The Case for Progressive Growth
Someone emailed me this Will Wilkinson post which I find interesting because his description of what progressives think about the economy has basically zero points of contact with what I think about the economy. It’s especially interesting, because the post starts by glossing Atlas Shrugged’s take on where economic progress comes from (quantum leaps of brilliant innovation) and then explaining that that’s wrong and that it really comes from “an accumulation of tiny productivity-enhancing innovations.” Now I have no idea whether or not anyone on the left agrees with the Atlas Shrugged heroic vision, but certainly I don’t, whereas I’m quite certain that lots of people on the right agree with it. That’s part of the reason you have all these congressman and libertarian bloggers saying nice things about Atlas Shrugged.
But what I think progressives think about economic growth—certainly what I think about economic growth—is that a country in the circumstances facing the United States has more to gain from investments in infrastructure, education, health, and amelioration of the conditions of the most deprived than it does from low tax rates. I also think that it’s sometimes necessary to take a short-term hit to growth in order to ward off an ecological catastrophe, and that there are some worthwhile non-commercial goods whose creation and dissemination has an impact on welfare that’s not captured in GDP statistics.
The idea that “Obama and his devotees are Bizarro World Randian romantics in the grip of an adolescent faith in the generative powers of the state” seems simply outlandish to me. Does Will think this describes Larry Summers? Jared Bernstein? Really? I think if there’s romanticism in Obama’s rhetoric that’s because speechwriters prefer romantic language. The state doesn’t have magic generative powers, but there are certain kinds of worthwhile goods that are better provided by the state. The political right has been extremely powerful in the United States for the past thirty years which has left us relatively underinvested in those goods. If I was really seduced by fantasies about the generative powers of the state, I’d be recommending an expanded public sector for France too. But they’re in a different situation. Their health care is great and they’ve got plenty of high-speed rail. They could probably use some tax cuts and deregulation.
29 Responses to “The Case for Progressive Growth”
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March 7th, 2009 at 2:58 pm
The argument isn’t usually that the state had “magic generative powers,” but that it has enormous capacity to fund investments, i.e., to pay to do things that private sourcing either cannot or has apparently chosen not to do. Where’s the “magic” part? What part of rural electrification called upon “magic”?
March 7th, 2009 at 3:03 pm
Larry Summers, no. Jared Bernstein? Maybe! Anyway, by “Obama devotee” I didn’t mean “everyone who supports Obama,” I meant a certain kind of starry-eyed enthusiast. I wouldn’t include you (or most liberals) in that number, just as I wouldn’t include myself (or most libertarians) among the Randian romantics about capitalism. (I think you have a plausibly cynical take on the way government works when you’re being serious and not trying to rouse your minions.) I guess I should have hedged: “Obama and his devotees OFTEN COME OFF AS…” How’s that?
March 7th, 2009 at 3:06 pm
We’re still talking about Atlas Shrugged? The book is certainly worthy of one post’s worth of derision, but come on. Once a book has been beaten to a pulp, it’s time to move on. And you haven’t even read it. There’s other books worthy of our derision, and you may have even read some of them. Let’s talk about them instead.
March 7th, 2009 at 3:10 pm
Well, I’m sitting here watching CNN tell us simultaneously that Obama’s spending is basically useless pork, and that the unemployment rate is at recent historic highs and only going to get worse. What’s missing? the idea that the spending might actually be useful in fighting the unemployment.
As long as the media insists on treating government spending as a political fight unrelated to the economic suffering of ordinary Americans, I’m willing to cut Obama a ton of slack for the timidity of his program to date. The idea that his program this far is a triumph of big goverment liberalism, whe looked at in relation to the levle of crisis we’re facing, ought to be laughed out of the discussion.
March 7th, 2009 at 3:29 pm
If your economy needs a jump-start it has to be large, and it has to be spent rather than put into the mattress. That basically means federal gov’t spending, and hence the strong support for such an effort from Krugman, DeLong, MY, Josh Marshall, Duncan Black, etc.
The problem that the poster MY refers to is perhaps a bit different however. I have noted before MY (and Ezra Klein’s) tendency to assume that large, structured programs with tight central control are efficient and effective. Whereas in the industrial world I have been working in for 25 years organizations are choking themselves to death on structure and central control. And trying to fix the problems they are experiencing by outsourcing more and more functions to bondage-and-discipline structured centralized service providers – which not surprisingly tends not to end well either.
I have suggested to MY that he (and Ezra) need to review in some detail the story of the FAA’s outsourcing of the Flight Service and its consolidation/centralization under a large military contractor. Sure, it looked really smart on paper to close all those “inefficient” local and regional offices with their expensive decentralized “bodies” (i.e. actual human beings) who lived in the region and knew their jobs into one huge Star Trek-style control center (located helpfully in Reston VA). And the budget does look better. Unfortunately from the point of view of the people who use that system the results have been a disaster, with poor service, lack of understanding of local conditions, service-to-rule, and an absolute lack of recourse to address the failures.
That I think may be what the quoted poster is getting at: not just that he opposes a stimulus, but that he fears it will be spent on additional efforts similar to the FAA’s FSS centralization that have massive unanticipated side-effects and lower productivity and innovation.
Cranky
The lack of a preview function on Yglesias’ blog must be destroyed!
March 7th, 2009 at 3:33 pm
It’s especially interesting, because the post starts by glossing Atlas Shrugged’s take on where economic progress comes from (quantum leaps of brilliant innovation) and then explaining that that’s wrong and that it really comes from “an accumulation of tiny productivity-enhancing innovations.”
Lone geniuses are rare. But lone (or more usually) team genius does generate breakthroughs. The breakthroughs (generately by the state of private investment) are needed to provide the fertile ground for the thousand tiny productivity-enhancing innovations, bah, improvements, which is where the money is made.
Somebody had to build the giant goddamn computer, and then somebody else had to pay to refine the thing, and then they had to pay a bunch more money to refine the spinoffs and finally, after 20-30 years, the computer industry really took off, to produce this here internet thingy. You know, the network designed for DoD to survice a nuclear attack, powered by chips modeled on designs originally conceived to crack Kraut encryption during the war, the development of which was funded by selling crap to the DoD for other projects.
While I am at it:The problem is that we’re going to get Projects A-Z, most of which will be a bust, instead of some significant number of the billions of tweaks that make innovation and growth happen.
Most projects are busts. Most small business starts fail. And then someone else comes along and picks up the pieces to make it work. Most venture capitalist lose money on a bunch of projects. Government projects fail all the time. AND THAT’S OK. Negative results are the bedrock of science, baby! It’s hard to find the right results if you don’t find the wrong results first. Unfortunately, there ain’t no money in canvassing for negative results, so nobody does it so much in private industry. Which is why Wilkerson’s blah blah blah about exponential growth curves misses the point that that scheme only works if the ‘natural’ rate of private innovation is higher than the rate of ‘forced’ government innovation. (The big problem of government projects is that they tend to pin too much on too few projects, leading to ineffienciencies of missed opportunities. Venture capital has the same problem.)
We just did that experiment, as government has cut in half R&D and infrastructure spending over the last 30 years, leaving the private R&D teams to the same amount of funding as a % of GDP, with the result that all the technological progress of the last 30 years has involved innovating around old breakthroughs from the era of Really Ginourmous Government and High Marginal Tax rates.
Essentially Wilkerson has just coughed up the hoity-toity version of McCain’s blattering about beavers. So, you know. FAIL.
max
['I see that Wilkerson is just as big a fatuous asswipe as when I was paying attention last, which would be when he thought killing brown foreigners in Iraq was bad but neccessary.']
March 7th, 2009 at 3:33 pm
Will talks way better than he writes. I’d never read a thing he had wrote and have only been exposed by bloggingheads.tv.
I read that and it seemed like an entirely different person. The comment and it’s crazed use of parenthesis looks like my writing and it’s making me wish I’d pretend to believe in the magic of markets more than I do and tried for an internship at Cato.
March 7th, 2009 at 3:47 pm
Wilkinson’s post is so wrong on so many levels- first, of course, by referencing the two most cartoonish characters of the 20th century, Rand and Hyak, and lastly, by being so incoherent as to almost escape criticism, but, alas, in the middle by being grotesquely wrong.
How great would it be if Obama could bring forth a game-changing ecomagination industrial policy that would reduce unemployment to zero building carbon-free power sources to provide education and healthcare to all! But that, of course, is not what’s happening.
As anyone who’s devoted even the most cursory of glances at current events knows (a category that apparently does not include Wilkinson) the stimulus bill and now the omnibus budget bill are coming from the Congress- with all that implies.
Wilkinson apparently does not understand that the Ponzi schemes, the collapsing market for Hummers and SUVS, the deflation of the housing bubble, and the general fall of rubble from on high are happening in the private sector. The collapse of state revenues as millions of people lose their jobs does not mean our system of government is a failure and should be changed. It means our system of “private enterprise” has been massively wrong, again and again, and the chickens are coming home to roost.
But, Wilkinson will be happy to know, we’re still not ready for a game-changing moment. The budget for war is bigger than last year, billions will be lavished on the Wall Street crooks who got us in this mess, car companies will be coddled, coal will still belch carbon, and universal single-payer healthcare will remain an unattainable dream.
So, as nearly as can be ascertained from Wilkinson’s befuddled post, his fondest dreams are in fact the stuff of which Obama is made.
March 7th, 2009 at 3:51 pm
With all due respect to Will Wilkinson, who seems to be a nice guy with a functioning brain, treating libertarians as constructive participants in a discussion of economic policy today is rather like giving Marxists a role in the discussion in the 1970s and ’80s.
Milton Friedman-style libertarian economics prevailed, more or less, in this country from the late ’70s until the financial meltdown, which was a predictable outcome of putting into practice their nostrums of markets operating with minimal regulation and corporate power unchecked by workers, consumers or the state. We’re just beginning to count the costs, and we’ll probably spend the next decade repairing the damage.
Libertarianism, at least it applies to economics, is a failed ideology. It has some credence in discussions of state power vs. individual behavior on the micro level (e.g., drug decriminalization or end-of-life decisions), but it simply doesn’t work as an organizing principle in complex social interactions.
March 7th, 2009 at 4:05 pm
I’ve got to admit, I’m puzzled by why Atlas Shrugged has suddenly regained popularity, or maybe I’ve just been ignoring it the past few years. I slogged through it one summer. I just didn’t think it was all that good as storytelling, even if it did have a larger philosophical purpose. There is a way of balancing the two aims; see almost everything written by Charles Dickens, and I say that much preferring Elizabeth Gaskell’s social problem fiction to his.
March 7th, 2009 at 4:14 pm
allbetsareoff @ #9, is, I believe, correct when he/she says that libertarianism is a failed ideology. But that’s different from saying that libertarians should not be treated as constructive participants in a discussion of economic policy.
The way I see it, there are two broad groups of libertarians. One group is basically a cheerleading section for rent-seekers, plutocrats, and negative externalizers, whose job is to provide an intellectual fig leave for rent seeking, wealth concentration, and pissing into the water supply.
The other group actually cares about the health of the economy and society, but simply believes that less regulation, lower taxes, and market-based solutions are generally best. While I and most progressives would say that this latter group grossly underestimates the prevalence of market failures and the difficulty of collective action, we can still learn something from them when they propose market-based solutions like congestion pricing or other taxes/fees-as-regulations. These are usually small-scale issues. This second group of libertarians also tends to come up with interesting things to say on non-economic issues like drugs and sex/sexuality-related matters.
So they key is to be able to distinguish the first group from the second, and then we can treat the second group as constructive participants (when they’re not being ideologues). Libertarians have been a junior constituency of the Republican party for a while–why not try a little to get some of them to feel more comfortable in a modus vivendi with the Democrats?
March 7th, 2009 at 4:25 pm
…and then explaining that that’s wrong and that it really comes from “an accumulation of tiny productivity-enhancing innovations.”
Why the need for this either/or reductionism? In the business world that I work in, we see growth and progress in an enterprise coming from a combination of factors. There is certainly a lot of bottom-up growth from modest, decentralized initiatives and productivity improvements taking place department by department, office by office, worker by worker. But there is also a lot of growth that comes from direction from above. There are major, long-term strategic initiatives that require large, organized, coordinated capital expenditures behind a corporate strategic plan. Growth and progress do depend on to a substantial degree on – yes – planning. This is not surprising, since we are rational human beings capable of creating and working in rational and disciplined organizations for the attainment of goals that cannot be achieved by individuals working separately and independently. Fortunately, while we know how to take advantage of the aggregate and emergent benefits flowing from the independent and self-directed work of separate individuals, we are not dependent on that form of progress alone, but are capable of exploiting our human talents for organization and rational planning.
The need for an interplay between planning and decentralized initiative, which applies in every kind social organization, applies just as much to the national economic system as it does to the individual firms that participate in that system. Some forms of economic growth and progress depend on broad national endeavors that require the organized harnessing of substantial amounts of national capital and labor behind well-conceived and disciplined national projects. These projects can achieve important strategic economic aims that cannot be expected to emerge magically from the uncoordinated, small and local initiatives producing invisible hand effects. Done right, these large projects can liberate previously untapped stores of pent-up individual initiative in a stagnant enterprise – including a stagnant national enterprise.
One of the truly stupidest aspects of the contemporary American outlook is that the quite reasonable rejection of the fully “planned economy” has been turned into a wholly unreasonable rejection of any national strategic economic planning and investment whatsoever. This despite the fact that in every other phase of our lives we are acquainted with the fruitful interplay and interdependence of centralized planning and decentralized initiative and innovation. We constantly leave huge stores of potential economic energy untapped.
Libertarians like to invent models that justify their economic agenda on utilitarian grounds by claiming implausibly that every sort of economic good can be achieved without relying on the human capacity to build and sustain organizations that exceed the firm in size. It’s voodoo. In the end, libertarians are like their anarchist cousins in indulging in permanent adolescent rebellion against almost every form of hierarchy and accountability.
What they would produce doesn’t even deserve to be called “freedom” or “liberty”. In the libertarian dystopia, I am required to sacrifice my share of the human potential for working collectively with many others to choose a national future, and then aim for that chosen future and build it. In exchange, I am limited to tending my own garden, and observing passively as an entirely unchosen future emerges from the dispersed and disorganized hubbub of separate and self-involved points of light.
March 7th, 2009 at 4:30 pm
Will, you have one (1) sentence that actually purports to provide evidence that Obama’s policies depend on the Randian theory of innovation. But it rests entirely on a snarky name, the “Ecomagination Industrial Policy,” and a link to an article that claims cap-and-trade serves GE’s interests — but as far as I can tell doesn’t give a smidgen of evidence that cap-and-trade is meant to produce one big innovation rather than a bunch of little innovations. So it looks like you’ve provided literally no evidence for your argument that Obama and his supporters subscribe to a “Randian” rather than “Hayekian” view of innovation, even if we accept the piece you linked as gospel. None.
March 7th, 2009 at 4:33 pm
Most economic growth does probably come from “quantum leaps of brilliant innovation” rather than “an accumulation of tiny productivity-enhancing innovations.” I mean, sure, the computer needed to improve a lot to get to where it is today, and manufacturing has come a good way since the industrial revolution, but these things seem to happen pretty naturally once the original concept gets off the ground. Moreover, incremental improvements are saturating, whereas great breakthroughs aren’t (at least not yet). Every doubling of computer power provides less growth than the previous because there are only so many valuable uses for computer power. This saturation effect is important because it implies that high growth rates can’t be stable without constant breakthroughs (and without them, the difference between 3% and 2% growth this year only manages to get us to the peak faster, it has no long-term significance.)
March 7th, 2009 at 5:20 pm
Breakthroughs come in a variety of fashion.
What breakthrough was required for Europe to start colonizing North America? Mainly a cultural break through, and the search for wealth. But is was the same old ship technology. Now the clipper ship was a technology breakthrough, with immediate impact.
On the other hand, what about commercial radio? Once De Forest got the vacuum tube technology, then a restructuring of hundreds of million dollars of inventory could be had by a thousand dollar investment in a radio station, which many department stores did indeed do.
The transistor was an immediate revolution for telephone. The web developed over ten years and only involved the standardized adoption of a page layout format.
What makes a technology become a breakthrough is its unexpected utility, when a large group of important consumers suddenly adopt the technology, as if in synchronization.
March 7th, 2009 at 5:34 pm
As long as the media insists on treating government spending as a political fight unrelated to the economic suffering of ordinary Americans, I’m willing to cut Obama a ton of slack for the timidity of his program to date. The idea that his program this far is a triumph of big goverment liberalism, whe looked at in relation to the levle of crisis we’re facing, ought to be laughed out of the discussion.
March 7th, 2009 at 5:39 pm
I’ve spent some time commenting over there in recent weeks (and in the linked thread), and pushback against WW’s misconceptions seems to be a project with very little in the way of returns. Given that he seems to be the best that Cato has to offer, ignoring everything that comes out of there seems to be the best utility maximizing strategy.
March 7th, 2009 at 5:44 pm
Shrugged’s…”
I don’t know how to say this politely but Atlas Shrugged sucks. It’s a horrible novel and it’s absurdly incoherent either as a moral or political philosophy.
There is only one demographic devoted to this book. Adolescent boys with bad skin and awkward physique, but extraordinary verbal sat scores and today, a differential diagnosis on the continuum between aspergers and autism.
Don’t you people know any women who’ve been to college? Ask any of them and they’ll tell you – a guy quoting AS after the age of 16 has long since left the land of nerdy but sweet and rushed headlong into the company of losers. As for the very rare woman who follows them – only one word describes her – token.
I read a number of nominally sane conservatives and I say nothing has explained to me more the insane level of support Bushco got for the Iran war than this recent spate of allusions to Ayn Rand. Quoting Ayn Rand for any purpose except mockery instantly reveals a person to be inherently unserious. Someone needs to take these guys aside and say as firmly as possible, “get a life.”
March 8th, 2009 at 3:01 am
There’s quite a bit of industrial engineering literature showing that the cumulative effect of incremental improvements (from things as simple as tweaking the arrangement of machines or adjusting feeds, etc.) on productivity is greater than that from a major generational change in technology. And what’s more, such improvements are usually the kind that workers, with Hayekian “distributed knowledge” of the production process, are uniquely qualified to identify.
March 8th, 2009 at 9:25 am
They could probably use some tax cuts and deregulation.
Right, because what the European economy needs right now is more deregulation. Christ, what an idiot.
March 8th, 2009 at 1:02 pm
Before the crisis, I at least found WW interesting. However, since the crisis began he has shown no ability for his ideological cohorts to take any moral responsibility for what has occurred. In his eyes, libertarianism can only be failed. Never mind the fact that one of the libertarians whose fingerprints are all over this, Alan Greenspan, has admitted he was wrong. He’s an art school kid playing at being an economist. He’s just making it more and more obvious that he doesn’t understand the difference between philosophical texts he likes and actual empirical economic analysis.
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