Economics

Happy new year: Are you pessimistic or optimistic about the future?

Peter Boettke is pessimistically optimistic about the future, because the forces of exchange and innovation should outpace the force of stupidity. That is if economists remain vigilant advocates of free society and markets in our role as public intellectuals and educators.

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That is the message from a new piece of his in the latest issue of The Independent Review (which can also be found ungated here on SSRN). By the way, there are a number of great essays in this issue—including J. Walker Smith on the Uber-all economy of the future, Mike Munger on the sharing economy, and William Luther on bitcoin and the future of digital payments—but you will have to scour the internet for yourself to see if ungated versions are out there.

Back to Boettke. His optimism stems from a belief that

the ultimate resource is the human imagination and that the great diversity of human ingenuity and creativity will help us find our way out of the numerous troubles that we have made and may make for ourselves.

Yet this is a tempered ‘pessimistic optimism’ because

the dominant mental models that human beings deploy to make sense of their interaction with each other and with nature are so fundamentally flawed and grounded in zero-sum and negative-sum moral intuitions.

On the one hand we have “the creativity of individuals and the power of the market” and right there on the other hand we have “the tyranny of government controls in the affairs of men” that is seemingly a product of “moral intuitions hard-wired into humans through our evolutionary past”. I do get the sense from the piece that Boettke is ultimately more optimistic than pessimistic, but it’s a hell of a qualification.

This is much the same point that Hayek makes in explaining the extended order of human cooperation and the great society resulting from ever-widening coordination and exchange. Due to our long history living in small hunter-gatherer groups, tribes, and even settled agricultural communities, humans are more attuned to communal institutions structured around hierarchical relations, and unfamiliar and distrustful of the impersonal coordination and exchange of market-based society. The extended order is largely a cosmos, yet we have evolved in societies that are closer to a taxis.

A major obstacle to convincing people of the superiority of the market order and free society is this evolutionary hard-wiring. Most people struggle to accept that good order can emerge from individual action, without being planned and imposed from on high by tribal leaders, sovereigns, or technocrats. And so they are willing to accept when a ‘big man’ tells them of their grand plans for society, because that has been the dominant institutional form for quite some time. Yet the extraordinary prosperity we today enjoy depends on us overcoming what is now maladaptive evolved moral intuitions. Isn’t it ironic?

It doesn’t help that even public intellectuals and educators often fail to grasp this too. But this is the role for good economists (and friends!)—to continually let it be known that

we can follow the Smithian propensity to truck, barter, and exchange, or we can follow the Hobbesian propensity to rape, pillage, and plunder.

Boettke is optimistic of  “Smithian propensities winning out over Hobbesian ones” but cautious of “Hobbesian propensities sweeping aside the Smithian ones.” This has been the ever-present battle throughout human history, and—just like in the past—our prosperity depends on which set of norms of human interaction prevail. It’s an open question.

His conclusion:

We will continue to suffer from macrovolatility and microdistortions, but the erring entrepreneurs will outpace the bumbling bureaucrats in realizing mutually beneficial exchanges and coming up with creative entrepreneurial innovations in production and distribution of goods and services.

This should ensure

a better world than today, but not as good a world as it could have been had individuals come to understand the tyranny of politics and ineffectiveness of economic policies of control and been more receptive to freedom of choice and the power of the market.

Your new years resolution is to ensure your Smithean propensities win out over your inner Hobbesian.

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