Grand Pursuit

by Sylvia Nasar

  Suppose, to use an updated version of Sen’s original example, “Prude” values the freedom to practice his own religion, but not as much as he would a ban on pornography. “Lewd” values the freedom to read pornography, but not as much as he would a ban on religion. If the government outlawed both pornography and religion, both would be happier—but also less free.

  Economics hasn’t necessarily come to grips with Sen’s message, but economists are now more apt to reflect on what’s left out of the equation when they use GDP to measure material gains. In particular, they have become more circumspect in equating GDP with well-being. Sen argues that GDP leaves out individuals’ opportunities that may be more important to them than their income, a serious shortcoming. To be sure, one could argue (as does Eric Maskin, a Nobel laureate in economics) that while rights and welfare may sometimes conflict, in general, rights can be seen as a way of protecting welfare. The right to read what you want—as opposed to having people tell you what you can read—usually results in higher incomes, for example. Still, given how polarizing such conflicts are in many societies, it was remarkably prescient of Sen to have pointed it out three decades ago.

  In expanding his assault on utilitarianism, Sen argued that growth alone is an inadequate measure of welfare because it doesn’t reveal how well or badly deprived individuals are doing, and that utility—based on people’s current preferences and satisfaction—is similarly misleading, because deprived individuals often tailor their aspirations to their impoverished circumstances. To get around these and other difficulties, he proposed a new way of thinking about the goals of development. He called it “the capabilities approach.”

  What creates welfare aren’t goods per se, but the activity for which they are acquired, he argued. I value my car for increasing my mobility, for example. You might value your education for giving you the chance to participate in discussions like ours. According to Sen’s view, income is significant because of the opportunities it creates. But the actual opportunities (or capabilities, as Sen calls them) also depend on a number of other factors—not just preferences that might be constrained by deprivation—such as life spans, health, and literacy. These factors should also be considered when measuring welfare. He constructed alternative welfare indicators, such as the UN’s Human Development Index, in this spirit.

  Paralleling his approach to welfare measurement, Sen maintains that individuals’ capabilities constitute the principal dimension in which societies should strive for greater equality—though he stops short of saying which capabilities and what degree of equality. He admits, however, that one problem with this definition of justice is that individuals make decisions—whether to work hard or to complete an education—that determine their capabilities at a later stage.

  How does postcolonial India measure up in Sen’s view? His book with Jean Drèze, India: Development and Participation, begins by quoting Nehru’s stirring speech at the hour of independence: “Long years ago we made a tryst with destiny, and now the time comes when we shall redeem our pledge.” Nehru pledged among other things, “the ending of poverty and ignorance and disease and inequality of opportunity.”15 For Sen, “the ambitious goals . . . remain largely unaccomplished.” A student once asked Sen why he hadn’t changed the “content” of his thoughts since the 1950s. “Because,” said Sen, “the surrounding environment hasn’t changed. I’ll probably die saying the same things.”

  To be sure, he points out, much has changed in the third world. Life expectancy has expanded from forty-six to sixty-five, and real per capita income has more than tripled. Many once-poor countries now have more in common with rich ones than with the ones they left behind.

  Yet, Sen says, the 1 billion citizens of the world’s biggest democracy are still among the world’s most deprived. Extreme deprivation, he points out, is now concentrated in just two regions of the world: South Asia and sub-Saharan Africa. Life expectancy is higher in India than in Africa because India has escaped large-scale famine and avoided civil war. But in terms of illiteracy, chronic malnutrition, and economic and social inequality, India does as badly or worse than sub-Saharan Africa, especially with respect to the condition of women.

  India and China were comparably poor in the 1940s. Today, however, China’s life expectancy is seventy-three versus India’s sixty-four. Infant mortality is less than half of India’s, seventeen deaths per one thousand births versus fifty. Nutritional yardsticks also show that China is far ahead in eliminating chronic malnourishment. Literacy rates for adolescents are well over 90 percent in China—with no gap between girls and boys—versus much lower, and far more divergent, rates in India.16 Of course, India’s citizens enjoy democratic rights—including a free press—that China’s more prosperous citizens can still only dream of. The challenge for Sen and other economists advising India is how to nudge its economy along China’s path of globalization without sacrificing the democracy of which Sen and India are so proud.

  Robert Solow, who won a Nobel for his theory of economic growth, once called Sen the “conscience of our profession.” For a long time, however, Sen’s approach to economics was decidedly suspect on both left and right. At Cambridge, Calcutta, and Delhi in the 1950s and 1960s, when Soviet-style planning was in vogue, Sen was persona non grata on the Left. In the 1980s and 1990s, when free markets were once again the rage, the then chairman of the Nobel Prize committee confidently predicted, “Sen will never get the prize.” Sen won the Nobel in 1998 “for his contributions to welfare economics.”

  But times have changed. These days, when he travels to Asia, Sen is treated more like Gandhi than like a professor of economics as he travels about with police escorts. In Santiniketan in January 2002, crowds lined the streets to watch him come and go, and young girls at Visva-Bharati dropped to the ground to touch his feet (something he brusquely discourages). Determined, like the poet who named him, to use his Nobel Prize to draw attention to issues he cares about, he has donated half of his $1 million winnings to establish two foundations, one in West Bengal, the other in Bangladesh, to promote the spread of elementary education in rural areas.

  As India’s Soviet-style, autarkic, and bureaucratic economy became increasingly dysfunctional, while Japan and the Asian tigers achieved modern standards of living, Sen moved away from the view that Western aid and better terms of trade were the keys to third world growth and closer to the Schumpeterian perspective that local conditions are decisive and that nations do, ultimately, control their own destinies. He embraced deregulation and opening the Indian economy to foreign trade and investment while insisting on government intervention on behalf of the poor, especially in health, education, and nutrition. The argument ended when Mao suspended the Cultural Revolution and Deng Xiaoping introduced economic freedoms. China’s remarkable leap into modernity left the Soviet Union in the dust and fatally discredited the Soviet economic model.

  Epilogue

  Imagining the Future

  Most journeys start in the imagination. The grand pursuit to make mankind the master of its circumstances is no exception.

  The eighteenth-century founders of economics had a vision of economic organization in which voluntary cooperation would replace coercion. But they assumed that nine out of ten human beings were sentenced by God or nature to lives of grinding poverty and toil. Two thousand years of history convinced them that the bulk of humanity had as much chance of escaping its fate as prisoners of a penal colony surrounded by a vast ocean had of escaping theirs.

  Dickens, Mayhew, and Marshall came to economics in Victorian London during a revolution in productivity and living standards. They were animated by a brighter, more hopeful vision. To them, the ocean looked more like a moat. They could imagine humanity on the far side, advancing a step at a time toward an ever-receding horizon. These economic thinkers were driven not only by intellectual curiosity and a hunger for theory but also by the desire to put mankind in the saddle. They were searching for instruments of mastery: ideas that could be u
sed to foster societies characterized by individual freedom and abundance instead of moral and material collapse.

  Economic intelligence, they learned, was far more critical to success than territory, population, natural resources, or even technological leadership. Ideas matter. Indeed, as Keynes famously put it during the Great Depression, “the world is ruled by little else.”1 Like Marshall, Keynes thought of economics as an engine of analysis that could separate the wheat of experience from the chaff, and he was convinced that economic ideas had done more to transform the world than the steam engine. Economic truths might be less permanent than mathematical truths, but economic theory was essential for learning what worked, what didn’t, what mattered, what did not. Inflation could lift output in the short run but not the long run. Gains in productivity are the primary driver of wages and living standards. Education and a safety net could reduce poverty without producing economic stagnation. A stable currency was necessary for economic stability, a healthy financial system is essential for innovation. As Robert Solow observed, “The questions keep changing and the answers to even old questions keep changing as society evolves. That doesn’t mean we don’t know quite a bit that is useful, at any given moment.”2

  Economic calamities—financial panics, hyperinflations, depressions, social conflicts and wars—have always triggered crises of confidence, but they have not come close to wiping out the cumulative gains in average living standards. The Great Depression put economics as well as the modern decentralized economy on trial. World War II ended on a note of gloom and self-doubt with Keynesian economists anticipating a twilight age of stagnation and disciples of Hayek fearing the triumph of socialism in the West. Instead, growth rebounded and living standards shot up. Governments achieved some success in managing their economies. Since World War II, history has been dominated by the escape of more and more of the world’s population from abject poverty. Defeated Germany and Japan rose phoenixlike from the ashes in the 1950s and 1960s. China launched its remarkable growth spurt around 1970. More recently, India has emerged from decades of stagnation.

  Reality has mostly outstripped imagination. Even Schumpeter could not have imagined that the world’s population would be six times greater but ten times more affluent. Or that the fraction of the earth’s citizens who lived in abject poverty would dwindle by five-sixths. Or that the average Chinese lives at least as well today, if not better, than the average Englishman did in 1950. Only Fisher would not have been surprised to learn that the average lifespan has risen to two and one-half times that of 1820 and continues to edge higher. Remarkably, even the Great Recession of 2008 to 2009, the most severe economic crisis since the 1930s, did not reverse the prior gains in productivity and income. Life expectancy kept going up. The world financial system did not collapse. There was no second great depression.

  Madmen in authority from Hitler to Stalin and Mao have repeatedly tried—still try—to ignore or even suppress economic truths. But the more nations escape poverty and make their own economic destinies, the less compelling the rationalizations of dictators become. Rather than overtaking the West, the Soviet Union collapsed in 1990.

  There is no going back. Nobody debates any longer whether we should or shouldn’t control our economic circumstances, only how. Asked about their fondest hope for the future, protestors in Cairo named economic improvement. The men and women on the streets of Tunisia, Syria, and other Middle Eastern nations in 2011 represent the latest wave of citizens to imagine an economic future characterized by growth, stability, and a business climate favorable to entrepreneurship. Once such a future can be imagined, returning to the nightmare of the past seems increasingly impossible.

  Acknowledgments

  I’ve accumulated a staggering number of debts while researching and writing this book.

  The largest are owed to three individuals without whom Grand Pursuit would never have been started, sustained, or completed: My editor, Alice Mayhew, who showed me, patiently and with extraordinary dedication, how to turn economics, history, and biography into a story; my agent, Kathy Robbins, who launched the whole enterprise with her customary elan; and my eldest daughter, Clara O’Brien, who helped bring the project to its conclusion.

  Many individuals and institutions generously supported my research. Topping the list are Amartya Sen, Emma Rothschild, Eric Maskin, Philip Griffiths, Alan Krueger, Orley Aschenfelter, and Eric Wanner. I am grateful to the Institute for Advanced Study, Russell Sage Foundation, Churchill and Kings Colleges at the University of Cambridge, the Yaddo Foundation, and the MacDowell Colony for stimulating and productive visits.

  At Columbia, I got some of my best ideas from the extraordinary Bruce C. N. Greenwald. My journalism colleague Jim Stewart was a constant source of support and sage advice. And I can’t thank my teaching partner, Ed McKelvey, enough for giving his all to our students for the past two years, to my benefit as well as theirs.

  I had the incredible good fortune to work with a remarkable team at Simon & Schuster. Special thanks to Jonathan Karp, Richard Rhorer, Roger Labrie, Rachel Bergmann, Irene Kheradi, Gina DiMascia, John Wahler, Nancy Inglis, Jackie Seow, Ruth Lee-Mui, Tracey Guest, Danielle Lynn, Rachelle Andujar, and the imperturbable Phil Metcalf.

  For granting me interviews and sources, I am grateful to William Barber; Peter Singer; Harold James; Bruce Caldwell; Meghnad Desai; Marina Whitman; Peter Dougherty; Geoffrey Harcourt; Prue Kerr; Frances Stewart; Francis Cairncross; Barbara Jeffrey; Dutta Jayasri; Avinash Dixit; Lawrence Hayek; Luigi Pasinetti; Bill Gibson; Laurie Kahn-Leavitt; Jim Mirlees; Hans Jörg Hennecke; Hans Jörg Klausinger; Nils Eric-Sahlin; Geoffrey Heal; the family of Margaret Paul; Harold Kuhn; Hugh Mellor; Peter Passell; Edmund Phelps; Jagdish Bhagwati; Andrew Scull; Ruth and Carl Kaysen; Peter Boettke; Guido Hulsmann; William Barnett; Vernon Smith; Peter Temin; Elizabeth Darling; Robert Skidelsky; Andrew Scull; John Whitaker; Ray Monk; Amartya Sen; Paul Samuelson, his wife, Risha, and longtime assistant, Janice Murray; Robert and Anita Summers; Robert and Bobbie Solow; Milton and Rose Friedman; and Kenneth Arrow.

  Ruth Tenenbaum waged a ruthless but always good-natured campaign against errors and omissions. Alexandra Saunders, Louise Story, Jonathan Hull, Barry Harbaugh, Melanie Hollands, Rachel Elbaum, Catherine Viette, and Tori Finkle provided helpful research assistance at various points. I am especially thankful to Bill Gibson for spotting logical and other lapses in the final galleys.

  Most of the research for this book was done in archives and libraries, and I would especially like to thank the staffs of the following for their kindness and expert guidance: Marshall Library, University of Cambridge, Trinity College Archive, Kings College Archive, City of Cambridge Archive, Harvard University Archive, London School of Economics Archive, MIT Archive, Hoover Institution Archive. My gratitude extends, naturally, to the creators of Google Books, J-Stor, Lexis-Nexis, the Marx-Engels Archive, and numerous online archives and libraries that have revolutionized historical research.

  The last word is, as always, for my children, Clara, Lily, and Jack, and my dear friends. They know that it’s all about the journey . . . and who travels with you.

  1. In Jane Austen’s lifetime, “nine parts of all mankind” were doomed to dire poverty and lifelong drudgery.

  2. A generation later, Charles Dickens was convinced that “we are moving in a right direction towards some superior condition of society.”

  3. Henry Mayhew, the first investigative journalist, wanted to learn whether the wages and standard of life of London’s poor could improve. In a time of cholera, he scoured London’s back streets and alleyways for facts and created an extraordinary portrait of life and labor in the capital of the world. But the answer to his question eluded him.

  4.

  5. For Friedrich Engels, Victorian London was a modern-day Rome and Judgment Day, both inevitable and imminent.

  6. His friend and dependent Karl Marx promised to reveal modern society’s Law of Motion, but suffered from writer’s block. He never learned Engl
ish or visited a single factory while composing Das Kapital.

  7. A mathematician and missionary manqué from London’s lower middle class, Alfred Marshall had an overriding aim to “put man into the saddle,” and his deepest conviction was that a proletariat was not a necessity of nature.

  8. He and his Cambridge-educated bride, Mary Paley, set out to turn economics into a compass to guide mankind out of poverty.

  9. Beatrice Potter was born into Britain’s governing class but was torn between conflicting desires: to pursue a career as a social investigator or to become the wife of a powerful man, namely the charismatic and domineering Joseph Chamberlain.

  10.

  11. She found a perfect partner in Sydney Webb, the clever son of a London hairdresser, and together they invented the idea of the welfare state and the “think tank.”

  12. The former Tory and new “thunderer on the Left,” Winston Spencer Churchill, picked Beatrice’s brain.

  13. The greatest American economic thinker of the last century was a Yankee tinkerer, teetotaler, and TB survivor. Trained in mathematics but desiring “contact with the living age,” Irving Fisher invented the rolodex, the consumer price index, and the economic forecast.

  14. By the 1920s, Fisher (left) was America’s economic oracle, wellness guru, and stock picker, his celebrity rivaling that of Alexander Graham Bell (right).

  15. In a postgraduate year in London, Joseph Alois Schumpeter rode, fenced, dressed, and talked like one of the Viennese aristocrats he wished to be taken for. He spent most of his time at the British Museum writing a book criticizing economic theory for ignoring how the economy evolved over time.