There is no more controversial of the social sciences these days than the study of economics. Yes, a social science – the study of human interactions; and though it does contain laws (supply and demand, unintended outcomes) proven and repeatable, it is still after all just about humans. Of course, many people want us to forget that; those who want to use economics to advance their political projects (Marxists and socialists) and their unscrupulous defenders (Paul Krugman, cough… cough…)
Controversial, because economics is always used these days in the defense of violence. Who can take my property, break up my company, force what should be free interactions with those to whom I seek to engage in the trade of goods and services – and why. Of course the most evil man of all time – Karl Marx – was an economist. And a bad one, his children starved to death and committed suicide. That certainly isn’t a recipe for a ‘life more abundant’.
Because THAT is what economics should be about; and that is what Angus Deaton’s thoughtful book “The Great Escape: Health, Wealth and the Origins of Inequality” is about. It is an attempt to understand, as he eloquently states, “…the endless dance between progress and inequality, about how progress creates inequality, and how inequality can sometimes be helpful – showing others the way, or providing incentives for catching up – and sometimes unhelpful – when those who have escaped protect their positions by destroying the escape routes behind them.”
The book delves into two main areas of human existence which are illustrative of humanity’s recent (and dramatic) escape from ‘misery’: the increase in life expectancy and the increase in income (material well-being). The Industrial Revolution, the “Great Divergence”, measuring the progress that has allowed life for the average middle-class American to be better than even that of the Pharaohs of old. It is an optimistic story: yes India and China are emerging so quickly from poverty that it gives reason for hope. It is a sad story: Africa is worse off now than it was when measurements of poverty started.
As a serious economist, Deaton does not offer prescriptive answers – instead merely laying out facts and hypothesizing as to why they are, and what might be required for things to change. Good economists help us see patterns, what helps ‘make things better’ and what ‘makes things worse’ and encourage us to follow small decisions one after another as they lead us to well-being. This is why ideological economists advocating utopias and recipes of how to achieve them are so dangerous; because as Hayek said, “To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm.”
I do have a couple of caveats – Deaton rightly highlights the fact that there is no proof that the dramatic increase in the population of the planet has resulted in increased poverty, as Thomas Malthus famously worried, but in fact the opposite has been true. I am not as sanguine as Deaton on this – but I have lived my entire adult life in countries ravaged by poverty; where all the trees have been chopped for firewood and animals eaten to stave off hunger – and I think we’re on the verge of combustion. Perhaps I’m wrong to be pessimistic about “the arriving ordeal”; but I doubt it. My next concern is the use of traditional measurements of poverty, especially in the third world. While $2 a day might be what the World Bank says is destitution, “a life more abundant” requires significantly more. Others have flirted with the idea of a “happiness index” to capture not monetary but quality of life indexes, but these are imperfect as happiness is too subjective an idea. I prefer a “choices based” approach to well-being – because a life more abundant is a result of our ability to choose products, careers, vacations, the number of our children and so on. I don’t know of any economist who has thought of such a scale, more on that later. All that to say is, stating “650 million Chinese escaped extreme poverty” says little about the real improvement in their lives; the threshold seems arbitrary. Same is true for health – while the reduction of infant mortality has increased life expectancy the world over (except for Africa) to about 70 years, it says nothing of the quality of those years – and let’s be honest, compared to Methuselah 70 years is a paltry sum indeed. I also doubt the permanence of our “escape”, given humanity’s penchant for reinventing misery. Deaton recognizes all this, and this is not a criticism except that the title of the book is a little self-congratulatory.
Finally, the end of the book goes into the relatively new field of Foreign Assistance (International Aid). “It is not surprising,” Deaton says, “that, in spite of the direct effects of aid that are often positive, the record of aid shows no evidence of any overall beneficial effect.” This is of course true, and he helpfully and correctly explains the problem with the “tyranny of foreign good intentions”; our foreign assistance is government to government. Never in the history of history has government intervention sparked development. Our own disastrous “New Deal” and “War on Poverty” efforts demonstrate this. And large sums unbalance democracies and cement tyrannies. No, it is best to remember (as Deaton reminds us) that government sets the table; government codes the rules and makes sure everybody is playing fair – but the story of human development is written by the ingenuity of individual people.