To a previous piece , “The End of Poverty“, my friend Indradeep added a few thoughtful and thought-provoking comments. I take him seriously since he’s a fellow member of my tribe (namely, economists). In the following, I will do my best to address the points that he has raised. But first, here’s what I wrote in summary in my piece:
Technology is advancing at an exponential pace. Therefore the cost of energy will continue to drop. Therefore the cost of production of stuff will monotonically decrease, until a point that it will be practically close to zero. Therefore all the basics of life will be available for consumption at zero price. Therefore extreme poverty will be solved. This will happen in about 15 years.
I reproduce Indradeep’s comment here for reference:
Hard to argue with the idea that technology will reduce cost to near-zero levels. But the rest of it borders on wishful thinking. Especially, the expectation that some system of distribution will magically appear, sounds almost as sanguine as the familiar and now roundly discredited argument advanced by free-market fanatics that free trade is surely beneficial and the matter of how the winners compensate the losers is only a minor wrinkle that we do not need to worry about. Political economy, voice, agency – these things are nowhere in the picture. Does not a system of representation of voice have to precede the appearance of a system of distribution? If the rich have no intrinsic interest in alleviating poverty, how will that first system come into existence?
Let’s examine the “now roundly discredited argument advanced by free-market fanatics that free trade is surely beneficial”.
It’s absolutely true that your’s truly is a proud, fully paid-up card-carrying member of the free-market fanatics club.
OK, so free trade is not beneficial. But compared to what? For me, any claim that the free trade regime is not beneficial has to be backed up by some indication of an alternative that is more beneficial or less imperfect than the free market. I am willing to become a fanatical member of any club that is proven to be better for the people at large than the free trade club.
If the alternative to free markets is a command and control system commonly advocated by the members of the collectivist clubs (namely socialism and communism), then I am afraid that that’s a non-starter. Certainly the free markets road does not lead to unalloyed universal prosperity but the alternatives to it have been demonstrated to be the fast road to perdition.
What’s the evidence, you’d ask. Here’s a simple test. When people do have the freedom and the ability to migrate, do they go from free market economies to controlled economies, or do they do the reverse? People vote with their feet and by doing so reveal their preferences. Their revealed preferences show that free markets are better than controlled economies. People go where they anticipate a better life. Unless the claim is that people are so stupid that they systematically err, it has to be admitted that free markets deliver what people prefer better than the alternatives.
Follow the money, as the dictum goes. I say, to know which system is better, follow the people because people follow the money. I will give up my membership to the free markets club the day I read that people are moving out of free market economies and into socialist countries. There will be a big market for parkas in hell the day people migrate to Venezuela and North Korea.
I note that the rate at which I am going, it will take a bit of time for me to address just this one comment, leave alone the followup comments in that discussion. So I will stop here for now and continue with the rest later.
Coming up: the matter of distribution and how winners could compensate the losers. Stay tuned.