Who is John Galt?

There’s been a lot of talk lately about free market types “going Galt” to protest current economic policies. This provokes my friend Jeff, and many others, to say “Go ahead, be my guest.” They’re right that few productive people are really going to venture off into the wilderness and watch the rest of the world descend into chaos, and that adolescent power fantasy is undeniably part of Atlas Shrugged’s appeal. But there’s a more sophisticated reading than that, one that’s relevant to current debates. Jason Kuznicki puts it very well in the third item of this post:

Ayn Rand hated F. A. Hayek, but in a weird way, the Hayekian idea of the entrepreneur — a little guy who happens to stumble onto a tiny, useful bit of knowledge, and who finds himself free to employ it — is a better fit to the relatively more sophisticated view of Rand’s work, which holds that Atlas is just a metaphor, not a blueprint for world takeover. Schumpeter’s heroic entrepreneur is, I think, empirically wrong, but better suited to a literal reading of Atlas.

Who is John Galt? An ephemeral process. And if you could follow that, well, you get the libertarian gold star for today.

I won’t pretend to have any great insight into how current policies will affect that process; Jim Manzi takes a stab at it here, arguing that they could be very detrimental to entrepreneurship. Even if, like Jeff, you’re not concerned about losing talent, losing investment capital and reducing the rewards to innovation should be a significant concern.

A fascinating paper from Tyler Cowen is worth contemplating here (“Caring About the Distant Future: Why It Matters and What It Means,” [pdf]). He makes the underappreciated point that economic growth isn’t simply cumulative; growth provides the fuel for further growth in an exponential process. To oversimplify, a few years delay in getting Edison’s bulb to market is a few years in which other entrepreneurs toil less productively in the dark. From the paper:

Just as the present appears remarkable from the vantage point of the past, our future may offer comparable advances in benefits. Continued progress might bring greater life expectancies, cures for debilitating diseases, and cognitive enhancements. Millions or billions of people could have much better and longer lives. Many features of modern life might someday seem as backward as we now regard the large number of women who died in childbirth for lack of proper care. It is a simple failure of imagination to believe that human progress has run its course. [...]

The importance of the growth rate increases the further into the future we look. If a country grows at 2 percent, as opposed to growing at 1 percent, the difference in welfare in a single year is relatively small. But over time the difference becomes very large. For instance, had America grown 1 percentage point less per year between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. At a growth rate of 5 percent per annum, it takes just over 80 years for a country to move from a per capita income of $500 to a per capita income of $25,000, defining both in terms of constant real dollars. At a growth rate of 1 percent, such an improvement takes 393 years.

Robert Lucas put it succinctly: “The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about [exponential growth], it is hard to think about anything else.”

Again, I’m not bringing this up with regard to any particular policy. But we are living in a time in which drastic measures are being taken in response to an immediate economic crisis, the costs of which will be felt for decades to come. The impact these policies will have on the ephemeral process of market production deserves attention. Conservatives and libertarians threatening to “go Galt” aren’t merely expressing selfish frustration at having to pay more taxes; they’re calling our attention to the vital moral imperative of considering long-term growth.

Comments

  1. Matt says:

    And here’s where I call B.S. “Vital moral imperitive” my foot. It’s all about money. If it were really about long-term growth, etc., you wouldn’t see the kind of mess we’re in today, you wouldn’t see companies focused on the short term, you wouldn’t see companies routinely engaged in underhanded tactics to keep out competitors and actual innovation, you wouldn’t see the massive lobbying efforts we have, you wouldn’t see false advertising , you wouldn’t see cooked books and fishy accounting, and I could go on and on. It’s all about making a buck. Bottom line. Maybe some intellectuals care about long-term growth but that hasn’t translated to the business and corporations and “innovators” you’re commending here.

  2. Jacob Grier says:

    To be clear, I wasn’t speaking just about innovators, and definitely not about corporations (which cannot talk). The “Galt impulse” is alive and well in many ordinary people who are fed up with government interference in the economy and who are worried about its long-term impact.

  3. Matt says:

    And I guess my point (which was hastily made, and probably a bit more agressive than I intended it to be – sorry), was that the Galt impulse is misplaced because it’s premised on the idea that an unregulated market is superior for innovation. My point is that there are all sorts of ways in which a lack of regulation actually hurts innovation. So, while it might be fair to be concerned about particular policies and regulations, it is only so if you can point to ways in which they undercut innovation. And likewise, it is fair to be concerned about some unregulated aspects of the free market because we can show the ways in which innovation is hindered.

    Also, I’m still having some trouble loading this page, on both my year-old laptop and an older desktop. It’s just a lot slower than any page, and it often temporarily freezes up my browser (almost ashamedly, explorer).

  4. Jac says:

    Innovation hindered by unregulated markets? I’d like to see just how that can be shown… In any market.

  5. Matt says:

    Jac –
    The point is that, left to their own devices, corporations/innovators will promote only their own innovations, and will work to the detriment of other innovations. Thus, for example, Tucker created an incredibly innovative car that the Big 3 colluded to prevent from reaching market. The innovations seen in the Tucker auto were delayed decades as a result.

    A market participant will use their power to keep competitors out of the market, and limit/destroy/prevent any innovation that reduces their profit. Lack of regulation allows them prevent the innovations of others in pretty much any way they can. Regulation can be used to prohibit them from taking actions that harm innovation, punish them for doing so, and disincentivize this undesirable behavior. Pretty basic really.

  6. Jac says:

    And who did the Big Three collude with to ruin Tucker? The United States Government; specifically, the Securities and Exchange Commission, the purpose of which is to regulate business.

  7. Matt says:

    Ah, but it was private industry doing everything in their power to stop the Tucker. The SEC was just one of the tools they used in this particular instance.

    And of course, this is just an example. I think the basic point stands, and is, in fact, fairly obvious: A market participant will use their power to keep competitors out of the market, and limit/destroy/prevent any innovation that reduces their profit.

  8. Jacob Grier says:

    @Matt: Yes, it is that simple. And Jac’s point is that influencing government regulation is one of the most powerful tools companies can use to limit competition. As soon as government is given power in the economic sphere, participants have an incentive to lobby the government to intervene in their favor. And given that the benefits are concentrated while the costs are often widely distributed, it’s very difficult to prevent that from happening.

  9. Jac says:

    Exactly! The primary source of “their” power is government intervention in the market.

    From an excellent piece by Roderick Long on Corporatism, subtitled Whip Conflation Now:

    Corporations tend to fear competition, because competition exerts downward pressure on prices and upward pressure on salaries; moreover, success on the market comes with no guarantee of permanency, depending as it does on outdoing other firms at correctly figuring out how best to satisfy forever-changing consumer preferences, and that kind of vulnerability to loss is no picnic. It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market. Indeed, most of the existing regulatory apparatus—including those regulations widely misperceived as restraints on corporate power—were vigorously supported, lobbied for, and in some cases even drafted by the corporate elite.[1]

    Corporate power depends crucially on government intervention in the marketplace.[2] This is obvious enough in the case of the more overt forms of government favoritism such as subsidies, bailouts,[3] and other forms of corporate welfare; protectionist tariffs; explicit grants of monopoly privilege; and the seizing of private property for corporate use via eminent domain (as in Kelo v. New London). But these direct forms of pro-business intervention are supplemented by a swarm of indirect forms whose impact is arguably greater still.

  10. Matt says:

    Yeah, but in the absence of the government the powerful corporations are going to do significantly worse things than lobby for laws that limit competition. They’re gonna prevent competition much more directly. The problem isn’t government, it’s letting corporations have too much influence on the government. There are plenty of times when government gets it right in favor of innovation, despite pressure from businesses.

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