Friday, July 15, 2005

Learning to Be Grateful for the Industrial Revolution

"Working hours increased radically during the industrial revolution, while the desirability of the work generally declined, being dangerous, toxic, repetitive, noisy, and otherwise unpleasent compared to the far from idyllic but basically acceptible alternative."

I would very much like to receive empirical support for the notion alleged above (and in his comments to my previous post) by Michael Vassar. By comparing the Amish with 19th century factory labor, Michael perpetuates a dreadful illusion founded by Marx, Engels, and Dickens: that rural peoples lived in some sort of idyllic bliss prior to the Industrial Revolution.

The Amish live on exceptionally productive land and benfit in numerous ways from the technological miracles of the Industrial Revolution, including the extremely low cost of any implement or supply they purchase through the modern marketplace. Pre-industrial agricultural people's lives in no way resembled Amish life today.

In Ireland rural peoples often lived in mud hovels that, when it rained, as it frequently did, were wet hell-holes. Imagine raising a baby in a wet hole in the mud. With respect to working hours, agricultural hours during agricultural seasons were as long, or longer than daylight - often longer than factory hours in the sun. It is not clear to me that, on balance, the desirability of work declined. Meanwhile, the Industrial Revolution rapidly made luxuries previously available only to the wealthy into cheap commodities enjoyed by the working classes: Cotton clothing, tea, sugar, books, and newspapers conspicuous among them. The overall desirability of pre-industrial life must include wearing the same wool clothing throughout the year. By the mid-19th century working class peoples could travel to distant cities via cheap rail tickets; a level of cosmopolitanism that was unheard of for the generations of rural peoples who had never left their village.

Social mobility began to increase as well during the Industrial Revolution, as various mechanical jobs (often in factories) became available to talented working class boys. This was the age of the working class inventor, with numerous inventions (and wealth) created by sons of farmers and other working class boys (see Paul Johnson's "The Birth of the Modern" for a great account of this aspect of the Industrial Revolution.)

Why does all of this matter today? Because poor rural peoples around the world continue to be impoverished by righteous do-gooders who attack "sweatshops" and capitalism on the misguided notion that applying our current standards of well-being will help their lives. I've met people from the developing world who state openly "Please give us your sweatshops" because they know that the jobs provided by multi-nationals are almost invariably better paying and working conditions than are currently available locally (including farm labor). If pre-industrial rural conditions are so rosy, why is it that Thai farming families sell their daughters into prostitution?

Prior to the Industrial Revolution, famine was a recurring fact of life for the working classes around the world. The Industrial Revolution, for the first time in history, created such an astounding increase in the standard of living that by 1830 or so, periodic large-scale famine never again occurred in Britain or the U.S. This achievement is strictly due to laissez-faire capitalism. The notion that pre-industrial conditions were "better" somehow fails to take into account the extraordinarily harsh lives of the starving poor prior to the introduction of full bellies, cotton clothing, books, cosmopolitan travel and careers open to talent that represent the amazing legacy of the Industrial Revolution.

Engels and Dickens told compelling stories that were based in actual conditions at the time. Unfortunately they did not provide a realistic account of pre-industrial alternatives. Lives continue to be destroyed by the illusions created by Engels and Dickens.

Sunday, July 10, 2005

Empirical Beliefs

I was convinced that economic liberty was largely beneficial, even for the poor, due to a series of changed factual beliefs. The "heretical" beliefs, derived from academic economics, include:

1. The standard of living for workers rose throughout the industrial revolution. The notion that "the rich get richer and the poor get poorer" was simply false.
2. The Great Depression, like the S&L crisis, was caused by government, not by an unregulated market.
3. In a free-market, monopoly has rarely been a serious problem. Government supported monopolies, such as labor unions, the AMA, taxi-cab medallion systems, public education, public utilities, the postal service, etc. have been (and continue to be) serious monopoly problems.
4. African-American wages increased as much, or more, before civil rights laws were passed as they did afterwards: a growing economy, rather than legislation, has improved the standard of living of minorities. Minimum wage laws and unions have been especially harmful to minorities. Affirmative action laws tend to benefit the wealthiest and best educated individuals within a minority while the least-skilled among the minority may be harmed by legally-mandated preferential treatment.
5. Union gains are largely made at the expense of other, non-union, workers and of consumers rather than at the expense of management and investors.
6. Wage and price controls are harmful, including minimum wage and rent controls. They lead to misallocations of goods (a more serious problem than I had realized) and they harm the poor disproportionately. Relatedly, price rationing is a wonderful policy tool and ought to be used more extensively, as in peak-load pricing of public transit.
7. Running out of natural resources (with the exception of unappropriated natural resources, such as clean air) is not a problem because of technological innovation and the price mechanism. People who ridicule the notion that technological innovation can prevent the horrors of resource depletion do not understand how effective price changes are in allocating resources.
8. The market can sometimes deal with externalities and collective action problems more effectively than can government (Coase theorem and public choice theory).
9. Because of a lack of clear ownership is the cause of externalities, more private property (such as of waterways, fishing rights, air, etc.) is the solution to most pollution and resource problems.
10. Economic growth is the most effective means of reducing the rate of population growth because birth rates collapse as nations industrialize.
11. Most regulatory legislation benefits existing firms, at the expense of potential entrants, and not consumers or workers.
12. The harms from environmental and safety regulation often exceed the benefits. The clear evidence of horrors which may occur without regulation are not ipso facto proof that the gains of regulation outweigh the costs. Liability law may serve as a substitute for regulation in some situations.
13. Most government redistribution is from one subset of the middle class to another rather than from rich to poor. In general it is from the more dynamic, creative, and industrious members of the middle class to a lazier or less creative segment which is in effect relying on law rather than exertion to obtain and protect their wealth.
14. Increasing consumer prices by means of taxes, regulations, etc. amounts to regressive taxation.
15. Advertising does not cause people to have the tastes that they have. Imposing elite tastes on others does not make them happier.
16. By and large, people are being paid what they are worth. If they are not being paid what they are worth, then someone can (and morally should) make a profit by employing them.
17. By and large, the market produces good products. If not, they someone can (and morally should) make a profit by producing better products.

What is interesting about this list to me is that most of the items on this list are largely accepted among academic economists today (including most Nobel laureate economists) whereas most of the items on this list are highly controversial (or are considered false) by most non-economists.

If I had not been convinced by economics that most of these items were mostly true most of the time, I would not be supportive of markets in the way that I am. Changed empirical beliefs were crucial.