Category: Economic Growth

I recently wrote a review of Friedman’s Moral Consequences of Economic Growth for the forthcoming edition of the Cato Journal, and I wrote a lot of notes that I didn’t use. And what good are blogs if not for publishing your discarded book review notes!

A main weakness of the Friedman book is that he becomes increasingly fuzzy about what he takes to be the specifically moral consequences of growth. Toward the end, you strongly suspect “moral” in Friedman’s mouth means something like “egalitarian welfare liberal.” As much as this undermines the credibility or interest of his overall case, this move has been, I think, a rhetorical success for Friedman. His resolute sloppiness about the normative side of the equation gives him a lot of room to move. And he gets credit (though not so much from me) for avoiding the standard economist moral argument for growth. And here’s what I have to say about that.

Which consequences of growth count as moral consequences? This is no small question. The answer naturally turns on one’s moral theory. According to the utilitarian philosophy (sometimes just called “consequentialism”) morality is entirely a matter of consequences, and the consequences that matter are those that increase the net quantity of pleasure or happiness. If economic growth increases the net sum of happiness, then that’s all we need to know in order to endorse it morally.

In fact, a kind of simple utilitarianism is the house philosophy of the economics profession. In the orthodox neoclassical theory, utility just is a measure of the satisfaction of an agent’s preferences, and it is a logical consequence of the definition of terms that an increase in income leads to the choice of a more preferred combination of goods, thereby increasing utility. It should be emphasized that the formal notion of utility as preference satisfaction, is, well, formal, and is not a substantive psychological notion at all. Formal utility implies nothing whatsoever about subjective experience and is not synonymous with pleasure or happiness, just as “preference” in the formal theory implies nothing about liking or wanting. Preference is nothing more than that which is revealed by what an agent has done, and utility is the notation for representing it.

Nonetheless, economists are generally all-too-happy to shuffle back and forth between the two notions of utility according to convenience. The slide from formal to substantive utility, combined with utilitarian moral theory, leads to what I call “economic folk morality.” According to economic folk morality, the moral desirability of economic growth is close at hand. Broad-based growth makes almost everyone wealthier; wealthier people can satisfy more of their preferences; satisfying preferences just is happiness; and happiness just is the moral summum bonum. So growth is morally good. QED.

But economic folk morality is false for at least three reasons. First, preference satisfaction does not entail happiness. It is possible to want and get things that will make us miserable. Second, the pleasure or happiness a life contains does not exhaust its value. The value and quality of our lives depends not only on how we feel, but also on how much of our human potential has come to fruition, the content of our characters, and the objective nature of our behavior. Third, morality is not primarily a matter of adding up a quantity of anything. A person who achieves her ends, honors her obligations, and contributes to her community has lived a moral life, regardless of the quantity of happiness she added to it.

Part of the interest of Friedman’s book is that he does not lean on the economic folk proof for the morality of growth. Insofar as the folk proof is unsound, that has to be to Friedman’s credit. However, the folk proof is tantalizingly close to a profound truth about the morality of economic growth. My complaint is that Friedman’s list of the moral consequences of growth are in fact moral consequences only because they are instrumental to some further state of affairs that is good.

Democracy, tolerance, openness are not good for their own sakes, but for what they enable. But what they enable—an increase in the scope of opportunity and the realization of meaningful human ends—is what economic growth enables, too. Friedman’s moral favorites are not things of independent value with which to justify growth. Rather these liberal desirables are part a package of political-economic goods that already includes growth. These elements are part of the same package in virtue of the fact that they each make life more secure, more satisfying, and more worth living. Growth has better consequences when it occurs within a liberal system. But liberalism is worth having in very large part because it enables economic growth and its consequences. Friedman’s moral desirables are in fact desirable because they enable and magnify the life-enhancing powers of wealth. If it is true that growth in turn enables the conditions that enable it, then we will have a virtuous circle. But we have to get out of the circle to morally vindicate growth. And the folk proof shows the way: growth makes life better.

Not against the idea that growth is good (heaven forbid), but against what Friedman says is good about it.

(Cogency warning: this is a sketch, and only sketch. Blog as dialectical scratchpad.)

Friedman argues that economic growth “fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy,” and that these are moral goods.

This is a varied list, is it not? Let’s just assume that Friedman is arguing that growth actually produces more fairness and democracy and not just “commitment” and “dedication.” Anyway, many of the things on the list strike me as the vehicles through which growth creates moral consequences.
This of course all depends on what you think “morality” is about. What do I think morality is about? I think morality is, on the one hand, about people realizing the ends that make their lives meaningful and, on the other, about the constraints on individual and collective opportunistic behavior that enable individuals to realize their meaningful ends in cooperation with others.

It turns out that my foundational theory of what morality is FOR says that the function of morality is, by and large, to enable gains from cooperation. That is, the point of morality is to produce cooperative surpluses. (That morality does enable gains from cooperation is an evolutionary possibility condition for morality. If it didn’t enable cooperative gains by constraining opportunistic behavior, morality wouldn’t exist.) But economic growth just is periodic expansion in the overall size of the surplus in the broader network of cooperation. So, the way I see it, economic growth is more or less what morality is for.

For instance, fairness matters because cooperative surpluses matter. If we cannot divide the gains from cooperation according to terms that each party finds mutually agreeable, then we will not cooperate, and so there will be no gains to divide. Fairness is morally desirable because gains from cooperation are morally desirable. If growth produces more fairness, then great, because fairness leads to cooperation, which leads to cooperative surpluses, and better cooperation leads to bigger surpluses, which is what we want! The moral consequence of fairness is: growth! And if Friedman is right and fairness is a moral consequence of growth, then growth is a moral consequence of itself. Growth is its own reward!

Surplus is desirable because we’re individually better off with a piece of the surplus than without a piece. That’s why we cooperate. And by “better off” I mean: helps us realize our meaningful ends. I actually mean more than that. The surplus often opens up the space of ends, making formerly infeasible ends feasible. Some of these ends will be more meaningful for us than the ends in the pre-surplus feasible set. So surpluses can make available more meaningful ends, and therefore more meaningful lives. And meaningful lives is the real bottom line.

If increasing cooperative surpluses in the service of meaningful lives is what morality is for, then it may seem that growth is basically what morality is for. Maybe we’ve got a scalability issue here, and surpluses arising from huge impersonal networks of cooperation have too many negative external effects, and so defeat the ability to put our shares of the surplus to use in building meaningful lives. Morality collapses in on itself at a certain scale. I doubt it. But the real point is that this is a question about whether morality is scalable or self-defeating. If we can point out that growth has moral consequences, but all we’re doing when we point that out is that growth helps consolidate the preconditions for growth, then we will have gotten exactly nowhere.

Either growth facilitates our ability to live ever more meaningful lives in cooperation with one another or it doesn’t. If it does, that’s the worthy moral consequence of growth. If growth does that in part by promoting itself through increasing cosmopolitanism, broadening opportunity, increasing demand for liberal political institutions, etc., then great. But we should just take the argument straight home to meaningful lives rather then getting hung up in the socio-political instrumentalities. If growth doesn’t facilitate our ability to live ever more meaningful lives in cooperation with one another, then growth is immoral, even if the antecedents of growth are morality itself. Then our task would be to pick out where the scale problem begins, and try to refurbish morality, and our moral sensbility, to reflect its own limitations of scope.

Well, I’ve got some real problems with that, but it was fun! What’s your beef?