Frontpage Feed
Community Feed
The Idea Market Feed
The 'Verse Feed
Poverty And Wealth, Redux
Submitted by Jonathan Wilde on Wed, 2005-06-08 12:00.
A few clarifications to my previous post arguing that poverty, not wealth, is unnatural -
First, I realize that over the long term, modern day wealth in the first world is an anomaly. I do not claim that we were once richer in the past, or deny that, in the larger perspective, we are at the apex of material abundance. I simply argue that extremes need not determine what is "natural" or "not natural".
Technological change, innovation, and economic progress have been happening since the beginning of human civilization and even before it. The belief that progress is a very recent phenomenon limited to the last few centuries is inaccurate. In the middle paleolithic, technological innovation was occurring at a very slow rate - approximately one new discovery every 20,000 years. The pace picked up in the upper paleolithic starting at about 40,000 years ago, with a new technological innovation occurring approximately every 1,400 years. The invention of agriculture about 10,000 years ago at the start of the mesolithic era greatly sped up the rate of innovation, with a new discovery approximately every 200 years.[1] To summarize:
| Era | frequency of innovations | examples |
| Middle Paleolithic | 20,000 years | flake tools, body paint, smoking/drying meat, rock art |
| Upper Paleolithic | 1,400 years | flint tools, ornamental artifacts, use of bone |
| Mesolithic | 200 years | woodworking, canoes, storage of food, bows, domestication of animals|
Reaching back even further, evolution faciliated technological change via the development of memory, opposable thumbs, language modules, increase in brain volumes, and light sensors, all the way back to the hypothesized relative greater stability of molecular replicators. The longer into the past one looks, the slower the rate of technological change.
Coming back to present times, the rates of change increase even faster with the onset of the industrial revolution and the mastery of the scientific method. In the future, if the world does not end in a techno-terrorist holocaust, I expect economic growth to increase even more rapidly. Slow genetic evolution equipped us for an ever-faster memetic evolution. The rate of economic growth is increasing, has always been increasing, and barring a major catastrophe, will continue to increase.
Second, I agree with everyone who stated that cultural institutions are necessary precursors to any stable politcal system. I have argued in the past on various occasions that it is preferable to enact societal change via culture rather than by force.
However, I do not agree that culture is the sole determiner of the wealth of a society. As an example, the closest thing we have to a controlled experiment between communism and liberal democracy is the Korean Peninsula. Fifty years ago, North Korea and South Korea shared the same culture, geography, natural resources, and genetics. The consequences of the different political systems are readily apparent today. This should be an obvious point. It's why we debate about various structures of governing, constitutions, proportional representation, referendums, amendments, France rejecting the EU, and basic public policy itself. Because policy matters. It lies on a plane above philosophy, economics, and ethics, where these considerations manifest themselves in the real world.
There is a decent theory for why economic growth is exponential (or a sum of exponents, etc). It is due to the network effects of distributed knowledge. The power of any network is proportional to the number of nodes in it, likely with at least a second-power relationship. Because ideas are non-rivalrous in use[2], when someone thinks of a good idea, anyone can use that idea on which to base the invention of a new idea. More ideas form the basis for more new ideas. Within a network, more and more ideas result in more and more new ideas at an ever increasing rate. New ideas enable the technology needed to support a growing human population, which in turn also increases the number of nodes that can create new ideas. Rinse and repeat in a virtuous cycle.
Consider an observant human being living in 8,500 BC who somehow has at his disposal a complete knowledge of history. Would it be accurate for him to observe the world around him and call agriculture "unnatural"? After all, it had only been discovered a few centuries earlier. Human domestication of plants represented merely a drop of water in the ocean of time. The observer would also be accurate in claiming that 'recent' economic growth far exceeded that of the more remote past. But I argue that none of this would make the state of the world at that time "unnatural".
As another example, when my co-bloggers and I met up in DC, we toured to the Natural History Museum. In the Western Culture section, there was an exhibit on Roman Emperor Diocletian's Edict on Maximum Prices in which he declared the death penalty for any merchant charging above his set limits on prices of various goods. As expected from our 21th century perspective, the effect was the opposite of that intended.[3] None of us had even an ounce of criticism for Diocletian's policy. We concluded that it was an economically less-sophisticated time, and that price controls appear on the surface to be perfectly reasonable answer to prices that intutively seem "too high". Yet, the same type of policy proposal today would be met with screams of anguish on this blog today. What may have been a natural reaction two millenia ago is clearly reckless policy today. The difference is knowledge. Progress is entirely natural.
Progress does not merely come from science and technology, but also in weeding out bad ideas and in selection of good ideas: in the abstract - tolerance, skepticism of power, rational self-interest, a positive-sum worldview, and more concretely - the scientific method, liberal democracy, pluralism, and separation of powers. Likewise, I view economic theory as an emergent property of civilization.
The thrust of my argument is that, given the current state of human civilization, the body of knowledge acquired through the rise and fall of various societies, the empirical data collected by scientists and philosophers, the ideas that percolate via the spirit of the times, and the ever growing economic sophistication acquired during the last century, it is poverty, not wealth, that is unnatural.
And yes, one way to enable those living in poverty for raise themselves out of it is for governments of the third world to get out of the way, much as the governments of South Korea, Singapore, Taiwan, and more recently China and India have done so over the last few decades. By "get out of the way", I mean making a few basic policy changes such as dropping trade barriers, reducing the size of the public sector, relaxing state control over prices, and for governments of the first world to end subsidies to their own failing industries.
fn1. Robert Wright, Nonzero
fn2. Which is one of the main arguments in favor of intellectual property laws
fn3. We also wondered whether anyone alive at the time would have comprehended a mechanism by which price caps cause shortages. Dave proposed that the merchants were likely the first to make the connection as they would see for themselves that the artificially low prices made it unprofitable to supply the same goods they had been supplying before the onset of the price controls.
Trackback URL for this post:
http://www.distributedrepublic.net/trackback/2731
»
Is wealth natural? Over at
Over at Catallarchy, Jonathan Wilde has elaborated further on his contention that poverty is unnatural. A very interesting argument. I think he's saying it's the remaining poverty in the world that's anomalous and in need of explanation.
Geron, you certainly did
Geron, you certainly did bring it up only to dismiss it, so I guess I can't complain.
Richard, some quick hits in return: you're wrong that knowledge and ideas can grow indefinately; both must be held within either some form of physical storage, or within people's minds, both cost time, material, and energy. As Bruce Sterling says, "Websites run on oil".
Your European stats appear to be wrong; you seem to be basing their standard of living on their private expenditures. If people buy goods with public funds, clearly that is part of their standard of living. Without looking at your article (no time right now) I'd guess that you e.g. counted the cost of medical insurance for Americans as part of their standard of living and didn't count the Scandinavian money spent on their socialized health care systems.
It’s clear that the
You're absolutely right. There is support for this idea among the modern day inheritors of witch doctors, faith healers, round-worlders, and four-humorists. This is about where the liberal dogma runs any thoughtful discussion in the ground. It is an angry, mystic, irrational refusal to accept reality. The blank slate refuses to be rewritten.
Don, If I understand you
Don,
If I understand you correctly, you are saying that with information dissemination happening so fast, it's not profitable to innovate. That sounds like an argument for intellectual property laws.
But what about the open-source model? To me, that seems to be a nice model for "information-rich" goods.
Jonathan, I'm inclined to
Jonathan,
I'm inclined to believe that there is an inherent limit to the effective rate of innovation-driven economic growth. That limit would be the result of a need to actually generate profits from the application of the innovations to actual real world products. In the long run, shorter and shorter time windows of profitability must increase the risk of losses faced in the attempt to bring new products to market. This will have a dampening effect.
Regards, Don
There is a decent theory for
There is a decent theory for why economic growth is exponential (or a sum of exponents, etc) ... Because ideas are non-rivalrous in use2, when someone thinks of a good idea, anyone can use that idea on which to base the invention of a new idea. More ideas form the basis for more new ideas.... Rinse and repeat in a virtuous cycle.
Then, in footnote 2, you note:
[the non-rivalrous nature of ideas] is one of the main arguments in favor of intellectual property laws.
Um, if the function of intellectual property laws is to repair the non-rivalrous nature of ideas, surely this argument in short form is that intellectual property laws serve to prevent a virtuous cycle of ideas and inventions.
--G
This whole post just doesn't
This whole post just doesn't cohere. OK, at the beginning there's a historical summary, apparently taken from Robert Wright's _Nonzero_ and Hanson's modification of Brad DeLong. There's a bit on why ideas are easier to share than material objects. This leads to a conclusion that "poverty, not wealth, is unnatural".
The trouble with "poverty, not wealth, is unnatural" is that it could mean anything, depending on how you define "poverty" and "natural". If you assume that every part of the world is going to follow an exponential growth in wealth however defined, then it is perfectly natural (i.e. expected) that some will still be relatively poor, because they start at different places, and exponential growth will mean that the laggards will appear to change slowly in comparison to the leaders. See Jared Diamond's _Guns, Germs, and Steel_, for example. But the definition of "poverty" is itself controversial, and there are reasons to think that "wealth" can not be indefinately increased, see Fred Hirsch's _Social Limits to Growth_.
It's clear that the definition of "wealth" must be complex within this essay, because exponential growth in any one thing can not continue indefinately within a finite world. I think that some acknowledgement of sustainability theory, if only to dismiss it, would be preferable. There is some support for the idea that current prosperity is built on the unsustainable use of natural resources which can not be easily replaced.
Finally, the policy suggestions in the last paragraph do not follow: why should an illustration powered by description of the first world lead to an assertion that the first world should stop doing what it has been doing, i.e. "end subsidies to their own failing industries", or "reduce the size of the public sector" past the degree done in, say, the rich and successful Scandinavian countries? General economic growth of the sort described is compatible with either liberalism or libertarianism; it's probably compatible with conservatism (of the "go-slow" variety).
Economic growth likely to
... based on pace of technological innovation, writes Jonathan Wilde.
In fact, innovation, the main growth driver, is speeding up.
Technological change, innovation, and economic progress has been happening since the beginning of human civilization...
Grant, Um, if the function
Grant,
I didn't say I support intellectual property laws. :razz:
Contra the consequential argument to reward innovation via intellectual property laws, many people have made the argument that intellectual property laws have negative consequences, and I sympathize with that view.
Rich, a couple of quick
Rich, a couple of quick hits:
exponential growth in any one thing can not continue indefinately within a finite world
Nonsense. Knowledge and ideas can grow indefinitely. And, since they enable us to create new resources (per Julian Simon, we create, not discover, resources), so can wealth.
Finally, the policy suggestions in the last paragraph do not follow: why should an illustration powered by description of the first world lead to an assertion that the first world should stop doing what it has been doing, i.e. “end subsidies to their own failing industries", or “reduce the size of the public sector” past the degree done in, say, the rich and successful Scandinavian countries?
Well, Jonathan could have phrased that more clearly. Reducing the size of the public sector is one of the policy changes that third world nations can make to facilitate their rise from poverty. First world governments can help these third world nations by ending the subsidies that limit the third world nations' ability to market their goods.
And you're joking about there being no reason to reduce the public sector below that of the "rich and successful Scandinavian countries," right? In a recent post about what's wrong with Europe, I noted:
I think economic performance differences like that provide plenty of reasons for further reductions in the public sector.
Rich, while it's true that
Rich, while it's true that there are limits on the total amount of wealth/information in this universe, those limits are very, very high. So high that it is foolish for us, so low down on the exponential curve, to worry about them as limits. Let our machine descendants (each commanding the mass of an entire galaxy rewrought into computers) do that.
Also note that we don't know for sure that we cannot create new mass "from nothing", and thereby indeed have an unlimited amount of information storage in this universe. Alternately, we may be able to create new universes and communicate into them, which would have much the same effect.
That said, it is not foolish for us to worry about specific limits found in our world, that we don't yet know how to surmount. Doing so is, in fact, one driver of the exponential curve of knowledge.