Saturday, October 3, 2009

Growth Triumphant

Growth Triumphant, by Richard A. Easterlin
1998, 200 pp.

This compact, efficient little book is a surprisingly satisfying foray into the melee of economic growth literature. It takes as its task the explanation of what it argues are the two major developments in the modern world: rapid and sustained economic growth and enormous population growth. Both of those topics have provoked an enormous and tedious amount of literature, and arguments as to their causes are so numerous that a small army of scholars is fed simply to generate new ones. Easterlin does something audacious, though: he argues that both have the same cause, progress in roughly the same way, and are leading towards the same result. The cause is technological change, and in his view it determines mostly everything else.

Considering the simplicity of that explanation, he makes a remarkably persuasive case. He argues that since the technological changes of the Industrial Revolution created large, expensive, complicated methods of production, they were not feasible to buy and use in a home, farm or workshop. This necessitated institutions like corporations to raise capital to invest in these new technologies, centralization of production to take advantage of the economies of scale generated by large production facilities, which in turn created more administration (leading to white-collar jobs) and urbanization. Urbanization promoted agglomeration industries (services catering to large populations) and a demand for municipal government services. Better technology reduced transport costs, which promoted trade. It increased income, which increase demand for products, which generates more growth. Better technology requires better education, which is why education is necessary to development. In his argument, virtually all the usual explanations for growth are just consequences of technological change and scientific methodology.

He takes the argument further, to state that the population explosion is the result of technologies and scientific developments which reduced mortality. This created an over-supply of children relative to demand, which eventually falls off as incomes rise and the cost of regulating fertility falls. So after an initial, transitory increase in population, fertility drops off and populations stabilize. Easterlin argues that both this demographic transition and the process of growth are happening faster now than they did in the past, so he predicts a future of permanent, general growth, constantly rising aspirations, and disappearing cultural differences in a “constant race to achieve the good life of material plenty.” His analysis of technological change in industrialization and public health is interesting, upbeat, and engaging. He mentions a lot of intriguing, logical conclusions which follow from discarding the ideas he finds quantitatively inadequate, and consequently the book is an enjoyable and fairly quick read. It is also much less depressing than most books on economic development, which revolve around either European exploitation, hopeless poverty traps, or Malthusian catastrophe. Easterlin makes the whole process sound quite hopeful and encouraging.

To reach this conclusion, he deals with each issue separately, in a very careful, measured, precise, unemotional way. He presents both sides of a given argument, then some quantitative evidence, and sees what the evidence suggests. Quite often this is persuasive, as when he proves fairly conclusively that neither population growth nor population decline is correlated with economic growth. Other times he is less persuasive, as when he has to set up elaborate proxy variables for some difficult-to-quantify variable he wants to test. He also dispenses with whole arguments based on one or two quantitative studies, without discussing just how difficult it is to get reliable data, or the statistical significance of his correlations. Fairly large swathes of the first half of the book seem to be extended arguments with Paul Krugman, who largely invented the modern theories of economic geography, economies of scale, and North-North trade, but Krugman gets only one mention in the whole book, and that’s a rather disparaging remark on a minor article in Foreign Affairs. He also doesn’t spend much time explaining how and why that mighty technological change took place in northern England in the 1750’s, as opposed to earlier or later or in a different place. Obviously there had to be institutions in place to create and spread such technological change, which he acknowledges, but doesn’t spend much time analyzing. Growth Triumphant is also a fairly short book: only 154 pages of actual text, and that is frequently broken up by large charts and graphs. That being the case, Easterlin really could have been more thorough. He is persuasive when he uses quantitative data to dispense with faulty arguments, but less so at proving his own. The burden of proof for such a monocausal explanation is quite high.

Interestingly, the book seems to wind up on a very upbeat note: growth and rising aspirations for everyone forever! But then Easterlin pulls the rug out from under the reader with a genuinely chilling final sentence, like the last shot a film with a twist ending that makes you rethink everything that’s gone before: “In the end, the triumph of economic growth is not a triumph of humanity over material wants; rather, it is the triumph of material wants over humanity.” Yes, he suggests, the future is constant growth, but there is no choice, no room for human agency. Growth Triumphant indeed!

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