RE: ECON: The Affluent Society (was Dyson ) (long)

Billy Brown (
Tue, 19 Jan 1999 16:18:59 -0600 wrote:
> Billy Brown ( wrote:
> In more general terms, this analysis ignores the fact that the
> benefits of growth do not end when you have a warm bed and a full
> belly. Wealth can be spent to buy health, and the more wealthy you are
> the more health you can get. No nation on Earth is wealthy enough to
> provide top-notch medical care to everyone, and the best way to solve
> this problem is to grow as fast as possible. Growth won't remove the
> inequality, but it will make everyone better off than they were.
> Growth (sustainable) always has benefits. The analysis did not ignore
> The analysis did not claim we should stop growing. The analysis asserts
> the new material benefits are less urgent than the old benefits, and that
> different benefit we can buy is economic security, such as basic, never
> top-notch, medical care..

Yes, I understand. My contention is that if you compare the number of lives saved by even a well-designed welfare system to the number of lives saved by maximizing growth, you will find that growth wins by a huge margin. The reason is that welfare benefits a small (and shrinking) group by modest amount, while growth benefits virtually everyone.

In a really poor country there is not enough money to prevent the poor from occasionally starving, so welfare is impossible. In a modern country (like the U.S.) the number of people who can't afford food is so small that you don't need government to save them. In a really rich country (with basic AI / robotics / nanotech), the idea of people starving would be inconceivable.

Medical services, which are an even bigger life-or-death issue, follow a similar pattern. The only difference is that they are more expensive, so no one has really reached the 'wealthy' stage yet.

> But many people now would take a lower growth of the pool in return for a
> certain share. And they band together or pressure the government for
> from the vigors of pure competition. Farmers, manufacturers, workers, the
> elderly, the unemployed in time of depression, and more all seek ways
> to maximize their income, but in large part to make more secure the income
> they already have, by means of government action.

Yes, they do. One of civilization's ongoing challenges is the struggle to get people to accept enough risk to make progress possible. In a poor society most people sensibly refuse to take any risk, since failure often leads to starvation. The richer your society becomes, the more feasible risk-taking (and therefore capitalism) becomes.

America, however, is currently suffering from a pathological fear of any sort of risk. This is partly the result of modern medicine and the modern regulatory state, which together have engendered the hope that life can somehow be made 100% safe. The trend has been strengthened, however, by decades of exposure to the socialist idea that markets are a fraud and rapid growth is impossible. The end result is a situation where many people will sacrifice huge future returns to gain tiny immediate benefits, because they don't believe those returns will ever materialize. This is certainly a challenge to current proponents of capitalism, but it is a temporary social phenomenon rather than a timeless fact of human nature.

> 19th century America wasn't laissez faire, but it was closer, and they did
> make speeches about it, and it was part of the conventional wisdom, and a
> of activity went into constructing the classical liberal state, with a lot
> the gov't imposed inefficiencies swept away, and balanced budgest, and
> currencies. We grew, and had depressions, and worse depressions, and grew
> some more, and had the Great Depression, and finally tried something else,
> because 25% of the population was persistently unemployed.
> I predict that if any nation in the next 50 years tries something close to
> real laissez faire, it will be China in some enlightened despotism mode,
> because they have the willingness to shoot protesters. Democracies find
> to save people from losing Hayek's game.

It is easy to get this picture of history if you look only at the broad sweep of events, especially if your textbook was written by believers in big government. Pick any specific instance of crisis, whether recession, depression, or simple monopoly, and you will find a different story in its details. Whatever the problem, whatever the age, the government will be in the middle of it trying to fix things. There has never been a time when government just left the economy alone.

Read the economists of the generation after that crisis, and you will find another interesting fact. Occasionally they find that the government intervention helped, but far more often they discover that it only made things worse. Frightened officials, under public pressure to 'do something', simply grasp at whatever strays come easily to hand. The result is almost never an improvement.

The simple fact is that no one can predict what an economy will do next year, and no one can understand an economy anywhere near well enough to manage its operation. The best we can do is lay a stable foundation, remove a few obvious impediments, and hope for the best.

> Wait, I thought they wanted mansions. You can't have most people having
> higher and higher ideas of what constitutes affluence but also have them
> fishing once the gov't provides them with $8000 income.
> The idea isn't to imitate the Culture where all desires are met. The idea
> to provide, well, a safety net. Perhaps a negative income tax. Perhaps
> generous unemployment insurance, between the US and European levels
> Certainly not blank medical checks. Most people will still work for fun,
> for 'luxuries' (more fashionable clothes, better tasting food, bigger
> electronic toys, more drugs), or both. Some won't; we can afford it.

*Sigh* Let me try again:

Over _long_ time spans, each _generation_ wants more than their _parents_. This doesn't mean that a particular person has infinite wants, or that everyone is the same. It does, however, mean that modern welfare beneficiaries think color TV is a basic necessity of life.

The safety net is not a new idea. We've been trying it out for several generations now, and we've got pretty good experimental data to base our decisions on. I recommend Charles Murray's "Loosing Ground" if you are interested in the details. Based on past experience, however, we can safely say that:

  1. If you have a program that provides anyone who signs up with food, clothing and a place to live, at least 10% of the population will end up living on it.
  2. If such a program exists, there will be a constant pressure to increase the benefits and remove any restrictions on who can benefit.
  3. There is no such thing as cheap, basic medical care. If you want government medical care, even for a minority of the population, you face a very unpleasant choice. You can either tell people they are going to die because you won't pay for a treatment that would save them, or you design a program that will bankrupt the public treasury.

Putting all of this together, we see that you can't fund a meaningful safety net at our current level of affluence without taking enough in taxes to significantly hurt the middle class. Trying to build a government safety net reduces growth, increases poverty, and creates large power groups with a vested interest in maintaining a large social underclass. Over time the benefits tend to grow, requiring higher taxes which force more people below the poverty line. All you've really done is institutionalize poverty.

The other approach is to lower taxes and maximize growth. Then most of that 10% will get jobs, and almost everyone will be able to save enough to tide them over in a crisis. The remaining needy population would be 1% or less of the population, which is a small enough group for private charity to help. Better yet, growth causes the poor class to shrink while the philanthropic classes grow, so the problem becomes smaller with time.

Thus, my personal answer to poverty - get rich enough that it doesn't cost anything significant to deal with it, then let private organizations deal with it on their own.

Billy Brown, MCSE+I