Is America in Decline? Posner's Comment

I agree that there is no reason to expect the rate of growth of per capita income in the United States to decline in the foreseeable future. Of course it may decline; the future is uncertain; a particular uncertainty concerns the ever-present possibility of catastrophe (see my book Catastrophe: Risk and Response [2004]). Abrupt global warming, nuclear terrorism, a pandemic, an asteroid strike—all are possible events that could have cataclysmic effects on economic growth. Also, it is important to distinguish between monetary income and economic welfare. Increases in leisure and in the quality and variety of products and services can increase welfare without increasing per capita income; conversely, expenditures on security, while they may be cost-justified because of the risk of terrorist or other attacks, reduce consumption; and service deteriorations, for example due to congestion, can reduce welfare; but in neither case would the welfare loss show up in lower per capita incomes. A related example is wasteful expenditures on health care, all of which show up as income to providers, though it is possible that as much as a third of all expenditures on health care in the United States either yield no benefits in greater longevity or better health or exceed what it would cost to achieve the same benefits more cheaply (for example, by exercise and healthy eating). I do not share Becker's pessimism about the rise of regulation. The deregulation and privatization movements have, since their beginning in the late 1970s, freed large parts of the economy from government control; income tax rates have fallen; unions have continued to decline; and the courts have become more conservative with respect to economic issues. (The Supreme Court's "liberal" Justices are liberal mainly concerning issues, such as abortion, capital punishment, and homosexual rights, that have little economic significance.) There will now be some re-regulation, but I would be surprised if it went far, given the political power of business. Environmental regulation has increased, but it deals with real externalities. The increased regulation of labor markets, however, mainly as a result of antidiscrimination laws, is difficult to justify on economic grounds, though its economic effects may be largely offset by the decline of unions. Even after the recent increase in the federal minimum wage, that wage in real (i.e., inflation-adjusted) terms is no higher than it was in 1960. Social conservatives believe that the nation is in free fall because of the decline of traditional social values, a decline reflected in low marriage and high divorce rates, a high rate of births out of wedlock, increases in pornography and vulgarity, the flaunting of homosexual relations, and abortion on demand. Becker does not cite any of these factors as inimical to economic growth; nor would I. But there is a crucial ambiguity in the word "decline" when applied to a nation, and I will devote the rest of my comment to that. To begin with, the word might denote not a reduction in the rate of growth of per capita income but a reduction in that rate relative to the rate in other countries. Small differences in growth rates cumulate over time, like compound interest. Some nations will grow faster than the United States, but I do not see the growth rate of the United States dropping below the world average. The idea of national decline might even refer to a decline in a nation's share of world income. The U.S. share peaked in 1951 at 28 percent, fell to 21 percent by 1975, and is about 20 percent today. The percentage will continue to fall as incomes in China, India, Brazil, and other rapidly developing countries rise. This almost certain "decline" has, however, no significance for the welfare of Americans--except insofar as a nation's share of world income is correlated with the nation’s political (and ultimately military) power--"geopolitical power." And when one speaks of a nation in "decline," it usually is to the nation's geopolitical power that one is referring. Although China's military expenditures are far smaller than those of the United States, they are increasing more rapidly and eventually may surpass ours; and their increase is driving Japan to become once again a major world military power. Russia's military expenditures are increasing as well. India's too. And these are all countries that have potential enemies and so take military preparedness seriously (unlike Western Europe). What is more, the power of large countries such as the United States (and before that, notably, Great Britain) to coerce small ones has declined. When early in World War II Iraq and Iran began leaning toward the Axis powers, Britain (aided in Iran by the Soviet Union) quickly intervened and, more or less effortlessly, changed the governments in those countries. Britain of course for centuries controlled a vast empire with slight military forces. Tiny Holland ruled what is now Indonesia. France ruled what is now Vietnam, Cambodia, and Laos. Japan ruled Korea and Taiwan. The Western nations, including the United States, are vastly less powerful than they were half a century ago. The U.S., despite a military budget roughly equal to that of all other nations combined, has its hands full trying to control two militarily third-rate countries, Iraq and Afghanistan, and is incapable of preventing Iran from becoming a nuclear power. From a political rather than an economic standpoint, the United States today may be in a position comparable to that of the Roman Empire in the fourth century A.D. or the British Empire in the 1930s: the world's leading "empire" (in the sense not of having colonies, but of having the most influence over other countries), but, as an empire, in decline.

Comments

[John]

Why is the rate of divorce seen as a sign of national decline? Divorce is always seen by some as pathological; an unhealthy behavior like substance abuse, which is always personally tragic and for which programs should be created so that it can be avoided at virtually any cost.

It is difficult to see the upside of increasing rates of violent crime or drug addiction, two phenomena most people would agree are adverse to social welfare (even by those who believe the US is not declining). But high rates of divorce are different. Divorces are voluntary transactions, people get divorced because they want to. There are benefits to divorce as people who are dissatisfied with their marriage can move on and live a happier life.

In addition to personal benefits, there are also social ones. Spousal abuse and child abuse are two factors cited by petitioners in divorce proceedings and those issues, presumably, would be mitigated somewhat by divorce. Substance abuse could rise as a result of the stress of legal confinement in an unhappy relationship.

The US' rise in the post World War II era coincided with the growing acceptance of divorce. Ireland's economy (the Celtic tiger) took off around the same time divorce became legal.

I know it is simplistic to look at divorce in isolation when looking at the causes of a complex phenomena like the US' potential decline. I just don't think that divorce should be evaluated as a cause of decline, but rather, it may have a net social benefit.

[Josh SN]

Daniel,

I didn't say he invented tariffs, but "infant industry protection" through tariffs. Nice use of the word regurgitation? No. I was wrong about that.

I've read months of the debates of the 1st Congress on tariffs. Hamilton wasn't there. What he wanted was fairly irrelevant. I've read his ideas of "infant industry protection" were not, in fact, adopted till later. In fact, that's what your link says. Thanks for making my point for me. Too bad I had to waste my time reading your link to support my argument.

I never said he wanted "especially high tariffs" ever. You are repeatedly making "stuff" up and refuting it. You hardly need me for this argument at all! The (northern, manufacturing base) Federalists supported higher tariffs than the Jefferson's Democratic-Republicans.

You are free to point to anything _other_ than the economy that Becker and Posner are talking about. You tried already, but only pointed out something that Posner was saying didn't have much impact on the economy. Posner did, briefly, mention raw military power, but, as I said before, most of that conversation was really about military expenditures.

I think what you don't like to hear is that, by and large, I'm right. Neither Becker nor Posner anywhere mention freedom, liberty, justice or independence.

You make one point, about tariff rates, which is interesting in the current context. The Federalists, Whigs and Republicans (before Hoover) believed in a larger government, and the main source of revenue was tariffs. So, the early "left" was, by its nature, relatively protectionist, as it is now, and for large government, which is what the "left" is by definition, and, yet, the right calls itself Federalist.

[BO Bill]

I disagree with the Professor and believe that we are in economic decline. If you break down the Jobs Report, we are steadily losing manufacturing, construction, and business jobs, which, in my opinion, create value. We are steadily gaining health care and government jobs, most of which take wealth away from the value creators.

I see a consumer economy that is sustained through borrowing and deflating the currency, neither of which is sustainable. Unless our electorate votes themselves entitlement cuts, which they won’t, does it not become inevitable that people will stop loaning the government money? Then what?

I’m not sure either so I have a large garden.

[Daniel]

Wow Josh - I'm rather enjoying getting you all riled up over this.

What I said was "Hamilton didn't invent the idea" - which I meant to imply infant industry protection, not just tariffs themselves. Regardless, why the hell do you think they were even imposing tariffs in England before Hamilton? For the fun of it? They were trying to protect their relatively undeveloped industries from imports from the Continent and beyond.

Could we agree on: "Alexander Hamilton was one of the earlier explicit proponents of the theory of infant industry"? Geez...

And I'm not sure what you mean by: "I've read his ideas of "infant industry protection" were not, in fact, adopted till later. In fact, that's what your link says. Thanks for making my point for me." Pretty much every tariff Hamilton suggested was adopted in 1792. Its not that his program wasn't adopted until later - it was adopted immediately. What was adopted later was a STRONGER, more protectionist tariff... a non-Hamiltonian tariff, if you will. Tariff levels that he opposed when he was at Treasury. I would hardly say that his "ideas were not adopted till later".

You are right that northern manufacturers supported higher tariffs, but wrong to say that the Federalists did (or at least Hamilton and Washington - I can't claim to chronicle what all the federalists thought). Jefferson and Madison both passed substantially higher tariffs than Hamilton ever proposed or wanted in their trade war with Britain.

The point is, Hamilton wasn't particularly enthusiastic about using tariffs to protect industries - he was very enthusiastic about promoting industries with subsidies and strong national credit markets.

And please read what I'm saying about Posner and Becker! I'm not saying they talked about anything other than economics in any substantial way. what I'm saying is, quite simply: "who cares". Nobody's beliefs are encapsulated in a single blog post, and its quite understandable that these two particular bloggers are going to focus on economics - its what their readers want. It does not mean its the only thing in the world they care about - GET OVER IT.

[Daniel]

One more thought - Drew McCoy is a great source on differences between Federalists and Republicans on this stuff - especially the way that Republicans ultimately co-opted core Federalist constituencies by going overboard on the initial, modest, Hamiltonian protection plan.

Why do you think the Republicans dominated the political scene for decades? They beat the Federalists at their own game... and when the Federalists lost the average northerner, all they had left were the bankers - and although bankers are useful to have around, that's not a constituency that's going to win you any elections.

[Anonymous]

مركز تحميل

[Anonymous]

thanks
بنت الزلفي

[Anonymous]

العاب
___
ÿ¥ÿßÿ™

[Anonymous]

ÿßÿ®ÿ±ÿßÿ¨
___
دليل

[Anonymous]

ÿØÿ±ÿØÿ¥ÿ©
___
صور

[Anonymous]

العاب
___
ÿ¥ÿßÿ™

[Anonymous]

Badly need your help. The release of atomic energy has not created a new problem. It has merely made more urgent the necessity of solving an existing one.
I am from Rwanda and know bad English, tell me right I wrote the following sentence: "Adt is a security alarm company that provides sophisticated home cctv products adt security solutions for home and business."

THX 8-), Lavonne.

[Anonymous]

ÿØÿ±ÿØÿ¥ÿ©
___
صور

[Anonymous]

thanks to tell me that,i think thats ao usefully----
ed hardy
links of london

[Anonymous]

thanks for your

ÿ¥ÿßÿ™

دردشه

[Anonymous]

Perfect site, i like it!

[Anonymous]

Very interesting site. Hope it will always be alive!

[Anonymous]

Incredible site!

[Anonymous]

دردشة برق

دردشة الخليج

[Anonymous]

I bookmarked this link. Thank you for good job!

[Anonymous]

Very interesting site. Hope it will always be alive!

[Anonymous]

Excellent site. It was pleasant to me.

[Anonymous]

Incredible site!

[Anonymous]

Great site. Good info.

[Anonymous]

If you have to do it, you might as well do it right.