Stubborn Attachments

by Tyler Cowen

  The data show just how much living standards have gone up. In 1900, for instance, almost half of all U.S. households (forty-nine percent) had more than one occupant per room and almost one quarter (twenty-three percent) had over 3.5 persons per sleeping room. Slightly less than one quarter (twenty-four percent) of all U.S. households had running water, eighteen percent had refrigerators, and twelve percent had gas or electric lighting. Today, the figures for all of these stand at ninety-nine percent or higher. Back then, only five percent of households had telephones, and none of them had radio or TV. The high school graduation rate was only about six percent, and most jobs were physically arduous and had high rates of disability or even death. In the mid-nineteenth century, a typical worker might have put in somewhere between 2,800 and 3,300 hours of work a year; that estimate is now closer to 1,400 to 2,000 hours a year.6

  Until recently, polio, tuberculosis, and typhoid were common ailments, even among the rich. U.S. presidents George Washington, James Monroe, Andrew Jackson, Abraham Lincoln, Ulysses S. Grant, and James A. Garfield all caught malaria during their lives. Antibiotics and vaccines have existed for only a tiny fraction of human history, and it is no coincidence that they emerged in the wealthiest time period humanity has ever seen. There is also a strong and consistent relationship between wealth and rates of infant mortality; small children do best when they are born into wealthier countries, and that is because wealth supplies the resources to take better care of them.

  As recently as the end of the nineteenth century, life expectancy in Western Europe was roughly forty years of age, and food took up fifty to seventy-five percent of a typical family budget. The typical diet in eighteenth-century France had about the same energy value as that of Rwanda in 1965, the most malnourished nation for that year. One effect of this deprivation was that most people simply did not have much energy for life.7

  In earlier time periods, most individuals performed hard physical labor, and a college or university education—or even a high school education—was a luxury. Leisure time has risen with economic growth. In 1880, about four-fifths of individuals’ discretionary time was spent working, according to economist Robert Fogel. Today we spend about fifty-nine percent of our time doing what we like, and that may rise to seventy-five percent by 2040.8

  The splendors of the modern world are not just frivolous baubles; they are important sources of human comfort and well-being. Imagine that a time traveler from the eighteenth century were to pay a visit to Bill Gates today. He would find televisions, automobiles, refrigerators, central heating, antibiotics, plentiful food, flush toilets, cell phones, personal computers, and affordable air travel, among other remarkable benefits. The most impressive features of Gates’s life, seen from the point of view of a person from the eighteenth century, are those shared by most citizens of wealthy countries today. My smartphone is as good as his. The very existence of an advanced civilization—the product of cumulative economic growth—confers immense benefits to ordinary citizens, including their ability to educate and entertain themselves and choose one life path over another. For further arguments along these lines, I recommend Steven Pinker’s recent book, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress.9

  The economic growth of the wealthier countries benefits the very poor as well, though sometimes with considerable lags. The distribution of wealth changes over time, and not all growth trickles down, but as an overall historical average, the bottom quintile of an economy shares in growth.10 You can see this by comparing the bottom quintile in, say, the United States to the bottom quintile in India or Mexico.

  The richer economy can also do more to elevate the living standards of immigrants. Poor people who move to rich countries usually receive higher incomes and have better living conditions, and their children do better still. The richer the receiving country, the more new immigrants tend to benefit. Central American immigrants to the United States do better than Central American immigrants to Mexico or Nepalese immigrants to India. Immigrants also send remittances back home at a rate that far exceeds governmental foreign aid. Actual upward mobility in the United States far exceeds what the usual numbers indicate, because published statistics on upward mobility do not typically include a comparison with pre-immigration outcomes.

  But the chain of benefits does not stop there. Migrants will often return to their home countries, bringing new skills and new business connections. Both India and Israel have developed vibrant technology and software scenes precisely because of their close ties with the start-up scene of the United States. English-language universities in English-speaking countries have trained many thousands of Asian students in science and engineering, again leading to new businesses and, eventually, higher economic growth in their home countries.

  New medicines and technologies developed in wealthy nations also make their way to the rest of the world, as illustrated most conspicuously by the rapid spread of the cell phone and now the smartphone. One study predicts that if the leading twenty-one industrial countries were to boost their R&D by half a percentage point of GDP, U.S. output alone would grow by fifteen percent. But it doesn’t end there: output in Canada and Italy would grow by about twenty-five percent, and the output of all industrial nations would increase by 17.5 percent, on average. In the less economically developed countries, output would increase by about 10.6 percent on average.11

  Although these historical processes have often embodied unfairness and long lags of decades or more, economic growth has nonetheless brought wealth to the poor and elevated their status. The Greek city-states and the Roman Empire benefited from maritime trade across the Mediterranean; those regions in turn spread growth-enhancing institutions around Europe, Northern Africa, and the Middle East. The commercial revolution of the late Middle Ages and Renaissance reopened many of the trade routes of antiquity, and eventually human beings started to climb out of the Malthusian trap of very low per capita incomes at subsistence. The wealth of the West helped to enable the export miracles of the East Asian economies. Today, most poor countries seek greater access to wealthier Western and Asian markets, and flourish if they can achieve it.12

  For all the recent increases in inequality within individual nations, global inequality has declined over the last few decades, in large part because of growth in China and India. And the growth in these emerging nations was largely driven by earlier growth in the West and in East Asia. China, for instance, engaged in “catch-up” growth by adopting Western technologies and exporting to the wealthier nations. China has gone from being a quite poor nation to a “middle-income” nation with a sizable middle and upper class.

  Although recent media coverage has focused almost exclusively on within-nation magnitudes, recent world history has been an extraordinarily egalitarian time. It is above all else a story about how global economic growth helps the poor. There has been a squeezing of the middle class in the wealthier nations, in part because of increasing global competition. Still, we have seen economic growth, aggregate wealth, and global income equality all rising together over the last twenty-five years. Many citizens in East Asia, South Asia, and Latin America have seen significant gains in their standard of living, and much of this has been a trickle-down effect from the earlier growth of the wealthier countries. Much of Africa is now following suit, bolstered in part by China’s demand for raw materials, and also by the spread of modern technologies such as affordable cell phones.13

  Sometimes extended periods of growth do not confer full or fair benefits to the poor or lower classes, for instance during the early phase of the British Industrial Revolution in the late eighteenth century. Still, the historical record suggests that it was better for Britain to push ahead with economic growth, as this eventually drove the greatest boost in living standards the world has ever seen. To be sure, there were probably better policies which, had they been adopted, would have distributed the benefits of growth more widely (e.g., fewer wars a
nd Poor Law reform and free trade for the British). But even taking misguided policies into account, Britain fared better by pursuing economic growth rather than turning its back on the idea, even though significant real wage gains for the working class often did not arrive until the 1840s.

  Nobel Laureate Amartya Sen has promoted the idea of “capabilities” as, if not quite a substitute for economic growth, then an alternative focus. Sen points out that our positive opportunities in life often matter more than the amount of cash in our bank accounts. He also notes that some parts of the world, such as the state of Kerala in India, have relatively good health and education indicators, even though their per capita incomes are relatively low.

  Sen’s points are well taken, but they do not put a fundamental dent in the relevance of wealth, or, as I am calling it here, Wealth Plus. The significant benefits accrued from capabilities, such as health benefits, are accounted for in Wealth Plus, even if they are not properly represented in current GDP measures. In other words, Kerala is wealthier than some limited statistical measures imply. Wealth and good social outcomes are still strongly correlated on average, and this correlation is stronger over longer time horizons. For instance, if Kerala does not grow much in more narrow economic terms, it is unlikely to look so impressive in its social indicators fifty or one hundred years from now. Even today, Kerala manages as well as it does in large part because so many Keralans take jobs in wealthier countries, especially in the Gulf States, and send money back home. And compared to other Indian states, Kerala has an above-average measure of wealth, as well as above-average consumption expenditures, both of which are accounted for in traditional statistics.14

  The truth is that economic growth is the only permanent path out of squalor. Economic growth is how the Western world climbed out of the poverty of the year 1000 A.D. or 5000 B.C. It is how much of East Asia became remarkably prosperous. And it is how our living standards will improve in the future. Just as the present appears remarkable from the vantage point of the past, the future, at least provided growth continues, will offer comparable advances, including, perhaps, greater life expectancies, cures for debilitating diseases, and cognitive enhancements. Billions of people will have much better and longer lives. Many features of modern life might someday seem as backward as we now regard the large number of women in earlier centuries who died in childbirth for lack of proper care.

  I myself have written of the great stagnation, a slowdown in growth which overtook the Western world starting in about 1973. It would be a failure of imagination, however, to believe that human progress has run its course. The more plausible view is that progress is unevenly bunched, we have been in a slow period as of late, various new developments are percolating, and we should do our best to help them along. Whether we like it or not, economic growth and technological progress do not always arrive at a steady pace.

  World history offers various precedents for the idea of a “great transformation” leading to enormous increases in the quality and quantity of human lives. Our ancestors did not foresee the evolution of humans, the agricultural revolution, the “urban revolution” (Sumeria and Mesopotamia, circa 4000 B.C.), or the Industrial Revolution. For that matter, the East Asian revolution in economic growth was not widely anticipated. Each development dramatically changed the human condition over time, and eventually very much for the better. The history of economic growth, to some extent, is the history of working out the consequences of such unforeseen transformations. It is unlikely that we have seen the last of such revolutions, at least provided that civilization manages to stay afloat.

  Looking into the more distant future makes the question of the economic growth rate all the more important. For instance, a two percent rate of economic growth, as opposed to a one percent rate, makes only a small difference across the time horizon of a single year. But as time passes, the higher growth rate eventually brings about a very large boost to well-being. To make this concrete, here’s an experiment: redo U.S. history, but assume the country’s economy had grown one percentage point less each year between 1870 and 1990. In that scenario, the United States of 1990 would be no richer than the Mexico of 1990.15

  It is also worth pondering some comparisons with higher rates of economic growth, of the sort we often see in emerging economies. At a growth rate of ten percent per annum, as has been common in China, real per capita income doubles about once every seven years. At a much lower growth rate of one percent, such an improvement takes about sixty-nine years.

  Robert E. Lucas, Nobel Laureate in Economics, put the point succinctly: “The consequences for human welfare involved in questions like these are staggering: once one starts to think about [exponential growth], it is hard to think about anything else.”16

  Even if you don’t regard material wealth as central to human well-being, economic growth brings many other values, including, for instance, much greater access to the arts and education. Economic growth also gives individuals greater autonomy and minimizes the chance that their destiny will be determined by the time and place in which they were born. It remains true that many individuals are born poor or are born into families that do not much respect formal education or are born far away from cities. Still, ask yourself a simple question: has there ever been a time in human history when so many individuals had such a good chance of becoming world-class scientists?

  Individuals today are more able to shape their futures, choose their friends, communicate with the outside world, and weave together diverse cultural strands when building out their personal narratives. Benjamin M. Friedman, in his brilliant The Moral Consequences of Economic Growth, shows just how many of the virtues of the modern world depend on higher and indeed growing levels of wealth.17

  The bottom line is this: the more rapidly growing economy will, at some point, bring about much higher levels of human well-being—and other plural values—on a consistent basis. If some set of choices or policies gives us a higher rate of economic growth, those same choices or policies are akin to a Crusonia plant.

  Does economic growth make us happier?

  Many of us are prone to speculating about where in the world the quality of life is highest and where the people are happiest. Is it in the richest countries? The countries where the people have the best psychological attitudes? Or is there some other answer to this question?

  Recent research suggests that wealth boosts happiness and that this holds true for a great variety of people, including for the relatively wealthy, who are already meeting their basic needs. Economists Betsey Stevenson and Justin Wolfers, in the most comprehensive study of the income-happiness link to date, find that the relationship between measured well-being and income is roughly linear-log, which implies that income boosts happiness even at higher levels of earnings. A comprehensive study by Nobel Laureate economist Angus Deaton finds similar results, namely that extra income brings extra happiness, even in relatively wealthy settings.18

  An older body of literature suggests that additional riches do not make citizens in wealthy countries any happier, at least not above a certain level of wealth. The core evidence here is taken from questionnaires that ask people how happy they are. Once a country has a per capita income of somewhat above $10,000 a year or more in current U.S. dollars, the aggregate income-happiness link appears weak to many observers. Some commentators argue that the curve flattens out at about half of current American per capita income. These results cast doubt upon whether economic growth does in fact yield ongoing benefits in terms of happiness.19

  Despite this evidence, I see wealth and happiness as comoving in the broad sense, again subject to a properly sophisticated understanding of wealth.

  The observation of a nearly flat happiness-wealth relationship says more about the nature of language than it does about the nature of happiness. To give an example, if you ask the people of Kenya how happy they are with their health, you’ll get a pretty high rate of reported satisfacti
on, not so different from the rate in the healthier countries, and in fact higher than the reported rate of satisfaction in the United States. The correct conclusion is not that Kenyan hospitals possess hidden virtues or that malaria is absent in Kenya, but rather that Kenyans have recalibrated their use of language to reflect what they can reasonably expect from their daily experiences. In similar fashion, people in less happy situations or less happy societies often attach less ambitious meanings to the claim that they are happy. Evidence based on questionnaires will therefore underrate the happiness of people in wealthier countries.20

  The literature on happiness often focuses on aspiration or treadmill effects. Under this view, you get more, but you also start expecting or aspiring to more. Greater wealth therefore translates into less happiness. But it is unlikely that treadmill effects “eat up” all of the happiness gains from greater wealth. Along the lines of the Kenya example, growing wealth also causes people to recalibrate their language and affects how they would respond to questions about their happiness. If happiness itself is subject to framing effects, surely talk about happiness is subject to framing effects as well; if anything, it may be easier to recalibrate your language than to recalibrate your expectations of happiness.

  The wealthy develop higher standards for when they consider themselves to be “happy” or “very happy.” If you are a millionaire living next door to a billionaire, you might be less likely to report that you are ecstatically well-off, even though your day-to-day existence is pretty sweet. The failure to issue a totally glowing report does not mean that you spend all of your time envying the billionaire or suffering because of your lower relative status; you can still lord your wealth over plenty of other people, if you so desire. But the presence of your even wealthier neighbor may indeed cause you to have a higher standard for how you use the terms “happy” or “very happy.”