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A Message of Hope from the Dismal Science

December 24, 2010

Tags Free MarketsWorld HistoryEntrepreneurshipOther Schools of Thought

People have spilled a lot of ink both digital and real about the state of the world, kids these years, and the apparent moral and cultural poverty of modernity. We are facing, we are told, an economic crisis unlike anything we have experienced in our lifetimes, with this indicator or that indicator appearing in various outlets alongside the descriptor "worst since the Great Depression." Perhaps most troublingly, we have been told that free-market capitalism has been tried, measured, and found wanting, that it rewards the darker angels of our nature, and that we have sacrificed our humanity and our values on the altar of commerce. We are given various wake-up calls and are told that we must — we must — recognize that maybe we have gained the world but we have lost our souls.

I disagree. In this article I want to offer a message of hope from economics, known as "the dismal science" to some. Interestingly enough, it got the name "dismal science" not because of doom-and-gloom predictions but because economists were among the first to recognize that there are no moral differences among people of different races and, therefore, were among the first to call for the abolition of slavery. Thomas Carlyle first called economics "the dismal science" as a way of saying that economics did not advance knowledge in his defense of the proposition that abolition had sullied the character of the freed slaves.

Are these dark times? They could be better, but I don't know if I would call them "dark." I want to focus on how these times relate to history and how we can change the future by applying the economic way of thinking. I am therefore going to draw your attention to four different themes: where we have been, where we are, where we are going, and change we can believe in.

Where We Have Been

An old saw tells us that we have to have some idea of where we have been before we can really know where we are. Viewed in historical perspective, we are in the absolute golden age of humanity. Today is the best day to be alive, ever. We have opportunities undreamt of by our ancestors. We will live longer and healthier lives. We can communicate with friends around the globe. Now more than ever, we have the opportunity to live lives rich with meaning.

It wasn't always this way, of course. For most of history, people have been desperately, grindingly poor. Our Cro-Magnon ancestors had a life expectancy of eighteen years. Life expectancy had reached 24 at the height of the Roman Empire and 30 during the Middle Ages. It had climbed all the way to 40 or 45 by the dawn of the 20th century. Today, life expectancy pushes 80. All else equal, I see no reason not to expect my children to live to be 100.

In short, modern economic growth is just that: modern. Almost all economic progress has been confined to the last two and a half centuries, which has (for me, at least) changed the way I look at history, look at my life, read my Bible, and all sorts of things. We've done well, but the fact that our progress is confined largely to the last 250 years suggests that we should tread lightly and avoid hubris. The past shows us that economic growth is not automatic, and under the wrong conditions, self-interest will be channeled into predation rather than production.

Where We Are

The 19th and 20th centuries are our laboratories for what we would like to understand. We enjoy levels of prosperity unlike anything the world has ever seen. If you are here today, you are probably one of the richest 5 percent of people in the world and one of the richest 1 percent of people who have ever lived. This is the direct result of unleashed free markets. The 20th century in particular gave us prosperity. As Steven Pinker has argued, for all of our wars and bloodshed you are today less likely to die at the hands of another person than at any point in history. In China and India, we are witnessing the largest movement of human beings out of abject poverty in the history of our species.

"We've done well, but the fact that our progress is confined largely to the last 250 years suggests that we should tread lightly and avoid hubris."

An average life several hundred years ago would be considered a humanitarian disaster today. And we have made enormous strides. Consider some of the humanitarian disasters we consider when we are talking (say) about mission trips from church or service trips from school. According to a 2004 report from the World Health Organization and UNICEF, half the people in the modern world now have clean water piped into their homes while 83 percent of us live within walking distance — 30 minutes — of clean water (McCloskey 2006:18). Yes, people in many countries do not have things that we take for granted in the United States. In historical perspective, however, the idea that about 4/5 of the human population has that kind of access to clean water is absolutely amazing.

Capitalism produces virtue. It does not destroy it. Markets reinforce virtue. They do not undermine it. This has been one of the themes that has emerged from my research on Walmart, commerce, and culture. In what follows, I rely heavily on work by Tyler Cowen and Deirdre McCloskey.

Prosperity and high life expectancy makes us better people in a "loose and baggy sense," to borrow from McCloskey again. In a world where everyone is dead by 30 or 40 and only a lucky few live to a ripe old age, people don't have any incentive to think long term. In McCloskey's words, "[a] churning mass of impoverished juveniles makes for easy tyranny" (McCloskey 2006:21). History is Lord of the Flies on a global scale.

Not all is well, of course, and while the 20th century produced dizzying prosperity it also gave us what scholar R.J. Rummel called "democide," which is essentially the wholesale slaughter of a people by their government. Hitler killed his millions, but Stalin and Mao killed their tens of millions. Between 1949 and 1987, 76.7 million people died at the hands of the Chinese government. Between 1917 and 1987, the USSR killed almost 62 million people. Twentieth-century colonialism gave us a death toll of 50 million. Between 1933 and 1945, almost 21 million people were killed by the government in Germany. Statism's 20th-century body count clocks in at about 262 million people.

Where We Are Going

I will agree that we are standing at a fork in the road, and I fear the direction we will choose. Governments have a nasty but predictable and systematic habit of writing checks they are not good for. In the American case, we have something on the order of $43 trillion in unfunded Medicare and Social Security liabilities. These are checks we have written that will bounce unless we come up with new sources of revenue. Profligate spending means that we are consuming our seed corn, so to speak, and reducing our ability to deal with future problems. In the parlance of environmentalism, what we are doing is "unsustainable."

I recall having a conversation with my grandfather in which he said that after a lifetime of paying into the Social Security system, he expected to get something back. The tragedy, of course, is that for most of us there will be nothing to get back. The government spent it. On the long list of things that are worth worrying about, the unsustainable trajectory of Social Security and Medicare are near the top. Indeed, our saving decisions are based on the assumption that we will not only receive nothing from Social Security; if anything, we will bear a heavier tax burden to pay for it.

Change We Can Believe In

To use yet another cliché, here are a few ways to think globally and act locally. I will begin by offering a quote from Deirdre McCloskey:

The poor are not better than you and me. They're just poorer. We bourgeois do not make them better off by being ashamed of being rich, since it's not our fault that they are poor, and there is therefore no original sin in our being rich. We should instead work to make them rich, too, by spreading the used-up liberal capitalism. (p. 28)

Recognize that just because markets do it imperfectly does not mean that force works. To paraphrase Sheldon Richman from the Foundation for Economic Education, just because some people cannot be trusted with liberty does not mean that other people can or should be trusted with power. So here are some changes I can believe in:

  1. The first change is to temper the rhetoric. Calling President Obama a socialist or a Nazi short-circuits the discussion and puts our friends on the Left on the defensive. It obscures the substance of the analysis. It's also intellectually lazy, and it's something I don't tolerate from my students.

  2. Understand the data and be careful about your comparisons. Consider some American commentators' infatuation with European welfare states. In the case of international discrepancies in infant mortality, for example, European countries measure infant mortality in a way that biases the numbers downward and the US measures infant mortality in a way that biases the numbers upward. It is also important to note that European welfare states are financed by high debt, high taxes, and high inflation. In the words of one expert on French economic history, the French are able to enjoy a massive welfare state because they have spent the next two generations' incomes.

  3. Write with a clear, cogent, and temperate voice. Perhaps you've seen a bumper sticker that says, "Stop Whining and Start a Revolution" — or something less polite. It's hard to do, and I've wondered from time to time, "What can I do? I'm just one guy." Start with letters to editors of different newspapers that you can publish on a blog. Don Boudreaux, former president of the Foundation for Economic Education, is a prolific writer of letters to the editor, and he has been my inspiration for a lot of letters and columns I have written.

  4. Look for private rather than political solutions. Political processes reward people who are good at politics. Political process rewards people who are good at conveying sincerity rather than achieving results. Assess your charitable giving and the institutions and organizations you support. In particular, look for things that voluntarism does better than government, and support that. Education is the best example I can think of. Government education monopolies are crimes against humanity. Not only do they absorb massive resources and turn out mediocre products, they rely on and exploit the credulity of the citizenry in order to protect their ability to do so. The resources available at Mises.org, for example, are breathtaking, and organizations like the Foundation for Economic Education, the Mises Institute, the Cato Institute, the Independent Institute, and a host of others are producing excellent educational resources every day.

Conclusion

Things could be much better. They could also be much worse. "The dismal science" shows us how (in both directions). I don't fear the death of Western civilization (yet) and I remain optimistic about the world in which we live. We have attained much, and we can attain much more. We can also lose a lot. To borrow a phrase from one of my mentors, 1993 Nobel laureate Douglass C. North, there is no guarantee that we will continue to "get it right" in the sense that we will maintain the institutions responsible for the prosperity we enjoy. Economics offers us a message of hope, though, by showing us exactly what we have attained and how we have attained it.

References

McCloskey, Deirdre N. 2006. The Bourgeois Virtues: Ethics for an Age of Commerce. Chicago: University of Chicago Press.


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