September 21, 2013
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A rallying whimper
JDN 24565554 PDT 20:54.
A review of The End of Poverty by Jeffrey Sachs
This should have been one of the greatest books ever written. It should have been the rallying cry for a radical new approach to global development, a seminal advance in what it means to do economics—it should have been quite literally a book to save a billion lives.
And make no mistake, Jeffrey Sachs has a project that really does have the potential to have that kind of impact. But The End of Poverty doesn’t quite manage to sell that project, for reasons that are not all that easy to pin down.
I think part of the problem is that Sachs was trained as a neoclassical economist and hasn’t quite managed to break free from this indoctrination. This makes Sachs, and thus The End of Poverty, of two minds: On the one hand he wants to say that the Washington Consensus has failed, capitalism is in crisis, and we are approaching a fundamental paradigm shift in development economics. On the other hand, he keeps talking about market incentives and rational expectations, and dismisses socialism as an obvious failure—even though many of the reforms he wants are in some sense socialist reforms. I couldn’t find the passage when I looked back to quote it, but there’s even a section where he talks about the shift from communism to capitalism and says “only then did unemployment emerge” and makes it sound like a good thing. It’s really bizarre; rather than saying, “Yes, these workers had to bear the pain of unemployment, but in the long run the market reforms were necessary and made everyone better off,” he actually speaks as though he thinks laying off all those state employees was intrinsically beneficial.
At the end of the book he calls upon us to see past narrow self-interest and work to create the world we want to live in. This is exactly right; and like him, I do believe it is possible. But in earlier pages he talks about how collective farms obviously fail because they don’t have market incentives… and I find myself asking, “Well, why couldn’t they see past narrow self-interest?”
Much of what Sachs says is not only right, it is desperately needed. His message sounds like a pipe dream—ending poverty in less than 20 years?—but his economic sophistication is undeniable. He not only shows how it can be done, he calculates how much it would cost and what would be the most efficient way to pay for it. The number he derives is now widely accepted by development economists, yet so few laypeople comprehend it: $100 billion per year. 0.7% of GDP. That’s how much the United States would need to spend; the rest of the First World, mostly Europe and Japan, would add another $100 billion. And that’s it. That’s all it would take. For less than 1% of our total income, we could end extreme poverty forever.
Now, to be fair, this is extreme poverty—it’s the kind of crushing poverty that leaves you starving in a rusting shack made of corrugated steel in a slum by the train tracks in Ghana. Sachs is not proposing to eliminate relative poverty—the dramatic difference between the richest and the poorest in the US—and it’s not clear whether his plan would even fully eradicate absolute poverty—the state in which some people don’t have enough to meet their basic needs. There are some things that might be considered “basic needs”, especially in a First World society (like electricity, transportation, and dentistry) that might still remain out of reach for some of the world’s poor. But Sachs’ proposal really does have a serious chance of ensuring that everyone in the world has food to eat, water to drink, shelter to live in, and basic medical care. Sachs asks us to imagine a world without starvation or malaria, and then provides concrete steps we could take right now to get us closer to that world.
The problem is, Sachs appears torn between the neoclassical concept of selfishness and an idealistic concept of altruism. What he needs is a fundamentally new paradigm, something that is neither selfishness nor altruism—what he needs is what I call the tribal paradigm. Humans are not selfish individual utility maximizers; indeed, one would have to be a psychopath to act that way. But nor are we selfless altruists, giving everything we have to anyone who asks. The default setting for human moral intuition is tribalism—it is to think in terms of an “in group” that we are altruistic toward, and an “out group” that we are not. Put another way, our unit of rational action is the tribe, not the individual.
I’m actually working on how I might work this into an empirical paper or an econometric argument—perhaps my master’s thesis will ultimately be titled, “The Tribal Paradigm”—but for now, let me offer some illustrative examples.
Are racists selfish? Is it acting in your self-interest to hate Black people? No, it isn’t. Indeed, the reason neoclassicists have thus far utterly failed to explain or respond to racism is that it couldn’t exist within their model of human behavior. There would always be a market incentive to not be racist, because whatever the color of their skin, the color of their money is the same. But does this mean racists are altruistic? It certainly seems odd to say so; if they’re such altruists, shouldn’t they be nicer to Black people? The answer is that they are tribalists—they are altruistic to their in-group (White people) and not to those outside it.
Here’s another example, particularly relevant to economics: We often speak of “the firm” or “firms” as economic agents with well-defined interests and actions. Sometimes we speak of “the government” in a similar way. But for fundamental game-theory reasons, there’s no reason to think that the interests of a firm are the same as the interests of any individual in that firm, or even necessarily an aggregate of all their interests put together. Yet we can with some accuracy predict the behavior of firms by assuming they are self-interested agents; how? Because sometimes people identify with the company as their tribe. And let’s be honest: Who in the US government doesn’t think of the US government, or the American people as a whole, as their tribe? You have to at least convincingly fake such tribalism to even be elected—we call this “patriotism”.
I certainly hope Sachs succeeds. I just wish he were a little better at selling it.
