There’s an ongoing debate in left-of-center policy circles between redistribution and “predistribution”, and it’s often framed like this:

The redistribution camp wants to let the market do its thing and then if (when) it creates winners and losers that camp suggests we should redistribute those gains using the tax system and various kinds of spending programs. Doing so would mean getting the best of both worlds, the thinking goes: the efficiency of the market with the welfare gains of redistribution.

The predistribution camp raises a number of objections to this and suggests that instead policy should directly aim to transform the market so that its outcomes are more just, even before taxes and transfers. The predistribution camp has a few different arguments; my list is certainly not comprehensive:

1. Political economy: a society full of rich people will fight tooth and nail against redistribution.
2. Fairness, dignity, and trust: People don’t want to be marked as an economic “loser” and then compensated for it. They want to feel they’ve earned a good living and they will lose trust in a system that doesn’t offer them that.
3. Growth: Markets are highly imperfect and we’re actually leaving growth on the table when we sit back and leave things to “the market”, which is itself highly contingent.

These are good critiques, and I’m quite open to lots of predistribution ideas. The easy response is to say we need some of both.

But I do think this debate can sometimes misunderstand the role of redistribution. Specifically, it misses the sense in which today’s redistribution is tomorrow’s predistribution.

To see what I mean it’s easier to start in a very different context: cash transfers in developing countries. I have no strong view on the efficacy of cash transfers relative to other development interventions; my point is just to note that the argument for cash transfers in this context is that they spark economic development. Here’s economist Chris Blattman, who studies this, in 2013 (if you want more recent information on the effectiveness of cash transfers for development try here):

So how do you create “good” jobs and productive work? Another way of asking this question is “what is holding young people back?” or “what constrains them?”…

More and more, economists think that the real constraint is capital. Studies show that the poor, on average, have high-earning opportunities if they get a little cash or equipment. Studies with existing farmers or businesspeople have seen returns of 40 to 80% a year on cash grants.

This gels with economic theory, which says that infusions of capital should expand people’s choice of occupations, self-employment, and earnings. People can’t get access to that capital through loans because credit markets are so broken and expensive. This can be a development trap, or at the very least a drag on growth.

Redistribution in the U.S. is taking place in a very different context, of course. What’s true in developing countries might not be in developed ones. But when we talk about redistribution’s merits (or lack thereof) in the U.S. we ought to consider its ability to change economic fundamentals. And we have evidence that this sort of thing happens. Welfare state programs — including transfers like food stamps — increase entrepreneurship by helping to de-risk it. Likewise, Raj Chetty and colleagues have demonstrated that the combination of school performance and parents’ income predict the likelihood that a child will go on to file a patent. The “Einstein gap” that Chetty points to is an income gap. It’s at least plausible (if not likely) that if you substantially raised the incomes of parents, their kids’ likelihood of being a (well-compensated) inventor would increase dramatically. Today’s redistribution is tomorrow’s predistribution.

Of course, most left-of-center policy people get all this. And politicians in particular are keen not to pitch redistribution programs simply as static subsidies. Several 2020 primary candidates are doing a good job of proposing redistributive policy ideas in the context of a broader economic transformation. It’s when the more philosophical redistribution vs. predistribution debates get going that the problematic framing I’ve described typically seems to occur.

For example, when we frame the basic income as simply a way to subsidize a permanent underclass in the face of automation or when we treat the welfare state as merely a way to placate those who’ve lost the lottery of winner-take-all capitalism we miss at least part of redistribution’s potential. Transferring money from richer to poorer people changes the economy in important ways, and that’s a big part of its appeal.

That doesn’t mean we should rely solely on redistribution and neglect predistributionist ideas. Many of those ideas are great! And the predistributionists are right to have drawn the lesson that we’ve been too deferential to market outcomes, as if they were delivered from on high. Furthermore, none of what I’ve said addresses the political economy critique that certain market outcomes make certain policy changes harder.

Nonetheless, redistribution should be an important part of any economic policy agenda. And it shouldn’t be framed as simply a static transfer from “winners” to “losers” because that’s not what it is.

Here’s Matt Yglesias of Vox on The Weeds podcast, discussing the recent social media study I mentioned here:

The optimistic case is always ‘Well, it’s crowding out television’… But what you see in this study is that, while making people not use Facebook did crowd in extra television watching, it also crowded in extra socializing and extra exercising.

And:

You just put more stuff on the entertainment-options bus and this is what you get. It’s just kinda not great. To have so much of the innovation and progress… happening just specifically in the entertainment zone is maybe not actually great for peoples’ lives.

These are both really good points. I used to trot out the (important!) finding that internet users watched less television, usually sourcing it to Yochai Benkler’s book The Wealth of Networks which reviewed that evidence (p. 361).

But we’re past that. Social media isn’t just crowding out TV; it’s crowding out important stuff, too. As I wrote in my post What the Internet is Good For:

It may be that by the time we had email, we more or less had the big benefits we were going to gain from cheap communication.

Another theory would be that, whereas early internet communications were a substitute for TV but still a very different activity, much of today’s “communication” technologies like social media are more or less a TV equivalent. (In the language of economics, the internet has evolved to be a more-perfect substitute for TV.) In this view, we’re spending more and more time on media, much of it mindlessly entertaining ourselves watching videos and scrolling through photos…

The internet made communication and entertainment cheap, and put endless information at our fingertips. It seems likely that we’ve overdone it on cheap communication and entertainment, and underdone it on instant access to other forms of information.

The next phase of the internet needs to be less about entertainment and more about other things.

Just clipping a couple things that caught my eye on this recently:

Why do people fall for fake news?

Much of the debate among researchers falls into two opposing camps. One group claims that our ability to reason is hijacked by our partisan convictions: that is, we’re prone to rationalization. The other group — to which the two of us belong — claims that the problem is that we often fail to exercise our critical faculties: that is, we’re mentally lazy.

And from Nieman Lab:

Building on a draft paper from last year, psychologists Gordon Pennycook and David Rand have a new study showing that people across the political spectrum rate mainstream news sources as more trustworthy than hyperpartisan and fake news sites — and that “politically balanced layperson ratings were strongly correlated with ratings provided by professional fact-checkers.”

And the sites fact checkers trust:

And (from Nieman also):

“I know that you’re right, but I don’t care. What do people do when their favored presidential candidate gets fact-checked? They do not change their minds, according to a new study in Political Behavior from Brendan Nyhan, Ethan Porter, Jason Reifler, and Thomas Wood. They conducted two studies of voters during the 2016 election, fact-checking Trump’s claims about crime and unemployment. They found that “people express more factually accurate beliefs after exposure to factchecks. These effects hold even when factchecks target their preferred candidate.” But “we find no evidence that changes in factual beliefs in a claim made by a candidate affect voter preferences during a presidential election.”

Two narratives commonly emerge in answer to this question. The first focuses on the struggle between democracy and its alternatives, pitting liberalism against fascism, National Socialism, and Marxist-Leninism. The second focuses on competition between capitalism and its alternatives, pitting liberals against socialists and communists. Democratic capitalism is simply the best, indeed the “natural” form of societal organization, these stories assert, and once Western Europe fully embraced it, all was well. This account obviously contains some truth: the century did witness a struggle between democracy and its enemies and the market and its alternatives. But it is only a partial truth, because it overlooks a crucial point: democracy and capitalism were historically at odds. An indispensable element of their joint victory, therefore, was the discovery of some way for them to coexist. In practice, that turned out to mean a willingness to use political power to protect citizens from the ravages of untrammeled markets. The ideology that triumphed was not liberalism, as the “End of History” folks would have it, it was social democracy.

…

Correctly understood social democracy should be seen as a distinctive ideology and movement all its own, built on a belief in the primacy of politics and communitarianism and representing a non-Marxist vision of socialism. The term social democracy has thus been incorrectly applied to a wide range of groups, with unfortunate consequences for an understanding of the movement’s true history and rationale. In addition, social democracy should also be seen as the most successful ideology and movement of the twentieth century: its principles and policies undergirded the most prosperous and harmonious period in European history by reconciling things that had hitherto seemed incompatible—a well functioning capitalist system, democracy, and social stability.

That’s from a paper by Sheri Berman, a political scientist at Barnard. Here’s one of her books on the topic, and a series of responses to it by the Crooked Timber folks.

From NYT:

So what happens if you actually do quit [Facebook]? A new study, the most comprehensive to date, offers a preview.

Expect the consequences to be fairly immediate: More in-person time with friends and family. Less political knowledge, but also less partisan fever. A small bump in one’s daily moods and life satisfaction. And, for the average Facebook user, an extra hour a day of downtime.

The study itself.

Previous posts on this here and here.

I tend to be optimistic about technology, and so I’m often asked by friends… Um, why? I haven’t always answered that question as well as I would have liked and so I wanted to try to do so here. To make the case for technology as a driver of human welfare, I’ll start with the macro-historical view. I’ll suggest that the world is improving and that technology appears to be playing a central role. Then I’ll get into why economists expect technology to be a key driver of economic growth, in line with the broader historical picture. Next, I’ll present some more direct, plausibly causal evidence for technology’s benefits. Finally, I’ll discuss the role of institutions, culture, and policy. And I’ll end with a short case study.

The big picture

 

Human welfare has improved in any number of ways over the past two hundred years, whether measured through life expectancy, GDP per capita, homicide rates, or any number of other variables. (I’m borrowing charts from the excellent site OurWorldInData.) Not everything is improving, of course, and this sort of progress can’t be cause for complacency. But it is real nonetheless.

As the economic historian Robert Gordon writes, “A newborn child in 1820 entered a world that was almost medieval: a dim world lit by candlelight, in which folk remedies treated health problems and in which travel was no faster than that possible by hoof or sail.” But things changed, not so much gradually as all at once. “Some measures of progress are subjective,” Gordon continues, “but lengthened life expectancy and the conquest of infant mortality are solid quantitative indicators of the advances made over the special century [1870-1970] in the realms of medicine and public health. Public waterworks not only revolutionized the daily routine of the housewife but also protected every family against waterborne diseases. The development of anesthetics in the late nineteenth century made the gruesome pain of amputations a thing of the past, and the invention of the antiseptic surgery cleaned up the squalor of the nineteenth-century hospital.”

What changed? The short answer is the industrial revolution. A series of what Gordon calls “Great Inventions,” like the railroad, the steamship, and the telegraph set off this transformation. Electricity and the internal combustion engine continued it. And though these “Great Inventions” were perhaps most central, countless other technologies made life better in this period. The mason jar helped store food at home; refrigeration transformed food production and consumption; the radio changed the way people received information.

Gordon’s book The Rise and  Fall of American Growth, from which I’m quoting, is rich with detail and data and well worth a read. Its conclusion, and my point here, is that the rapid rise in living standards over the past two hundred years is directly linked to new technologies. Technology isn’t the only thing that has driven progress, of course. More inclusive political institutions have obviously driven tremendous progress, too. But technology is a central part of progress, and without it our potential to improve human welfare would be more limited.

The theory

Technology has long played a central role in economic theory. How much an economy can produce depends in part on the availability of inputs like workers, raw materials, or buildings. But what determines how effectively these inputs can be combined — how much the workers can produce given a certain amount of resources and equipment? The answer is technology, and for a long time economists thought of it as outside the bounds of their models. Technology was this extra “exogenous” thing. It was “manna from heaven” — critical to explaining economic growth but not itself explained by economic models. As economic historian Joel Mokyr wrote in 1990, “All work on economic growth recognizes the existence of a ‘residual,’ a part of economic growth that cannot be explained by more capital or more labor… Technological change seems a natural candidate to explain this residual and has sometimes been equated with it forthwith.”

But around the time he was writing that, economists’ theory of technology was starting to change. Paul Romer, among others, started publishing models of economic growth that more directly accounted for technology. In these models, “ideas” were the source of economic growth, and the growth of ideas depended in part on how many people went into the “ideas producing” sector, sometimes called R&D. In 2018, Romer won the Nobel Prize in economics for this work. David Warsh’s book Knowledge and the Wealth of Nations is a wonderful read on this shift in growth theory.

My point here is simply to note that economic theory suggests that for sustained economic growth to happen, we need a steady stream of new ideas and new technologies. A theory is not evidence per se, but it fits with the point of this essay: if we want to improve living standards over time, technology will likely be important.

The evidence

If both the broad historical picture and economic theory support the idea that technology is essential for rising living standards, what about more micro-evidence? One wonderful study of this, written about by my former colleague Tim Sullivan, measured subscriptions to Diderot’s Encyclopedie, to measure how the spread of technical knowledge effected economic growth in Enlightenment-era Europe:

 “Subscriber density to the Encyclopedie is an important predictor of city growth after the onset of industrialization in any given city in mid-18th century France.” That is, if you had a lot of smarty pants interested in the mechanical arts in your city in the late 18th century (as revealed by their propensity to subscribe to the Encyclopedie), you were much more likely to grow faster later on. Those early adopters of technology – let’s call them entrepreneurs, or maybe even founders – helped drive overall economic vitality. Other measures like literacy rates, by contrast, did not predict future growth. Why? The authors hypothesize that these early adopters used their newly acquired knowledge to build technologically based businesses that drove regional prosperity.

Another study of U.S. inventors from 1880 to 1940 links patenting to GDP at the state level. Yet another links a city’s innovation-oriented startups to its future economic growth. Another paper confirms that the rapid economic growth in the 1990s was due to technical change. This one links venture capital funding to economic growth. I could go on.

Policy, institutions, and culture

People often say that technology is a tool, and so neither inherently good or bad. That’s true enough, but what I’m arguing is that it’s an essential part of progress. If we want to improve human welfare, using technology well is going to be a big part of that at least in the long run.

Whether technology improves human welfare depends on a lot of things, including policy, institutions, and culture. Economists Daron Acemoglu, Simon Johnson, and James Robinson write:

Economic institutions matter for economic growth because they shape the incentives of key economic actors in society, in particular, they influence investments in physical and human capital and technology, and the organization of production. Although cultural and geographical factors may also matter for economic performance, differences in economic institutions are the major source of cross-country differences in economic growth and prosperity.

In terms of policy, Gordon does a good job explaining how regulations around food quality helped improve welfare, limiting one of the major downsides to the mass production of food. Likewise, regulation was essential to the spread of the electric light, again to limit its downsides in the form of accidents. Mokyr has written extensively on the role of culture in promoting innovation and growth.

Being good at technology — being a society that harnesses it well — depends on much more than technical progress. But that’s part of what I’m arguing for when I lay out the optimistic case for technology. My hope is not just that we’ll blindly embrace new tech, but that we’ll build reliable, trustworthy institutions, create a culture that embraces innovation but acknowledges its risks, and regulate technology wisely with an eye towards both its benefits and its costs.

The electric light

Light used to be fabulously expensive.

Over time, though, technology changed that. Humans gained control over their environment, opening up new possibilities in terms of how we work, how we entertain ourselves, the communities we live in, and more. I’ve written a lot about the electric light, based in large part on the book Age of Edison. And I see in that story the big points I’ve laid out here. The chart above gives the macro-historical story of light. It used to be wildly expensive, and now it’s something most people at least in developed countries can afford. It’s clear that it transformed societies for the better:

The benefits of electrical power seemed widely democratized. By the early twentieth century, all American town dwellers could enjoy some of the pleasure and convenience of an electrified nightlife and a brighter workplace, while domestic lighting was coming within reach of many middle-class consumers and a growing number of urban workers… In this respect, what distinguished the late nineteenth century technological revolution was not its creation of vast private wealth but the remarkable way its benefits extended to so many citizens. The modern industrial system built enormous factories for some but also served a more democratic purpose, improving ‘the average of human happiness’ by providing mundane comforts to the multitude. (Age of Edison 234-235)

But culture, institutions, and policy all mattered. Electric light caused accidents and required regulation. It created new opportunities for capitalists to exploit workers. It contributed to a growing urban-rural divide. The answer, I think, quite clearly is not to denounce the electric light or to roll the clock back to gas lighting. Rather it’s to acknowledge that maximizing the electric light’s benefits required more than technical change. America and the world were better off for that invention, but making the most of it required new rules and norms.

The future

Robert Gordon is skeptical about information technology, in terms of its potential to replicate the benefits of the industrial revolution. And in recent years key areas of the internet have not turned out well; I’m thinking of social media. Why be optimistic? Partly, I simply don’t see an alternative. I’ve argued that technology is one of the major forces for human progress and so without it the scope for improvements to human welfare is significantly diminished. But partly I’m optimistic because regulation, culture, and institutions can help make IT and the internet better. They can help us maximize the benefits we receive from them (which are already substantial). I have some thoughts as to what that might look like but the history of technology suggests that to get the most from any new invention requires participation from all of society. We need inventors, surely, and entrepreneurs. But we need critics, too, as well as politicians and regulators and activists. We need people to recognize the potential and the risks simultaneously, rather than focusing only on one or the other. What we need to make the most of technology is a well-functioning democracy.

There is a sort of elitism that attaches itself to every kind of media. TV is an opiate of the masses — unless you watch the sort of prestige stuff that’s well-reviewed in The New Yorker. There’s a version of that for social media, too. Most people are wasting time, the thinking goes, but I’m using it for important stuff. Contrast that with this bit from Tyler Cowen, part of his predictions for the next 20 years:

Social media has become a kind of opiate of the intellectual class. So, grandparents use social media to track what their grandkids are doing — that’s nice and wonderful. But people who keep on refreshing Twitter for the latest developments in the Mueller investigation — frankly, I think it’s a big waste of time. I think there has been great wrongdoing. I fully support what Mueller is up to. But, at the end of the day, following it moment-to-moment is a kind of trap.

This is almost the opposite view. The everyday usage of social media might actually be good for you, whereas the intellectualized version of it may be terrible!

Now, I don’t think either half of that view is quite right. If most people were using social media well and its ill effects were just a problem for intellectuals, you wouldn’t see the broader evidence that it’s making people less happy.

Moreover, I suspect Cowen would agree that there is an even more intellectualized way of using social media that can be quite good for you: using it to become a wiser and more productive consumer of information, in the spirit of Cowen’s book Create Your Own Economy. For instance, try redoing your Twitter feed to follow mostly academics — not just the ones who double as public intellectuals — and watch how things change.

So, there are better and worse ways of using social media — that much is obvious. What I like about Cowen’s line is that it reminds us that intellectuals and journalists aren’t immune from tremendously unproductive social media habits. If they want to get more from social media, they ought to rethink what they’re using it for.

But when you step back and do that rethinking, I suspect it still leads you to less social media overall. Yes, redoing your Twitter feed might help. But at that point why not spend more time on Coursera or listening to podcasts? Why not go back to your RSS reader and follow dozens of great blogs? Why not invent some other kind of internet/media product entirely? The more you think about what you like best about social media, the more you remember the other great stuff the rest of the internet can do for you.