At least since Thomas Carlyle’s infamous denigration of economics as “gloomy science” (for economists with the audacity to oppose slavery), it is common to denigrate economics as a discipline that promotes depression on the one hand and narrow self-interest the other. Perhaps the two are related, says the reviewer.
My own experience of economics runs counter to these claims. Studying economics instilled in me a deep sense of gratitude. When you are grateful for something, you appreciate the benefits you have received, says the Oxford English Dictionary.
That’s what I feel.
More than that, University of California, psychologist Davis Robert Emmons says gratitude is a “social emotion” “because it forces us to see how we have been supported and affirmed by other people”. The study of economics crystallizes and clarifies how we depend on others to sustain us. Let’s see why.
Ours is a great escape
No one can spend more than a few minutes studying economic history without noticing something amazing.
The big fact. The Great Enrichment. The great escape. Whatever your preferred terminology, it’s a story that’s been told a million times, though it can’t be told enough. We are, for the first time in history, staggeringly rich. It’s here, visually. To take just one snapshot, the average per capita income of an Englishman has increased some thirty times over the past three centuries, after millennia of no growth at all.
Which of us, if we had a time machine, would voluntarily swap places with Louis XIV, the extravagant French “Sun King”, symbol of the era of royal absolutism? He is a good example because he stood – and died – on the precipice of prosperity.
Let us dwell on a single aspect of Louis’ pilgrimage in this vale of tears: his health. Before dying an agonizing death from gangrene (leaving his soul, he cried out the words of Psalm 72, “O Lord, hasten to help me”), King Louis suffered from diabetes throughout his life, boils, dizziness, gout and migraines. If Louis was an outlier, it was only because he had reached the ripe old age of seventy-six. Thomas Hobbes’ most famous words that life in the state of nature is “wicked, brutal and short” are an apt description of all life on planet Earth for 99% of human history. The average “elite” born before the Great Enrichment enjoyed a standard of living that most of us would dismiss as intolerable.
Yet Hobbes’ description now rings hollow for more than half of humanity. In fact, the lion’s share of material inequality is a relatively new experience for humanity, as for the first time many are wealthy. As a Nobel Prize-winning economist, Angus Deatonsays: “Inequality is often a result of progress. Instead of virtually everyone being poor, more than half of the world’s population is now wealthy by historical standards. The intended targets of 17th-century “sumptuary laws”—edicts that restricted the consumption of relatively wealthy people—were poor, even by poor American standards. Their plumbing was primitive and contributed to disease, their caloric intake was meager, and food was often a source of disease, yet they knew none of the luxuries of modern technology. With these facts alone, we are on the path to gratitude.
But the gratitude springs from another source: the Great Escape is recent. My own grandfather, born two months to the day before Pearl Harbor, grew up with a dirt floor and attended a one-room school from grades one through eight. For an average boy born in the Midwestern United States, this was not an unusual experience. The odds of you being born on the “good” side of the Great Enrichment of history are incredibly small.
Of course, it is always possible to identify discouraging trends, but the solution is always to zoom out. Even a global pandemic, gasoline prices, wars and rumors of war could not change the sign of the slope of the trend line of humanity since the 18e century. While most Americans to believe the world becomes worsethis belief does not fit easily with a lots of factseach of which is downstream of the Great Enrichment of mankind.
Whichever way you break it down, the evidence points to the same conclusion: We are globally richer than ever. From fatal car accidents (falling) to reforestation (rising), to the prices of most consumer goods measured in the time-cost it takes to acquire them (falling), to their quality (rising), to the cancer deaths per capita (down), the Great Global Enrichment continues. Since I was born, over a billion souls have left crushing poverty in the dust.
We stand on the shoulders of a giant (accumulation of capital)
It would be one thing if we could take credit for this extraordinary wealth explosion. It certainly wouldn’t facilitate gratitude to the same extent. But where do all these blessings come from? The answer is complicatedbut to paraphrase the feeling of barack obama, “we” – the living – are not responsible for it. The cornucopia of consumer goods we enjoy is the product of a vast network of constructed capital goods bequeathed by our ancestors. Mines, machinery, factories, equipment and infrastructure are prerequisites for the production of such a wide range of consumer goods.
Accumulating this vast network of capital goods requires economy and time. Saving is the restriction of present consumption in search of a better future. Sacrifice. But the “time” element means that the savers themselves do not benefit from all these future advantages. Rather, those of us who have done not making sacrifices reaping at least some of the benefits of previous rounds of savings and investment. In contemporary economic parlance, the existence of this extremely complex capital structure is a “positive externality”. Our ancestors gave us benefits without us paying them a penny. Thanks.
We depend on distant others
All of these capital goods wouldn’t be worth much without the people to work on them. The division of labor is a worldwide phenomenon, today more than ever. Even Adam Smith observed in 1776 that the common woolen coat that protects the average day laborer from the elements is the product of the cooperation of a multitude of anonymous “others”. No single individual could create a pencilnot to mention a decent coat, definitely not a smartphone. We live, as Paul Seabright says, “in the company of strangers.”
What was true in Smith’s time is magnified a hundredfold in ours. Just look at the volume of international trade since The Second World War. Since the exchange is not zero-sum – it benefits both parties – not only do we depend on a host of anonymous others, but we also bless them with our trust.
Economics teaches us that the main spectacle in societies based on Hume’s trifecta of “ownership, contract, and consent” is cooperation and coordination, not conflict and competition. Even better, empirical evidence suggests that After and After societies are approaching this Humean ideal.
The study of economics highlights our mutual dependencies, and the result is a spontaneous bubbling of gratitude. We come to understand that each of us in a commercial society serves his neighbor and is served by his neighbor. None of us would go far by going it alone, like a hermit. We can only earn an income by providing others with something they value enough to part with their own hard-earned money. Seizing this point, we no longer view others as rivals in a hopeless game of competition for scarce resources. Rather, we view them as a contribution to our own success. We recognize that their prosperity does not come at our expense.
Exchange turns strangers into friends
Cooperation through the division of labor does more than “deliver the goods”. Trade and commercial activity turn some of Seabright’s “outsiders” into close companions and sometimes even friends. The idea that commerce humanizes its participants and encourages the virtues of honesty, thrift, and diligence has a long line in economics, with Montesquieu and Smith making arguments along these lines.
As Mises describes in his magnum opus, human action, exchange provides the bonds that transform isolated men into a society. The economy is sometimes called “catallactic” (or, even more rarely, “symbiotic”), from the Greek word “katalaxia“, which conveys a rich understanding of the conversion of an enemy into a friend through the act of exchange.
The exchange society greatly increases our number of associates beyond what would be possible in a society where we pursue our own self-sufficient and self-sufficient acts of production. Returning for a moment to my grandfather’s house, his business trips took him around the world and allowed him to establish friendships with people from cultures which, only a generation before, were closed to all Western contact.
Of course, it would be a mistake to adopt a Pollyanna-like view of the social world. On the one hand, material progress is far from automatic; it depends on the “right” economic institution. Although the details are much debated, all economists agree that informal and formal institutions – the “rules of the game” – hinder or facilitate the accumulation of capital and the division of labor from which we come. to speak. The classic example is to compare the divergent results of South Korea and North Korea. Hume’s “Property, Contract and Consent” are the institutional substrates that give rise to the accumulation of capital and the division of labor which, in turn, generate prosperity.
On the other hand, there is still real poverty in the world (about one billion people in the world), not everyone in the rich countries lives in prosperity and real injustice, to varying degrees, persists . These facts, however, are reasons to work toward the kind of institutional reform that has brought justice and prosperity to so many others. Gratitude is not synonymous with apathy, nor an unqualified defense of the status quo. On the contrary, grateful hearts want to see the kind of prosperity they have enjoyed extended to others near and far. Fortunately, economics also offers the recipe for prosperity, if only we have ears to listen.