Tyler Cowen has written a moral philosophical treatise that favours sustainable economic growth as the major tool for enriching humanity, but contained by (1) strong forms of human rights and (2) a heavy weighting to the distant future and (3) a wider definition of wealth than GDP which therefore puts much more weight on managing the environment plus the government investing in ideas and other intangible capital for the long-term.

I summarise what a few of the ideas mean to me. My friends will know a lens of the long-term, art/theatre, intangible capital, sustainability, mortality and healthcare, and forms of happiness have been topics of interest to me.

I found it a thoughtful counterpoint to “de-growth” economic philosophers, such as Kate Raworth. Raworth puts much more emphasis on the limits of environmental capital and therefore “circular economy”. Cowan has good regard for the environment but puts weight on economic growth as being the major driver lifting humanity’s wealth-plus over many years of history. I think the interested reader should attempt both sets of work to understand the different lens they come from. Although, my reading of the works suggest much practical overlap even if Raworth refutes “growth” and Cowan claims “growth” as the major driver of humanity. The protection of environmental capital is an overlap, as is protecting future generations, as is a criticism of current GDP measures as a proper measure of wealth.

I like Cowan’s approach of plurality (there are many type of thing that makes us “happy” not one type of thing - the ancient greeks had a few types of love and a few types of happiness, but my reflection is that there are probably even more) and the way important ideas or conclusions cut across traditional lines of left/right thinking.  However, if you’ve already dismissed “trickle down” economics and dislike several libertarian notions you’ll likely disfavour certain of Cowan’s conclusions.

Other ideas that spill out is this focus on ideas. This chimes with the work on intangibles I am interested (cf. Haskel & Westlake, Capitalism without Capital) and the very heavy focus of my day job investing work on ESG/intangibles/Sustainability as well as a focus on long-term investing. (see links end)

Cowan ends up on the same page as Nassim Taleb with respect to climate change (I think) because of the emphasis on distant future and weighting future generations heavily. Taleb arrives there via precautionary principle applied to complex system of only one planet. (see links end)

Cowan emphasises not “sweating the little things” and putting a focus on the big material changes. This chimes with the maxims of many investors that boil down investing work to a few small number of important drivers and not a host of detail. Small items (butterfly wings causing a hurricane) can have large impacts but it’s too difficult to predict to sweat them too much. (cf. consequentialist thinking)

Cowan’s focus on the distant future has some regard to restitution for the past. Cowan ends up suggesting restitution with a small premium is a viable solution. This is an interesting outcome to me, especially with respect to climate change and slavery. Perhaps it would argue for a little bit more restitution for black Americans today (as potentially argued by Ta-Nehisi Coates and others) and also that advanced world countries (mainly the US as the major polluter historically) should be doing more to balance their large historic levels of pollution. I’m unsure that conclusion though will have much majority buy-in with the American people - but as a form of restorative justice, I think it could resonate well with historically oppressed minorities and level 1 / 2 countries (cf Rosling definitions).

Cowan has less weight on (the enormous expense) of caring for the last years of the elderly at the expense of the young. I think this is interesting as it chimes with some practical thinkers on healthcare. (It chimes with with science fiction work. Cowan seems struck by imaginative Sci Fi challenges). I’m particularly thinking of Atul Gawande’s book - On Mortality (see link end) but also the health economic work suggesting enormous cost in the last 6 to 12 months of life and of limited quality of life / life extension benefits. This would be better spent on other investment (the young or simply long-term ideas generation). One almost-irony being that when terminally ill choose positive palliative care, they often live longer than groups who opt for medicalised treatment to the very end - “we live longer when stop trying to live longer”. This gives a moral frame work for a thorny practical problem.

Cowan has some weight on faith. In some ways, one has to, if one puts weight on the distant future. That is an act of faith.

OK… on to some details:

Right/Wrong are typically absolute. Humans are very prone to error - irrational minds. We need to be fortified against self-deception.

“What’s good about human life can’t be boiled down to any single value” this plural view, I liked a lot. It resonated with what I understand through my life - I’m a husband, father, son - I’m a playwright - some time artist - reader - writer - long-term investor - cook and food lover. I don’t practise much sport or gym but I’ve cried thinking about my father while listening to Europe re-claim the Ryder cup, I’ve cheered and commiserated with my mother while watching Liverpool football club, I’ve sat through a 5 day cricket test match like a long Shakespeare play.

This messiness is important and I find Cowan partially reconciles this. Cowan reconciles much with a “common sense morality” which I observe most people typically apply in practice.

“We need to make room for beauty and justice”  and mercy and kindness and art and …. I find too often economists can not make room for these notions whereas I observe humans spend much time on them.  

And so, Cowan suggests:

“

First, I do not take the productive powers of economies for granted. Production could be much greater than it is today, and our lives could be more splendid. Or, if we make some big mistakes, production could be much lower, and we could all be much poorer.

…

Second, I will seek to revise some of our intuitive assumptions about moral distance. Which individuals should exert more of an influence over our choices, and which should exert less? I will argue, for instance, that the individuals who will live in the future should be less distant from us, in moral terms, than many people currently believe. Their interests should hold greater sway over our calculations, and that means we should invest more in the future. Even though it is sometimes hard for us to imagine how our actions will affect future people, especially those from the more distant future, their moral import remains high. I will therefore be asking humans to have greater faith in the future….”

I’ve realised this blog is going on, so I’m going to for now briefly skimp the 6 areas of debate Cowan covers:

Time - weighting the future/past

Aggregation - weighing one individual’s choice over another

Rules - Cowan speaks up for rules

Rights - Cowan speaks up for rights

Radical Uncertainty - how to make better choices under uncertainty

Common sense morality - work hard, take care of our families, live virtuous lives but helping other periodically where we are able to (with exceptions for the Martin Luther King’s of this world…)

To hit two  major thoughts:

(I) the productive powers of the economy

(II) the weighting of “moral distance” of future generations to us

and I hope to come back to some of his other problems in another blog.

so on (i) Cowan advocates that governments / society should maximise the long run rate of wealth/economic growth and that it should be measured by “wealth plus”

Wealth plus is GDP plus measures of leisure time, household production and environmental amenities.

“Wealth Plus : The total amount of value produced over a certain time period. This includes the traditional measures of economic value found in GDP statistics, but also includes measures of leisure time, household production, and environmental amenities, as summed up in a relevant measure of wealth. In this context, maximizing Wealth Plus does not mean that everyone should work as much as possible. A fourteen-hour work day might maximize measured GDP in the short run, but it would be less propitious over time once we take into account the value of leisure, not to mention the potential for burnout. Still, this standard is going to value a strong work ethic. 1 Maximizing Wealth Plus also does not mean destroying the natural environment. It’s now well understood that environmental problems can lower or destroy economic growth through feedback effects. We should therefore protect the environment enough to preserve and indeed extend economic growth into the more distant future. More broadly, the principle of Wealth Plus holds that we should maintain higher growth over time, and not just for a single year or for some other, shorter period of time.”

My particular concern here is that wealth plus is still too narrow a definition and fails to encompass certain notions of humanity he refers to elsewhere.

I can accept maximising wealth plus especially with a view to the distant future can increase human prosperity and happiness, but I wonder on the many intangible items that are hard to measure (not all things that count, are countable) that are left out - art, dance, community - all the “social and human” capitals - perhaps that is partly captured by the idea of “leisure” time but even in our financially poorest communities there is dance and song and art - and those items have value.

Perhaps the concept of “capital” is simply a poor notion for them. Linguistically and culturally come places shy away from the idea of human capital as it too closely evokes notions such as forced work labour camps.

I also wonder about causality here. There is the argument of Milton Friedman to seek corporate profits (and social goods spill out of that) but that’s potentially evolving into a wider stakeholder model that corporate profits spill out of fulfilling human wants and needs - that profits or wealth is an effect of labour/capital/resources/ideas and that  the total wealth mix of a nation mix contains much “other capital” not quite captured in the wealth plus definition.

Still the wealth plus definition does raise three questions that cut across political lines:

He summarises;

“We can already see that three key questions should be elevated in their political and philosophical importance, namely:

What can we do to boost the rate of economic growth ?

What can we do to make our civilization more stable ?

How should we deal with environmental problems ?”

One last thought before moving on.  Cowen argues for policies that do not pursue immediate growth too vigorously. He cites the Shah of Iran trying to modernise Iran too fast and arguably causing more damage that a more cautious approach.

I’m intrigued by this incrementalist view. It chimes with several observations I have. I wonder if you can see brexit through this lens. Brexit seems now to be a fairly radical break and the schisms it is throwing up are not incremental.

It also may not apply so readily on the company level. Companies may need more radical action to return to growth or become irrelevant. However, macro level policies may do better building on what that country has already built up.  Will dwell on it more.

Also, cf. Amryta Sen’s work.

Conclusion, has thrown up lots of ideas. Worth a read if you’d like to be challenged by a short read on a moral philosophy that ends up advocating for the environment, for growth, for sustainability and for thinking more about future generations.

As a counterpoint on trickle down economics read: try this from some IMF economists https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

If this has gone too deep, try  (a centre-left view) 23 Things They Don't Tell You About Capitalism

by Ha-Joon Chang Amazon link here https://amzn.to/2zoSbwe

On intangibles see: https://www.thendobetter.com/investing/2017/11/14/the-rise-of-intangibles-capitalism-without-capital

Nassim Taleb on climate here: https://www.thendobetter.com/investing/2017/9/18/nassim-taleb-climate-change-risk

Atul Gawande On Mortality: https://www.thendobetter.com/blog/2018/8/16/mortality-how-to-die-well

Cowen’s book - Amazon link here.