and see how well they correlate? I suspect we’d find that social wealth is optimized not in maximally voluntary societies or in maximally coercive societies, but in societies that feature some blend of voluntariness and coercion.

It’s all just jawboning until we have a testable model.

Excluded middle?

Could we try to clarify your cholera thought experiment? It seems like it is more objective.

Your comparison of a time before people understood the causes of cholera to a present day society with regulations banning contaminated water seems to leave out the option of a society whose members understand the causes of the disease but are allowed to treat sewage as they see fit. Can you refine the situation to get rid of the excluded middle?

Take 2

I find the voluntary society/coercive society distinction to be less stark than some other people do. As far as I can tell, the things that people do “without coercion” are heavily influenced by their environment – an environment that is shaped by coercion (or lack thereof). In 1800 people were getting cholera without coercion…. Today, however, I live in a world in which the state coercively deprives me of unsanitary water supplies…

Your comparison of a time before people understood the causes of cholera to a present day society with regulations banning contaminated water seems to leave out the option of a society whose members understand the causes of the disease but are allowed to treat sewage as they see fit. Can you refine the situation to get rid of the excluded middle?

?? I can try.

The same Wikipedia site that explains the causes of cholera also catalogs continuing cholera outbreaks. That suggests to me that knowledge is not necessarily a sufficient tool for managing cholera (and externalities/public goods in general).

For example, the site notes that Haiti is currently experiencing a cholera outbreak. How to explain it? Perhaps present-day Haitian society lacks knowledge because no one has translated the Wikipedia page into Haitian Creole. Or perhaps members of that society do understand the causes of the disease, are allowed to treat sewage as they see fit, and for their own inscrutable reasons they freely choose to treat sewage in a manner that results in cholera outbreaks. Or perhaps the people of Haiti are heavily influenced by their environment – an environment that is heavily influenced by a rather coercive earthquake, but also by a general lack of (coercively-enforced) law and order.

Whatever theory you embrace, I’d be hard pressed to conclude that Haiti’s problems arise from an excessively coercive government. Hell, they barely have any functioning government at all. Which is not to say that Haitians are not subject to coercion. Perhaps they’re subject to private mugger/gangster-variety coercion. Perhaps they’re subject to constricting social norms.

Unlike the Haitians, I suffer rather little from either cholera outbreaks or private muggers/gangsters, and I find my current social norms not unduly constricting. I do, however, suffer from a rather powerful central government that imposes on me policies that clean my water, control my neighbors, and defend my autonomy to flout (many) social norms. And on balance, I think I prefer living under the thumb of those mean, slick bad-asses, even if it means foregoing the freedom from government coersion that I might otherwise enjoy in Haiti.

In short, it is far from clear to me that a society in which someone exercises great coercion is a poor society. Again, I appeal to empiricism: Which societies seem wealthiest? To what extent do the people in those societies endure coersion?

Ontological and empirical arguments lead to the same conclusion

I'm going to skip past commenting on most of this for now (I don't think the Haiti example is a clearer thought experiment), and go to the end:

In short, it is far from clear to me that a society in which someone exercises great coercion is a poor society. Again, I appeal to empiricism: Which societies seem wealthiest? To what extent do the people in those societies endure coersion?

From our earlier conversation, I know you aren't persuaded by the ontological argument that coercion, by definition, forces individuals to choose things that are of less value to them than they would otherwise.

Are you familiar with the empirical argument from the Economic Freedom Network? They produce annual reports to chart the economic freedom in each country of the world. They conclude:

Nations that are economically free out-perform non-free nations in indicators of well-being

  • Nations in the top quartile of economic freedom had an average per-capita GDP of $32,744 in 2007, compared to $3,858 for those nations in the bottom quartile in constant 2005 international dollars (exh. 1.6).
  • In the most-free quartile, the average income of the poorest 10% of the population was $8,474 compared to $910 for those in the least-free quartile, in constant 2005 international dollars (exh. 1.9).
  • Interestingly, the average income of the poorest 10% in the most economically free nations is more than double the overall average income in the least free nations.
  • Life expectancy is 79.3 years in the most-free quartile but 59.9 years in the least-free quartile (exh 1.10).
  • People in nations in the most-free quartile report a life satisfaction of 7.5 out of 10 while those in the least-free quartile report a life satisfaction of 4.7 (exh. 1.11).
  • Nations in the most-free quartile have an average score of 7.4 for corruption on a scale of 10, while those in the least-free quartile have an average score of 2.6 (exh. 1.12).
  • Nations in the top quartile have an average score of 1.6 for political rights and civil freedoms on a scale of 1 to 7, where 1 marks the highest level, while those in the bottom quartile have an average score of 4.3 (exh. 1.13).

Philosophy and Ontology and Empiricism -- Oh My!

I don't think the Haiti example is a clearer thought experiment….

Admittedly, the disparities between the US and Haiti are sufficiently vast that it’s hard to make useful comparisons. Upon reflection, I suspect you wanted to ask something more like, “Which is better: A nation like the US, or a nation like the US but with somewhat less coercion?”

Are you familiar with the empirical argument from the Economic Freedom Network?

No, I’m not.

How awesome!

And unexpectedly responsive to my question!

Shit, now I may have to actually create a new blog post about this….

And unexpectedly responsive

And unexpectedly responsive to my question!

Yeah, I thought that would surprise you. And raise your life satisfaction score by 0.78 points.

Everything is going according to the plan. Drop US wages another five bucks and raise Chinese and Indian wages four bucks and there will be a world wide parity for labor. Labor will be a commodity like coal and iron, something to be consumed. Most of us in the US will landless serfs, ronin. The new negros.

"The ruling classes are not stupid"

Stefan Molyneux disagreed with this position at last month's Freedom Summit [link repaired] (his speech starts at 1:05, the quote at 1:07:41):

The ruling classes are always looking for a place to put themselves, where they don't actually have to trade and interact and voluntarily associate with other people. Communism was invented, largely from the priestly class and largely from the Jewish tradition, so they wouldn't have to work for a living--so that they could start swarming into the avenues of the State.

So if you look at it that way, what has changed--I would argue--since the 19th century and is going to determine where we're going to go in the future, is that the ruling classes fully and fully and completely understand that you need the free productive classes to generate the taxes that they live on. They understand this cattle management... They're not going to go back to feudalism, they're not going to go back to communism, they're not going to go back to fascism, any more than your average farmer is going to go back to using slaves rather than a combine harvester.

That technological question of the value and productivity of the free market has long been settled.

I would add that I don't think the "ruling classes" are completely in charge of what happens. As kings and nobles and barons scramble for court position between themselves, their brinkmanship will inadvertently destroy more than would be optimal if their positions were static and well determined.

To return to the farming metaphor, once the livestock start to break holes in the fences and wander around the landscape, they become common property and subject to tragic exploitation.

On the perspective hunt

Everything is going according to the plan. Drop US wages another five bucks and raise Chinese and Indian wages four bucks and there will be a world wide parity for labor. Labor will be a commodity like coal and iron, something to be consumed. Most of us in the US will [be] landless serfs….

Yup, it’s tough times in the US as a hundred million wage laborers are reduced to the status of landless serfs.

And its BOOM TIMES for a couple BILLION people in China and India.

Is this really something to bemoan?

YES, to bemoan

Because when workers in China and India are at parity with the US and Canada there will be a world wide race to the bottom for the working class, not just a US race to the bottom. Manufacturing contracts will go to the country with the lowest business taxes and the highest productivity. High productivity - lowest unit cost - means low wages and/or automation.

On the other hand, the nature of poverty in the civilized industrial nations has changed. The welfare class has every sort of consumer good the rich people have but at a much lower quality level. There will always be cheap bread and cheap beer and the sports channel. The advantage of being rich - vacations, no worrying about paying the bills, and no standing in lines.

Worldwide race to the bottom price

If robots can manufacture automobiles that cost $100, will the world's poor be worse off?

In a more controversial piece

In a more controversial piece from Charles Kenny, he argues that there is little evidence communism was bad for economic growth.

I looked through his post,

I looked through his post, the subsequent comments, and his replies to subsequent comments; simple conclusion: He's full of shit.

Slightly longer conclusion: he over simplifies his arguments, makes sweeping generalizations, and mis-defines certain topics so that they may correspond with his arguments.

That was Tomasz, not Charles

That was Tomasz, not Charles Kenny. As you might have noticed, I was one of the people arguing with Tomasz. I linked to him though because he provides an overview for reading the whole thing.