Things look really good…if all you care about is money

Are things really getting better? Well, the answer is a resounding ‘yes’ if you’re a monetary consequentialist (i.e., think all that matters is maximizing the amount of monetary resources in the world).  A group of 21 economists plus one Bjørn Lomborg have a new book coming out soon that will survey 10 pressing global problems such as health, air pollution and gender equality in the world from 1900 to 2050.  According to Lomborg’s précis, they have found that on most of the dimensions, things are improving (only biodiversity is identified as having gotten worse), and the positive trends are expected to largely continue.  This will come as some relief to those bemoaning recent political, environmental and humanitarian crises.  But don’t break out the champagne just yet – their analysis evidently relies on a crude GDP-centric measurement tool that obscures a number of crucial issues. 

Lomborg et al. admirably set out to measure/predict past and future progress across the very domains.  Quantitative analysis of problems is important, to be sure, and having commensurable metrics can indeed be very useful.  Lomborg vastly overstates his case, though, when he infers from their findings that “the world is doing much better” and will likely continue to do so. This is because the book measures progress ultimately in terms of minimizing monetary costs – losses in percent of GDP, in particular.  This metric was presumably chosen because it is relatively easy to analyze and can be used as a foundation for comparing progress in diverse domains and across different time periods.

But percent cost to GDP can only tell you about how good things are overall (or overall within a specific domain) if all you care about is GDP.  This indicates an odd sort of morality according to which all that matters is money.  Well, if that’s the case, we don’t need very fancy analysis of the book to tell us how things are – we could just compare real GDP from varying eras, and note its growth to prove the optimistic point.  But more importantly, such a perspective would rely on an impoverished morality that cares about dollar signs, not people.  So, for instance, gender equity progress is measured purely in terms of the marginal contribution to the GDP via women’s participation in the workforce – not in terms of enfranchisement, reproductive rights, elimination of patriarchal norms or other concerns of those interested in gender equity.  The authors might contend that GDP is a mere proxy for well-being, and they are – like many economists – embarking on utilitarian analyses.  It is far from clear that GDP is a good proxy for well-being, though, and Lomborg certainly does not bother trying to make that point.

What’s more, a purely utilitarian outlook would itself be insufficient to capture what are often perceived as society’s contemporary ills.  Famously, utilitarianism cannot adequately account for distributional justice.  In an era where inequality is indeed rising within countries (though, notably, falling between countries) and movements like Occupy Wall Street become increasingly concerned with the disparity between the vast majority and a small wealthy minority, these concerns should be taken seriously by anyone making sweeping claims about global improvement.  Similarly, robust inalienable rights have a hard time under utilitarianism.  How can rights violations be meaningfully translated into GDP loss?  Indeed, it is perfectly plausible that an institution like slavery might contribute positively to GDP growth, and modern-day slaves make similar contributions.  On the Lomborg’s model, if slavery is a boon to GDP, then more slavery would count as a boon to the world and emancipation an unfortunate cost.

To be fair, the book title is more upfront about this limitation (titled “How much have global problems cost the world?”) than Lomborg’s popular press report (titled “Of course the world is better now than it was in 1900” or, in a different venue, “A better world is here”).  But given that most people will only see short press summaries like Lomborg’s than read the actual book (indeed, as it’s not out yet, I haven’t had the chance to peruse it – maybe they’re more careful about the scope of their claims in the text), it is crucial that those summaries are fair and don’t overstate the conclusions.  Lomborg may well be right that things are overall getting better, but the evidence he adduces is far too limited to make such a claim, and it is important to keep in mind competing considerations that the book’s economic analysis excludes.

One final thought – even on the book’s own terms, it is rather limitedly backwards-looking.  It may well be that the greatest future threat to GDP is not the 10 problems they list, but instead the existential risk posed by things like novel technological advances in biological warfare, artificial intelligence and other powerful, potentially world-altering forces.  Measuring existential risk is difficult as we can’t just look at past performance – humanity hasn’t been completely wiped out before (as far as we know) – and extrapolate from there.  But there are a number of research projects seeking to more accurately quantify those risks, and economists should take such issues into account.  The sheer magnitude of loss involved in extinction or near-extinction is such that a small increase in existential risk may well swamp marginal improvements due to fluctuations in, say, medical care.

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4 Responses to Things look really good…if all you care about is money

  • Anthony Drinkwater says:

    Owen,
    I don’t often jump to the defence of economists (or consequentialists) but it seems to me that Lomborg’s popular press reports’ titles are infinitely more accurate than your title and your second sentence, both of which mis-represent his views.
    Nowhere does he state or imply that all he cares about is money, nor that that he thinks all that matters is maximizing the amount of monetary resources in the world.

    • Owen Schaefer says:

      I beg to differ. While Lomborg doesn’t explicitly state that GDP is all that ultimately matters, his analysis implies this. At various points he makes the very general claim that the world really is doing better, including in his title and text. But the sole evidence he adduces for this very general claim reduces to the economic analysis that the loss to GDP due to various factors has fallen. If GDP savings are sufficient to show that things are all things considered getting better, this implies that nothing else not already captured in GDP could be a competing contribution to how well things are going – else we would need to know more about countervailing factors that might outweigh GDP savings before reaching Lomborg’s general conclusions.

      More charitably, he’s using GDP savings as a proxy for something like welfare. But as I said above, this is itself a questionable assumption (I think it too much equates well-being and wealth) and means takes on board the various limitations of utilitarianism for evaluating how well things are going overall.

  • Anthony Drinkwater says:

    Thanks for your reply, Owen
    I can agree that GDP is a very crude, and sometimes stupid, measure : for example, if we all charged our family and neighbours for services freely rendered, we would see a magical and totally imaginary increase in measured wealth. But crude as it is, it enables a fairly objective way of measuring at least a major part of “getting better”. And calculating the changes in the proportions of GDP affected to various aspects of life does not seem to me to imply at all that GDP is all that matters.
    If society “A” spends a far larger part of its resources (yes, crudely measured by GDP – but how else do you suggest we measure it?) on feeding itself than society “B”, it seems reasonable to conclude that society B is better off. And if society “B” has lower infant mortality rates and longer life expectancy as well, the validity of this conclusion is strengthened.
    This doesn’t imply, of course, that society “B” is a paradise, and you are right to stress that other things are vital to well-being, but I fail to see how this type of analysis implies that money is all that matters.

    • Owen Schaefer says:

      I agree your framing of Lomborg’s point seems more reasonable. But that’s only insofar as you’ve qualified it much more than Lomborg – you emphasize GDP as a way of measuring a ‘major part’ of getting better, not overall improvement like Lomborg insists. And your example of resources relies on very large differences (that might reasonably be thought to swamp any competing issues like inequality or rights violations); Lomborg’s claims do not rest on the extreme magnitude of improvement, as most improvements in the book are apparently in the 5-20% of GDP range.

      When those GDP differences are in that relatively marginal range, I do believe there is a lot of room for other factors (like inequality or rights violations) to outweigh or countervail them. The fact that Lomborg doesn’t consider these factors and is still perfectly willing to make broad claims about how well things are going overall implies to me that he thinks those factors not reducible to GDP savings aren’t all that important. But they are – for instance, as the GDP savings measurement appears to be insensitive to distribution, we cannot tell from this analysis whether those savings are really accruing to the masses or a few elites at the top. Given recent economic growth has mostly manifested itself in gains at the top, it’s not unreasonable to worry that those GDP savings are similarly being focused at the top.

      You suggest GDP is the best objective measurement of well-being we have. I don’t think that’s right – I would have more confidence in an analysis of improvements in terms of DALYs or QALYs, which are (a) much closer to what we actually care about when it comes to well-being and (b) more immune to unequal distributions (you can’t as easily accumulate massive QALYs/DALYs in a few elites the way you can with wealth). But even that sort of analysis would leave a large part of the picture out; the most reasonable statement may well be that there is currently no truly objective metric that adequately measures how well things are going overall. We have to focus on more limited domain-specific and outcome-specific claims.

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