By Graham Peterson
Given the awkward political labels I have to work with, sure, I tell people I’m “fiscally conservative.” But that is a senseless phrase, because there is nothing more progressive than the progress that we reap from markets — both technologically and socially.
That will sound like, well, a real LOL to a lot of people. For most people, I imagine, technology and markets seem unrelated, except for of course, technology companies. And social progress and markets probably seem totally antithetical to one another.
But the connection between technology and markets is a bigger issue than Google et al. If you believe (markets) = (great big companies), you shouldn’t. So too, if you believe (technology) = (great big companies), you shouldn’t.
The greatest number of firms in society are small and medium sized, and they contribute the largest portion of national income.* Moreover, these small and medium sized firms produce a growing product by innovating. To innovate is, in short, to create new recipes for production — whether those recipes be in the way one sweeps the floor, swaps the 8 O’Clock shift, or parallels CPUs in order to solve computationally difficult algorithms.
That’s how we know national income comes from technology (recipes), and how we know markets are so important for delivering increases in technological efficiency.** So I hope we agree that technology, or “working smarter and not harder,” is a good thing.
You may still think we can get lots of technology without lots of markets, and lots of people in history have thought the same thing. That’s what Karl Marx hoped for, and his progeny throughout the 20th century.
The major socialist experiments in China and the USSR were, notably, not back-to-the-hut-and-campfire hippie dippie attempts at intentional communities — they were attempts to mimic the technological progress of the West, but to get rid of the supposed corrupting influence of self interest and profit (because politicians are rarely self interested).
But it doesn’t work, because markets themselves are a technology, just like language is a technology, that allows people to communicate their values to one another. Prices are, literally, words, and if you sew everyone’s mouth shut, you get a lot of breakdowns in coordination. People cannot know what to set out to make (and make better) for one another, without a sense of what’s on demand in the market. And people simply cannot talk to one another as well through any other social mechanism than the price system.
That covers technology. But earlier I said that markets, too, are conducive to social progress.
It is my belief that the technological progress I described above is ineluctably wound up in progressive social ethics. That’s right — I think economic growth is a product of the same heart-warming social liberalism that creates opportunities and great big hugs for people.
Firms have ways of doing business, or production processes that get carried out largely by routine. These routines make up social structures that remain relatively stable. But what is so remarkable about economic growth, is that it requires such social structures to constantly undergo change — it requires social innovation in order to generate what economists call super normal profits.
Hence economic growth, or increasing technology, is not the result of rearranging silicon on a microchip alone. Economic growth is, inescapably, a product of social change.
Incidentally, our modern anti-discrimination ideas are precisely what organizations need in order to encourage such internal change in structures of routine. A few/four hundred years ago, production processes were held closely by certain groups (e.g. guilds), and were protected from change by (1) keeping people from outside those groups from producing, and (2) making sure people inside the group didn’t change anything.
When we began to rail against such social and economic conservatism, we started to get more innovation and economic growth. And that is precisely what the agenda today, about making organizations more porous to meritocratic hiring, making business-side networks more open to new entrepreneurs, and ditching old-worn gendered and racial stereotypes, is all about.
Hence it is my belief that social liberalism: the grab bag of tolerance, acceptance, encouragement of deviance, challenge of authority and convention, is what ultimately drives economic progress. So it is my belief that we get both a wealth of social liberty and progress as an input-to, and an output-of, economic growth and market processes.
And that is why my warm tingles for free markets are the most progressive position one can adopt. The only thing I am conservative about, is conserving the staggering progress that markets have so far offered us, and will continue to, both materially and socially.
*This fact should at least chink, if not devastate, intuitions about the persistence and importance of monopoly, and generally most intuitions about capital-P power in the economy.
**Normally when economists use the word “efficiency” they don’t mean “more output for less input” in the engineering, “fuel efficiency” sense — they mean it in the sense of people, who want one another’s stuff, being able to find one another to trade in a market without severe impediments to doing so.