Tyler Cowen’s new book, Stubborn Attachments, says many things. But his main claims are, roughly, 1) we should care much more about people who will live in the distant future, and 2) promoting long-run economic growth is a robust way to achieve that end. As a result, we should try much harder to promote long-run economic growth.
A very late comment for discussion on this article.
My concern is that we are seeing diminishing marginal returns to research across many areas. In the US Robert Gordon has written a major work on this subject. In my own industries of specialty it is also occurring. There is no doubt that there will be improvements as industries and countries catch up to the technological frontier but the frontier is moving much more slowly now. As economists we should all know the impacts of diminishing marginal returns in any activity and it now appears to be in research and technological developments.
The world will be very different as recognition of this problem becomes more widespread. The implications are not good.
When considering tradeoffs between people today and people in our distant future, people from long ago have much lower discount rates, caring about these two groups more equally. So their choices can be expected to make distant future people matter more.
"Are you willing to let such long-lived autonomous investment organizations grow and come to dominate and control most world investment, including most real estate, inducing housing, and most firms, including most jobs? Even if they are not accountable to anyone else and yet their preferences also carry a lot of weight in political systems?
So who is persuaded to adopt these many policies to create longer views, to make distant future people matter more?"
I don't understand why you think huge foundations would tend to create situations where future people matter more. Wouldn't it just as likely create a situation where the views of a very few long dead people matter more than anyone currently living and anyone in the future?
And at some point isn't the idea "more growth is better for people in the future" defeated by "the foundations of the past control all/nearly all of the profit made by growth"?
I am confused by how ease of divorce and non-compete agreements escape future discounting. It isn't as though most people are choosing between two different spouses or job offers; most of these decisions are made one case at a time.
These policies may not have been chosen because they promote long run growth, but if they succeed in doing so that may inspire others to copy their example.
The idea isn't that the average application of perpetuities, commitments, or long-lived investment orgs will immediately promote the long run. It is more than allowing search in these larger spaces has a much better chance of finding ways to promote the long run.
[trying again. Disqus seems unhappy with me.]I agree with you that enabling more growth is a good thing. Reducing the rule against perpetuities would be a good step, though I'm not convinced that allowing the founders of such institutions to bind the future managers of those institutions would be a good thing. Rather than giving those future managers more power to make decisions, that seems like giving the founder (their dead hand of the past) more power to control future outcomes.
>> are you okay with [more wealth inequality]?
As long as it's associated with growing wealth overall, absolutely.
>> Would presidents for life actually be a good idea?
I think it's conceivable that lengthening terms on the margin might have good consequences, but I doubt that going to this extreme would be a good thing. As others have pointed out here, the electorate's ability to vote again is a strong check on the power of incumbents to buy elections. Ideally I'd want to reduce gerrymandering and some other anti-democratic tendencies in current politics before taking these steps.
>> Are you okay with [reviving ancient practices like oaths of fealty, letting parents commit ... kids ..., and letting people sell themselves into slavery.]?
Robin, you present these as ways to let people make long-term commitments, but these are only long relative to current law. They don't seem like they're focused on the very long term like the rest of the post; the effects are limited to a single lifetime. It's plausible that some of them are wealth enhancing, since as you say, the buyer clearly values the labor being purchased more than the seller. From the historical evidence, it appears that indentured servitude had better checks on the buyers' ability to mistreat the seller than even chosen slavery would.
I don't see allowing parents to control their childrens lives beyond adulthood or making divorce harder as likely improvements. As you know from my own life choices, I'd prefer it if we made it simpler for adults to make more flexible marriage-like choices rather than having a single institution that one can accept or not.
>> Are you willing to let such long-lived ... organizations grow and ... dominate ... most world investment, ... real estate, ... firms, ... jobs?
While they might collectively dominate investment, property, and employment, there would likely be competition among them. If different groups of managers were controlling each, then each generation some would disperse their assets, others would focus on long-term growth, and still others would try to work for the betterment of their present. In order for one to dominate, it would have to perpetually focus on growing its assets rather than influencing the society around it.
"Will you endorse no taxes on savings including bequests, no protection of out-of-date firms and jobs, only simple and flexible regulation, strong worldwide intellectual property, presidents for life, parents committing kids, selling yourself into slavery, and complete freedom of the terms of wills, including allowing long-lived investment orgs that control most world asset use?"
You've inadvertently described the long-running policy of Singapore to a tee.
No taxes on savings, capital gains or inheritances. Investment is tax subsidized. Very lean body of statutes and light touch regulation. No protection of national champion companies like Chartered Semiconductor or NatSteel. All employment is at will, with no unemployment benefits. Single-party rule since independence with no term limits. Eternal investment bodies in the form of multiple sovereign wealth funds, that own a large portion of the country's capital and commanding heights. Indentured service in exchange for education is commonplace (I myself served eight years in the civil service in return for them paying for my MIT degree). Parents making major life decisions for children is considered unremarkable and commonplace.
All the good and bad that results from that body of policy are on display here. High capital accumulation (especially human capital), economic growth and standard of living, at the cost of high inequality and significantly lowered happiness for our level of wealth.
I agree with you that enabling more growth is a good thing. Reducing the rule against perpetuities would be a good step, though I'm not convinced that allowing the founders of such institutions to bind the future managers of those institutions would be a good thing. Rather than giving those future managers more power to make decisions, that seems like giving the founder (their dead hand of the past) more power to control future outcomes.
>> are you okay with [more wealth inequality]?
As long as it's associated with growing wealth overall, absolutely.
>> Would presidents for life actually be a good idea?
I think it's conceivable that lengthening terms on the margin might have good consequences, but I doubt that going to this extreme would be a good thing. As others have pointed out here, the electorate's ability to vote again is a strong check on the power of incumbents to buy elections. Ideally I'd want to reduce gerrymandering and some other anti-democratic tendencies in current politics before taking these steps.
>> Are you okay with [reviving ancient practices like oaths of fealty, letting parents commit ... kids ..., and letting people sell themselves into slavery.]?
Robin, you present these as ways to let people make long-term commitments, but these are only long relative to current law. They don't seem like they're focused on the very long term like the rest of the post; the effects are limited to a single lifetime. It's plausible that some of them are wealth enhancing, since as you say, the buyer clearly values the labor being purchased more than the seller. From the historical evidence, it appears that indentured servitude had better checks on the buyers' ability to mistreat the seller than even chosen slavery would.
I don't see allowing parents to control their childrens lives beyond adulthood or making divorce harder as likely improvements. As you know from my own life choices, I'd prefer it if we made it simpler for adults to make more flexible marriage-like choices rather than having a single institution that one can accept or not.
>> Are you willing to let such long-lived ... organizations grow and ... dominate ... most world investment, ... real estate, ... firms, ... jobs?
While they might collectively dominate investment, property, and employment, there would likely be competition among them. If different groups of managers were controlling each, then each generation some would disperse their assets, others would focus on long-term growth, and still others would try to work for the betterment of their present. In order for one to dominate, it would have to perpetually focus on growing its assets rather than influencing the society around it.
Yes, if you have specific preferences that can still be fulfilled after you and everyone who ever interacted with you is dead. You mention the example of people you will never meet celebrating your life, which you will never observe.
artifex is correct if the prices are as he says, but that is just the general libertarian free-market argument for freedom of contract and don't point to specific benefits and don't prove that anyone would take up the offer. The reason why someone would become a slave is that slavery would allow the capital-poor to obtain investment in their human capital by the rich, with low risk on both sides. This would most likely be done with slaves selling for a fixed annuity, plus whatever amount was needed in the short term, for surgery say or education. As opposed to fixed student loans, it would cushion the slave against the risk of failure in education; and as opposed to income percentage payback, it would negate the deadweight loss of a usual income tax, as the slave could be forced to take a high-paying job regardless of stress or drawbacks. Of course it is questionable whether it is possible to enforce slavery on most forms of work today, which don't have easily measured outcomes, where shirking is hard to differentiate from being bad at a job, and people who are forced to work on something they don't want might actually be incapable of output that those enthusiastic about it might achieve.
Regulators have set up our bank systems to suffer especially large crises, resulting from especially large exposures to what’s perceived as especially safe, against especially little capital. Is it because they figure the crisis is long-term, and not to happen on their watch?
I think the main problem with Tyler's assertion (that free markets naturally neglect future people) is that it ain't so, at least to the extent to which we have and have had free markets.
You said, 'The main problem is that law has placed many obstacles explicitly designed to prevent the “dead hand of the past” from controlling current choices'.
So that, plus your list of alternatives and their problems (which I liked) made me think that you accepted Tyler's basic assertion, but didn't see a reasonable way out.
A very late comment for discussion on this article.
My concern is that we are seeing diminishing marginal returns to research across many areas. In the US Robert Gordon has written a major work on this subject. In my own industries of specialty it is also occurring. There is no doubt that there will be improvements as industries and countries catch up to the technological frontier but the frontier is moving much more slowly now. As economists we should all know the impacts of diminishing marginal returns in any activity and it now appears to be in research and technological developments.
The world will be very different as recognition of this problem becomes more widespread. The implications are not good.
When considering tradeoffs between people today and people in our distant future, people from long ago have much lower discount rates, caring about these two groups more equally. So their choices can be expected to make distant future people matter more.
"Are you willing to let such long-lived autonomous investment organizations grow and come to dominate and control most world investment, including most real estate, inducing housing, and most firms, including most jobs? Even if they are not accountable to anyone else and yet their preferences also carry a lot of weight in political systems?
So who is persuaded to adopt these many policies to create longer views, to make distant future people matter more?"
I don't understand why you think huge foundations would tend to create situations where future people matter more. Wouldn't it just as likely create a situation where the views of a very few long dead people matter more than anyone currently living and anyone in the future?
And at some point isn't the idea "more growth is better for people in the future" defeated by "the foundations of the past control all/nearly all of the profit made by growth"?
There could be long term advantages from committing to sticking with one partner, rather than leaving open the option to switch.
I am confused by how ease of divorce and non-compete agreements escape future discounting. It isn't as though most people are choosing between two different spouses or job offers; most of these decisions are made one case at a time.
These policies may not have been chosen because they promote long run growth, but if they succeed in doing so that may inspire others to copy their example.
The idea isn't that the average application of perpetuities, commitments, or long-lived investment orgs will immediately promote the long run. It is more than allowing search in these larger spaces has a much better chance of finding ways to promote the long run.
[trying again. Disqus seems unhappy with me.]I agree with you that enabling more growth is a good thing. Reducing the rule against perpetuities would be a good step, though I'm not convinced that allowing the founders of such institutions to bind the future managers of those institutions would be a good thing. Rather than giving those future managers more power to make decisions, that seems like giving the founder (their dead hand of the past) more power to control future outcomes.
>> are you okay with [more wealth inequality]?
As long as it's associated with growing wealth overall, absolutely.
>> Would presidents for life actually be a good idea?
I think it's conceivable that lengthening terms on the margin might have good consequences, but I doubt that going to this extreme would be a good thing. As others have pointed out here, the electorate's ability to vote again is a strong check on the power of incumbents to buy elections. Ideally I'd want to reduce gerrymandering and some other anti-democratic tendencies in current politics before taking these steps.
>> Are you okay with [reviving ancient practices like oaths of fealty, letting parents commit ... kids ..., and letting people sell themselves into slavery.]?
Robin, you present these as ways to let people make long-term commitments, but these are only long relative to current law. They don't seem like they're focused on the very long term like the rest of the post; the effects are limited to a single lifetime. It's plausible that some of them are wealth enhancing, since as you say, the buyer clearly values the labor being purchased more than the seller. From the historical evidence, it appears that indentured servitude had better checks on the buyers' ability to mistreat the seller than even chosen slavery would.
I don't see allowing parents to control their childrens lives beyond adulthood or making divorce harder as likely improvements. As you know from my own life choices, I'd prefer it if we made it simpler for adults to make more flexible marriage-like choices rather than having a single institution that one can accept or not.
>> Are you willing to let such long-lived ... organizations grow and ... dominate ... most world investment, ... real estate, ... firms, ... jobs?
While they might collectively dominate investment, property, and employment, there would likely be competition among them. If different groups of managers were controlling each, then each generation some would disperse their assets, others would focus on long-term growth, and still others would try to work for the betterment of their present. In order for one to dominate, it would have to perpetually focus on growing its assets rather than influencing the society around it.
"Will you endorse no taxes on savings including bequests, no protection of out-of-date firms and jobs, only simple and flexible regulation, strong worldwide intellectual property, presidents for life, parents committing kids, selling yourself into slavery, and complete freedom of the terms of wills, including allowing long-lived investment orgs that control most world asset use?"
You've inadvertently described the long-running policy of Singapore to a tee.
No taxes on savings, capital gains or inheritances. Investment is tax subsidized. Very lean body of statutes and light touch regulation. No protection of national champion companies like Chartered Semiconductor or NatSteel. All employment is at will, with no unemployment benefits. Single-party rule since independence with no term limits. Eternal investment bodies in the form of multiple sovereign wealth funds, that own a large portion of the country's capital and commanding heights. Indentured service in exchange for education is commonplace (I myself served eight years in the civil service in return for them paying for my MIT degree). Parents making major life decisions for children is considered unremarkable and commonplace.
All the good and bad that results from that body of policy are on display here. High capital accumulation (especially human capital), economic growth and standard of living, at the cost of high inequality and significantly lowered happiness for our level of wealth.
I agree with you that enabling more growth is a good thing. Reducing the rule against perpetuities would be a good step, though I'm not convinced that allowing the founders of such institutions to bind the future managers of those institutions would be a good thing. Rather than giving those future managers more power to make decisions, that seems like giving the founder (their dead hand of the past) more power to control future outcomes.
>> are you okay with [more wealth inequality]?
As long as it's associated with growing wealth overall, absolutely.
>> Would presidents for life actually be a good idea?
I think it's conceivable that lengthening terms on the margin might have good consequences, but I doubt that going to this extreme would be a good thing. As others have pointed out here, the electorate's ability to vote again is a strong check on the power of incumbents to buy elections. Ideally I'd want to reduce gerrymandering and some other anti-democratic tendencies in current politics before taking these steps.
>> Are you okay with [reviving ancient practices like oaths of fealty, letting parents commit ... kids ..., and letting people sell themselves into slavery.]?
Robin, you present these as ways to let people make long-term commitments, but these are only long relative to current law. They don't seem like they're focused on the very long term like the rest of the post; the effects are limited to a single lifetime. It's plausible that some of them are wealth enhancing, since as you say, the buyer clearly values the labor being purchased more than the seller. From the historical evidence, it appears that indentured servitude had better checks on the buyers' ability to mistreat the seller than even chosen slavery would.
I don't see allowing parents to control their childrens lives beyond adulthood or making divorce harder as likely improvements. As you know from my own life choices, I'd prefer it if we made it simpler for adults to make more flexible marriage-like choices rather than having a single institution that one can accept or not.
>> Are you willing to let such long-lived ... organizations grow and ... dominate ... most world investment, ... real estate, ... firms, ... jobs?
While they might collectively dominate investment, property, and employment, there would likely be competition among them. If different groups of managers were controlling each, then each generation some would disperse their assets, others would focus on long-term growth, and still others would try to work for the betterment of their present. In order for one to dominate, it would have to perpetually focus on growing its assets rather than influencing the society around it.
Yes, if you have specific preferences that can still be fulfilled after you and everyone who ever interacted with you is dead. You mention the example of people you will never meet celebrating your life, which you will never observe.
artifex is correct if the prices are as he says, but that is just the general libertarian free-market argument for freedom of contract and don't point to specific benefits and don't prove that anyone would take up the offer. The reason why someone would become a slave is that slavery would allow the capital-poor to obtain investment in their human capital by the rich, with low risk on both sides. This would most likely be done with slaves selling for a fixed annuity, plus whatever amount was needed in the short term, for surgery say or education. As opposed to fixed student loans, it would cushion the slave against the risk of failure in education; and as opposed to income percentage payback, it would negate the deadweight loss of a usual income tax, as the slave could be forced to take a high-paying job regardless of stress or drawbacks. Of course it is questionable whether it is possible to enforce slavery on most forms of work today, which don't have easily measured outcomes, where shirking is hard to differentiate from being bad at a job, and people who are forced to work on something they don't want might actually be incapable of output that those enthusiastic about it might achieve.
Excellent post. Honest and delightfully sharp review - please keep it up!!
That's plausible.
Regulators have set up our bank systems to suffer especially large crises, resulting from especially large exposures to what’s perceived as especially safe, against especially little capital. Is it because they figure the crisis is long-term, and not to happen on their watch?
http://subprimeregulations....
I think the main problem with Tyler's assertion (that free markets naturally neglect future people) is that it ain't so, at least to the extent to which we have and have had free markets.
You said, 'The main problem is that law has placed many obstacles explicitly designed to prevent the “dead hand of the past” from controlling current choices'.
So that, plus your list of alternatives and their problems (which I liked) made me think that you accepted Tyler's basic assertion, but didn't see a reasonable way out.