The Awestruck and the Awws

 Don Boudreaux at the American Institute for Economic Research.

---------------------------------

If we exclude misanthropes, most people today can – without excessive simplification – be divided into two distinct camps: the Awestruck and the Awws. The Awestruck are unceasingly amazed at the modern world. They are enormously grateful for the countless amenities and benefits of life in the modern global economy. They are aware that nearly all of our ancestors not only did without the comfort and convenience of the likes of air-conditioning, automobiles, air travel, aspirin, automatic dishwashers, telephony, recorded music, and laptop computers and smartphones connected 24/7/365 by wi-fi to the Web, the Awestruck also realize that most of our ancestors did without access to antibiotics, artificial lighting, indoor plumbing, the ability to bathe daily, and even regular supplies of food.

The Awws, in contrast, are either ignorant of how most of our ancestors lived, or they believe that our ancestors’ experiences are irrelevant for assessing the state of the world today. Unlike the Awestruck, the Awws do not compare the state of the world today to that of the actual past. Instead, the Awws compare the state of the world today to fictions conjured by their imaginations. They compare today’s reality to what they imagine to be a Perfect World. The Awws then notice an undeniable reality: As marvelous as today’s world is, it’s not perfect. It could be marvelouser. Imperfections abound.

Upon noticing these imperfections the Awws, in their dismay, moan “Awww.” No matter how much higher standards of living for nearly everyone in today’s market-oriented economies are, living standards could be even higher. The costs of obtaining, maintaining, and further raising these living standards could be even lower. The ‘distribution’ of the abundance of goods and services could be more equal. And were there fewer disagreeable aesthetics of industrial, commercial society – what with its factories and mines and pipelines and strip malls and light pollution and telemarketers and vulgar websites – persons with finely polished sensibilities would indeed suffer fewer irritations.

It’s curious just how incurious the Awws are about the true nature and source of economic growth. Most Awws seem to think that the massive daily outpouring of goods and services, while it could be further enlarged by wise government intervention, could not be shrunk by such intervention, or at least not shrunk by enough to matter to sensible people. As the Awws see matters, wealth is generated automatically by a machine called “the economy,” which itself was created by – and is maintained by – the state. This machine will slow down or sputter only if the government fails to operate it properly – by erecting protective tariffs on imports of steel, by subsidizing the building of a new baseball stadium, and by fueling the economic machine with regular injections of newly created money, for example.

Unlike the Awestruck who are gobsmacked whenever they contemplate the stupendous amount of on-going individual, detailed efforts that are necessary for the production of even the simplest economic outputs, the Awws are perpetually disappointed that the economic machine never works as well as they can imagine. The Awws, you see, see only surface phenomena. For example, the Awws see a report of Jeff Bezos’s net worth or of Amazon’s market valuation and, looking no further, conclude that the world would be a better place if much of Bezos’s wealth were ‘redistributed’ to poorer Americans and Amazon were forced to charge even lower prices.

The Awws – let’s give them this much – excel at arithmetic. They know that if the retail price of some item sold by Amazon is cut, the new price will be lower than the old price. Brilliant! They also know that Bezos’s net worth, expressed in dollars, is many multiple times higher than the net worth of any ordinary American. The Awws further know that if the government were to subtract $X from Bezos’s wealth and then add that $X to the bank accounts of other Americans, the immediate result would be a decrease in the difference between Bezos’s monetary wealth and other Americans’ monetary wealth.

It’s an A+ performance in arithmetic! Proud of their high academic marks, the Awws then go “aww” if and when the government refuses to recognize the worthiness of the Awws to dictate policies that carry out in practice such arithmetical exercises.

The Awws loudly “boo” when, for example, the Awestruck speak out against income or wealth “redistribution.” The Awestruck do their best to inform the Awws that the monetary wealth of entrepreneurs such as Jeff Bezos reflects those entrepreneurs’ successes at pleasing consumers. Therefore, the Awestruck argue, it would be unjust to seize this wealth simply to give it to individuals who did nothing to earn it. Let’s be real, observe the Awestruck: More than anyone else, Jeff Bezos did indeed build Amazon, while those individuals who would get from the government any money ‘redistributed’ away from Bezos did indeed not build Amazon.

Second, the Awestruck explain that ‘redistributing’ monetary income or wealth is not merely a matter of government reshuffling the ownership of sums of money. It’s true that ‘redistributive’ taxation takes from wealthy individuals like Bezos and then gives what was taken to other people. But, the Awestruck note, what’s ultimately ‘redistributed’ is resources. Raising taxes on Bezos would almost certainly not cause him to reduce his consumption. Instead, it would incite him to withdraw an amount of resources equal in value to the amount of the additional taxes he must pay from his company. Amazon would then operate less efficiently. It would have fewer or less-well-maintained delivery vehicles; its workers would receive less training; its warehouses would be outfitted with fewer productivity-enhancing machines; its logistics workers would operate with worse software.

Among the consequences would be lower worker productivity at Amazon, and, hence, lower real wages. This reduced productivity would also manifest itself in consumers getting lower-quality and more expensive products from Amazon. And with the deterioration of Amazon’s service quality and the rise in its prices would come reduced pressure on Walmart and other retailers to compete.

The Awws are unaware of this reality because they see only immediate effects. They’re oblivious to the indescribable complexity and unfathomable interrelatedness of modern economic phenomena. The Awestruck – being, well, struck with awe at this complexity and interrelatedness – know that the simplistic schemes favored by the Awws are destined to have ill consequences that would almost certainly outweigh whatever benefits these schemes might produce.

But despite being warned by the Awestruck, the Awws remain clueless. Stubbornly clinging to the belief that economic reality is really quite simple – that economic reality is certainly not awe-inspiring – the Awws then naturally cling also to the belief that economic reality can easily be engineered to suit their fancies.

The Awestruck, meanwhile, remain awestruck at the Awws’s naivety.