Relativities: local and global

by Chris Bertram on November 13, 2006

In the past few weeks John and Henry have engaged in arguments with Tyler Cowen and Will Wilkinson on the subject of whether relative wealth matters. To be sure, that isn’t the ostensible focus of the dispute with Tyler, which is about demographics. But digging deeper, the crux of Tyler’s argument has been that Europe’s ageing population matters because it will lead to lower growth rates and that the compounding effect of these will be that Europe’s position relative to the US (and China, and India) will decline, and that that’s a bad thing for Europeans. Whilst Tyler insists that these global relativities matter enormously, Will suggests that domestic relativities between individuals matter hardly at all. Since I think of Will and Tyler as occupying similar ideological space to one another, I find the contrast to be a striking one, and all the more so because I think that something like the exact opposite is true. That is to say, I think that domestic relativities matter quite a lot, and that global ones ought to matter a good deal less (if at all) just so long as the states concerned can ensure for all their citizens a certain threshold level of the key capabilities.



Domestically, it seems to me that relativities in wealth and income matter because of the way that they can impact upon people’s absolute levels of well-being. There are a number of components to this, and I needn’t rehearse the arguments in grim detail. Amartya Sen goes through some of them in his well-know essay “Poor Relatively Speaking”: if wealthier people come to have access to new technologies, and if access to important goods get mediated through access to those technologies, then the poor who lack such access will find it harder and more expensive to supply their needs. You can run this one from everything from cars and out-of-town shopping centres to the internet. Second there are arguments about how inequalities in wealth and income undermine political equality. Third there are the Frank-style arguments about how relativities impact directly upon happiness. Fourth there are the Marmot and Wilkinson (the other one) arguments about how inequality impacts on health. Fifth, there arguments such as those put forward by Adam Swift concerning how people can translate their advantage in wealth and income into better educational opportunities for their children and place them better in the queue for jobs that those of poorer individuals. Some of these arguments may have flaws (I’m inclined to be more skeptical about the Frank ones than the others) but together they make a compelling case for the idea that inequality is bad for people, domestically.

By contrast, I see no good reason to think that analogues of these arguments hold for international relativities. If Germans end up poorer in wealth and income than Americans, this will not thereby undermine political inequality among Germans. Position in local rather than global hierarchies is what matters for health outcomes and self-esteem. Just so long as all Germans, say, continue to enjoy those capabilities that are important for full participation as citizens in their communities, something that can certainly be assured on the basis of a level of wealth and income such as Germans enjoy today, I see no special reason for moral concern about the relative decline of Germany compared to the United States. Of course, there may be a problem if there is mass emigration by talented and productive people in Europe to the United States (in the way that there is currently a movement from Eastern to Western Europe). That would be bad if it impacted directly on the access of Europeans to, say, health care, and it would be bad if the talented were able to use their opportunities elsewhere in a way that made European countries domestically more unequal. But just so long as European countries can give people adequate opportunities to live absolutely decent lives in Hamburg, Paris or Bristol, there will a limit on those who will leave just for increased wealth and income, especially if that wealth and income can’t be guaranteed to translate into a higher level of well-being.

Finally, it seems to me that any concern that some advanced capitalist countries might experience relative decline compared to other advanced capitalist countries ought to be greatly outweighed by the urgency of the absolute level of poverty that people experience in many countries. That people in sub-Saharan Africa die prematurely and preventably in large numbers matters far more that the fact that the populations of wealthy countries vary in their relative levels of wealth and income. All advanced societies are rich enough to secure for all their members the capability to participate as equal citizens, and only the internal maldistribution of their wealth means that some individuals face social and political exclusion. One of the texts that it is on my to-think-about-soon list is John Stuart Mill’s “On the Stationary State” from his Principles of Political Economy . I won’t comment further on that here, precisely because I need to think it through further. But Mill’s idea (endorsed by Rawls btw) that the goal of our policy ought not to be one of continual struggle for growth or for relative advantage once the threshold has been reached where we could all hope to enjoy a satisfactory level of well being seems to be right.

{ 1 trackback }

Crooked Timber » » Progress versus economic growth
11.16.06 at 3:39 pm

{ 61 comments }

1

Matt 11.13.06 at 9:40 am

I agree, so won’t comment on substance, but I think you’ve got a typo you might want to change here: “If Germans end up poorer in wealth and income than Americans, they will not thereby undermine political _inequality_ among Germans.”
[Thanks Matt, should have been "this" -- changed it now. CB]

2

abb1 11.13.06 at 10:10 am

Relativities in wealth and income” is a nice euphemism, but – to me, at least – the most important question is: why do these ‘relativities’ exist, what are they based on?

Are powerful people exploiting powerless? Is future Germany going to be exploited by the future US? I think that’s the issue, not ‘relativities’.

3

Alejandro 11.13.06 at 10:11 am

Oh, I saw the title on the RSS feed and thought it was about General and Special Relativity (which might also be called Local and Global respectively). That’s professional deformation for you.

4

Chris Bertram 11.13.06 at 10:18 am

1. It isn’t meant to be a euphemism.
2. I agree with you that exploitation is something we should care about (though we might not agree about what counts as exploitation). It seems that you agree with me that inequalities among rich countries and their relative positions don’t matter, as such. As for what “the issue” is, there seem to me to be several.

5

otto 11.13.06 at 10:26 am

“Position in local rather than global hierarchies is what matters for health outcomes and self-esteem.”

Well, the relative wealth of rich countries determines which are able to drive world political outcomes. One of the reasons why Europe is a spectator of world politics while the US is the global hegemon is that Europe is not richer.

6

engels 11.13.06 at 10:52 am

I’m inclined to agree with Otto. It seems to me that most, if not all, of the arguments for the importance of relative wealth within the nation state which you accept (rightly, in my opinion) have their analogues in the international arena.

For example, take the psychological effects of inequality on health and happiness: I don’t know why you think we would not see these on the international level. If you think that people can be made unhappy or unhealthy by an awareness of their relative status with their nation then I don’t know why you would think that they would not make such comparisons against people from other countries. People in poorer countries are confronted with images of well-off people in rich countries on a daily basis; I don’t think it would be much of an exaggeration to say that it is probably as easy for a Paolista to compare his life with a New Yorker, as it is for a Bristolian to compare his with a Mancunian.

Likewise, money can buy influence in international politics in many of the same ways which it can in domestic politics. Etc etc

7

Chris Bertram 11.13.06 at 10:53 am

No the wealth of rich countries does not _determine_ which are able to “drive” political outcomes. The Soviet Union played more of a role in “driving political outcomes” for many years than did many wealthier states. Besides, one might notice that the US has not, despite its wealth, been successful in achieving its foreign policy goals in recent years (Iraq!). Perhaps it is better to spectate than to have the illusion of power without the reality.

(Of course, if I accepted the Hobbesian view that states should constantly strive to augment their relative power with a view to subjugating other states, then I wouldn’t have posted as I did.)

8

John Emerson 11.13.06 at 10:58 am

Many economic conservatives, including self-described libertarians, seem ultimately committed to militaristic statism above all. The citizens of a nation with a static or diminishing population and a static or slightly diminishing GDP/capital might actually not have a declining quality of life at all in absolute terms, but such a nation would certainly be militarily weaker. And in military affairs, relative decline is absolute decline.

Many of them go on to worry about the fate of our way of life and the white race, too.

9

Chris Bertram 11.13.06 at 11:03 am

Engels, I you may have read my post too quickly. My point was about inequalities between nations that are already above a fairly high threshold of wealth and income. So your point about poor countries isn’t all that relevant.

As a matter of fact, though, I think that people compare their condition mainly with that of their compatriots and that middle class Germans, Belgians, Spaniards and Japanese are not typically made unhappy by comparing themselves to well-off Americans. YMMV.

I agree, though, that there is something to be said, for your point that money can buy influence in international politics, say in trade negotiations. It seems to me that that provides a reason to organize against that effect rather than one to enrich oneself with the sole aim of getting more bullying and bribing power.

10

otto 11.13.06 at 11:28 am

“No the wealth of rich countries does not determine which are able to “drive” political outcomes.”

Relative wealth is clearly one of the most important reasons which drives world political outcomes. Any IR course which flatly denied it – as per above – would be misleading its students. Of course, there’s regime type (measured in many dimensions), and the role of powerful organised groups (ditto) and there are international institutions which structure international interactions, not to mention other broad arguments in IR. But aggregate relative wealth is a large part of determining which country’s organised groups dominate, how international institutions are designed and operate, and so forth.

By the way, the USSR spent a lot of time in the 1920s and 1930s trying to reduce its relative economic output deficiency vis-a-vis its competitors. And arguably it collapsed in the end in part because it could not compete in mass consumption income with other industrialised countries.

11

dearieme 11.13.06 at 11:37 am

“Just so long as all Germans, say, continue to enjoy those capabilities that are important for full participation as citizens in their communities”: that could be used as an argument against governments imposing mass immigration on countries – the communities in which, say, Germans wish to participate might cease to exist, or their capabilities to participate fully in the new communities might be impaired.

12

Chris Bertram 11.13.06 at 11:38 am

Ah Otto, when you wrote “determine” you actually meant “influence”. Any IR course which denied that wealth influences outcomes (as I did not deny) would indeed be misleading its students.

IR courses also often accept the inevitability and even perhaps the desirability of a Hobbesian struggle for relative advantage. I disagree with Rawls’s Law of Peoples about many things, but the possibilty of replacing such a system with a law governed international order, as a realistic utopia for which we should strive, is one point I agree with him on.

13

otto 11.13.06 at 11:52 am

Even if we can get to a law governed international order, its format will be very much influenced by the wealthiest state or states, and impose greater costs on civil society in the other states. If the Germans want an international legal order that they will actually enjoy being part of, they’d better be rich.

14

xavier 11.13.06 at 11:55 am

A link to Mill’s On the Stationary State, from econlib.

15

xavier 11.13.06 at 11:56 am

That should have been “Of the stattionary state,” rather than “On”

16

Chris Bertram 11.13.06 at 12:01 pm

Otto, we get the point, you’re a realist.

17

finnsense 11.13.06 at 12:03 pm

I think Chris is right.

Certainly, the evidence on happiness studies does not suggest that the 30% wealth advantage the US has over most European countries translates into more happiness. The benefits of additional wealth to rich countries certainly seem to have diminishing returns. One reason might be that as city dwelling folk, our ability to buy nice apartments in the city has become a question of relative wealth rather than absolute wealth. It doesn’t matter how rich I become in absolute terms, I’ll never be able to pay the market value for a decent sized flat in Helsinki city centre unless I’m in the top 5% of earners.

With regards to political power it doesn’t seem to be much worth worrying about. The US is a hyperpower and finds it hard to exert its influence anywhere. In economic terms Europe and the US are equal because Europe acts as a block and despite being poorer per capita, it has far more people. Neither is this likely to change any time soon.

Repeated studies have shown that people are quite content when they feel things are improving. That should be the goal of policy, not perpetual growth of productivity increases.

18

reason 11.13.06 at 12:09 pm

I would have thought this sort of mental extrapolation was clearly doomed to irrelevance. Europe (as a whole) is clearly larger and richer than the USA but not more influential. The great bulk of western Europeans are not clearly poorer than the great bulk of Americans. Europe is saving, the USA is not. The US is running large trade deficits which means ceterus parabus eventually it will suffer a large terms of trade correction. Exponential growth never continues for ever (because resources are not infinite). Lets talk about angels on a pinhead instead.

19

engels 11.13.06 at 12:17 pm

Well, I’m not sure developing countries are completely irrelevant. I thought your argument was that inequality only really matters internationally in so far as it prevents the citizens of developing countries from attaining “a certain threshold level of the key capabilities”. I would think that, quite apart from this, you would expect there to be an effect on these people in terms of health and subjective well being similar to the effect on poorer people within the nation state. If you do agree with this, I don’t think that is entirely obvious from your post.

Anyway, I didn’t say “poor” counties, but “poorer countries”. If you wish to limit the discussion to developed countries, I could make the same point using Portugal as an example, rather than Sao Paolo. People in such a country probably know (or think they know) as much about the lives of well-off Americans as they do about the lives of many of their compatriots. If people in Bristol can be made unhappy (or unhealthy) by comparing themselves with people in London (or vice versa, naturally), why can not people in Lisbon be made so by comparing themselves with people in Los Angeles?

20

Chris Bertram 11.13.06 at 12:27 pm

Engels, I did say that I was more sceptical of the Frank-style arguments about domestic relativities than some of the other arguments. But of course there’s so logical reason why people in Lisbon shouldn’t make themselves unhappy by comparing themselves to people in LA. But as a matter of fact I rather doubt that they do make themselves unhappy via such comparisons.

The unhealthiness is a different matter. The Marmot/Wilkinson studies don’t claim that comparisons of the sort you mention are important causes of unhealthiness, so far as I’m aware. Rather it is position in a hierarchy (including an income hierarchy). (And I’m pretty sure that the effect is actually independent of whether the people in the hierarchy care about hierarchy.) For Marmot/Wilkinson purposes people in Lisbon aren’t part of the same hierarchy as people in LA.

21

TheIrie 11.13.06 at 12:36 pm

I’m not sure that you can separate local and global wealth. Taking Britain, my colleague was trying to convince me yesterday that as an economy we don’t actually do anything! We have freed our peasants from the fields, then the factories, and now into offices, where they don’t produce anything tangible. How can this be sustainable? He says it is the legacy of our empire, which allowed us to acquire great wealth, which we are basically recycling. In other words, the European/American way of life is basically unsustainable without global inequality. The flip side then is that a decent way of life is poor countries is made much less likely as long as we are depending on them entirely for the production we no longer do ourselves. So, I suppose my point is that a countries relative wealth will determine the economic activity carried out in that country, and the rich countries will allow themselves to do the more leisurely work. To the extent this is true – global relative inequality and not just absolute inequality does matter.

22

engels 11.13.06 at 12:51 pm

(1) Pure speculation but IMHO people do make such comparisons and will do so more in the future, partly because of the pervasiveness of American media.

(2) Yes, I shouldn’t have written that bad health may result from such comparisons: Marmot’s hierarchies are a different issue. I don’t know a lot about Marmot, but my understanding is that what’s important for his purposes is primarily people’s position in an occupational hierarchy. But isn’t it true such hierarchies can and do cross borders? For example, it’s easy to imagine a multinational company where the majority of bosses are American, and the majority of workers are Portuguese.

23

Martin James 11.13.06 at 12:57 pm

“Position in local rather than global hierarchies is what matters for health outcomes and self-esteem.”

So as long as all football matches end in a draw within countries it doesn’t matter what happens in the world cup.

24

Jim Harrison 11.13.06 at 1:00 pm

One reason relative poverty is important is that the relatively poor are much more likely to become absolutely poor in times of economic crisis. If a cornicopian future awaits mankind, the fact that Smith’s swimming pool has only half the acreage as Jones’ (or Sundaram’s or Chang’s) may not be very significant and arguments about inequality will sound rather scholastic because they will be about the equitable distribution of pleasure and status. In the more probable futures where ecological, demographic, and political emergencies are likely, the issue of inequality would be far more existential because it would be about the equitable distribution of suffering and death. It seems to me that many nonacademics in the lower middle class but even more among the rich, understand that arguments about inequality are about risk. The relative losers aren’t motivated by envy and the relative winners aren’t motivated by greed so much as everybody is motivated by fear. Everybody wants to be sure they’ll find a chair when the music stops.

25

Javier 11.13.06 at 1:05 pm

Chris, an interesting post. However, I think you’re wrong on several points.

First, I should preface this by saying that I reject most of your arguments that income inequality is bad, or at least I don’t understand all of them. Let me go through the ones that I do, I think, understand.

Second there are arguments about how inequalities in wealth and income undermine political equality.

I would be interested in hearing more about this. There seems to be the normative component (political equality is good) and the empirical component (inequalities significantly undermine political equality). On the normative component, I’m with people like David Estlund and Richard Arneson who argue that political quality, not equality per se, is what’s valuable (well, Estlund may think equality is valuable too, but it inequalities in political influence can be introduced if they improve political quality). You could argue that reducing income inequalities would increase the quality of decision-making, but that would require an additional empirical argument.

Also, I think the empirical evidence is very confusing about the role of money in politics. My reading of the literature suggests that money plays less of a role than most people tend to think. Here I will defer to Bradely Smith’s research.

Okay one more:

Fourth there are the Marmot and Wilkinson (the other one) arguments about how inequality impacts on health.

I would recommend looking up Angus Deaton’s research on the topic.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=167134

Suffice to say that the jury is still out. It is more plausible that inequalities in status create bad health outcomes, but income inequality might be a bad proxy for status inequalities.

Okay, enough of that. Tyler Cowen’s argument is more powerful than you suggest. His claim is that even relatively small differences in GDP growth per year average out into big disparities in the long run. And, all things considered, more income is better than less. That doesn’t seem so crazy to me. But I’m also thinking of The Moral Consequences of Economic Growth type arguments. Lower growth produces worse outcomes in terms of tolerance, openness, and progress reforms. Thus lower economic growth is problematic from this perspective as well.

Okay, this is already too long. My point is that there is more to be said for Cowen’s and Wilkinson’s arguments.

26

Barry 11.13.06 at 1:19 pm

Posted by John Emerson: “Many economic conservatives, including self-described libertarians, seem ultimately committed to militaristic statism above all. The citizens of a nation with a static or diminishing population and a static or slightly diminishing GDP/capital might actually not have a declining quality of life at all in absolute terms, but such a nation would certainly be militarily weaker. And in military affairs, relative decline is absolute decline.”

The simplest explanation is that both of these guys are right-wingers, first and foremost. They seek greater international inequality and dominance, while striving to preserve/increase intranational inequality and dominance.

27

abb1 11.13.06 at 1:23 pm

I still don’t understand this unhappiness business, its correlation with relative wealth; either internationally or individually.

If I choose to live in a barrel, dumpster-dive and pontificate about the good men all day, then I’m likely to be quite happy and I have no case against the guy who’s chosen to work 16 hours/day, live in a big house and drive a Ferrary.

It’s only if I work hard and see someone extracting some sort of unfair rent from me – for using the tools, using the land, or for nothing at all, just because they can – only then I’m unhappy. And people who exploit me may not even be wealthier than I, and it still sucks.

This is conceptually very similar to what those anarcho-capitalist guys feel, except that for some (mysterious) reason their idea of fair/unfair rents is completely off-base. Clearly the claim of the actual producer is much stronger than the claim of someone who, having fenced in a piece of land, said, “this is mine.”

28

Chris Bertram 11.13.06 at 1:29 pm

Thanks Javier. You’d be right to surmise that I don’t agree with those who favour democracy on purely instrumental grounds and that I think that there’s a right to what Harry has called the “equal availability of political influence”. I won’t go through all the arguments here and now, but, in any case, I think that both the equality and quality arguments ought to be hostile to the influence not just of money in politics, but also of inequality. So, for example, the wealthy and articulate don’t just influence education policy to the detriment of the poor because they make campaign contributions, but also because they have ways of making their voices heard in the political process that are more difficult or comparatively more expensive for the poor.

On Marmot/Wilkinson, I certainly need to look at some of the critical literature – so thanks for that.

Finally, I’m not sure why you write:

Tyler Cowen’s argument is more powerful than you suggest. His claim is that even relatively small differences in GDP growth per year average out into big disparities in the long run. And, all things considered, more income is better than less. That doesn’t seem so crazy to me.

The disparities, even if big, don’t matter on my view, so long as they don’t end up threatening people’s access to valuable capabilities (i.e. of making them worse off on a morally important dimension). Of course more income is better than less, _all things considered_ (though when some of them, such as leisure are considered, …) but once people have, in absolute terms, access to valuable and fulfilling lives, more income is of little moral importance and so shouldn’t be an overriding policy goal.

29

engels 11.13.06 at 1:47 pm

Javier – I remember going round this with you before, and correct me if I’m wrong, but isn’t Deaton’s conclusion only that societal inequality does not impact adversely on societal (average) health? IIRC he does not deny that relative low status can lead to poor health outcomes for individuals…

30

Javier 11.13.06 at 2:08 pm

Engels, that’s right, Deaton is not denying that low status has a bad health impact on individuals. But the degree of income inequality only loosely tracks status inequalities. I could be wrong here, but I believe that Marmot also doesn’t consider income redistribution to be the best strategy for decreasing the bad effects of status on health.

The disparities, even if big, don’t matter on my view, so long as they don’t end up threatening people’s access to valuable capabilities

I suppose whether this is true or not depends on what you consider to be “valuable capabilities” and the sufficientarian benchmark. So, for instance, one that thing that has always troubled me about the capabilities approach is the moral status of longevity. How much life is enough life? At the beginning of the 20th century, Sweden had the highest life expectancy in the world and it was about 45 years. Now the average life expectancy in Sweden is about 80 years. At what point do we say that people have a achieved the capability to have an adequate life span? Given that we can now live much longer than humans lived previously, we also have a different conception of what constitutes an adequate life span.

I agree that the analogy with income is weak, but it’s there. How much is enough? I’m not sure. Consider Mexico and the United States–the US has roughly 4 times the per capita income of Mexico. But Mexico is comparatively rich by historical standards. Is the average Mexican income enough? The problem, obviously, is where to set the benchmark. I’m not sure how to solve this problem. Perhaps someone can help me out.

31

Javier 11.13.06 at 2:14 pm

Chris, about economic growth: I would suggest checking out Benjamin Friedman’s The Moral Consequences of Economic Growth if you haven’t already. Among other things, a lower rate of economic growth may mean that people are less welcoming to immigrants and less willing to support progressive reforms. These are obviously things that egalitarian liberals should care about and so economic growth does matter for other reasons aside from it’s impact on absolute income.

32

Chris Bertram 11.13.06 at 2:26 pm

My suggestion would be simply to ask whether the society is wealthy enough to sustain basic liberal democratic institutions and to provide reasonable educational and career opportunities for its citizens as well as a decent standard of health care. Obviously there’s going to be room for some argument about what counts as reasonable and decent here, but I’m pretty sure that the UK and France have been at a level of economic development where all these things are possible (though not actual) for a long time now.

I think I should enter a slightly revised view on one key point, though, since I may have come across as more hostile to growth than I actually am. The point is, that once a society is above the threshold indicated above it may reasonably choose to pursue more growth or not. It is just that there is no strong moral or rational imperative to do so and no great reason to think that a failure to do so is disastrous. Keeping up with the Americans just doesn’t matter, morally speaking.

(And let me throw a bone to the realists: in a non-ideal world, keeping up with other states may well matter more if those other states have bad intentions towards you.)

33

Chris Bertram 11.13.06 at 2:32 pm

Thanks Javier. I don’t know Friedman’s work. But from what you say he’s claiming that low growth can have bad effects on people’s attitudes. To the extent to which that’s true that might sometimes give us an instrumental reason to favour more growth rather than less. I’m not clear why it would give us any reason to adopt preserving or improving our relative position compared to some other country as a goal.

34

Brandon Berg 11.13.06 at 2:51 pm

I don’t think that Cowen is saying at all that lower relative wealth is important. The point isn’t that Europe will be poor relative to the US, but that it will be poorer in absolute terms than it would have been had it followed the same course as the US.

I’m pretty sure that Cowen would agree that Europe would be worse off, not better off, if the US decided to adopt European-style domestic policies and consequently grew no faster over the next several decades.

35

leederick 11.13.06 at 3:02 pm

I think the “local is important, global isn’t” idea has some pretty weird consequences. If you want to get rid of ‘local’ differences in relative wealth you can do it by spatially segregating the poor and the rich. But I’m not sure many people would want to live in that world.

Take the UK, if people are randomly scattered around they’ll be a pretty nasty hierarchies some of them will be on the wrong end of. But if we arrange things so that all the rich people are in England, and Scotland and Wales are poverty stricken peripheries, then you’ve just slashed local differences in relative wealth. So long as the Scots and the Welsh compare themselves with their compatriots, and don’t compare themselves with people outside their reach (the English), the problem of relative poverty is solved.

Why shouldn’t people in Lisbon compare themselves to people in LA? It may make them miserable if they do, but if what stops them is segregation and social distance then I’m not sure you can accept them not doing it as a good thing. It’s a product of a particular social horizon, and perhaps not a justifiable one.

36

Matt Kuzma 11.13.06 at 3:05 pm

I think there are factors associated with international wealth differences that you may have overlooked. Certainly resources and commodities that are sold in the international marketplace are susceptible to supply and demand like anything else, and if the purchasing power of some European countries falls significantly below that of other nations, they may find the price of raw materials and energy sources consistently on the rise in relation to their economic growth. I don’t know how severe such a market imbalance can get, nor do I know what sort of a difference in purchasing power you’re assuming, but I can easily see this getting to the point where some kinds of infrastructure improvements and other public benefits become prohibitively expensive. This has much the same effect as the phenomenon you cited Adam Swift as talking about domestically – new developments that might make your economy more competitive become too expensive to develop at any reasonable pace.

The international market issue gets worse when you start talking about the rarest and most expensive commodities. For instance, there are a number of companies in the US currently manufacturing diamonds at a cost of a few dollars per karat. Their goal is to make sheets of diamond large enough to be the basis for new circuit board technology and plentiful enough to be the basis of a thousand other technical innovations. What happens when the price of those diamonds is doubled or tripled in a behind-the-curve European country? How much slower will its progress be?

37

Chris Bertram 11.13.06 at 3:24 pm

leederick: Societies aren’t just spatial entities, but even if they were forcible segregation of rich and poor would involve a pretty massive violation of liberties. I don’t think I said that wealth distribution and levels of well being are the only things that are important, did I?

Matt Kuzma: Your point is absolutely right. But I’m assuming that such effects are less marked between societies than within them. If a decline in Europe’s relative position were to undermine its standard of living in absolute terms that would be a matter of concern.

38

Slocum 11.13.06 at 4:47 pm

I don’t think either ‘relativity’ matters very much in the steady state, but what does matter, I think, is a sense that things are improving, that the future will be a better place (and that this place I’m living will be better in the future).

There are various consequences of this kind of optimism (or pessimism), which (as others have mentioned) is what I think Benjamin Friedman was addressing in The Moral Consequences of Economic Growth.

My intuitive sense of Europeans is that right now there is a widespread assumption that ‘this is as good as it gets’, that the future will be worse, and what we need to do is hold on to what we have as long as we can. Americans, on the other hand, tend to assume the future will be better. Now Europeans may be realistic and Americans deluded, but the many of the effects are the same regardless of whether they are realistic or not. Optimism is often misplaced, but is energizing anyway.

That said, I’m not too impressed with Cowen’s thesis because trends tend not to continue for long enough for small differences in growth to compound into huge disparities. Look at all the ups and downs on both sides of the Atlantic over the course of the 20th century. Depressions, booms, wars, huge political swings from left to right.

Not only don’t I expect trends in Europe to continue indefinitely, I don’t expect that in the U.S. either. The new Democratic majority is quite different, I think, than the Clinton administration in terms of openness. So especially if the Democratic majority is consolidated in 2008, I think we can expect some combination of ‘fair trade’ rather than free trade, restrictions on immigration, attempts to punish China for its currency policies, higher minimum wages (maybe ‘living wage’ laws), drug price controls, windfall taxes on oil companies, national health care, and so on.

39

kang de veroveraar 11.13.06 at 4:52 pm

CB´s points (that chasing the global Joneses is not a moral obligation, and that GDP is an imperfect measure of well-being) should be seen in conjunction with the following facts:

-GDP per capita has not been growing all that fast in the States;

-America´s GDP data is…well, if not fudged, certainly embellished by virtue of the use of such gimmicks as hedonic adjustments and imputations. The numbers are basically designed to be bigger, harder, better than those of other industrial nations.

However, the biggest canard IMO (and one that Chris appears to buy into, thereby lending a distracting “but it´s only sour grapes” undertone to his post) is the notion that the differences between America and the motley assortment of European states are the key to understanding how everybody has been faring recently.

In essence, this is an age of unprecedented Global Wage Arbitrage (yes, to Sound Serious you have to capitalize it). It fucks the working/middle classes, and yet it allows easy liquidity. That some countries (including some in Europe) have found it easier than others to swim in the latter does not mean that the former effect will not make itself felt across the board, eventually…

40

Martin James 11.13.06 at 5:04 pm

Chris stated that the crux of Tyler’s argument is lower relative growth rates. I think that crux of his argument is that growth rates matter because history and the future matter and small differences in growth make for profound differences over time.

Its all about the dynamics not the statics.

Its an unfair caricature but Chris’s response seems to be to add temporal to geographical provincialism and say its primarily the internal of society that matters not the external.

Or to say that its the moral ideal that matters not the reality of conflict.

I just don’t see how this kind of moralism can make any sense of the USA. What is it and how did it get to be so big? What else but immigration, innovation and increase?

Even if one is a doomsayer about the ecological consequences of growth, by what possible string of reasoning can one think that low population growth societies will be immune from the consequences of the high growth?

41

Thomas 11.13.06 at 5:48 pm

I don’t read Tyler to be focused on European standing relative to US standing, per se. Rather, his discussion of relative standing seems focused on highlighting the implications of different policy/cultural choices, and on the momentum and compounding effects these choices have over time. There’s not much to support the reading Chris offers, which has Tyler focused on relative, rather than absolute, standards of living. As I read him, Tyler is saying that the Europe of the future will be much poorer than the US of the future, and that Europeans of the future would be better off absolutely if Europe today made different choices.

I don’t think Tyler’s addressing any of the issues Will addressed, much less offering a view in contrast to Will’s.

42

Sebastian Holsclaw 11.13.06 at 6:27 pm

“My suggestion would be simply to ask whether the society is wealthy enough to sustain basic liberal democratic institutions and to provide reasonable educational and career opportunities for its citizens as well as a decent standard of health care.”

How does this fit (or maybe it doesn’t) with egalitarian analysis inside a country. My understanding (and it may be wrongly based on improper definitions of “decent standard” or “reasonable educational and career opportunities”) is that floor-level analysis is not sufficient for most egalitarian-influenced systems. If that it isn’t good enough inside a country, why is it good enough between countries?

43

Tom T. 11.13.06 at 9:47 pm

Chris, one of Maria Farrell’s posts on this very website addresses your topic:

“The abundance – of food, cars, roads, tv stations, just about everything a European could imagine, and then some – is probably unprecedented historically, and limited geographically to America. Growing up comfortably middle class in Ireland in the early 1980s, I found it almost unbelievable that T.V. Americans seemed to drink orange juice every day when we had it just for Christmas, went shopping just for fun and could afford to keep their enormous fridges constantly full.”

Myths about America

44

asg 11.13.06 at 10:04 pm

From #26:

>The simplest explanation is that both of these guys are right-wingers, first and foremost. They seek greater international inequality and dominance, while striving to preserve/increase intranational inequality and dominance.

This one’s for posterity!

45

Barry Freed 11.13.06 at 10:28 pm

…that could be used as an argument against governments imposing mass immigration on countries – the communities in which, say, Germans wish to participate might cease to exist, or their capabilities to participate fully in the new communities might be impaired.
Posted by dearieme · November 13th, 2006 at 11:37 am

Many of them go on to worry about the fate of our way of life and the white race, too.
Posted by John Emerson · November 13th, 2006 at 10:58 am

That is all.

46

Slocum 11.13.06 at 10:36 pm

Chris, one of Maria Farrell’s posts on this very website addresses your topic

Hmmm. That post is a nice demonstration that ‘international relativities’ apparently do have the capacity, in some cases, to arouse envy (and related emotions such as disdain and schadenfreude). Here’s a working link, BTW:

Myths About America

47

john c. halasz 11.13.06 at 11:12 pm

It seems to me obvious why the perception of “local” inequities and inequalities would outweigh the importance of distant international comparisons. It’s at the “local” level that one’s interactions occur, and it’s the quality of one’s iteractions and social relationships, far more than any abstract quantitative measure of wealth, (which may just be wasteful or underutilized anyway), that mostly determines one’s sense and perception of well-being. We are, for better or worse, far more sociable beings than the economic reductionists would like to think we are.

48

thetruth 11.14.06 at 2:14 am

It’s at the “local” level that one’s interactions occur, and it’s the quality of one’s iteractions and social relationships, far more than any abstract quantitative measure of wealth, (which may just be wasteful or underutilized anyway), that mostly determines one’s sense and perception of well-being.

Or to put it another way, your girlfriend is relatively unlikely to dump you because she has decided to move to Norway where the standard of living there is higher.

49

abb1 11.14.06 at 4:35 am

It’s true that perception of international inequities might be incorrect, but it isn’t necessarily more distant than the local kind.

People normally live in a homogeneous environment and their social iteractions don’t involve visiting palaces. In fact, they may have a much better chance of meeting foreign tourists with fancy camcorders than their own overlords. No fellow countryman ever invited me to spend a summer on his yacht or hitch a ride on her personal jet.

50

butwhatif 11.14.06 at 8:28 am

“I still don’t understand this unhappiness business, its correlation with relative wealth; either internationally or individually.”

I seem to remember, throughout the 90s, how guff about “Italia: quinta potenza industrielle” worked to keep 59 million people quite content, deflecting attention away from the elite and domestic problems.

51

Timon Braun 11.14.06 at 8:37 am

These “absolutely decent lives in Hamburg, Paris or Bristol” seem primarily to involve the ability to vote and security in the knowledge that your boss won’t be cured of the disease that kills you. That may have a health upside, but does it outweigh the known benefits of, for example, antiretrovirals, or breast carcinoma treatment? Are you really prepared to claim that the marginal benefit to equality in allowing a lump to metastasize is greater than the benefit of allowing a child to meet his grandmother? It is not a spineless apology for greed to notice that The Ministry of Groundbreaking Cures somehow never comes up with them. The companies whose exorbitant treatments are now the subject of billion-dollar Wall St intrigues and are creating what in 15 years time will be considered absolute prerequisites to the “absolutely decent life” in Hamburg and Bristol.

52

Chris Bertram 11.14.06 at 8:55 am

Tim, you seem to be moving rather more quickly than is warranted from economic growth, to technological progress in general, to improvements in medical technology, to improvements in health outcomes (same goes for Tyler’s response on his site btw). I may try to write a post on this in a couple of days when I’ve got some time.

53

Dave Meleney 11.14.06 at 10:52 am

Over at Marginal Revolution Professor Bertram chastises me thusly:

“Hmm, let’s see. I write:

“But the real problem with East Germany was not its comparative level of economic development or the level of health care its citizens could receive (rather good, actually).”

and David Meleney reads:

“Professor Bertram’s position is that the poverty of the East Germans he encountered …..was not ‘a real problem.'”

Remedial reading class needed?”

Having lived for short periods with poor people in the 3rd world, I am awaiting a more detailed explanation of the difference between what Professor Bertram said and my paraphrase of his statement.

Awaiting remediation,
Dave Meleney

[Simple. Your elementary comprehension failure has two parts: (1) To say that X is not "the problem" with respect to some question does not imply a denial that X is , unrestrictedly, "a problem"; (2) my comment concerned the level of economic development of the country and your reading of it concerned the poverty of its citizens. It is perfectly possible for one country to have a higher level of economic development than another country whilst its citizens are in greater poverty, because, e.g. of the diversion of productive resources to goals other than consumption. CB]

54

Tom Hurka 11.14.06 at 11:05 am

FWIW, isn’t Frank’s more recent view that ponds are getting bigger, i.e. one’s happiness depends more on comparisons with people far away than it did even twenty years ago, since e.g. even people in developing countries can now watch US TV shows about rich and glamorous housewives and compare their own lot with the ones on the screen? I remember that as one of the themes of the Winner-Takes-All book and/or Luxury Fever, and it’s a departure from his earlier view that only local hierarchies matter.

55

Sebastian Holsclaw 11.14.06 at 11:43 am

“It seems to me obvious why the perception of “local” inequities and inequalities would outweigh the importance of distant international comparisons. It’s at the “local” level that one’s interactions occur, and it’s the quality of one’s iteractions and social relationships, far more than any abstract quantitative measure of wealth, (which may just be wasteful or underutilized anyway), that mostly determines one’s sense and perception of well-being.”

How does this square with the Middle East? A large number of people in places like Saudi Arabia seem perfectly capable of focusing more on the US than their own overlords.

“Tim, you seem to be moving rather more quickly than is warranted from economic growth, to technological progress in general, to improvements in medical technology, to improvements in health outcomes (same goes for Tyler’s response on his site btw).”

Europe can probably free ride off of the US market for medical technology so long as the US government doesn’t screw up the market too badly. (This will apply to things with low marginal cost and high research costs only–something like drugs. If the technology turns on really expensive machines, Europe will have to wait for the price to come way down if its economic growth has lagged for a couple of decades.)

56

Thomas 11.14.06 at 11:56 am

Chris, as I read your response to Dave, I can’t help but think you may have a point on what you said, but not on your argument. You do mean to deny, don’t you, that there was any moral problem with E. Germany’s poverty, don’t you? An egalitarian system that, relatively speaking, impoverishes is morally permissible, in your view.

57

Dave Meleney 11.14.06 at 12:27 pm

Prof Bertram:
So If I understand you, you suggest that the East German total productivity was not “the real problem,” since party members and the military were raking off such a percentage of the whole that most people you met there ended up living very, very simply.

But your statement still resonates with a disdain for the economic liberties and economic well-being of those East Germans you traveled amongst, and I’ll include more context because it really clarifies your meaning: “But real problem with East Germany was not its comparative level of economic development or the level of health care its citizens could receive (rather good, actually). It was the fact that it was a police state where people were denied the basic liberties.”

58

Chris Bertram 11.14.06 at 12:43 pm

To reiterate the point as I put it at MR: I find it very possible to imagine people living decent lives with free institutions at very much lower levels of per capita GDP than United States in 2006. That people live under tyrannies is tragic. That they experience the standard of living of Americans in the 1950s, Brits in the 1960s or that Europeans experience a lower rate of _increase_ in prosperity over the next 30 years than American will is not tragic. If you think that sort of attituded evinces disdain for anyone, I’m truly sorry for you.

59

Dave Meleney 11.14.06 at 1:19 pm

Professor Bertram:

I agree 100% with your points that lower, and even much lower GDP can be quite tolerable, and I have lived happily in Thailand and China quite simply. I wish more Americans (Brits too) recognized what you are saying here.

But I ask you to consider those folk you remember from your travels in East Germany…. to the extent they seemed less joyful was it partly because their lack of economic freedoms made them less the “author or their own life”?

And when you consider the amazing range of opportunities open to your children and mine….would you for a second want our children to be stuck in East German economy, even if they had the full range of civil liberties?

Dave

60

abb1 11.14.06 at 2:18 pm

As far tyranny being tragic – a lot of people everywhere wouldn’t know civil liberties from a hole in the ground. They live their lives, don’t care about politics, play the hand they were dealt. And they might be happy or unhappy depending on many variables, civil liberties and economic opportunities being only a small part of it.

I have friends in Germany. Anecdotally, many eastern Germans are quite nostalgic for the communist past. Fewer opportunities – but less risk, less uncertainty, more peace of mind; this is not black and white.

61

Adamsmithee 11.14.06 at 2:28 pm

The arguments in the Moral Consequences of Economic Growth don’t actually hold up to much empirical scrutiny. The links between income growth and health outcomes, or income growth and democracy, or income growth and happiness, even in poor countries, are weak. Technology and institutional change explain most of the variation in health, rights and happiness over time, and relative income effects seem to be fairly localized.

Comments on this entry are closed.