Friday, May 6, 2022

Social limits of growth – I

It has long been believed, especially in Western societies (contrary to ancient wisdom), that the pursuit of economic advantage is actually a civilizing, moderating influence in society. Many people accept the view that people are motivated to pursue their narrow economic and material self-interests, assume that people support policies consistent with their vested interests, and regard behavior that is not self-interested with suspicion. The assumption that selfishness is the fundamental human motivation rests on the view that selfishness is beneficial, whereas otherishness is costly; people are selfish because they benefit from selfishness. 

We keep hearing material abundance would make it possible for everybody to have enough to be perfectly happy. Franklin D. Roosevelt reportedly remarked that if he could put one American book in the hands of every Russian, it would be the Sears, Roebuck catalogue. A person with such a mindset views anything that history, literature, philosophy, or long-standing traditions might have to suggest about the prudence one ought to employ in the shaping of new institutions as romantic babble which can be ignored. Harvey Cox writes in an article The Market as God

Expecting a terra incognita, I found myself instead in the land of déjà vu. The lexicon of The Wall Street Journal and the business sections of Time and Newsweek turned out to bear a striking resemblance to Genesis, the Epistle to the Romans, and Saint Augustine's City of God. 

Behind descriptions of market reforms, monetary policy, and the convolutions of the Dow, I gradually made out the pieces of a grand narrative about the inner meaning of human history, why things had gone wrong, and how to put them right. Theologians call these myths of origin, legends of the fall, and doctrines of sin and redemption. 

But here they were again, and in only thin disguise: chronicles about the creation of wealth, the seductive temptations of statism, captivity to faceless economic cycles, and, ultimately, salvation through the advent of free markets, with a small dose of ascetic belt tightening along the way, especially for the East Asian economies.

The last couple of centuries witnessed an impressive array of scientific discoveries, technical inventions, and industrial innovations which seemed to make the mastery of nature an accomplished fact rather than an idle dream. Many took this as a sign that all ancient wisdom had simply been rendered obsolete. As one chronicler of the new technology wrote in Scientific American: "The speculative philosophy of the past is but a too empty consolation for short-lived, busy man, and, seeing with the eye of science the possibilities of matter, he has touched it with the divine breath of thought and made a new world. " 

The assumption of self-interest pervades the social sciences, particularly economics and psychology. Empirical research suggests that this assumption is wrong or at least overstated. After a lot of searching the economist Joseph Henrich found that the Homo Economicus of economists' dreams does exist but, it is not a human, but a chimpanzee. ‘The canonical predictions of the Homo economicus model have proved remarkably successful in predicting chimpanzee behavior in simple experiments,’ Henrich noted dryly. ‘So, all theoretical work was not wasted, it was just applied to the wrong species.’ As Langdon Winner says in The Whale and the Reactor:

‘To argue a moral position convincingly these days requires that one speak to (and not depart from) people's love of material well-being, their fascination with efficiency, or their fear of death. The moral sentiments that hold force can be arrayed on a spectrum ranging from Adam Smith to Frederick W. Taylor to Thomas Hobbes. I do not wish to deny the validity of these sentiments, only to point out that they represent an extremely narrow mindset.’

Of course, all of economics is not about Homo Economicus. There are models which try to incorporate the complexities of human behavior. There are many results from experimental studies showing that people don’t behave according to the Homo Economicus model of human nature. We are far more cooperative and willing to trust than is predicted by the theory, and we retaliate vehemently when others behave selfishly. But most people who study economics don't go beyond the undergraduate level where such complexities are not discussed.

In Economics Rules: The Rights and Wrongs of the Dismal Science, Dani Rodrik says that many economists may have the predisposition of being knee-jerk market fundamentalists but it is certainly not what economics teaches. The correct answer to almost any question in economics is: It depends. Different models, each equally respectable, provide different answers. All the valuable lessons that economics teaches are contextual. They are if-then statements in which the “if” matters as much as the “then.”’

Economists don’t regard physical limits as a major problem because of the potential scope for substitution as a result of technological advance. Thus economic theory focused on explaining how conflicting selfish interests of market participants balance out in a way that results in the production of goods and services according to consumers’ preferences and an efficient allocation of resources to their production. What is not discussed are the ways in which growth creates its own frustrating limits.

The common argument is that even though the masses today could never get close to what the well-to-do have today, they can get most of the way there with patience in a not too distant tomorrow, through the magic of compound growth. If the fruits of aggregate advance appear inadequate or disappointing,  it merely reflects inadequate economic effort or excessive demands by individuals, or poor organization or inadequate capital equipment currently available to them. Too much has been expected too soon. Conventional wisdom thinks in terms of “excessive expectations.” The populace wants it now. It cannot have it now. It is too impatient. 

But in Social Limits to Growth, Fred Hirsch argued that the promise of economic growth which has dominated society for so long has limits that were essentially social rather than physical which made their analysis flawed. The distributional struggle is heightened rather than relieved by the process of growth. He shows why the affluent compete among themselves and how they create social scarcity. Affluence, by creating a kind of congestion, limits the welfare attainable by society as a whole.  

The affluent society is the frustrated society, seemingly incapable of improving the quality of life through greater material quantity. Generalized growth then increases the crush. It is an exact reversal of what economists and present-day politicians have come to expect growth to deliver. ‘To see total economic advance as individual advance writ large is to set up expectations that cannot be fulfilled, ever’.

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