Big economic things we don’t know – and what to do about them in a state of ignorance.
In Noah Smith’s typically smart review of the economist Tyler Cowen’s equally smart new book Stubborn Attachments, there are great oceans of economic uncertainty.
‘The Industrial Revolution was the biggest sustained growth success story in the history of the human race. But now imagine you’re an administrator in Ming Dynasty China in the 1400s. What policies do you recommend in order to make China industrialize? Even with the benefit of centuries of hindsight, the answer is not obvious at all. You can dig up coal, build factories, etc., but plenty of countries tried this approach with disappointing results. Even now, we don’t know what combination of factors allowed Britain to succeed (accidentally!) at industrialization when other countries’ later, deliberate attempts failed.’
And it’s worse than that. Because if we don’t know the magic growth-shifting policies in hindsight, ‘how likely are we to know them ahead of time?’ He adds:
‘This goes double for sustainability. The Industrial Revolution was amazing, but there’s still some chance – small, in my opinion, but real – that the whole thing will cause the death of the planet’s environment and make it permanently uninhabitable for the human race. If so, we might eventually wake up and realize that we would have been better off staying as subsistence farmers, trapped by the Malthusian ceiling, for many thousands of years, instead of enjoying a few centuries of doomed affluence. (Note again: I think this is unlikely, but it’s hard to rule out). ‘
These are vast uncertainties about fundamentals. But I think it’s also worth drawing to attention to Noah’s reaction to his own state of uncertainty: no throwing up of hands in despair, no wishful thinking that all will become clear with a little more research. No, he’s perfectly at home with his uncertainty. Even without rocks to stand on, we can still make decisions and come to judgements. And Noah does just that…
‘I do think there are a couple things that we can focus on that are more likely than not to result in super-long-term sustainable growth improvements. These two things are scientific progress and technology that enhances environmental sustainability.
The more ideas humanity knows, the higher the probability that the increase in our choice set gives us access to things that raise super-long-term sustainable growth. So, science.
And the more tools we have to reduce our use of finite resources, the higher the probability that our choice set includes futures where we don’t destroy ourselves by destroying our environment. So, sustainability tech.’
Noah develops the idea of what sustainability tech might mean in another blog here.
The argument that uncertainty necessarily leads to indecision, incapacity or lack of policy evidently does not hold. But it does mean that when we do take decisions – more aware that they are almost always bets with uncertainty – this awareness changes the kind of bet we’re wiling to take. Noah’s bet seems to me highly uncertainty-conscious, and the more credible for it.
The uncertainties might also imply that there’s a bigger role for normative motivations in whatever bet we take . When facts are uncertain, values might take over. If that’s the case, again, best acknowledge it, rather than pretend that our norms are physics not philosophy.
Posted in: Uncategorized