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by
Tyler Cowen
Why should costs and benefits receive less weight, simply because they are further in the future? When the future comes, these benefits and costs will be no less real. Imagine finding out that you, having just reached your twenty-first birthday, must soon die of cancer because one evening Cleopatra wanted an extra helping of dessert.
Most of us are altruistic, especially toward our own children and grandchildren. But this form of partial altruism does not make us care much about other people’s grandkids.
Political time horizons tend to be very short, often extending no further than the next election or the next media cycle.
If you own a Rembrandt painting, you’ll probably keep it in decent shape, even if you’re a selfish, uncultured bastard who doesn’t care about the artistic patrimony of the Dutch.
welfare economics holds up perfect markets as a normative ideal, yet future generations cannot contract in today’s markets.
Circa 2018, the future people of 2068 can’t express their preferences across a lot of the choices we are making today, such as how rapidly to boost future wealth or how much to mitigate the risk of serious catastrophes.4
if we discount the future by five percent, a person’s death today is worth about thirty-nine billion deaths five hundred years from now.
impatience will not justify the positive discounting of well-being across generations.
It cannot be argued that their forthcoming slice of time is worth less simply because they must wait for it.
If, for instance, we sent off a spacecraft at nearly the velocity of light, the astronauts would return to Earth, hardly aged, many millions of years hence. Should we pay less attention to the safety of our spacecraft, and thus to the welfare of our astronauts, the faster those vehicles go? Should we—as a result of positive discounting—not give them enough fuel to make a safe landing? And if you decline to condemn these brave astronauts to death, how are they different from other residents of the distant future? Instead of letting our speedy
Wealth can fund and enable better government, and that in turn gives rise to further wealth and better institutions. Institutional memories of economic success and good governance can persist for long periods of time.
there’s another way to approach the problem of time, and that is to ask how much the past is worth compared to the present.
The upshot is this: when we work from the past toward the present, we generally don’t—and shouldn’t—apply a standard rate of positive discount to make the later period of time less valuable.
In economic terms, the positive interest rate equalizes marginal rates of substitution over time,
One problem is that the needs of the suffering are so enormous that only a few able or wealthy individuals would be able to carry out individual life projects of their own choosing. Most people would instead become a kind of utility slave, serving only the interests of others and feeding themselves just enough to survive.
Our strongest obligations are to contribute to sustainable economic growth and to support the general spread of civilization, rather than to engage in massive charitable redistribution in the narrower sense. In the longer run, greater economic growth and a more stable civilization will help the poor most of all.
expressed as follows: we should redistribute wealth only up to the point that it maximizes the rate of sustainable economic growth.
There nonetheless remains a good case to be made for some degree of redistribution. For instance, a well-constructed welfare state can distribute education and nutrition more widely.
decrease feelings of desperation, both of which can help cement social order.
Excess transfers are bad for another reason, namely that they make it harder to absorb high numbers of immigrants from poorer countries.
But too high a level of benefits is likely to mean, one way or another, a lower level of migration and a corresponding reduction in the most effective anti-poverty program we have discovered to date. This too should limit our attachment to social welfare programs.
high-return activities like supporting immigration and producing new technologies with global reach, such as cell phones and new methods for boosting agricultural productivity.
Common sense morality tells us we should work and save to take care of our families and because we value our own lives.
I’m simply noting that the gap between common sense morality and utility maximization, properly construed, is much smaller than it might at first appear.
expected rates of return are negative, there are no long-lasting Crusonia plants, and my arguments, even if they hold up logically, do not apply.
But for the purposes of Crusonia plant arguments, positive economic growth need only be possible with some probability
Some people should make sacrifices to help out, but, because we must keep our economically advanced civilization up and running, not everyone should make such sacrifices.
In fact, we can think of the elderly as individuals who are poor in one particular dimension, namely in their future human capital.
My arguments therefore suggest a lower estimate of the value of a life, including an older life, than most other plausible frameworks, because replacement and replenishment of the civilizational flow are considered as one factor among many.
Unfortunately, when government spending needs to be limited or cut, investment is often the first area to go, while entitlements for the elderly remain intact. In this regard, I am suggesting some significant revisions to current trends.
from a consequentialist point of view, maximizing the growth rate takes priority over avoiding one-time expenditures and one-time adjustments. Even if those expenditures are large, we will earn back that value over time, due to the logic of compounding growth. So, contrary to what other frameworks might suggest, we should pay greater heed to the storms and less heed to the relocation costs.
In the model, the rate of return on capital diminishes as the capital stock increases. So when there is not much capital, the returns on investment and thus the incentives to invest are high, at least provided that the labor force is of good quality and institutions will protect the property rights of investors.
Under the increasing returns model, a one-time negative shock harms the long-run rate of growth, which implies that we must take great care to avoid or limit each and every possible negative shock. The Solow model suggests a picture of greater resilience, since catch-up effects prevent each and every mistake from compounding over time into a larger collapse.
The key question is whether gains and losses compound over time or dwindle into longer-run insignificance.
The key point is that small changes can very easily turn into big changes.
It only has to be the case that some small acts steer the future along a very different path.
I’m simply suggesting that we should take seriously the problems with the dogmatic assertion that we can ever absolutely know we are doing the world good.
If the correct social rate of discount were sufficiently high, uncertainty about the distant future wouldn’t matter so much because, given the logic of discounting, most future consequences would cease to matter within a few decades.
To put it simply, it is difficult to see a major biowarfare attack as favoring the long-term prospects of civilization on net, in expected value terms.
No matter how high the uncertainty surrounding long-term consequences, we can take some actions to favor good consequences in the short run. It is only necessary that those short-run good consequences are of sufficiently large and obvious value.
You can debate where to draw the line between the biowarfare attack and the dog’s leg, but once a distinction is made between cases which differ in terms of the size of the upfront costs, we have something to work with.
The Principle of Roughness: Outcomes can differ in complex ways.
The Principle of Roughness, when it applies, implies that we should not discriminate on the basis of relatively small benefits and losses.
floating in a sea of long-run radical uncertainty, so to speak. Only big, important upfront goals will, in reflective equilibrium, stand above the ever-present froth and allow the comparison to be more than a very rough one.
But the better conclusion is that the froth of uncertainty should induce us to elevate the import of large benefits relative to small benefits, so as to overcome the Principle of Roughness.
Our specific policy views, though we may rationally believe them to be the best available, will stand only a slight chance of being correct.
Imagine that your chance of being right is three percent, and your corresponding chance of being wrong is ninety-seven percent. Each opposing view, however, has only a two percent chance of being right, which of course is a bit less than your own chance of being right.
Yet in this instance it is wrong to set up the comparison as “baby’s life vs. $5 billion” and then have to choose. The correct comparison is “baby’s life vs. a froth of massive uncertainty with a gain of $5 billion tossed in as one element of that froth.”
Now let’s consider another crazy philosophical thought experiment: either we murder a specified baby, or aliens from Alpha Centauri will destroy the entire Earth. Here we have more room to be what is called a rights consequentialist.
First, believing in the overriding importance of sustained economic growth is more than philosophically tenable.
