Saturday, December 3, 2011

Markets and the Future

Peter Boettke links to Ken Rogoff on the prospects for capitalism. I basically agree with everything that Rogoff says, and I think this point is particularly important: "Today’s capitalist systems vastly undervalue the welfare of unborn generations. For most of the era since the Industrial Revolution, this has not mattered, as the continuing boon of technological advance has trumped short-sighted policies. By and large, each generation has found itself significantly better off than the last. But, with the world’s population surging above seven billion, and harbingers of resource constraints becoming ever more apparent, there is no guarantee that this trajectory can be maintained."

I would underemphasize the "resource constraint" point - those are precisely the problems that capitalism does deal with so well - and focus more on discontinuous, catastrophic problems (some of which are clearly related to our resource use, to be sure). Either way, a major problem is something that I've previously called "temporal autarky" - the stubborn illusion of linear time prevents us from transacting with future generations or even future versions of ourselves. What economists call "intertemporal choice" is actually a bit misleading. The "choice" we model isn't really intertemporal at all - it's all contemporaneous choice with present transactors acting as agents for their future selves. Intertemporal choice is as much a principal-agent problem as it is a standard consumer choice problem.

This is recognized by the liberal tradition. Adam Smith, Thomas Jefferson, Thomas Paine, and many others all recognized how the present coerces the future (or how the past coerces the present), and they identified it as a real problem for liberal society. I don't have any easy answers to this, but I do have some thoughts in the comment section of Boettke's post (he asks for insights into institutional arrangements to deal with the issues Rogoff raises).

I always also like Richard Rorty's spin on these problems - citing Hans Blumenberg (it starts at about 2:20):

Unfortunately I agree with Dierdre McCloskey insofar as I think there are a lot of economists who are ardent Platonists, who see capitalism more as a metaphysical thing than anything else, and who are less likely to deal with these sorts of problems or practice a methodology that can address these sorts of problems.


  1. The problem I have with Rorty here is that he acts like because we recognize this problem more now (and don't simply accept the inheritance of our status and condition), everything's fine.

    I think things have improved because this point has been recognized, but our incentives are (for obvious reasons) still centered on our contemporaneous selves, and we still have the problem that we have no way of interacting with the future. This puts definite limits on what we can do with Rorty and Blumenberg's insights.

  2. We've had these sorts of warnings for some time now (at least since Jevons thought the world was going to run out of coal). If I put my Humean cap on I can say that this is no guarantee of future plenty (all of these wrong predictions about a resource scare future, etc.), but at the very least it doesn't inspire much confidence in such predictions.

    "But, with the world’s population surging above seven billion..."

    This is a good thing. The more people the better I say.

    "...and harbingers of resource constraints becoming ever more apparent..."

    Are we living in the 1970s again?

    The future, like death, is and continues to be the "the undiscovere'd country, from whose bourn
    no traveller returns..."

    This and that group or person is always worried about what this or that current issue or act will do to the future course of events; if I am humble the past tells me that those fears are about the present and not the future. I could go into Kierkegaard's insight that our very creatureliness is what frustrates our efforts in this way, but I think the point is already made without doing so.

  3. I don't think the solution is to imagine away the limitedness of resources - it's to recognize that the extent to which that constrains us is a function of human ingenuity. Anyway, I think you're harping on the least interesting point. "Resource constraints" seemed almost like shorthand.

    The real concern is discontinuous disruptions, and history suggests those are quite possible. Indeed, they were possible during a history when change in the human population and its activities was much slower than it is today - certainly it's something we should continue to keep in mind. "Running out of X" seems somewhat beside the point to me.

  4. I don't imagine them away, they just aren't a big deal to start with. It is the most interesting and vital point to make. We've had decades of this "limits to growth" claim (the phrase comes from the title of a quite famous tudy) and it has yet to come true (see the report published by the Carter administration and see how well it weds up with what actually happened - not very well).

    "The real concern is discontinuous disruptions..."

    Perhaps. Either way they cannot be predicted. Thus the substitution of imagination for such, and our imagination is rather rich when it comes to the fears we project into the future.

    As for the video, his comments are non-sensical and simply unfounded. We know enough about the history of the family over the past several thousand years to reject such empty-headed, content free historical analysis out of hand. Indeed, it is so similar to long overturned claims that during the middle ages that somehow parents cared less about their children than moderns do that I'm shocked he even said it. There is simply no evidence for that sort of thing. The notion of some sort of unremitting pessimism by the ignorant and benighted masses of the past just doesn't pass the smell test and is not reflected in the historical record.

  5. Then again, like Foucault, Rorty was a continental philosopher, and they tend to be very poor historians indeed. Probably because they don't take the positivist aspects of history - gathering the data, etc. reading it, etc. - terribly seriously.

  6. Not only does unremitting pessimism, ignorance, and not caring fro children not pass the smell test - it also doesn't seem to have anything to do with what he's saying.

    Rorty was not a continental philosopher, Gary. Unless by "continental philosopher" you simply mean "didn't think continental philosophers were completely worthless".

    Once again I'm not sure what to do with your comments because you're turning the whole case that I'm making and the case that Rorty is making into something I have trouble recognizing.

  7. I would argue that a perhaps more useful understanding of this "vast undervaluation" of future generations starts with seeing this as the result of our short-term adaptations becoming too successful (i.e., not breaking with the other adaptation of being an extremely fecund species, like any other; in the past actual birth rates were held back to barely higher than a flat level by a harsh environment, and even then occasionally declined, i.e. the roughly tens of thousands of common ancestors to all humans living today).

    This is an important distinction to make, because it is not simply "today's capitalist system" but rather a fact of modern life.

    All that being said, you gentlemen have already reinforced this; however I still thought it would be useful to approach from another direction.

    There is an interesting question arising from my observation: In a hybrid system (reason vs. impulse), does one approach hold sway (universally, or cyclically)? On the one hand, you have a "biologically mandated," impulsive system; although it does lead to some horrendous choices on both individual and societal levels, it tends to smooth over even catastrophes (even the worst factoids about nuclear weapons, i.e. the removal of the Earth's crust, do not come close to guarantee the extermination of all people, let alone wiping out all life, even if there were a belligerent with the mindset to try to eradicate all life and a sufficiently large arsenal). Indeed, many have wondered if these catastrophes don't ensure a cycle of history, rather than trajectory (for the nuclear war angle, the novel A Canticle for Leibowitz treads exactly this path).

    On the other hand, you have the insights that come from the ability to reason how things should be, rather than what biological impulses dictate. With the current economic collapse and the apparent inability for any of the institutional protagonists to even see a way out, we are merely in the midst of one of those episodes that call into doubt the force or tenacity of pure reason.

    I find that the basic evolutionary theory has quite a bit to say about the problem of discontinuous disruptions. If on the one hand you seek to maximize diversity, what course would you take? Would you, as I argue you should, take into account the diversity of nonhuman species? That would preclude urban sprawl, though not (in theory) preclude ever-higher populations (we could postulate towers, or offworld colonies). In practice, however, this tension remains. You could also put faith in intelligent computers (which are not outside the constraints of selection) if you are most interested in creating a more rational agent to make these decisions.

    It strikes me that the ideal of competition, in all its forms, should definitely be part of the equation, and not merely as a subcomponent of an evolutionary doctrine.

    A key point not to miss is that land and food for creatures normally not considered part of the market, without their own effective and persistent allies (although William O. Douglas did his best in Sierra Club v. Morton, 1972), benefit far less from the ingenious solutions of market-participant scientists. I will concede that you don't theoretically need abundant diversity of natural life to keep a large human population healthy, but it certainly does not hurt; it seems much more prudent to actually consider natural diversity vital to the human species to have these natural resources to fall back on when our ingenuity fails us (to paraphrase Mr. Kuehn).

    (It might be more sensible in a philosophical sense to break down evolutionary impulse itself into conservatism and radicalism depending on the particular adaptation being talked about.)

  8. @ Gary Gunnels: The whole concept of fecundity (having lots of babies) implies something like unremitting pessimism, and there is also the inverted correlation between family size and economic size - I will readily agree that this is not due to ignorance, however, and agree that people didn't care less in the past.

    Nevertheless, while human reproduction has built-in the concept of quality over quantity, the fecundity is most pronounced in precisely the kind of situation where it gives exactly the sort of result that is not especially needed: Tons of babies born in circumstances where they are not likely to meet the resources we deem necessary for maintaining the standards of a good life (i.e. avoiding a life of crime, let alone maintaining the hopeful trajectory of increased future excellence in academics and other pursuits).

    Rather, "modern life" (going back to at least the 1600s, say, if you want to talk about the foundation of the orphanage ideal) has made it easier in some ways to ignore harsh realities of life, but also has made it easier to compensate for those (again, one of the themes of this comment thread). (Apologies also for the limit-breaking post.)

  9. Edwin - definitely on the point that this is much broader than capitalism.

    The reason why capitalism is so important to talk about in this regard, though, is that production and allocation under a capitalist system is directed by the incentives and interests of contemporary individuals - so insofar as this is problem for any self-interested individual (self-interestedness being a highly fit orientation that we've evolved), it has a strong impact on decisions made in the capitalist system. And since modern capitalism produces technologies that can have a huge impact on the future - and which can hurt the future while helping the present (or vice versa), it matters a great deal for capitalism.

    And yes - I'm ONLY pointing to the manifold problems associated with human welfare. I'm not even considering non-human welfare here.

  10. Daniel,

    Actually, it doesn't pass the smell test in the least little bit. The history of the family doesn't come to a conclusion remotely like that. I'll take the historians of the field over a philosopher who spent not one day researching the subject any day of the week, month or year.

    It has everything to do with what he is saying; he is making an argument based on a false premise - namely that we somehow care more about our children these days, whereas in the past everyone was concerned with getting to heaven, and thus cared about their children far less. Again, the historical record comes to a different conclusion; namely that there is a sort of general, uniform concern over time about the future and care of one's children.

    Rorty was a continental philosopher as much as he was anything else; given how much of his work was devoted to struggling with and discussing continental philosophy (however one wants to define it) it is the conclusion I came to long ago. Furthermore, given his approach to texts - that they are mere playthings he can draw any conclusion from - he fits in well with the continental school.


    "The whole concept of fecundity (having lots of babies) implies something like unremitting pessimism..."

    Not really. If we look at what has been left to us from the historical record being pessimistic about the future of one's children is not reflected therein. In all reality, the so-called modern family is similar to the family of the High Middle Ages in these respects.

  11. Gary -
    My point is I agree with you on relying on historians. I SAID it doesn't pass the smell test. Then what I followed that up with is that your take on Rorty is of surprisingly low quality. I didn't hear him say anything about history of the family here. You read that into him like you read lots of things into me because you want to show off or simply talk about what you want to talk about.

    Rorty's point was pretty simple - a Platonic drive animated philosophy for most of philosophical history. That has started to fall away and Rorty has played no small part in that - he thinks that is a good thing. He thinks that change has grown up with the move away from worrying about our future in some eternal paradise and instead worrying about the future of life here on earth. The turn of phrase was "we stopped worrying about eternity and instead started worrying about our great great grandchildren".

    Intellectual masturbation is one thing. Your tenure here as a commenter has been far more than that. Your an intellectual exhibitionist. If you don't have anything you can criticize you put words in peoples' mouths so you can then mock them.

    I'm not buying it, Gary. I haven't been buying it for quite a while now. Rorty is not offering a "history of the family" here, so quit acting so superior to him and everyone else.

    Edwin -
    I may seem like I'm overreacting, but this is a long-standing pattern.

  12. FYI: The history of the family and family life is a fascinating subject. It has been the subject of a great deal of revision since the ~1960s-1970s and provides a great venue by which to challenge our many modern pretensions about the nature of family life as opposed to the past.

  13. re: "The history of the family and family life is a fascinating subject."

    Then go write about it on your blog. It has nothing to do with the discussion here.

    It was a simple turn of phrase to illustrate a point about people being less concerned about heaven than they used to be.

    Likewise, Keynes's "Economic Possibilities for our grandchildren" - an essay I've related to Rorty in the past - is also not about Keynes's theory of the history of the family, it's about economic growth.

    I'm sure you find history of the family fascinating. Go write about it on your own blog. Or if you insist on going off on tangents here, don't call peoples' views "empty headed" because you twist them into whatever you want to twist them into.

  14. Daniel,

    Yes, the longstanding pattern, but not one to do with me.

    "I didn't hear him say anything about history of the family here."

    Go to the 2:20 mark; he very clearly makes an argument about the history of the family. We stopped hoping for immortality and started hoping for the future of our grandchildren (that is an almost direct quote of the gentlemen in question); it is an argument about the nature of the family and family life that is not born out by the historical record. I could not more succinctly write a sentence that reflects just as clearly the wrongheaded notions about the nature of family life and mental life of those who came before us.

    Daniel, you're an exceedingly ignorant yet at the same time arrogant person; you'll make the perfect academic.

  15. Daniel,

    It was more than a simple turn of phrase; it is the sort of statement that provides great insight into how people think about the "past" and then use that "past" as a means to discuss the present.

  16. "Your an intellectual exhibitionist."

    Oh, and thanks for the compliment. ;)

    No seriously, I feel like starting up my own Scriblerus Club now.

  17. @ Daniel's response #1:

    Yes, I'll agree with all that. I tend to insist on looking at things in another way because the terminology of capitalism (especially recently with the focus on Austerian thinking) tends to skew the debate away from those long-term demands, and completely away from the welfare of anything that isn't profitable (let alone what may be essential to human life), a bit like how the terminology of Marx skews a discussion as well (although I recognize that capitalism encompasses a plurality of viewpoints).

    The one thing I'm iffy on is whether a capitalist, self-interested economy provides a clear enough impulse for self-sufficiency. The evidence I have seen, though, points to this indeed being the case, and getting better: GMO crops are much more helpful and less extreme (in most cases) than many worriers believe; even though Norman Borlaug was worried about the eventual scarcity of arable lands, he was adamant that GMO crops were the only way forward (I should note, however, that much, if not most, of his research was done at universities and nonprofits; "capitalism" here definitely does not mean "companies only," though I do not see a major problem - corporate-university partnerships are a fact of life as always).

    The proliferation of many for-profit companies that have a business model based on good-doing is another good sign. NPR has covered many of these recently - from companies that sell energy bars to coffee shops and use part of the profits to send nutrition supplements to Africa, to domestic producers of organic products, and more. "Sustainable" has started to replace "green" as the most marketable buzzword, and this is yet more evidence that more than just money talks in a capitalist system.

    @ Gary:

    I suppose my "inherent pessimism" comment is a case of me talking around your point - once again, I'm referring to a purely biological viewpoint, which of course doesn't take mere feelings about one's own children into account. It's good to love one's children, but in the battle of instrumental virtues love (or altruism, or whatever) seems possibly subordinate to the (nonrational) goal of keeping one's own genetic line going, at least in the biological sense.

    Now, to stop being obtuse - I'll agree readily with your main point, which is that people don't care less for children than they used to, or vice versa. Even in harsh times when people had to give up on babies, there often was an attempt to be as gentle as possible (i.e. preferring poisoning to abandonment, in that extreme case).

    There are some cases that show this isn't a universal care for the children (i.e. preferring abandonment at an orphanage with upwards of 80% first year mortality, instead of simply not having babies - or even better, gaming the orphanage to generate a stipend), but I believe things look better now because society and technology have a better way of dealing with this problem, rather than there being some actual change in attitudes to children. All that clearly goes to your point.

  18. Edwin,

    I'd say we're in agreement then.


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