development economics

What would a world without poverty look like?

PNRJ core principles, critique of neoclassical economics, development economics, education, ethics, futurism, inequality, public policy , , , , , , , , , , , , , , , ,

Mar 22 JDN 2461122

In my previous post I reflected on the ways that conventional measures of poverty seem inadequate—and that a richer understanding of poverty suggests that it is far more ubiquitous than such measures suggest.

In this post, I will ask: Given this richer understanding of poverty, what would a world without poverty look like? Is it something we can realistically hope to achieve?

In techno-utopian circles (looking at you again, Scott Alexander), it is common to speak of “post-scarcity”: A world where there is no poverty because resources are effectively unlimited.

I don’t think that’s possible.

Not for humans as we know them. Perhaps in a future where greed is a recognized and treatable psychiatric disorder, we could genuinely have an economy where people really just take whatever they want and it works out because nobody wants an unreasonable amount.

But the fact that there are people with hundreds of billions of dollars tells me that among humans as we know them, some people’s greed is just literally insatiable. Give them a moon and they’ll demand a planet; give them a planet and they’ll demand a solar system. Whatever they are getting out of more wealth (status? power? the dopamine hit of number go up?), they’re never going to stop getting it from even more wealth, no matter how much we give them. For if they were going to stop at a reasonable amount, they would have stopped four orders of magnitude ago.

So let’s try to imagine what a world would look like if it really had no poverty, but not by somehow producing such staggering amounts of wealth that everyone could literally take whatever they want.

I think the key is that it would require all basic material needs to be met.

Everyone would have, at minimum:

  • Clean air to breathe
  • Clean water to drink
  • Nutritious food to eat
  • Shelter from the elements
  • Security against theft and violence
  • Personal liberty and political representation
  • A basic education
  • A basic standard of healthcare

(I will note that these resonate quite closely with the UN Universal Declaration of Human Rights.)

Some of these needs can probably never be completely satisfied—there is an inherent tension between liberty and security which requires us to balance them against each other. A society with zero crime is a horrific totalitarian police state; a society with complete liberty is an equally horrific Hobbesian nightmare. But we have achieved, in most of the First World at least, a reasonable standard of security along with a great deal of liberty, and preserving that balance should be of a very high priority.

Even clean air and water would be difficult to satisfy perfectly: even if we pivot our whole economy to solar, wind, and nuclear power (as we very definitely should be doing!), some amount of pollution is probably necessary just to have a functioning industrial society. So we need to establish reasonable standards for what amounts of pollution exposure are safe, and effective mechanisms for ensuring that people are not exposed to pollution outside those standards—we have largely done the former, but seriously fail at the latter.

But probably the most difficult needs to satisfy are actually difficult to even define.

Just what constitutes a basic standard of education, and a basic standard of healthcare?

These seem like moving targets.

Let’s start with education:

Someone who is illiterate and can barely add two numbers together would be considered to have very poor education today, but would be considered completely average among peasants in the Middle Ages. Someone like me with a PhD has education well beyond what anyone had in the Middle Ages: While Oxford was already graduating doctors in the 12th century, those doctors didn’t have to write dissertations, and didn’t know nearly as much about the world as you must to earn a modern PhD. (Most of the mathematics required to get an economics PhD specifically literally had not been invented.)

So it’s conceivable that educational standards will continue to rise over time, especially if we are able to radically improve learning via new technologies. In the most extreme case, if everyone can just download knowledge like in The Matrix, then it wouldn’t be unreasonable to expect the average person to know as much as a typical PhD today in dozens of fields.

Suppose that such technology did exist. Would it be fair to consider someone poor if they didn’t have access to it?

Yes, I think it would.

Because if it’s really cheap and easy to give breathtakingly vast knowledge on a variety of subjects to anyone instantly, then letting some people have that while others do not puts those others at a severe disadvantage in life. If you must know how to solve partial differential equations to get a job, then someone who only made it through high school algebra isn’t going to be able to find jobs.

So I think what we’re really concerned about here is inequality: The education of a rich person should not be too much better than the education of a poor person, lest “meritocracy” simply reinforce the same generational inequality it was supposed to eliminate.

Now consider healthcare:

This, too, has radically improved over time. Indeed, I’m not really sure it’s fair to call Medieval doctors doctors at all; they lacked basic knowledge of human physiology and their intervention was as likely to hurt patients as to help them. Surgeons certainly existed: They knew how to amputate a gangrenous limb or suture a wound. (They did so without antiseptic, let alone anaesthetic!) But should you come to them with a fever or a headache, they would likely do you as much harm as good.

So we could imagine a world of Star Trek medicine, where you lie in a bed, get scanned for a few moments, and the doctor immediately knows what’s wrong with you and what kind of painless injection to give you to fix it.

Once again, we must ask: If you don’t have that, are you poor?

And again, I’m going to say yes.

If the technology exists to heal people this effortlessly, and some people get access to it while others do not, the latter are being allowed to suffer when their suffering could be easily alleviated.

But now we must consider: what if the technology exists, but it’s too expensive to use routinely?

Most technologies are like this when they are first invented. Over time, the technology improves (and the patents expire!) and they become cheaper and more widely available.

Unlike education, healthcare doesn’t usually impose large advantages on those who receive it—though it can, especially in a society where disabilities are not adequately accommodated.

So I think I’m prepared to allow “early adopters” of new medical technology, people who are rich enough to pay for advanced treatments before they are available to everyone—within certain limits. If some new treatment grants radically higher productivity or lifespan, then in fact I think we have a moral obligation to wait until it can be universally shared before we give it to anyone—precisely because of the risk of reinforcing generational inequality.

Once again, in our effort to define poverty, we end up returning to inequality: The rich should not be allowed to be too much healthier than the poor.

This definitely makes education and healthcare more complicated than the others.

While we can pretty clearly define how much food and water a human being needs to live, and we could provide it to everyone, and then nobody would be poor in terms of food or water.

But making nobody poor in terms of education and healthcare requires meeting a standard that may in fact increase over time, and it is no contradiction to imagine that someone living in the 31st century could be receiving better healthcare than I ever will and yet is still not receiving adequate healthcare based on the technology available.

Furthermore, that person demanding better healthcare is not being ungrateful or envious—they are quite reasonably demanding that society fairly allocate healthcare so that there aren’t some people who live in eternal youth while other people still die of old age.

Are they richer than I am? In some sense, perhaps. We could stipulate that in every material way they are better off than I am now. But there’s a treatment that could extend their life by centuries, and nobody’s giving it to them, because they can’t afford it—and that’s wrong. That makes them poor, and it makes their society unfair and unjust. It isn’t just a question of how many QALY they have; it’s also a question of what it would cost to give them a lot more.

But with all that said, I do believe that a world without poverty is possible.

In fact, I believe that technologically we could already provide that world, if we had the political will to do so. Maybe we don’t quite have the economic output to support it worldwide, but even that is not as far off as most people seem to think.

Providing an adequate standard of food and water, for example, we could already do with existing food supplies. It would cost about one-eighth of Elon Musk’s wealth per year, meaning that, with good stock returns (as he most certainly gets), he could very likely afford it by himself!

Clean air for all would be harder, but we are moving the right direction now that solar power is so cheap.

Universal liberty and security would require radical shifts in government in dozens of countries, so that one seems especially unlikely to happen any time soon—yet it is very definitely possible, and by construction only requires political change.

Universal education and healthcare would be very expensive, and most countries are too poor to really provide them on their own. They are not simply poor in money, but poor in skills: There aren’t enough doctors and teachers, and so we would need to use the ones we have to train up a new generation, and perhaps a new generation after that, before the world’s needs would really be met. (Fortunately, there are people trying to do this. But they don’t have enough resources to really achieve these goals.) So this is not a technological limitation, but it is an economic one; it will probably be at least another generation before we can solve this one.

What about universal shelter? Now there’s the rub. Even in prosperous First World countries, housing shortages and skyrocketing prices are keeping homeownership out of reach for tens of millions of people, and leaving hundreds of thousands outright homeless. We clearly do have the technology to produce enough homes, especially if we are prepared to build at high density; but the economic cost of doing so would be substantial, and our policymakers don’t seem at all willing to actually pay it. I think as long as housing is viewed as an asset one invests in rather than a good that one needs, this will continue to be the case.

The problem isn’t that we don’t have enough stuff. It’s that we are not sharing it properly.

What is poverty?

PNRJ core principles, critique of neoclassical economics, development economics, ethics, inequality , , , , , ,

Mar 15 JDN 2461115

What is poverty? It seems like a simple question, one we should all already know the answer to; but it turns out to be surprisingly complicated.

In practice, we mainly define some amount of income or consumption that is considered a “poverty line”, and declare that everyone below that line is in poverty, while everyone above it is not.

This post is about why that doesn’t work.

The most obvious question is of course: How do we draw that line? Some absolute level, or relative to income in the rest of society? Different places do it differently.

But I have come to realize that there is actually a deeper reason why there will never be a satisfying choice of “poverty line”:

There is no specific amount of income that could ever decide whether someone is in poverty.

It’s not a question of purchasing power. prices, or inflation. It’s not something you can adjust for statistically. It’s a fundamental error in defining the concept of poverty.

The problem is this:

Human needs are not fungible.

This Less Wrong post on “Anoxistan” really opened my eyes to that: No amount of money can make up for the fact that you’re missing something you need, be it a roof over your head, food on your table, clean water to drink, or medical care—or, as in the parable, air to breathe.

The best definition of poverty, then, is something like this:

Poverty is having to struggle to meet basic human material needs.

(I specify “material” needs, because someone who is alone and unloved has unmet human needs, but it is not the responsibility of even a utopian fully automated luxury communist society to provide for those needs. They may very well be miserable, but it does not make them poor.)

Maybe—maybe—in a well-functioning market economy, we can sort of muddle through by making a list of what everyone needs, finding the prices for all those goods and services, adding that up, and declaring that the poverty line. (This is often what we actually do, in fact.) The notion would then be that, as long as you have at least that amount of money, you can probably buy all the things you need.

But this rapidly breaks down if you aren’t facing the same prices as what were used to make that aggregation—which you almost never are, because nobody is the average American living in the average American city. And it also misses the fact that security is a human need, and simply having the necessary income for now is not at all the same thing as knowing that you’ll continue to have the necessary income in the future.

One Libertarian commentator asked me: “Would you really switch places with Rockefeller if you could?”

I had to think about it: I’d be losing a lot of things, for sure. No Internet, no cell phone, no computer, no video games. The quality of my clothes might actually be worse (though my wardrobe would surely be larger). Finding vegetarian food I enjoy might actually be more of a challenge, though I could surely import it from anywhere. Worst of all, I would lose access to many medical treatments I currently depend upon: Treatment of migraines in the late 19th century was considerably worse, and treatment of depression was essentially nonexistent.

Since this is about wealth, I think we can ignore the fact that I’d be moving into a terrifyingly racist, misogynistic and homophobic society. That itself might actually be the reason I wouldn’t really want to make the switch. But you can simultaneously believe that the late 19th century was a worse time than today for everyone who wasn’t a White cisgender heterosexual man, and also that Rockefeller was much richer than you’ll ever be.

But what would I gain? Power, though I have very little interest in that. Opportunities for philanthropy, which I do care about, but they’d benefit other people more than myself. Real estate—I don’t even own my own home, and Rockefeller owned multiple mansions, including, famously, the Casements in Florida.

But above all, I would gain security. Owning an oil company would allow me to live comfortably for the rest of my life, and most likely also allow my heirs to live comfortably for their entire lives, without me ever needing to work another day. I could still take jobs if I wanted them, but no employer would ever have any power over me. If I was unhappy at a job, I could just leave. If I wanted to spend a month, or a year, or a decade, without working at all, I could just do that. That is what it means to be rich. That is what Rockfeller had that I don’t think I will ever have.

The difference between being rich and being poor is security.

As long as anyone is struggling to make ends meet, poverty exists.

As long as anyone is afraid to lose their job, poverty exists.

As long as anyone is choosing not to have children because they don’t think they can afford them, poverty exists.

As long as bosses can abuse their employees and get away with it, poverty exists.

And in fact, it begins to look like poverty in the United States has not been decreasing over the last two generations, even as our per-capita GDP and median income have continued to rise and our population below “the poverty line” have fallen. (Indeed, that particular measure of “unable to afford children” has very clearly greatly increased, and is a very bad sign for our society’s future.)

This is how our economy is failing. It has given us lots more stuff, and made some things available to all that were once only available to the rich; but it has not freed us from the constant struggle to meet our basic needs, even though there are clearly plenty of resources available to do that.

Productivity by itself does not eliminate poverty

PNRJ core principles, development economics, ethics, inequality, market failure , , , , , , ,

Jan 25 JDN 2461066

Scott Alexander has a techno-utopian vision:

Between the vast ocean of total annihilation and the vast continent of infinite post-scarcity, there is, I admit, a tiny shoreline of possibilities that end in oligarch capture. Even if you end up there, you’ll be fine. Dario Amodei has taken the Giving What We Can Pledge (#43 here) to give 10% of his wealth to the less fortunate; your worst-case scenario is owning a terraformed moon in one of his galaxies. Now you can stop worrying about the permanent underclass and focus on more important things.

I agree that total annihilation is a very serious risk, though fortunately I believe it is not the most likely outcome. But it seems pretty weird to me to posit that the most likely outcome is “infinite post-scarcity” when oligarch capture is what we already have.

(Regarding Alexander’s specific example: Dario Amidei has $3.7 billion. If he were to give away 10% of that, it would be $370 million, which would be good, but hardly usher in a radical utopia. The assumption seems to be that he would be one of the prevailing trillionaire oligarchs, and I don’t see how we can know that would be the case. Even if AI succeeds in general, that doesn’t mean that every company that makes AI succeeds. (Video games succeeded, but who buys Atari anymore?) Also, it seems especially wide-eyed to imagine that one man would ever own entire galaxies. We probably won’t even ever be able to reach other galaxies!)

People with this sort of utopian vision seem to imagine that all we need to do is make more stuff, and then magically it will all be distributed in such a way that everyone gets to have enough.

If Alexander were writing 200 years ago, I could even understand why he’d think that; there genuinely wasn’t enough stuff to go around, and it would have made sense to think that all we needed to do was solve that problem, and then the other problems would be easy.

But we no longer live in that world.

There is enough stuff to go around—at the very least this is true of all highly-developed countries, and it’s honestly pretty much true of the world as a whole. The problem is very much that it isn’t going around.

Elon Musk’s net wealth is now estimated at over $780 billion. Seven hundred and eighty billion dollars. He could give $90 to every person in the world (all 8.3 billion of us). He could buy a home (median price $400,000—way higher than it was just a few years ago) for every homeless person in America (about 750,000 people) and still have half his wealth left over. He could give $900 to every single person of the 831 million people who live below the world extreme poverty threshold—thus eliminating extreme poverty in the world for a year. (And quite possibly longer, as all those people are likely to be more productive now that they are well-fed.) He has chosen to do none of these things, because he wants to see number go up.

That’s just one man. If you add up all the wealth of all the world’s billionaires—just billionaires, so we’re not even counting people with $50 million or $100 million or $500 million—it totals over $16 trillion. This is enough to not simply end extreme poverty for a year, but to establish a fund that would end it forever.

And don’t tell me that they can’t really do this because it’s all tied up in stocks and not liquid. UNICEF happily accepts donations in stock. Giving UNICEF $10 trillion in stocks absolutely would permanently end extreme poverty worldwide. And they could donate those stocks today. They are choosing not to.

I still think that AI is a bubble that’s going to burst and trigger a financial crisis. But there is some chance that AI actually does become a revolutionary new technology that radically increases productivity. (In fact, I think this will happen, eventually. I just think we’re a paradigm or two away from that, and LLMs are largely a dead end.)

But even if that happens, unless we have had radical changes in our economy and society, it will not usher in a new utopian era of plenty for all.

How do I know this? Because if that were what the powers that be wanted to happen, they would have already started doing it. The super-rich are now so absurdly wealthy that they could easily effect great reductions in poverty at home and abroad while costing themselves basically nothing in terms of real standard of living, but they are choosing not to do that. And our governments could be taxing them more and using those funds to help people, and they are by and large choosing not to do that either.

The notion seems to be similar to “trickle-down economics”: Once the rich get rich enough, they’ll finally realize that money can’t buy happiness and start giving away their vast wealth to help people. But if that didn’t happen at $100 million, or $1 billion, or $10 billion, or $100 billion, I see no reason to think that it will happen at $1 trillion or $10 trillion or even $100 trillion.

A new Santa Baby

PNRJ current events, development economics, inequality , , , , , , , , , ,

Dec 28 JDN 2461038

In the song “Santa Baby”, there are several high-value items requested as Christmas gifts. I’m currently working on a rewrite of the song that compares these items with humanitarian interventions of the same cost, making into a protest song—but so far I’ve had trouble making it actually singable with the meter of the song.

So for now, I thought I’d share my cost estimates and what could be purchased with those same amounts:

Sable: $1000 More expensive than most dogs, but really not that bad! In fact, some purebreds cost more than that.

1954 convertible: $28,000; yeah, classic cars are really not that expensive actually.

Yacht: There are yachts and then there are yachts. Could cost anywhere from $300,000 to $500 million.

Platinum mine: Hard to estimate, but with platinum costing $2400 per ounce and mines capable of producing thousands of ounces per year for 20 years, should be worth at least $100 million—and possibly as much as $1 billion.

Duplex: $400,000 or so, depending on the location.

Decorations at Tiffany’s: Depends on what you buy, but easily $10,000 to trim a whole tree; that store is so wildly overpriced that a jewellery box can cost you $2,000 and even an individual Christmas tree ornament can cost $160. (Seriously, don’t shop at Tiffany’s.)

Ring: Depends on a lot of factors; I’ll assume platinum, so that will run you anywhere from $400 for a basic band to $95,000 for one with a huge diamond.

The platinum mine is a clear outlier; unless you buy one of the largest yachts in the world, none of the other items even come close to its price. Aside from the yacht, all the other items add up to less than a million dollars, and even the cheapest platinum mines are clearly worth more than that.

What else could you buy for these amounts?

Well, a malaria net costs about $2, and on average every $3,000 spent saves a child’s life. A vaccine costs about $1-$5 per dose. So for the price of the platinum mine alone, we could buy 50 million malaria nets or 20 million vaccines, and either way expect to save the lives of about 30,000 children.

(Maybe some other time I’ll actually make this into something singable.)

On the other hand, if you really wanna buy a sable or a 1954 convertible, they’re really not that expensive. The former is cheaper than a purebred dog, and the latter costs about the same as a new car.

What is the cost of all this?

PNRJ core principles, current events, development economics, ethics, inequality, politics , , , , , , , , ,

Nov 23 JDN 2461003

After the Democrats swept the recent election and now the Epstein files are being released—and absolutely do seem to have information that is damning about Trump—it really seems like Trump’s popularity has permanently collapsed. His approval rating stands at 42%, which is about 42% too high, but at least comfortably well below a majority.

It now begins to feel like we have hope, not only of removing him, but also of changing how American politics in general operates so that someone like him ever gets power again. (The latter, of course, is a much taller order.)

But at the risk of undermining this moment of hope, I’d like to take stock of some of the damage that Trump and his ilk have already done.

In particular, the cuts to US foreign aid are an absolute humanitarian disaster.

These didn’t get so much attention, because there has been so much else going on; and—unfortunately—foreign aid actually isn’t that popular among American voters, despite being a small proportion of the budget and by far the most cost-effective beneficial thing that our government does.

In fact, I think USAID would be cost-effective on a purely national security basis: it’s hard to motivate people to attack a country that saves the lives of their children. Indeed, I suppose this is the kernel of truth to the leftists who say that US foreign aid is just a “tool of empire” (or even “a front for the CIA”); yes, indeed, helping the needy does in fact advance American interests and promote US national security.

Over the last 25 years, USAID has saved over 90 million lives. That is more than a fourth of the population of the United States. And it has done this for the cost of less than 1% of the US federal budget.

But under Trump’s authority and Elon Musk’s direction, US foreign aid was cut massively over the last couple of years, and the consequences are horrific. Research on the subject suggests that as many as 700,000 children will die each year as long as these cuts persist.


Even if that number is overestimated by a factor of 2, that would still be millions of children over the next few years. And it could just as well be underestimated.

If we don’t fix this fast, millions of children will die. Thousands already have.

What’s more, fixing this isn’t just a matter of bringing the funding back. Obviously that’s necessary, but it won’t be sufficient. The sudden cuts have severely damaged international trust in US foreign aid, and many of the agencies that our aid was supporting will either collapse or need to seek funding elsewhere—quite likely from China. Relationships with governments and NGOs that were built over decade have been strained or even destroyed, and will need to be rebuilt.

This is what happens when you elect monsters to positions of power.

And even after we remove them, much of the damage will be difficult or even impossible to repair. Certainly we can never bring back the children who have already needlessly died because of this.

Taylor Swift and the means of production

PNRJ development economics, futurism, inequality, market failure, politics , , , , , , , , , , , ,

Oct 5 JDN 2460954

This post is one I’ve been meaning to write for awhile, but current events keep taking precedence.

In 2023, Taylor Swift did something very interesting from an economic perspective, which turns out to have profound implications for our economic future.

She re-recorded an entire album and released it through a different record company.

The album was called 1989 (Taylor’s Version), and she created it because for the last four years she had been fighting with Big Machine Records over the rights to her previous work, including the original album 1989.

A Marxist might well say she seized the means of production! (How rich does she have to get before she becomes bourgeoisie, I wonder? Is she already there, even though she’s one of a handful of billionaires who can truly say they were self-made?)

But really she did something even more interesting than that. It was more like she said:

“Seize the means of production? I am the means of production.”

Singing and songwriting are what is known as a human-capital-intensive industry. That is, the most important factor of production is not land, or natural resources, or physical capital (yes, you need musical instruments, amplifiers, recording equipment and the like—but these are a small fraction of what it costs to get Talor Swift for a concert), or even labor in the ordinary sense. It’s one where so-called (honestly poorly named) “human capital” is the most important factor of production.

A labor-intensive industry is one where you just need a lot of work to be done, but you can get essentially anyone to do it: Cleaning floors is labor-intensive. A lot of construction work is labor-intensive (though excavators and the like also make it capital-intensive).

No, for a human-capital-intensive industry, what you need is expertise or talent. You don’t need a lot of people doing back-breaking work; you need a few people who are very good at doing the specific thing you need to get done.

Taylor Swift was able to re-record and re-release her songs because the one factor of production that couldn’t be easily substituted was herself. Big Machine Records overplayed their hand; they thought they could control her because they owned the rights to her recordings. But she didn’t need her recordings; she could just sing the songs again.

But now I’m sure you’re wondering: So what?

Well, Taylor Swift’s story is, in large part, the story of us all.

For most of the 18th, 19th, and 20th centuries, human beings in developed countries saw a rapid increase in their standard of living.

Yes, a lot of countries got left behind until quite recently.

Yes, this process seems to have stalled in the 21st century, with “real GDP” continuing to rise but inequality and cost of living rising fast enough that most people don’t feel any richer (and I’ll get to why that may be the case in a moment).

But for millions of people, the gains were real, and substantial. What was it that brought about this change?

The story we are usually told is that it was capital; that as industries transitioned from labor-intensive to capital-intensive, worker productivity greatly increased, and this allowed us to increase our standard of living.

That’s part of the story. But it can’t be the whole thing.

Why not, you ask?

Because very few people actually own the capital.

When capital ownership is so heavily concentrated, any increases in productivity due to capital-intensive production can simply be captured by the rich people who own the capital. Competition was supposed to fix this, compelling them to raise wages to match productivity, but we often haven’t actually had competitive markets; we’ve had oligopolies that consolidate market power in a handful of corporations. We had Standard Oil before, and we have Microsoft now. (Did you know that Microsoft not only owns more than half the consumer operating system industry, but after acquiring Activision Blizzard, is now the largest video game company in the world?) In the presence of an oligopoly, the owners of the capital will reap the gains from capital-intensive productivity.

But standards of living did rise. So what happened?

The answer is that production didn’t just become capital-intensive. It became human-capital-intensive.

More and more jobs required skills that an average person didn’t have. This created incentives for expanding public education, making workers not just more productive, but also more aware of how things work and in a stronger bargaining position.

Today, it’s very clear that the jobs which are most human-capital-intensive—like doctors, lawyers, researchers, and software developers—are the ones with the highest pay and the greatest social esteem. (I’m still not 100% sure why stock traders are so well-paid; it really isn’t that hard to be a stock trader. I could write you an algorithm in 50 lines of Python that would beat the average trader (mostly by buying ETFs). But they pretend to be human-capital-intensive by hiring Harvard grads, and they certainly pay as if they are.)

The most capital-intensive industries—like factory work—are reasonably well-paid, but not that well-paid, and actually seem to be rapidly disappearing as the capital simply replaces the workers. Factory worker productivity is now staggeringly high thanks to all this automation, but the workers themselves have gained only a small fraction of this increase in higher wages; by far the bigger effect has been increased profits for the capital owners and reduced employment in manufacturing.

And of course the real money is all in capital ownership. Elon Musk doesn’t have $400 billion because he’s a great engineer who works very hard. He has $400 billion because he owns a corporation that is extremely highly valued (indeed, clearly overvalued) in the stock market. Maybe being a great engineer or working very hard helped him get there, but it was neither necessary nor sufficient (and I’m sure that his dad’s emerald mine also helped).

Indeed, this is why I’m so worried about artificial intelligence.

Most forms of automation replace labor, in the conventional labor-intensive sense: Because you have factory robots, you need fewer factory workers; because you have mountaintop removal, you need fewer coal miners. It takes fewer people to do the same amount of work. But you still need people to plan and direct the process, and in fact those people need to be skilled experts in order to be effective—so there’s a complementarity between automation and human capital.

But AI doesn’t work like that. AI substitutes for human capital. It doesn’t just replace labor; it replaces expertise.

So far, AI is currently too unreliable to replace any but entry-level workers in human-capital-intensive industries (though there is some evidence it’s already doing that). But it will most likely get more reliable over time, if not via the current LLM paradigm, than through the next one that comes after. At some point, AI will come to replace experienced software developers, and then veteran doctors—and I don’t think we’ll be ready.

The long-term pattern here seems to be transitioning away from human-capital-intensive production to purely capital-intensive production. And if we don’t change the fact that capital ownership is heavily concentrated and so many of our markets are oligopolies—which we absolutely do not seem poised to do anything about; Democrats do next to nothing and Republicans actively and purposefully make it worse—then this transition will be a recipe for even more staggering inequality than before, where the rich will get even more spectacularly mind-bogglingly rich while the rest of us stagnate or even see our real standard of living fall.

The tech bros promise us that AI will bring about a utopian future, but that would only work if capital ownership were equally shared. If they continue to own all the AIs, they may get a utopia—but we sure won’t.

We can’t all be Taylor Swift. (And if AI music catches on, she may not be able to much longer either.)

Against Moral Relativism

PNRJ core principles, development economics, ethics, Logic of Kindness, tribal paradigm , , , , , , , , , , , ,

Moral relativism is surprisingly common, especially among undergraduate students. There are also some university professors who espouse it, typically but not always from sociology, gender studies or anthropology departments (examples include Marshall Sahlins, Stanley Fish, Susan Harding, Richard Rorty, Michael Fischer, and Alison Renteln). There is a fairly long tradition of moral relativism, from Edvard Westermarck in the 1930s to Melville Herskovits, to more recently Francis Snare and David Wong in the 1980s. University of California Press at Berkeley.} In 1947, the American Anthropological Association released a formal statement declaring that moral relativism was the official position of the anthropology community, though this has since been retracted.

All of this is very, very bad, because moral relativism is an incredibly naive moral philosophy and a dangerous one at that. Vitally important efforts to advance universal human rights are conceptually and sometimes even practically undermined by moral relativists. Indeed, look at that date again: 1947, two years after the end of World War II. The world’s civilized cultures had just finished the bloodiest conflict in history, including some ten million people murdered in cold blood for their religion and ethnicity, and the very survival of the human species hung in the balance with the advent of nuclear weapons—and the American Anthropological Association was insisting that morality is meaningless independent of cultural standards? Were they trying to offer an apologia for genocide?

What is relativism trying to say, anyway? Often the arguments get tied up in knots. Consider a particular example, infanticide. Moral relativists will sometimes argue, for example, that infanticide is wrong in the modern United States but permissible in ancient Inuit society. But is this itself an objectively true normative claim? If it is, then we are moral realists. Indeed, the dire circumstances of ancient Inuit society would surely justify certain life-and-death decisions we wouldn’t otherwise accept. (Compare “If we don’t strangle this baby, we may all starve to death” and “If we don’t strangle this baby, we will have to pay for diapers and baby food”.) Circumstances can change what is moral, and this includes the circumstances of our cultural and ecological surroundings. So there could well be an objective normative fact that infanticide is justified by the circumstances of ancient Inuit life. But if there are objective normative facts, this is moral realism. And if there are no objective normative facts, then all moral claims are basically meaningless. Someone could just as well claim that infanticide is good for modern Americans and bad for ancient Inuits, or that larceny is good for liberal-arts students but bad for engineering students.

If instead all we mean is that particular acts are perceived as wrong in some societies but not in others, this is a factual claim, and on certain issues the evidence bears it out. But without some additional normative claim about whose beliefs are right, it is morally meaningless. Indeed, the idea that whatever society believes is right is a particularly foolish form of moral realism, as it would justify any behavior—torture, genocide, slavery, rape—so long as society happens to practice it, and it would never justify any kind of change in any society, because the status quo is by definition right. Indeed, it’s not even clear that this is logically coherent, because different cultures disagree, and within each culture, individuals disagree. To say that an action is “right for some, wrong for others” doesn’t solve the problem—because either it is objectively normatively right or it isn’t. If it is, then it’s right, and it can’t be wrong; and if it isn’t—if nothing is objectively normatively right—then relativism itself collapses as no more sound than any other belief.

In fact, the most difficult part of defending common-sense moral realism is explaining why it isn’t universally accepted. Why are there so many relativists? Why do so many anthropologists and even some philosophers scoff at the most fundamental beliefs that virtually everyone in the world has?

I should point out that it is indeed relativists, and not realists, who scoff at the most fundamental beliefs of other people. Relativists are fond of taking a stance of indignant superiority in which moral realism is just another form of “ethnocentrism” or “imperialism”. The most common battleground of contention recently is the issue of female circumcision, which is considered completely normal or even good in some African societies but is viewed with disgust and horror by most Western people. Other common choices include abortion, clothing, especially Islamic burqa and hijab, male circumcision, and marriage; given the incredible diversity in human food, clothing, language, religion, behavior, and technology, there are surprisingly few moral issues on which different cultures disagree—but relativists like to milk them for all they’re worth!

But I dare you, anthropologists: Take a poll. Ask people which is more important to them, their belief that, say, female circumcision is immoral, or their belief that moral right and wrong are objective truths? Virtually anyone in any culture anywhere in the world would sooner admit they are wrong about some particular moral issue than they would assent to the claim that there is no such thing as a wrong moral belief. I for one would be more willing to abandon just about any belief I hold before I would abandon the belief that there are objective normative truths. I would sooner agree that the Earth is flat and 6,000 years old, that the sky is green, that I am a brain in a vat, that homosexuality is a crime, that women are inferior to men, or that the Holocaust was a good thing—than I would ever agree that there is no such thing as right or wrong. This is of course because once I agreed that there is no objective normative truth, I would be forced to abandon everything else as well—since without objective normativity there is no epistemic normativity, and hence no justice, no truth, no knowledge, no science. If there is nothing objective to say about how we ought to think and act, then we might as well say the Earth is flat and the sky is green.

So yes, when I encounter other cultures with other values and ideas, I am forced to deal with the fact that they and I disagree about many things, important things that people really should agree upon. We disagree about God, about the afterlife, about the nature of the soul; we disagree about many specific ethical norms, like those regarding racial equality, feminism, sexuality and vegetarianism. We may disagree about economics, politics, social justice, even family values. But as long as we are all humans, we probably agree about a lot of other important things, like “murder is wrong”, “stealing is bad”, and “the sky is blue”. And one thing we definitely do not disagree about—the one cornerstone upon which all future communication can rest—is that these things matter, that they really do describe actual features of an actual world that are worth knowing. If it turns out that I am wrong about these things, \I would want to know! I’d much rather find out I’d been living the wrong way than continue to live the same pretending that it doesn’t matter. I don’t think I am alone in this; indeed, I suspect that the reason people get so angry when I tell them that religion is untrue is precisely because they realize how important it is. One thing religious people never say is “Well, God is imaginary to you, perhaps; but to me God is real. Truth is relative.” I’ve heard atheists defend other people’s beliefs in such terms—but no one ever defends their own beliefs that way. No Evangelical Baptist thinks that Christianity is an arbitrary social construction. No Muslim thinks that Islam is just one equally-valid perspective among many. It is you, relativists, who deny people’s fundamental beliefs.

Yet the fact that relativists accuse realists of being chauvinistic hints at the deeper motivations of moral relativism. In a word: Guilt. Moral relativism is an outgrowth of the baggage of moral guilt and self-loathing that Western societies have built up over the centuries. Don’t get me wrong: Western cultures have done terrible things, many terrible things, all too recently. We needn’t go so far back as the Crusades or the ethnocidal “colonization” of the Americas; we need only look to the carpet-bombing of Dresden in 1945 or the defoliation of Vietnam in the 1960s, or even the torture program as recently as 2009. There is much evil that even the greatest nations of the world have to answer for. For all our high ideals, even America, the nation of “life, liberty, and the pursuit of happiness”, the culture of “liberty and justice for all”, has murdered thousands of innocent people—and by “murder” I mean murder, killing not merely by accident in the collateral damage of necessary war, but indeed in acts of intentional and selfish cruelty. Not all war is evil—but many wars are, and America has fought in some of them. No Communist radical could ever burn so much of the flag as the Pentagon itself has burned in acts of brutality.

Yet it is an absurd overreaction to suggest that there is nothing good about Western culture, nothing valuable about secularism, liberal democracy, market economics, or technological development. It is even more absurd to carry the suggestion further, to the idea that civilization was a mistake and we should all go back to our “natural” state as hunter-gatherers. Yet there are anthropologists working today who actually say such things. And then, as if we had not already traversed so far beyond the shores of rationality that we can no longer see the light of home, then relativists take it one step further and assert that any culture is as good as any other.

Think about what this would mean, if it were true. To say that all cultures are equal is to say that science, education, wealth, technology, medicine—all of these are worthless. It is to say that democracy is no better than tyranny, security is no better than civil war, secularism is no better than theocracy. It is to say that racism is as good as equality, sexism is as good as feminism, feudalism is as good as capitalism.

Many relativists seem worried that moral realism can be used by the powerful and privileged to oppress others—the cishet White males who rule the world (and let’s face it, cishet White males do, pretty much, rule the world!) can use the persuasive force of claiming objective moral truth in order to oppress women and minorities. Yet what is wrong with oppressing women and minorities, if there is no such thing as objective moral truth? Only under moral realism is oppression truly wrong.

Why is America so bad at public transit?

PNRJ development economics, inequality, politics, public policy , , , , , , , , , , , , , , , , ,

Sep 8 JDN 2460562

In most of Europe, 20-30% of the population commutes daily by public transit. In the US, only 13% do.

Even countries much poorer than the US have more widespread use of public transit; Kenya, Russia, and Venezuela all have very high rates of public transit use.

Cities around the world are rapidly expanding and improving their subway systems; but we are not here in the US.

Germany, France, Spain, Italy, and Japan are all building huge high-speed rail networks. We have essentially none.

Even Canada has better public transit than we do, and their population is just as spread out as ours.

Why are we so bad at this?

Surprisingly, it isn’t really that we are lacking in rail network. We actually have more kilometers of rail than China or the EU—though shockingly little of it is electrified, and we had nearly twice as many kilometers of rail a century ago. But we use this rail network almost entirely for freight, not passengers.

Is it that we aren’t spending enough government funds? Sort of. But it’s worth noting that we cover a higher proportion of public transit costs with government funds than most other countries. How can this be? It’s because transit systems get more efficient as they get larger, and attract more passengers as they provide better service. So when you provide really bad service, you end up spending more per passenger, and you need more government subsidies to stay afloat.

Cost is definitely part of it: It costs between two and seven times as much to build the same amount of light rail network in the US as it does in most EU countries. But that just raises another question: Why is it so much more expensive here?

This isn’t comparing with China—of course China is cheaper; they have a dictatorship, they abuse their workers, they pay peanuts. None of that is true of France or Germany, democracies where wages are just as high and worker protections are actually a good deal stronger than here. Yet it still costs two to seven times as much to build the same amount of rail in the US as it does in France or Germany.

Another part of the problem seems to be that public transit in the US is viewed as a social welfare program, rather than an infrastructure program: Rather than seeing it as a vital function of government that supports a strong economy, we see it as a last resort for people too poor to buy cars. And then it becomes politicized, because the right wing in the US hates social welfare programs and will do anything to make sure that they are cut down as much as possible.

It wasn’t always this way.

As recently as 1970, most US major cities had strong public transit systems. But now it’s really only the coastal cities that have them; cities throughout the South and Midwest have massively divested from their public transit. This goes along with a pattern of deindustrialization and suburbanization: These cities are stagnating economically and their citizens are moving out to the suburbs, so there’s no money for public transit and there’s more need for roads.

But the decline of US public transit goes back even further than that. Average transit trips per person in the US fell from 115 per year in 1950 to 36 per year in 1970.

This long, slow decline has only gotten worse as a result of the COVID pandemic; with more and more people working remotely, there’s just less need for commuting in general. (Then again, that also means fewer car miles, so it’s probably a good thing from an environmental perspective.)

Once public transit starts failing, it becomes a vicious cycle: They lose revenue, so they cut back on service, so they become more inconvenient, so they lose more revenue. Really successful public transit systems require very heavy investment in order to maintain fast, convenient service across an entire city. Any less than that, and people will just turn to cars instead.

Currently, the public transit systems in most US cities are suffering severe financial problems, largely as a result of the pandemic; they are facing massive shortfalls in their budgets. The federal government often helps with the capital costs of buying vehicles and laying down new lines, but not with the operating costs of actually running the system.

There seems to be some kind of systemic failure in the US in particular; something about our politics, or our economy, or our culture just makes us uniquely bad at building and maintaining public transit.

What should we do about this?

One option would be to do nothing—laissez faire. Maybe cars are just a more efficient mode of transportation, or better for what Americans want, and we should accept that.

But when you look at the externalities involved, it becomes clear that this is not the right approach. While cars produce enormous amounts of pollution and carbon emissions, public transit is much, much cleaner. (Electric cars are better than diesel buses, but still worse than trams and light rail—and besides, the vast majority of cars use gasoline.) Just for clean air and climate change alone, we have strong reasons to want fewer cars and more public transit.

And there are positive externalities of public transit too; it’s been estimated that for every $1 spent on public transit, a city gains $5 in economic activity. We’re leaving a lot of money on the table by failing to invest in something so productive.

We need a fundamental shift in how Americans think about public transit. Not as a last resort for the poor, but as a default option for everyone. Not as a left-wing social welfare program, but as a vital component of our nation’s infrastructure.

Whenever people get stuck in traffic, instead of resenting other drivers (who are in exactly the same boat!), they should resent that the government hasn’t supported more robust public transit systems—and then they should go out and vote for candidates and policies that will change that.

Of course, with everything else that’s wrong with our economy and our political system, I can understand why this might not be a priority right now. But sooner or later we are going to need to fix this, or it’s just going to keep getting worse and worse.

Housing should be cheap

PNRJ core principles, development economics, inequality, macroeconomics, market failure, public policy , , ,

Sep 1 JDN 2460555

We are of two minds about housing in our society. On the one hand, we recognize that shelter is a necessity, and we want it to be affordable for all. On the other hand, we see real estate as an asset, and we want it to appreciate in value and thereby provide a store of wealth. So on the one hand we want it to be cheap, but on the other hand we want it to be expensive. And of course it can’t be both.

This is not a uniquely American phenomenon. As Noah Smith points out, it seems to be how things are done in almost every country in the world. It may be foolish for me to try to turn such a tide. But I’m going to try anyway.

Housing should be cheap.

For some reason, inflation is seen as a bad thing for every other good, necessity and luxury alike; but when it comes to housing in particular—the single biggest expense for almost everyone—suddenly we are conflicted about it, and think that maybe inflation is a good thing actually.

This is because owning a home that appreciates in value provides the illusion of increasing wealth.

Yes, I said illusion. In some particular circumstances it can sometimes increase real wealth, but when housing is getting more expensive everywhere at once (which is basically true), it doesn’t actually increase real wealth—because you still need to have a home. So while you’d get more money if you sold your current home, you’d have to go buy another home that would be just as expensive. That extra wealth is largely imaginary.

In fact, what isn’t an illusion is your increased property tax bill. If you aren’t planning on selling your home any time soon, you should really see its appreciation as a bad thing; now you suddenly owe more in taxes.

Home equity lines of credit complicate this a bit; for some reason we let people collateralize part of the home—even though the whole home is already collateralized with a mortgage to someone else—and thereby turn that largely-imaginary wealth into actual liquid cash. This is just one more way that our financial system is broken; we shouldn’t be offering these lines of credit, just as we shouldn’t be creating mortgage-backed securities. Cleverness is not a virtue in finance; banking should be boring.

But you’re probably still not convinced. So I’d like you to consider a simple thought experiment, where we take either view to the extreme: Make housing 100 times cheaper or 100 times more expensive.

Currently, houses cost about $400,000. So in Cheap World, houses cost $4,000. In Expensive World, they cost $40 million.

In Cheap World, there is no homelessness. Seriously, zero. It would make no sense at all for the government not to simply buy everyone a house. If you want to also buy your own house—or a dozen—go ahead, that’s fine; but you get one for free, paid for by tax dollars, because that’s cheaper than a year of schooling for a high-school student; it’s in fact not much more than what we’d currently spend to house someone in a homeless shelter for a year. So given the choice of offering someone two years at a shelter versus never homeless ever again, it’s pretty obvious we should choose the latter. Thus, in Cheap World, we all have a roof over our heads. And instead of storing their wealth in their homes in Cheap World, people store their wealth in stocks and bonds, which have better returns anyway.

In Expensive World, the top 1% are multi-millionaires who own homes, maybe the top 10% can afford rent, and the remaining 89% of the population are homeless. There’s simply no way to allocate the wealth of our society such that a typical middle class household has $40 million. We’re just not that rich. We probably never will be that rich. It may not even be possible to make a society that rich. In Expensive World, most people live in tents on the streets, because housing has been priced out of reach for all but the richest families.

Cheap World sounds like an amazing place to live. Expensive World is a horrific dystopia. The only thing I changed was the price of housing.


Yes, I changed it a lot; but that was to make the example as clear as possible, and it’s not even as extreme as it probably sounds. At 10% annual growth, 100 times more expensive only takes 49 years. At the current growth rate of housing prices of about 5% per year, it would take 95 years. A century from now, if we don’t fix our housing market, we will live in Expensive World. (Yes, we’ll most likely be richer then too; but will we be that much richer? Median income has not been rising nearly as fast as median housing price. If current trends continue, median income will be 5 times bigger and housing prices will be 100 times bigger—that’s still terrible.)

We’re already seeing something that feels a lot like Expensive World in some of our most expensive cities. San Francisco has ludicrously expensive housing and also a massive homelessness crisis—this is not a coincidence. Homelessness does still exist in more affordable cities, but clearly not at the same crisis level.

I think part of the problem is that people don’t really understand what wealth is. They see the number go up, and they think that means there is more wealth. Real wealth consists in goods, not in prices. The wealth we have is made of real things, not monetary prices. Prices merely decide how wealth is allocated.

A home is wealth, yes. But it’s the same amount of real wealth regardless of what price it has, because what matters is what it’s good for. If you become genuinely richer by selling an appreciated home, you gained that extra wealth from somewhere else; it was not contained within your home. You have appropriated wealth that someone else used to have. You haven’t created wealth; you’ve merely obtained it.

For you as an individual, that may not make a difference; you still get richer. But as a society, it makes all the difference: Moving wealth around doesn’t make our society richer, and all higher prices can do is move wealth around.

This means that rising housing prices simply cannot make our whole society richer. Better houses could do that. More houses could do that. But simply raising the price tag isn’t making our society richer. If it makes anyone richer—which, again, typically it does not—it does so by moving wealth from somewhere else. And since homeowners are generally richer than non-homeowners (even aside from their housing wealth!), more expensive homes means moving wealth from poorer people to richer people—increased inequality.

We used to have affordable housing, just a couple of generations ago. But we may never have truly affordable housing again, because people really don’t like to see that number go down, and they vote for policies accordingly—especially at the local level. Our best hope right now seems to be to keep it from going up faster than the growth rate of income, so that homes don’t become any more unaffordable than they already are.

But frankly I’m not optimistic. I think part of the cyberpunk dystopia we’re careening towards is Expensive World.

Wrongful beneficence

PNRJ core principles, critique of neoclassical economics, development economics, ethics, inequality, market failure, public policy , , , , , , , ,

Jun 9 JDN 2460471

One of the best papers I’ve ever read—one that in fact was formative in making me want to be an economist—is Wrongful Beneficence by Chris Meyers.

This paper opened my eyes to a whole new class of unethical behavior: Acts that unambiguously make everyone better off, but nevertheless are morally wrong. Hence, wrongful beneficence.

A lot of economists don’t even seem to believe in such things. They seem convinced that as long as no one is made worse off by a transaction, that transaction must be ethically defensible.

Chris Meyers convinced me that they are wrong.

The key insight here is that it’s still possible to exploit someone even if you make them better off. This happens when they are in a desperate situation and you take advantage of that to get an unfair payoff.


Here one of the cases Meyers offers to demonstrate this:

Suppose Carole is driving across the desert on a desolate road when her car breaks down. After two days and two nights without seeing a single car pass by, she runs out of water and feels rather certain that she will perish if not rescued soon. Now suppose that Jason happens to drive down this road and finds Carole. He sees that her situation is rather desperate and that she needs (or strongly desires) to get to the nearest town as soon as possible. So Jason offers her a ride but only on the condition that […] [she gives him] her entire net worth, the title to her house and car, all of her money in the bank, and half of her earnings for the next ten years.

Carole obviously is better off than she would be if Jason hadn’t shown up—she might even have died. She freely consented to this transaction—again, because if she didn’t, she might die. Yet it seems absurd to say that Jason has done nothing wrong by making such an exorbitant demand. If he had asked her to pay for gas, or even to compensate him for his time at a reasonable rate, we’d have no objection. But to ask for her life savings, all her assets, and half her earnings for ten years? Obviously unfair—and obviously unethical. Jason is making Carole (a little) better off while making himself (a lot) better off, so everyone is benefited; but what he’s doing is obviously wrong.

Once you recognize that such behavior can exist, you start to see it all over the place, particularly in markets, where corporations are quite content to gouge their customers with high prices and exploit their workers with low wages—but still, technically, we’re better off than we would be with no products and no jobs at all.

Indeed, the central message of Wrongful Beneficence is actually about sweatshop labor: It’s not that the workers are worse off than they would have been (in general, they aren’t); it’s that they are so desperate that corporations can get away with exploiting them with obviously unfair wages and working conditions.

Maybe it would be easier just to move manufacturing back to First World countries?

Right-wingers are fond of making outlandish claims that making products at First World wages would be utterly infeasible; here’s one claiming that an iPhone would need to cost $30,000 if it were made in the US. In fact, the truth is that it would only need to cost about $40 more—because hardly any of its cost is actually going to labor. Most of its price is pure monopoly profit for Apple; most of the rest is components and raw materials. (Of course, if those also had to come from the US, the price would go up more; but even so, we’re talking something like double its original price, not thirty times. Workers in the US are indeed paid a lot more than workers in China; they are also more productive.)

It’s true that actually moving manufacturing from other countries back to the US would be a substantial undertaking, requiring retooling factories, retraining engineers, and so on; but it’s not like we’ve never done that sort of thing before. I’m sure it could not be done overnight; but of course it could be done. We do this sort of thing all the time.

Ironically, this sort of right-wing nonsense actually seems to feed the far left as well, supporting their conviction that all this prosperity around us is nothing more than an illusion, that all our wealth only exists because we steal it from others. But this could scarcely be further from the truth; our wealth comes from technology, not theft. If we offered a fairer bargain to poorer countries, we’d be a bit less rich, but they would be much less poor—the overall wealth in the world would in fact probably increase.

A better argument for not moving manufacturing back to the First World is that many Third World economies would collapse if they stopped manufacturing things for other countries, and that would be disastrous for millions of people.

And free trade really does increase efficiency and prosperity for all.

So, yes; let’s keep on manufacturing goods wherever it is cheapest to do so. But when we decide what’s cheapest, let’s evaluate that based on genuinely fair wages and working conditions, not the absolute cheapest that corporations think they can get away with.

Sometimes they may even decide that it’s not really cheaper to manufacture in poorer countries, because they need advanced technology and highly-skilled workers that are easier to come by in First World countries. In that case, bringing production back here is the right thing to do.

Of course, this raises the question:

What would be fair wages and working conditions?

That’s not so easy to answer. Since workers in Third World countries are less educated than workers in First World countries, and have access to less capital and worse technology, we should in fact expect them to be less productive and therefore get paid less. That may be unfair in some cosmic sense, but it’s not anyone’s fault, and it’s not any particular corporation’s responsibility to fix it.

But when there are products for which less than 1% of the sales price of the product goes to the workers who actually made the product, something is wrong. When the profit margin is often wildly larger than the total amount spent on labor, something is wrong.

It may be that we will never have precise thresholds we can set to decide what definitely is or is not exploitative; but that doesn’t mean we can’t ever recognize it when we see it. There are various institutional mechanisms we could use to enforce better wages and working conditions without ever making such a sharp threshold.

One of the simplest, in fact, is Fair Trade.

Fair Trade is by no means a flawless system; in fact there’s a lot of research debating how effective it is at achieving its goals. But it does seem to be accomplishing something. And it’s a system that we already have in place, operating successfully in many countries; it simply needs to be scaled up (and hopefully improved along the way).

One of the clearest pieces of evidence that it’s helping, in fact, is that farmers are willing to participate in it. That shows that it is beneficent.

Of course, that doesn’t mean that it’s genuinely fair! This could just be another kind of wrongful beneficence. Perhaps Fair Trade is really just less exploitative than all the available alternatives.

If so, then we need something even better still, some new system that will reliably pass on the increased cost for customers all the way down to increased wages for workers.

Fair Trade shows us something else, too: A lot of customers clearly are willing to pay a bit more in order to see workers treated better. Even if they weren’t, maybe they should be forced to. But the fact is, they are! Even those who are most adamantly opposed to Fair Trade can’t deny that people really are willing to pay more to help other people. (Yet another example of obvious altruism that neoclassical economists somehow manage to ignore.) They simply deny that it’s actually helping, which is an empirical matter.

But if this isn’t helping enough, fine; let’s find something else that does.