Economic policy, growth, and human flourishing

What do scientific innovation, economic policy, GDP, employment, and entrepreneurship have to do with increasing flourishing at scale?

I’ve put a pin in this project for now, and I’m parking my observations, questions for further research and brief summaries of some key readings here.

Observations

I noticed two schools of thought emerge from my research.

The first, Camp Progress, is intensely considered with raising living standards, and supporting a talented elite driving this forward for all of society.

Take Tyler Cowen and Patrick Collison’s definition of progress: “By “progress,” we mean the combination of economic, technological, scientific, cultural, and organizational advancement that has transformed our lives and raised standards of living over the past couple of centuries.”

Camp Progress includes: Tyler Cowen, Patrick Collison, Peter Thiel, Benjamin Friedman, Progress Studies.

The second, which I’ll call American Compass, considers a broader definition of progress. Interests include raising the number of meaningful individual earners and producers, and leveraging economic policy in support of community and social fabric, at the expense of solving directly for GDP. Elites cling onto their places on an island that’s shrinking, and have given up on dignity, honor and courage as core values.

Camp Compass includes: Oren Cass, Andrew Yang, Henry George, Matthew Stewart, Tanner Greer, Angelo Codevilla, Chris Arnade, Venkatesh Rao.

It seems to me that the Progress Studies camp pays little mind to the flourishing of the median individual. But living standards are a component of flourishing, not the whole. What impact do rising living standards - and a policy regime solving for them - have to do with capacity of the median individual to be meaningful creators and adventurers in and of their lives? I’m not seeing it.

A sub-bullet of the above that occurred to me is that the study of economics does not (and cannot) solve for adventure or confidence in life as values for the every day person, the way you might see amongst old-school adventure types like you see in fiction, or my old math teacher! Qualities like adventure and confidence operate independently of living standards. A culture or society that solves for living standards squashes capacities for adventure and confidence. I think it also squashes the foundations for community and relationship - that’s another story.

Progress studies: We have a living standards problem. Look at this chart! Housing, childcare, education! That’s what’s getting in the way of more flourishing.

American Compass: We’re past the point where growing the top line and increasing living standards will make a difference for those that are struggling. The issue is that we’ve suffocated the ability of the median person to earn for themselves, their families and communities. And lost sight of what those living standards are actually for.

Future Questions

Is what Oren Cass calls “economic piety” (policies oriented towards maximizing GDP + redistribution, versus facilitating the ability of the median worker to produce) actually the case? If so, has it really backfired? By what standard do we measure this? Could this work? Or do I agree that GDP growth and human flourishing gotten detached from each other, and we could do better solving for the latter with different policies?

To what extent is it true that the rich have pulled the ladder up behind them? If so, how did this work, concretely?

How extractive is the financial industry? What have been the reasons, costs and benefits of finance growing from 3% of the economy in 1950 to 10%+ today?

Employee ownership, B-corps, cooperatives, Patagonia, etc. Are these trivial or vanity projects? Do they rely too much on individual saintliness, or could we see norms, policies or incentives evolve to make these mainstream? Is it worth working to build a world where this is the norm? What would it take?

Automation. Is it a big deal, or not? And is Andrew Yang right that most of us are “servants to the tide of innovation and efficiency,” clinging onto our place in a shrinking island?

Can we make universal claims about what it means to flourish, strong enough that we can reasonably design federal economic policy around it? What does it means for an individual to flourish? What would those policies be?

What’s the deal with the social safety net status quo? Oren Cass argues it’s become too high, Angus Deaton argues it’s too low. What are its component parts (quantifying this seems to gets thorny, since you’re dealing with disparate federal agencies, not an integrated approach…healthcare, unemployment benefits, food stamps)?

Fact check: “Rich people own. The top 0.1 percent are 3 times as likely to make their income from owning a business vs a wage. Salaries don’t make people rich, equity does.” But, isn’t this only true for owners of mega-companies? See Great Escape.

Bibliography & Summaries

The Moral Consequences of Economic Growth, Benjamin Friedman

• When there’s broad-based economic growth (rising standard of living for the clear majority of citizens), we play positive-sum games and get along. If no broad-based growth, we start to fight and screw each other over. Therefore there’s a moral imperative to ensure economic growth.

The Once and Future Worker, Oren Cass

• We need to solve for labor market, not consumer welfare/GDP growth. This is the foundation of strong individuals (production more satisfying than consumption), strong families and communities and, hence, sustainable growth, too. Yet we’ve done the opposite, through a variety of regulatory wedges: (60’s and 70’s) payroll taxes, workplace rules, environmental regulation, college for all (unprepared workers), rent-seeking organized labor, immigration policy, free trade, dysfunctional safety net devaluing work.

The War on Normal People, Andrew Yang

• Automation is destroying jobs, first lower-skill and eventually higher-skill. We’ve given up on teaching values in favor of narrow-minded self-interest and the skills demanded by the market. Instead of settling for increasing competition over a shrinking land-mass of prosperity, we need dramatic interventions from the federal government to promote job-growth and flourishing for all of society.

The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society, Eric D. Beinhocker

• Wealth creation follows the formula of evolution: differentiate, select, amplify. Like a computer program for creating new arrangements. Search algorithm for finding “needles of good design in haystacks of possibility.” Both economic systems and biological systems are subclasses of “evolutionary systems.” Co-evolution of physical technology, social technology, (ideas and designs) and business (implementation) drives the patterns of change and growth we see. Evolutionary system (i.e. complex = never settle into a state of rest) as opposed to going from static equilibrium to equilibrium. Agents can adapt and coordinate.

Peter Thiel

• It’s not that growth is bad…we haven’t even had growth. Much of our growth is an accounting trick (e.g. more measurable jobs covering the same underlying labor, exchange of value) or has come from “interiorizing” technologies. We stopped having hope and believing in the future, and retreated from the world.
• So this is slightly perpendicular to Oren Cass view…

How this All Happened, Morgan Housel

• Vague alignment with Epsilon Theory…funding consumption and living standard increases via debt is now coming back to haunt us.
• Low interest-rate funded consumption and consumer investment as a way to avoid depression immediately following war, which was concern given so many returning people with no jobs available to them. Household debt grew, but so did incomes, so no big deal. America is booming together, median wages growing, middle class doing better and better.
• 70’s recession. Atmosphere of fear. When economy returns to boom in 80’s, it’s no longer broad-based growth. More winner-take-all. Many people still have the expectation that their lifestyles can resemble those of the rich (and I figure politicians fuel this), but no longer the case. So they stretch themselves. -> 2008. Quantitative easing, backstopping corporate debt - both prevented economic collapse and boosted asset prices, a boon for those who owned them – mostly rich people. People who don’t benefit this start to want out, they didn’t sign up for this. Monopoly Power and the Malfunctioning American Economy / Goliath: The 100-Year War Between Monopoly Power and Democracy by Matt Stoller
• We have tremendous inequality in both ownership and income; winner-take-all, monopolistic economy that’s good for so few. Growth hasn’t been broad-based in a while.
• It didn’t use to be this way; we created this environment via Chicago school neoliberalism, well-intentioned/corporatist technocracy even among liberals, Reaganism + Clinton continuing it, solving for consumer above all else. We used to fight economic concentration and solve for small business.
• Consensus to fight concentration is growing once again. New political fault lines emerging.
• Aligned w/ The Once and Future Worker

The 9.9%, Matthew Stewart

• The top 0.1 has captured most of the gains, the next 9.9% has maintained, the bottom 90% has lost relative wealth.
• And the 9.9% is pulling the ladder up, fighting over territory on an island that is shrinking.
• Aligned with The War on Normal People. Progress and Poverty, Henry George
• In 1879, a man asked “How come all this new economic development and industrialized technology hasn’t eliminated poverty and oppression?”
• Poverty and wealth disparity appear to be perversely linked with progress, The Rent is Too Damn High, and it’s all because of land.
• [Implication: “progress” isn’t enough to ensure broad-based growth…]