The economically ideal society

David S. Landes’ The Wealth and Poverty of Nations is my favorite book on economic evolution and economic history up to and including the industrial revolution. Its main question is “Why did England win world domination?” There were plenty of contenders – The Netherlands, France, Spain and Portugal all had colonies, military power and trade, for instance. But in the end it was the comparatively small island nation that won out and dominated until the first world war. Landes explores this in riveting detail, attributing the ascendancy of England to it being closer to an ideal growth-and-development state than the competition.

The central chapter, chapter 5, Landes lays out the ideal case on pages 217-218 – and quoting that is reason enough for a blog post (not to mention obligatory reading for anyone concerned with economic policy.):

Let us begin by delineating the ideal case, the society theoretically best suited to pursue material progress an general enrichment. Keep in mind that this is not necessarily a “better” or a “superior” society (words to be avoided), simply one fitter to produce goods and services. This ideal growth-and-development society would be one that

  1. Knew how to operate, manage, and build the instruments of production and to create, adapt and master new techniques on the technological frontier.
  2. Was able to impart this knowledge and know-how to the young, whether by formal education or apprenticeship training.
  3. Chose people for jobs by competence and relative merit; promoted and demoted on the basis of performance.
  4. Afforded opportunity to individual or collective enterprise; encouraged initiative, competition, and emulation.
  5. Allowed people to enjoy and employ the fruits of their labor and enterprise.

These standards imply corollaries: gender equality (thereby doubling the pool of talent); no discrimination on the basis of irrelevant criteria (race, sex, religion, etc.); also a preference for scientific (means-end) rationality over magic and superstition (irrationality).*

Such a society would also possess the kind of political and social institutions that favor the achievement of these larger goals; that would, for example,

  1. Secure rights of private property, the better to encourage saving and investment.
  2. Secure rights of personal liberty – secure them against both the abuse of tyranny and private disorder (crime and corruption).
  3. Enforce rights of contract, explicit and implicit.
  4. Provide stable government, not necessarily democratic, but itself governed by publicly known rules (a government of laws rather than men). If democratic, that is, based on periodic elections, the majority wins but does not violate the rights of the losers; while the losers accept their loss and look forward to another turn at the polls.
  5. Provide responsive government, one that will hear complaint and make redress.
  6. Provide honest government, such that economic actors are not moved to seek advantage and privilege inside or outside the marketplace. In economic jargon, there should be no rents to favor and position.
  7. Provide moderate, efficient, ungreedy government. The effect should be to hold taxes down, reduce the government’s claim on the social surplus, and avoid privilege.

This ideal society would also be honest. Such honesty would be enforced by law, but ideally, the law would not be needed. People would believe that honesty is right (also that it pays) and would live and act accordingly.

More corollaries: this society would be marked by geographical and social mobility. People would move about as they sought opportunity, and would rise and fall as they made something or nothing of themselves. This society would value new against old, youth as against experience, change and risk as against safety. It would not be a society of equal shares, because talents are not equal; but it would tend to a more even distribution of income than is found with privilege and favor. It would have a relatively large middle class. This greater equality would show in more homogeneous dress and easier manners across class lines.

No society on earth has ever matched this ideal. […]

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*The tenacity of superstition in an age of science and rationalism may surprise at first, bur insofar as it aims at controlling fate, it beats fatalism.  It is a resort of the hapless and incapable in the pursuit of good fortune and the avoidance of bad; also a psychological support for the insecure.  Hence persistent recourse to horoscopic readings and fortune telling, even in our day. […]

Sorry, I couldn’t resist including the footnote – direct language and linguistic surgical strikes abound – go get it! (And incidentally, the concluding paragraphs are highly quotable as well.)

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One thought on “The economically ideal society

  1. JoddeHaa

    Jeg har ikke lest boka du siterer, men jeg gir enn ikke opp min favorittforklaring for hvorfor den industrielle revolusjonen var Britisk. http://www.voxeu.org/index.php?q=node/3570
    Billig kull, billig jern, dyr arbeidskraft, maskiner som var s ineffektive at de selv i England bare var s vidt profitable i starten. Da blir det egentlig penbart at den industrielle revolusjonen starter i England.

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