Progress as Changing Patterns of Dependence

Progress. Hardly any word describes better what is special about the last 200-250 years of human history. Up to then, technological, economic, social progress was scarce, the European Medieval was characterized rather by regress, for instance. But then, then came the Great Transformation, the Industrial Revolution, and changed everything. Today, it is clear to (almost) everyone that the pursuit of progress is what defines humanity, even though it is not the whole definition. Yes, we have difficulties when it comes to agreeing on what progress is. But we mostly identify progress, at least implicitly, with technological progress – all the nice innovations, not necessarily technical in a narrow sense, but also e.g. institutional, that make us less dependent on nature. This is, indeed, what defines social progress in the end – our ability to overcome scarcities and obstacles “created” by nature, be it with regard to natural resources for production, be it our psyche. When it comes to the former, however, it may be argued that we do not really become less dependent – we only change the source of dependence.

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The Rationale for Being a Sceptical Economist

Recently I have renamed my blog to “The Sceptical Economist”. Partly, it is an ironic allusion to the self-called Skeptical* Environmentalist Bjørn Lomborg. Another reason for choosing this name is my dedication to rationality, pragmatism and scepticism – the foundation I try to base my worldview on. The last reason rationalizing my choice is my deep scepticism toward the dominant orthodoxy in the discipline I’m trained in – economics. This last reason I would like to explain more comprehensively today.

The Need for Government and Consumer Action to Tackle Climate Change

Climate change has been called “the greatest market failure in the history the world has ever seen”. As is the case with most market failures, the reason is an externality – the CO2 (and other greenhouse gases) dumped seemingly free of charge into the atmosphere. To correct for this economic system error, a price must be set for emitting carbon dioxide and other greenhouse gases, one way or another. The relevant questions are: who is to set the price, how should it be done, and how high? In the following I am going to explain why the answer to the first question is: governments and consumers, but not private firms.

The Global(ized) Antiglobalism

It is an interesting thing that what is commonly called the antiglobalist movement (by the media as well as by those involved themselves) is probably the best interconnected – one may say, globalized – movement in the world. The spread of Occupy Wall Street to Europe is a most recent example. In this context, two question may well be asked: is it right to call that movement anti-globalist? And what does it represent? What are the grounds such an interconnected movement has emerged? The latter questions must be answered first, before we can turn to the former one.

The Postindustrial Society’s Dilemma

Many economists and commentators are celebrating the alleged advent of the postindustrial society – a society whose economy is based on the services sector, with industry playing a negligible role at most. Indeed, the economies of the United States and many European countries are already post-industrial – the secondary sector (i.e., industry) accounts for about one-fourth of GDP in these countries, while services account for more than two-thirds. However, the recent (and still not overcome) crisis has shown that a postindustrial society has problems of its own. In an illuminating article a Polish journalist describes the postindustrial society’s dilemma – and since I cannot expect all of my blog’s readers to understand Polish, I shall summarize the article in what follows.

Globalization’s Trilemma and Sustainability

Can we enjoy democracy, nation state and deep economic globalization at once? This is the big question posed by the outstanding development economist Dani Rodrik in his recent book “The Globalization Paradox”. His answer is: no, we cannot have them all at the same time. We are forced to choose two of the goals instead, limiting our pursuit for the third one. As Rodrik further argues, since democracy is and remains one of humanity’s greatest achievements and one can hardly imagine a global government, economic globalization is what has to be constrained. I would like to show here that from the point of view of sustainability, his is an essential insight.

Ricardo’s Theory of International Trade versus Antiglobalist Arguments

There is one particular reason why my study of economics is very interesting: I am confronted, repeatedly, with traditional economic models, theories, and arguments. Some of them are of some value, many are not (maybe for training some basic economic understanding, but not for analysis of real world problems). Recently I attended a lecture in Advanced International Economics, in which the theory of international trade by David Ricardo was presented. For non-economists: Ricardo developed the first major theory of international trade (in the beginning of the 19th century). It is a very simple theory built upon the foundation of the so-called “comparative advantage”, stating that trade between two countries is mutually beneficial when their relative productivities are differ (not as in Adam Smith’s theory, where only absolute productivity was of meaning). For a short introduction see here.

After having explained the theory, the teacher wanted to show us how it can be applied to real world problems (though he himself had pointed out to some deficiencies due to basic assumptions of the theory): he picked up some “frequent antiglobalist arguments” against free trade and “defeated” them using Ricardo’s simple comparative-advantage model.

Frontiers of Economic Globalization?

At the Project Syndicate website you can find an interesting new article by Dani Rodrik. The column starts with an overview of the explanations of economic problems in distinct countries since 2008: