Video of the event is on YouTube here.
I also received a pleasant surprise around the 31:00 mark when Norberg, whose work I’ve long admired, quoted favorably from my recent review of Open.
Video of the event is on YouTube here.
I also received a pleasant surprise around the 31:00 mark when Norberg, whose work I’ve long admired, quoted favorably from my recent review of Open.
On March 25, 2021 at noon ET, CEI is hosting a double book forum featuring Johan Norberg, the 2019 winner of CEI’s Julian L. Simon Memorial Award, and Patrick Moore, a Greenpeace cofounder and author of Fake Invisible Catastrophes and Threats of Doom. Register here, where video of the event will also be viewable afterwards.
Liberalism—in the correct sense of the word—needs fresh voices. The ideological conversation is different than it was a decade ago, and many market-liberal thinkers have not kept pace. Today’s debate is over whether society should be open or closed, not which side of the Iron Curtain was better.
This is where the Swedish economist Johan Norberg performs a valuable service. He is fighting the current battle, not the last one. His newest book, Open: The Story of Human Progress, is a superb defense of the pro-freedom side of the debate. And he defends it against the nationalists and populists who are attacking it right now.
People over a certain age on the political right tend to still use the word “socialism,” but often as a catch-all term for things they dislike. This is different from the word’s commonly understood meaning of state ownership of the means of production, belief in dialectical materialism, teleological stages of history, or any of the other things socialists actually believe in.
People under a certain age on the political left often say they favor socialism. But they, too, have given the word a new and different meaning. They typically define socialism as a more-or-less market economy with a large welfare state, as in the Nordic countries. They are also often careful to add the qualifier “democratic” as an implicit nod to what socialism’s original meaning entails.
When people give the same word different meanings, confusion reigns. When people today lob the s-bomb, they are often talking at each other, not to each other. The real debate is elsewhere.
This tactic is great for getting people riled up, though. The heat-without-light approach has advanced the careers of people like Fox News host Tucker Carlson and former President Trump on the right, and Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez on the left. But it makes substantive debate difficult.
Openness and liberal institutions have generated more wealth for more people than any other socioeconomic system in history. But they are also unpopular. Norberg has some ideas on why, drawing on a mix of history, economics, and psychology. He sums up his thesis on page 6:
As I will argue, the reason that the Enlightenment and the Industrial Revolution started in Western Europe was that this region of the world happened to be the most open, partly just out of luck. It has been repeated in every place that has gone through similar institutional changes. It is not the triumph of the West, it is the triumph of openness.
First, the history. The last two centuries have seen a mass enrichment unlike anything in human history. As economic historian Deirdre McCloskey has pointed out, people today are 30 times wealthier than our ancestors were in about 1800. Not 30 percent more, but 30-fold. As President Biden once said about a different issue, this is a big deal. Since the Great Enrichment began, life expectancies have doubled. Infant mortality is down by more than 90 percent. Famines today have political causes, not natural ones. Violence, both intentional and accidental, are sharply down across the board. A few years ago, the percentage of world population living in absolute poverty—$1.90 per day or less—fell below 10 percent for the first time ever. Almost every long-run trend is showing improvement.
This historical process is as important as the taming of fire or the invention of the wheel. This is what Norberg defends. And it needs defending, because the openness and liberal values that made it all possible are unpopular. Psychology helps to explain why.
People respond to threats more sharply than to good news. In lab experiments, people feel the sting of loss about twice as sharply as a gain of similar amount. Psychologists call this loss aversion. We evolved this trait because mother nature is a superb economist. People have only so much attention to give to things, so we have evolved ways to economize on it. When things are going well, we can leave them alone, and save our scarce attention for dealing with threats. We are hardwired to pay more attention to threats, because long ago there was a survival advantage in doing so.
This tendency is not unique to humans, and long predates us. In a way, the modern life we all enjoy runs counter to hundreds of millions of years of natural selection processes. No wonder liberals have an uphill battle!
In the last two centuries or so since the Great Enrichment began, threats have become progressively less menacing. People don’t have to worry nearly as much about famine, disease, or violence. But that same impulse still exists. Now it gets channeled differently. Socialists—actual ones—viewed capitalists as threats. Populists, from William Jennings Bryan to Josh Hawley, frame various elites as threats. Nationalists view immigrants and foreigners as threats.
Who and what people consider to be threats changes with the times. But that core psychological mechanism remains constant. Some kind of outside Other always poses a threat to the in-group, which must always be defended. This in-group can be a family, tribe, race, nation, political party, or just about anything else. People can also have multiple in-groups at the same time, and can shift seamlessly between them. A Republican and a Democrat who would be enemies in one setting might become fast friends at a baseball game if they like the same team, then go back to being enemies when the game is over.
The key point is that the in-group/out-group dynamic is in everybody’s DNA, and is where the urge to close society comes from. Norberg here draws on the political psychologist Karen Stenner’s 2005 book The Authoritarian Dynamic, which argues that about a third of people have an underlying authoritarian impulse in them—but it doesn’t express itself unless people feel threatened. During normal times, they are just as open and amiable as anyone else. But when they feel threatened, “they react explosively,” Norberg writes on p. 343. “They become intolerant of diversity and dissent and willing to restore unity by government control, even if it wrecks rule of law and free speech.”
Liberal institutions are powerful enough to double lifespans and increase prosperity 30-fold in a handful of generations. At the same time, they are vulnerable to attacks like this.
Prior liberal flowerings got started in societies as diverse as Ancient Greece and Song dynasty China. But none of them lasted. The general intellectual climate wasn’t open enough to openness. Plato was executed essentially for nonconformity. After Mongol invaders ended the Song dynasty, the succeeding Ming dynasty responded to the threat by destroying the world’s most advanced fleet of oceangoing ships and banning nearly all foreign contact.
That vulnerability is why the open society will always need defending, especially as its attackers change tactics every generation or two. Norberg’s defense is perfectly suited for this generation’s emerging threats. Populist and nationalist governments have come to power in recent years in countries such as Brazil, Mexico, Hungary, and elsewhere. President Trump’s trade war, immigration restrictions, race-baiting were slowing the longest economic expansion in U.S. history and causing cultural divisions even before COVID-19 hit.
Even after he cost his party the House, the Senate, and the presidency, the Republican party is continuing along a national populist trajectory. The progressive wing of the Democratic party is pushing similar policies in different packaging, on issues from international trade to technology policy. The United Kingdom’s Brexit debate, which should have been about escaping the European Union’s burdensome regulatory, agricultural, and tax policies, was instead hijacked by ugly nationalist impulses, and became divisive for all the wrong reasons. Strongman governments and nationalist political parties are springing up in places that should know better, such as Eastern Europe, which bore the brunt of both fascism and communism in the 20th century.
Norberg writes clearly and persuasively, with passion, and without anger. It is an impressive performance, and a joy to read. He has only one notable slip in 384 pages, and that is his support for a carbon tax on pages 330-331. Ironically, this comes in a section about the knowledge problem in economics. A centralized body such as Congress is unlikely to have the on-the-ground knowledge it needs to put an accurate price on carbon emissions.
Perhaps more significantly, the carbon tax suffers from public choice problems—which basically means that politicians tend to behave like politicians. A cardinal rule of politics is that policies are made and enforced by the government we have, not the government we want. Even if Congress did overcome the knowledge problem, it is unlikely that people like Nancy Pelosi and Mitch McConnell, or whoever succeeds them down the road, would craft a carbon tax on the merits. For Norberg, a carbon tax is “supposed to be an incentive, not a source of revenue.” This is surely not how a carbon tax would work under a real-world government.
That quibble aside, Open is one of the best books of its kind to come out in years. It is the right defense of the right values at the right time.
Norberg is not the only voice in favor of openness. Recent works by economists Virgil Storr and Ginni Choi, psychologist Joseph Henrich, and experimental economist Bart Wilson are other recent contributions. Matt Ridley, Steven Pinker, and Deirdre McCloskey have all been flying the flag for openness, tolerance, and dynamism for years. But just as Julian Simon was in his day, these voices of reason are too often drowned out by a chorus of doomsayers.
Markets are inherently dynamic and ever changing. No one is in charge of them, and no one directs the process. Markets work best when people are open, tolerant, and cooperative. People need to get along with people who look different, speak differently, and may live far away. It takes trusting strangers. That not natural to the human brain, which evolved to fit a hunter-gatherer world. But open markets have gotten us this far. If we let them, they can take us much farther. Whether we do or not will be this generation’s defining debate.
Muhammad Yunus – Banker To The Poor: Micro-Lending and the Battle Against World Poverty (New York: PublicAffairs, 2007)
Yunus is a Bangladeshi economist who did much to popularize microlending—small loans to budding entrepreneurs in the developing world. He won the 2006 Nobel Peace Prize. This is his autobiography.
While his bottom-up approach to development is a massive improvement from the top-down model favored by economists such as Jeffrey Sachs and organizations like the World Bank, Yunus is not without his critics, and was touched by scandal in recent years. Now 80 years old, he is mostly retired.
Though not entirely objective, this is a good introduction to how a creative, entrepreneurial approach can have a large positive impact on philanthropy and economic development. There are lots of ways to cook an egg. Yunus’ recipe is one of many that are not perfect, but are still part of a healthy diet.
Further reforms must operate not just in finance or in this or that policy area, but also at the institutional level, such as property rights protections, and in culture, such as a general sense that openness, innovation, and commerce are good things, and corruption should be resisted, rather than tolerated.
Mokyr’s larger thesis is that technology is the most important driving engine of growth. It’s not the only factor, but the most important one–and it isn’t the direct factor. Lurking one level beneath technology are cultural attitudes about technology and progress. This, to Mokyr, is where the real explanation lies for the origins of the modern economy. The Romans had the technology for the steam engine. But Roman culture wasn’t interested in applying technology to improving production processes the way the 18th-century Britain was when James Watt was a young man. So steam power remained a novelty toy for the wealthy, and was soon forgotten.
Technophobic and neophobic cultures tend to have less technological progress. As such, they tend to be less prosperous and grow more slowly—and even then, much of the growth is “catch-up growth” when technologies long established elsewhere reluctantly enter through osmosis. There is a good deal of intersection here with Deirdre McCloskey’s work, which focuses more on wider bourgeois values. But Mokyr confines himself for the most part to technological norms rather than wider arguments about attitudes about letting people have a go, whether through commerce or life’s many other worthwhile aspects.
Mokyr has written several books applying his technology-and-culture thesis to different historical periods. His thinking has evolved over time, though the general framework has proved sturdy enough to pass the test of time. A Culture of Growth focuses mostly on Europe from 1500-1700, from roughly the end of the Renaissance, through the Scientific Revolution, up to the Enlightenment’s earliest stirrings. Essentially, these two centuries laid the cultural ground the Industrial Revolution needed before it could stand on its own.
See also Pierre Lemieux’s review, which goes into much more detail than this one.
Bas van der Vossen and Jason Brennan – In Defense of Openness: Why Global Freedom Is the Humane Solution to Global Poverty
Argued from a philosopher’s point of view, though both authors are economically literate. They argue that the most effective poverty-relief policies involve positive-sum interactions. A more open approach to trade, immigration, and entrepreneurship are the most important positive-sum policies, and they back them with strong moral and consequentialist arguments.
People have the right to make deals with each other, or to move somewhere else if they like. For a third party to get in the way and forcibly stop them requires a very strong reason. The burden of proof is on that third party.
Conservatives and nationalists offer few strong justifications for their force-happy trade and immigration policies. Progressives also come off poorly for preferring zero-sum redistribution policies even when positive-sum policies are readily available. Both authors argue instead for a more permissive, open, and liberal approach–liberal in its original, correct sense.
Review of Factfulness: Ten Reasons We’re Wrong About the World-and Why Things Are Better Than You Think (Flatiron Books, 2018) by Hans Rosling with Ola Rosling and Anna Rosling Rönnlund.
Think Julian Simon, Matt Ridley, and Steven Pinker’s data-driven optimism, mixed with Michael Shermer and Bryan Caplan’s awareness of human cognitive biases, as told by a kindly, avuncular Norwegian. The book reads easily, is visually savvy, and has a friendly, non-polemic tone.
Rosling, who passed away of cancer while writing this book, wanted it to be his last, grand statement. He wants people to simultaneously believe two things: that the state of the world can be both bad and getting better. Hundreds of millions of people still live in absolute poverty. But for the first time in history, the global absolute poverty rate is now below 10 percent. Improvement is coming so fast that the number of people in poverty is going down even as population increases.
Most people think in binaries—left and right, good and bad, and so on. Rosling encourages nuance. Rather than a simple binary of rich and poor countries, Rosling uses a four-level framework. Level one is absolute poverty—subsistence farming, little or no electricity, crude sanitation, high disease rates, and low life expectancy. Level four is where the rich countries are—the Anglosphere, most of Europe, and the Asian tigers. When people think of rich and poor countries, they tend to think of either level one or level four countries. As it turns out, most people in the world are middle class—they live in level two and level three countries. In varying degrees, these countries offer better health and sanitation than level one countries, along with some industrial development, education for children instead of labor, some degree of political and lifestyle freedom, and so on.
One thing I especially like about Rosling’s framework is that countries can level up. Prosperity is a process, not an on/off switch. And the number of levels is theoretically infinite. Rosling chose to use four levels, but a more granular analyst can use as many levels as they want. More importantly, it may well be that what Rosling describes as a level four country today will be startlingly poor a century from now. Most of the world will have leveled up to the equivalent of level five or higher.
Rosling also provides an important public service in teaching people how to look at data. The most important example is the lonely number fallacy:
Never believe that one number on its own can be meaningful. If you are offered one number, always ask for at least one more. Something to compare it with. Be especially careful about big numbers. (p. 130)
I used this advice in my review of Trump economic advisor Peter Navarro’s coauthored book with Greg Autry, Death by China. The data won’t allow Navarro and Autry to make the case they want, so they have to resort to trickery:
Navarro and Autry give just such a lonely number when they argue that, “On [President George W.] Bush’s watch alone, the United States surrendered millions of jobs to China.” (p. 10) Let’s give that large, lonely number some company. In January 2001, when Bush took office, the U.S. labor force was 143.8 million people. When his term expired in January 2009, it was 154.2 million people, despite the economy being in recession. The data are here.
So even if “the United States surrendered millions of jobs to China,” those losses were outweighed by gains elsewhere, most of which have nothing to do with trade policy.
Keep this in mind whenever you see a scary number in a news story—if it doesn’t come with company or context, it’s analytically useless at best.
Rosling’s book has been warmly received by a politically diverse audience, and rightfully so. Rosling’s optimism is based on widely available data, not his ideological priors. In areas where the world is not improving, he is quick to point to them as a reform priorities.
More importantly, the data show that the world’s arrows are almost all pointing up. Few people realize this—as Rosling humorously shows, most people perform worse than chimpanzees on a simple multiple choice quiz about human well-being. The errors are not random—they are overly pessimistic in participants across countries and in every demographic category.
Rosling was as effective as anyone in trying to correct pessimistic bias with facts, not least through his easy-to-understand bubble charts. Rosling’s son, Ola Rosling, and daughter-in-law, Anna Rosling Rönnlund, are carrying on his work with their group Gapminder—see, for example, their tour of Dollar Street that shows the various gradations between countries in levels one through four.
Things are bad in many places, but getting better. In fact, for most people in most places, living standards today are the best they’ve ever been. It is up to us to see that the process continues. To do that, we need to be aware of both the facts on the ground and our inborn cognitive biases that prevent us from seeing those facts clearly. From there, action. Use your head, not just your heart. You need both.
Economic inequality is one of today’s defining issues. How to address it? Iain Murray and I offer an unconventional approach in a new two-part CEI study, released today. The first part frames the issue. The title sums it up well enough: People, Not Ratios: Why the Debate over Income Inequality Asks the Wrong Questions. The second part,The Rising Tide: Answering the Right Questions in the Inequality Debate, outlines a concrete policy agenda to make the poor better off.
Anti-poverty activists routinely fret about the ratio between a CEO’s salary and her lowest-paid employee’s, or how the top one percent’s ratio of national income compares to the bottom one percent’s. Instead of mathematical ratios, we encourage activists to focus on human beings. Again, we plead: focus on people, not ratios.
Ratio-obsessed activists from Thomas Piketty to Naomi Klein ignore some obvious questions due to their monomania:
We seek to fill these disappointing gaps. According to nearly all available data, poor people are better off than ever before in human history—keep at it, then! There is still lots to do, but ignoring the accomplishments people have already made, and what can make more accomplishments possible, only hurts the poor.
Over the course of the 20th century, infant mortality went down by more than 90 percent—just think of how many parents’ broken hearts have stayed whole thanks to modern technology and sanitary practices.
Life expectancy improved by 30 years during the 20th century. And that’s not the only type of length modernity has improved: from 1900 to 1950, the average American became three inches taller, thanks to better nutrition, food security, and health care. The process has only continued since then.
Even if it was only the top one percent that enjoyed zero infant mortality, lived a hundred years, and were all seven feet tall, their best efforts could not bias society-wide statistics nearly that much, despite their most conspiratorial plutocratic efforts. This is what mass prosperity looks like.
According to the Swedish economist Max Roser, since 1960 the number of people living in absolute poverty has declined from nearly two billion to about 700 million—a two-thirds decline. And this happened as total world population more than doubled! This is good news. Today’s most important task is to keep this great enrichment going, and to eliminate absolute poverty altogether.
The poor will never have as much as the rich—every curve has a bottom and a top ten percent, and always will. No changing that. But only the hardest heads deny that most poor people today live better lives than their parents or grandparents did—and that future generations can expect this wonderful trajectory to continue, if they’re allowed to.
This is both a reason to celebrate, and a reason to double down. Now that we haveasked the right questions about inequality, the second part of our study, The Rising Tide, seeks to answer them: what policies can continue to make the world’s poor better off?
There are a lot of answers. We don’t pretend to have all of them, but we offer a few. One is an honest price system: runaway-inflation countries such as Zimbabwe and Venezuela are universally poor. Keeping inflation in check and making sure prices convey honest information will help consumers and entrepreneurs make wise decisions that create value for people.
Affordable energy is another answer, allowing everything from clean home heating (natural gas is somewhat cleaner than dung and logs, especially indoors) to more and better transportation choices, which expands employment options.
Any aspiring entrepreneur needs access to capital—Dodd-Frank-style financial regulations openly insult every person trying to escape poverty. So do many governments’ resistance to granting formal property rights to their people.
Another answer—there really are a lot of them, and no single panacea—is occupational licensing reform. There is no legitimate reason for an interior decorator or a hair-braider to undergo hundreds of hours of training in something they already know how to do, in order to do for pay something they can do for free. Nearly a third of American workers require government permission to begin their day’s work. That is ethically wrong, and should be immediately reformed.
Inequality is a complicated issue. Properly addressing it requires both asking and answering the right questions. Ask how real-world people are doing, not abstract income ratios. And ask about policies that can help people escape poverty. The answers are numerous, and Iain’s and my papers do not pretend to have all of them.
But, we humbly submit, a general ethos of not stamping down on impoverished hands would be a good start. It would also be quite a change from current policy in the U.S. and many other countries.
Non-economists tend to be much more skeptical about economic freedom than economists are. This in itself is a powerful case for free markets. But empirical data present a far richer and more compelling argument in favor of freedom. That’s why I look forward each year to the release of an updated edition of the Economic Freedom of the World report, jointly published by our friends at the Cato Institute and the Vancouver-based Fraser Institute, with help from more than 30 think tanks around the world.
The report is nothing if not thorough. James Gwartney, Robert Lawson, Joshua Hall, and a small army of contributors assemble data on 144 countries, ranging from regulatory burdens to property rights protections to the amount of corruption. In all, each country is measured on 42 variables. Then each country is given a score from 1 to 10. The freer the economy, the higher the score.
If economic freedom had no bearing on wealth creation, then plotting the scores against per capita GDP would show no distinct pattern. It would be a random blob. What the data actually show is anything but random. As it turns out, poor countries all have something in common: little economic freedom. Countries in the bottom quartile of economic freedom have an average per capita GDP of $5,188. They are clustered in the lower left hand side of our graph.
Rich countries all have something in common, too. They have high scores. Countries in the top quartile of economic freedom have an average per capita GDP of $37,691. That extra freedom results in a seven-fold increase in wealth. If you value human well-being, economic freedom is extremely important. People can only prosper if they’re allowed to.
If that seven-fold difference in living standards doesn’t move you at least a little bit at the margin in favor of free markets, you probably have a hard head, a cold heart, or both. It is the difference between modern sanitation and open sewers. It is the difference between having respectable medical care and not. It is the difference between subsistence farming and an industrial/service-based economy.
Gwartney, et al have been putting out Economic Freedom of the World reports since 1996, so by now they some good long-run data. The trends are encouraging on one front: worldwide, economic freedom has been on the rise for some time. In 1980, the global average score was 5.30. By 2010, it rose to 6.83. Eastern Europe, especially the Baltic region, and southeast Asia have been the biggest stars. The world’s two freest economies are Hong Kong (8.90) and Singapore (8.69).
China (6.16) and India (6.42) are slowly moving in the direction of economic freedom – neither is there yet – and as a result, hundreds of millions of people have already been lifted out of poverty. Liberalization is the most effective anti-poverty program the world has ever seen. More would be nice.
Domestically, the situation is less encouraging. Presidents Bush and Obama have sharply increased spending and regulation over the last decade, and have worsened the government’s already poor financial health. The result is that the world’s second freest economy in 2000 fell to 18th in 2010, the latest year for which data is available. America’s score has fallen from 8.65 in 2000 to 7.70 in 2010. It is the first time the U.S. has been outside of the top ten.
The Bush-Obama years have been very bad for economic freedom. There is a lot of regulatory excess to roll back, and a lot of debt to pay off. It will take time to undo all the damage, but it can be done. Perhaps the U.S. can look to the examples set by economically freer countries such as Canada, the UK, Finland, and, surprisingly, Qatar.
Via Russ Roberts, this is an amazing video. I’m always impressed with creative, compelling ways to use data to tell a story. And this story is one of the most important in human history: how most of humanity went from being poor and sick to healthy and rich in just 200 years.
There is still a ways to go. But if past is prologue, I’m optimistic about the future.
Bill Easterly’s surprisingly Hayekian take on Afghanistan is worth a read:
News sources say that President Obama will choose “escalate” with additional troops for Afghanistan in his speech at West Point tonight. I and many like-minded individuals find this disastrous.
“Like-minded” means that critics of top-down state plans for economic development are also not fans of top-down state plans for military development. If the Left likes the first, and the Right likes the second, that just shows you how incoherent Left and Right are.