Climbing the Mountain of Atlas Shrugged
As sharp-eyed readers may have noticed from my sidebar, I've decided to take up the challenge of reading Ayn Rand's Atlas Shrugged - all 1,074 pages of it, in my softcover edition. Say what you will about the woman, but no one will ever accuse her of failing to deliver a low price-to-word ratio.
I've expressed my differences with Ms. Rand in the past, but I can't see any harm in giving her one last shot at changing my mind - and this book may be the subject of another chapter-by-chapter review, probably sometime next year after the current The Language of God series is completed. So, will Atlas Shrugged turn me into a jargon-spewing Randroid? Will it lead me to a nuanced and thoughtful libertarianism? We'll have to wait and see!
This is an open thread. Has anyone else actually read this entire book? What did you think of it, if so?
How to Think Critically: Anchoring
I'm pleased to announce the first-ever holiday edition of How to Think Critically. If you're planning to do your Christmas shopping soon, this post might just save you some money!
The mental phenomenon called "anchoring and adjustment" was first described in the 1970s by the psychologists Amos Tversky and Daniel Kahneman. When we're trying to estimate an unknown quantity, such as judging whether a price tag is reasonable or guessing what percentage of the population belongs to a certain age group, the first number we see tends to become a benchmark that colors all our subsequent estimates.
If you get charity solicitations in the mail, you've probably seen the anchoring effect at work. If it's written by a smart advertiser, the part of the letter that asks you to check off the amount you want to donate will look like this:
_ $250 _ $100 _ $75 _ $50 _ $25
and not like this:
_ $25 _ $50 _ $75 _ $100 _ $250
In experiments that expose people to situations similar to this, the first layout will consistently get higher donation amounts than the second layout. The "$250" you see first becomes an anchor that biases your judgment, subconsciously affecting your decision about how much is a reasonable amount to give.
Surprisingly, this effect persists even when the numbers that people are exposed to have nothing to do with the price of the item - as in this study by MIT economists. Study participants were asked to bid on an array of everyday items, from a bottle of wine to a cordless keyboard. But before placing their bids, they were asked to write down the last two digits of their Social Security number and then say whether or not they'd be willing to pay that amount for the items on bid. As it turns out, this meaningless exercise made a great deal of difference to the amount of the students' bids:
If people were perfectly rational, then writing down their social security numbers should have no effect on their bids. In other words, a student with a low valued social security number (like 10) should be willing to pay roughly the same price as someone with a high valued number (like 90). But that's not what happened. Look, for instance, at the bidding for the cordless keyboard. Students with the highest social security numbers (80-99) made an average bid of $56. In contrast, the average bid made by students with the lowest numbers (1-20) was a paltry $16. A similar trend held for every single item. On average, students with higher numbers were willing to spend 300 percent more than those with low numbers.
Retailers are well aware of the anchoring effect and consistently use it to their advantage. Take this post from the amusingly titled blog You Are Not So Smart:
You walk into a clothing store and see what is probably the most bad ass leather jacket you've ever seen.
You try it on, look in the mirror and decide you must have it. While wearing this item, you imagine onlookers will clutch their chests and gasp every time you walk into a room or cross a street. You lift the sleeve to check the price – $1,000.
Well, that's that, you think. You start to head back to the hanger when a salesperson stops you.
"You like it?"
"I love it, but it's just too much."
"No, that jacket is on sale right now for $400."
It's expensive, and you don't need it really, but $600 off the price seems like a great deal for a coat which will increase your cool by a factor of 11.
One of my first jobs was selling leather coats, and I depended on the anchoring effect to earn commission. Each time, I figured it was obvious to customers the company I worked for marked up the prices to unrealistic extremes. Yet, over and over, when people heard the sale price, they smiled and wrestled with their better judgment.
Of course, labeling an item with an inflated sticker price and then offering the customer a "discount" is one of the oldest tricks in the book. But anchoring can be used in even sneakier ways. Some retailers, for example, deliberately offer items for sale at "decoy" prices they don't expect anyone to pay, knowing that this will make everything else they sell look like a better deal. Some examples are cited in this review of William Poundstone's book Priceless:
Once you've seen a $150 burger on the menu, $50 sounds reasonable for a steak. At Ralph Lauren, that $16,995 bag makes a $98 T-shirt look cheap.
According to the review, the artist Damien Hirst even bought one of his own works - a platinum skull encrusted with diamonds - for $100 million, as a way of boosting the perceived value of the others. Apparently, it was successful, as a later auction of Hirst works smashed presale estimates.
The next time you go to the mall, you can be assured that some ad or salesperson will try to use this trick on you. The real dilemma for shoppers is that, unlike other kinds of cognitive bias, the anchoring effect tends to persist even when people are told about it. How to get around this? My suggestion: If you're dead-set on getting a deal, don't ever buy something the moment you lay eyes on it, even if it seems like a great bargain. Go to a competitor's store (or check the internet, if you have a smartphone) and compare prices. Having two or more numbers to compare against each other, rather than one number to anchor your decisions, ought to make it easier to judge the true value of what's on sale.
Other posts in this series:
As Tithing Declines, Atheists' Knowledge Grows
As you've probably heard, the Pew Forum has released a study on American religious knowledge. And their top finding deserves to be heard far and wide: atheists and agnostics outscored every other religious group - even evangelicals!
On average, Americans correctly answer 16 of the 32 religious knowledge questions on the survey by the Pew Research Center's Forum on Religion & Public Life. Atheists and agnostics average 20.9 correct answers. Jews and Mormons do about as well, averaging 20.5 and 20.3 correct answers, respectively. Protestants as a whole average 16 correct answers; Catholics as a whole, 14.7. Atheists and agnostics... perform better than other groups on the survey even after controlling for differing levels of education.
This shouldn't come as a surprise. It's well-established by now that most American theists are abysmally ignorant of the religion they profess: I wrote a post about this topic over four years ago. But the finding that atheists and agnostics are more knowledgeable is a nice little cherry on top!
That said, I'm not writing this post to gloat; I'm saying that this is what we should expect. Christianity is still the default option in American society, and tens of millions of people with no real commitment to that faith have been indoctrinated into thinking of themselves as Christians. On the other hand, it's still rare that people are raised atheist from birth. Most people who become atheists take that step because they've made an effort to investigate religious teachings and make up their own mind. The New York Times has a nice little stinger of a quote from Dave Silverman of American Atheists:
"I have heard many times that atheists know more about religion than religious people," Mr. Silverman said. "Atheism is an effect of that knowledge, not a lack of knowledge. I gave a Bible to my daughter. That's how you make atheists."
Silverman's point is excellently put. The virtue of this study is that it dispels the myth, still bandied about by proselytizers, that atheists are "afraid of the gospel". Instead, it supports the explanation that we're atheists because we've sincerely considered the claims of religion and found them unconvincing.
Truthfully, I wish more Americans would read the Bible. After all, it's not as if people who are ignorant of its contents will be easily shamed into becoming atheists. More likely, they'll just believe whatever their preacher tells them is in there. And when their preacher tells them that the Bible says God wants everyone to be rich and that being poor is a divine curse, or when their preacher tells them that God wants America to invade Iraq, or when their preacher tells them that Jesus argues for public prayer and the merging of church and state - when they hear those things from the pulpit, they believe them, and we've witnessed firsthand what the results are. If people read the Bible for themselves, they probably wouldn't be cured of sexism or homophobia or religious intolerance, but they might at least absorb some of its occasional teachings about universal love and social justice.
On that topic, I also wanted to mention this article, about how churches across the country are struggling with a lack of donations. The recession has accelerated the dropoff, but it's not the sole cause. Donations to churches have been slowly declining over the past forty years. As older, more religious generations fade away, they're not being replaced by younger members:
A 2007 study by three professors at Indiana University-Purdue University in Indianapolis found that baby boomers in 2000 were donating about 10 percent less to religious bodies than their parents’ generation did at a comparable age in 1973 — and almost 25 percent less than those parents, by then ages 62 to 76, were donating in 2000.
And this is a phenomenon that crosses denominational lines, from conservative synagogues to evangelical megachurches. As an explanation, the article cites a study which found that baby boomers are "more likely to construct a personal sense of spirituality than to subscribe to a denominational or even congregational one".
But I think this ignores a far simpler explanation: donations are declining because more people are becoming atheists, and fewer trust religion to be able to answer their dilemmas. It's not a lack of trust in institutions in general, but the simple recognition that religion's factual claims are unsupported and its moral beliefs are often cruel, arbitrary, and irrational - relics of a less moral and more superstitious past. Why should people donate their time and money to churches which have repeatedly failed to offer proof for their claims of authority, much less use that authority wisely to advance the good?
The Language of God: Rusty Containers
The Language of God, Chapter 2
By B.J. Marshall
Chapter 2 reminds me of a Tim Minchin song, Storm, where one line goes "Keeps firing off clichés with startling precision / Like a sniper using bollocks for ammunition." The next theme Collins discusses in this chapter involves addressing all the harm done in the name of religion and wondering how anyone could subscribe to the tenets of any religion that perpetrates such wrongs in the world. He gives two answers, but one is really a diversion: 1) keep in mind all the good that churches have done, and 2) the church is made of fallen people. Basically, the church and its people are "rusty containers" so you shouldn't equate it with the pure water of the Moral Law.
Prior to my leaving the church, I had no problems giving generously to it. But my leaving has caused me to think this over more deeply. I'm sure the church does some good in the world, but it's grossly inefficient and highly particular about doling out those funds. The Church of England's Archbishop's Council has an overview of their annual budget:
- 11,800,000 pounds for training for ministry
- 10,300,000 pounds for national church responsibilities
- 830,000 pounds for pension contributions
- 3,300,000 pounds for clergy retirement housing
- 1,500,000 pounds for "making a real difference to those whose lives are trapped in poverty"
So out of 27.7 million pounds in donations, the church only sends 5.4% to charity? I have not been able to find statistics on how much in donations to other Christian churches actually go to charity, but I have found some other pertinent information. Just two examples here: The Mormon Church spent $3 billion on a shopping mall in Salt Lake City, and spends less than one percent on helping the poor.
My wife used to work as secretary for a Roman Catholic parish. She said that she felt fine knowing that the donations of parishioners were going to help pay for others' incomes. I tried to explain as tactfully as I could (knowing that these were very dangerous waters I was treading in) that people donating to charities should look to pay as few administrative expenses as possible. She countered that the Church was actually providing a service to its parishioners, so it was not just engaged in charity work. I decided not to pursue the argument further, thinking that it wouldn't help matters to point out how misguided I thought the Church's "service" was.
Collins' evasion tactic is made funnier still by the examples he presents. In arguing how the church has played pivotal roles in "supporting justice and benevolence" (p.40), he cites Moses' leading the Israelites out of bondage. There is absolutely no evidence for this. Another case of the church supporting justice and benevolence: "William Wilberforce's ultimate victory in convincing the English Parliament to oppose the practice of slavery." Really, you mean the slavery that the Bible itself endorses? Interesting.
Onto Collins' second point: the church being comprised by rusty containers of fallen men. He asserts that the church has done some pretty bad stuff throughout history, but that you can't blame the pure, clean water of spiritual truth. He continues by listing some examples of violence that "sully the truth of religious faith." What's worse, Collins thinks that "[p]erhaps even more insidious and widespread [than the violence done throughout history] is the emergence in many churches of a spiritually dead, secular faith, which strips out all of the numinous aspects of traditional belief, presenting a version of spiritual life that is all about social events and/or tradition, and nothing about the search for God" (p.41). What's more insidious than the Spanish Inquisition, the Crusades, or Islamic terrorism? How about blasé modern worship in community-centered settings. I mean, I can handle genocide and torture. But all these spaghetti suppers, church group outings, and other non-traditional crap have just got to go! I guess genocide and torture does get closer to the pure, clean, petty, violent bully of a god we find in the Bible.
Let's be careful not to throw the baby out with the bathwater, though, because atheism is just as bad, Collins warns. He points to the Marxist Soviet Union and Mao's China. In this post, I won't go into the details of why atheism has nothing to do with communism's failure, except to say I think that some factors that play heavily into it are a lack of incentive to excel, a disconnect between prices and the supply and demand of goods, and a gross disparity in property rights. In any event, for Collins to point to atheism as if it were the sole cause of atrocity is preposterous. "In fact, by denying the existence of any higher authority, atheism has the now-realized potential to free humans completely from any responsibility not to oppress each other" (p.43). I suppose this is always a possibility, although it has a hard time explaining how atheists are just as ethical as church-goers. Collins can't see that a moral system can be built around individual desires in a cooperative environment.
Other posts in this series:
Weekly Link Roundup
For the holiday season, some goodies this weekend:
• First up, some music for the season: the blogger Lirone, of Words That Sing, in collaboration with William Morris, composer in residence at the British Humanist Association (did you know the British Humanist Association had a composer in residence? me neither!), has written a humanist carol, Gathering Round the Fire. It's 99 cents on iTunes, and all profits will go to the BHA. I downloaded and listened to it, and I enjoyed it greatly. Check it out, support a good cause, and lend a little bit of humanist cheer to your holiday gathering!
• Next, CNN has a surprisingly sympathetic interview with Richard Dawkins on evolution and atheist advocacy.
• The Daily Mail's Andrew Alexander offers a "heartfelt plea for atheism", an eloquent essay only slightly marred by an ignorant passage about climate change.
• Hanna Rosin asks whether the prosperity gospel contributed to the economic crash.
• On Daily Kos, it's a shameful day for the Irish Catholic Church, as a long-awaited report is released about the complicity of the bishops in sex abuse by predator priests.
• And finally, from Time, an unsparing essay about the subjugation and abuse of women in Islamic countries. (Did you know a Saudi Arabian woman has no legal proof of her existence besides her name on her husband's ID card? I didn't.) This is the kind of thing that the New Atheists get called "shrill" and "strident" when we write.
Also, you may have noticed that posts on Daylight Atheism are now classified by tag in addition to the six major categories (also, there's a tag cloud). I implemented this as a result of suggestions in the reader feedback thread, and I've been working my way backwards tagging older posts. Before I go further with that, I'm interested if people have any opinions on it. Too many tags? Too few? Are some missing that you'd like to see included? Personally, I'm still considering whether to add the "Science" tag to the posts on Lee Strobel.
Important Update on Kiva
Since I've endorsed Kiva in the past (and I stand by that endorsement), for transparency's sake it's worth linking to this post from David Roodman (see also the related article from the Times).
The quick summary is that the connection between Kiva lenders and loan recipients isn't as direct as you might have thought. Although the individuals listed on the site are real and their business proposals are genuine, their loan requests don't necessarily sit in limbo until they're funded by Kiva users. (This would, as the article rightly notes, be both demeaning and inefficient.) Instead, Kiva's partner MFIs often make the loans out of their own funds, then post the information on Kiva's site so that users who donate money end up reimbursing them for that amount. This wasn't exactly a secret - Kiva does say that loans may be disbursed before they're fully funded by users - but it also wasn't being made as clear as it could have been. I can personally attest to this, as it took me by surprise.
That said, this knowledge doesn't disturb me. There's really no reason why it should: after all, money is fungible. It doesn't make any difference whether I'm donating money directly to an entrepreneur in the developing world, or giving it to an MFI that's funding that entrepreneur, thus freeing up an equivalent amount of capital for that MFI to make other loans. If the amount being given is the same and the end recipients are the same, then the outcomes are identical. (One thing that did surprise me is that MFIs will sometimes repay lenders out of their own pocket when a loan recipient defaults - but this is just good business practice, and there's certainly no reason for us lenders to object.)
This news doesn't make any difference to my intent to continue lending through Kiva, but since I've invited other atheists to do likewise, I thought it worth passing on. If it matters to you, please take this into account.
Weekly Link Roundup
There are couple of news items this week that I thought merited a brief mention.
First, in the New Yorker, James Wood provides another piece of evidence for my theory that the only kind of atheists considered "respectable" are the ones who wish they were religious:
What is needed is neither the overweening rationalism of a Dawkins nor the rarefied religious belief of an Eagleton but a theologically engaged atheism that resembles disappointed belief.
And while we're on the topic of concern trolling, here's a superb example from the masters of the tactic, the Discovery Institute:
Coyne is an evolutionary biologist of the first rank, but that is where his competence ends. His arguments against the existence of God are embarrassing, and, like the arguments of Richard Dawkins and other New Atheists, are eliciting a backlash among intellectuals who have at least a modicum of philosophical and theological education.
...The damage that Coyne and other New Atheists are doing to their own atheist cause is incalculable.
One would think that if we New Atheists are hurting our own cause so much, creationist kooks like this one would stay quiet and let us self-destruct, rather than issuing us dire warnings about how we're ruining the cause of atheism by being all outspoken and passionate and articulate and such. It's a fairly safe bet that whatever ID advocates urge us not to do, that's the thing we should be doing more of.
Lastly, this made my day - an article from the New Republic about Ayn Rand and her cultish right-wing political philosophy. I recommend reading the whole thing if you have the time, but here are some highlights to give you a taste:
The young, especially young men, thrill to Rand's black-and-white ethics and her veneration of the alienated outsider, shunned by a world that does not understand his gifts.
She wrote of one of the protagonists of her stories that "he does not understand, because he has no organ for understanding, the necessity, meaning, or importance of other people"; and she meant this as praise.
Her political worldview began to crystallize during the New Deal, which she immediately interpreted as a straight imitation of Bolshevism. Rand threw herself into advocacy for Wendell Wilkie, the Republican presidential nominee in 1940, and after Wilkie's defeat she bitterly predicted "a Totalitarian America, a world of slavery, of starvation, of concentration camps and of firing squads." [Editor's Note: Does this remind you of anything in the news lately?]
Rand's inner circle turned quickly and viciously on their former superior. Alan Greenspan, a cherished Rand confidant, signed a letter eschewing any future contact with Branden or his wife. Objectivist students were forced to sign loyalty oaths, which included the promise never to contact Branden, or to buy his forthcoming book or any future books that he might write. Rand's loyalists expelled those who refused these orders, and also expelled anyone who complained about the tactics used against dissidents.
Rand held up her own meteoric rise from penniless immigrant to wealthy author as a case study of the individualist ethos. "No one helped me," she wrote, "nor did I think at any time that it was anyone's duty to help me."
But this was false. Rand spent her first months in this country subsisting on loans from relatives in Chicago, which she promised to repay lavishly when she struck it rich. (She reneged, never speaking to her Chicago family again.)
and a pitch-perfect summation of the whole movement:
Ultimately the Objectivist movement failed for the same reason that communism failed: it tried to make its people live by the dictates of a totalizing ideology that failed to honor the realities of human existence.
The Opportunity Cost of Pseudoscience
Last month, the U.S. government-funded National Center for Complementary and Alternative Medicine released a study which found that Americans spent $34 billion annually on alternative medicine. Although this is just 1.5% of total health care spending in the country, it represents over 11% of all out-of-pocket expenditures. The report estimates that about 38 million adults visited alternative practitioners in 2007.
Unusually for a mainstream media outlet, the Boston Globe offers a much-welcomed skeptical perspective on this news, via a quote from Public Citizen which points out the important fact that most of these therapies are untested and largely unregulated:
Dr. Sidney Wolfe, who leads Public Citizen's health research, has long criticized the government for what he considers lax regulation of prescription drugs and mainstream medicine. Yet, he also sees problems with the widespread use of dietary supplements.
"People think they are cleared" by the Food and Drug Administration, he said, when in fact they do not need proof of safety or effectiveness to go on the market.
"Mainly, they're ineffective," he said.
According to the NCCAM study, most alternative medicine spending goes to dietary supplements. Though supplements like fish oil and echinacea are massively popular, few of them have any clinically demonstrated effect, and even the ones that do contain active ingredients can vary dramatically in dosage and potency - which is, after all, what you'd expect from raw natural ingredients. The ability to isolate and purify the active ingredients found in nature, to deliver controlled doses at known potency, is the entire point of scientific medicine.
After supplements, some of the other alternative treatments mentioned in the study include acupuncture and homeopathy, both of which are useless placebos based on sympathetic magic and pseudoscientific theories about how the human body works. Another kind is massage therapy and chiropractic, which can be useful for some kinds of physical ailments but have nothing like the universal efficacy claimed by their more fanatical practitioners. Other therapies mentioned by the study include chelation, ayurvedic medicine, and "energy-healing therapy".
I can only view these figures as a massive missed opportunity. Not just a missed opportunity to educate the public about why we should rely on evidence-based medicine, although it's certainly that. But more than that, it's a societal failure: a misallocation of society's resources on an enormous scale. Just think what that $34 billion could have done if it were put toward genuine scientific and medical research - how many promising studies could have been funded, how many discoveries made, how many diseases potentially cured! (For comparison, the entire 2010 budget request of the National Science Foundation is only $7 billion.)
Obviously, there's no direct tradeoff here. Even if all Americans decided to reject alternative medicine, these funds wouldn't necessarily have gone to scientific research. Much spending on alternative medicine is for conditions that are still poorly understood or that have no effective treatment, since these are always the areas where pseudoscience springs up. What we're seeing here is an opportunity cost: the price we, as a society, pay for the decisions we collectively make about how to allocate our resources. Money that we spend on alternative medicine and other pseudosciences is money that we can't spend on areas that might genuinely improve our lives.
On the Morality of: Military Spending
I've been following, with some incredulity, a battle brewing in Congress over a military-spending bill and whether it will include money to buy more F-22 Raptors, a jet fighter used by the Air Force during the Cold War. Even though Defense Secretary Robert Gates insists that these planes are not needed, a contingent of Congresspeople are bent on putting that spending back into the budget - forcing the military to take these planes against their will!
Bizarre as this sounds, it's a classic example of how the military-industrial complex operates in America. Major military firms like Lockheed Martin and Boeing, which make most of their profit from multibillion-dollar government contracts, deliberately spread out their operations over as many states as possible - ensuring that senators and representatives from those states will vote for their programs, to ensure the steady flow of government cash that creates jobs in their districts. This pork is like a drug, and Congress, for the most part, is hopelessly addicted.
Stories like this one explain why the amount of money that the U.S. spends on the military is so staggering. Our 2009 base military budget, plus supplementals to paay for the Iraq and Afghanistan wars, is about $650 billion. When all military-related spending is counted, the total sum may be closer to $1 trillion. This is just about as much as every other country in the world spends, combined. (See also.)
Since the fall of the Soviet Union, America has not had an adversary that poses us any realistic military threat. And in a world increasingly interconnected by trade, great-power conflicts like those of the 20th century seem less and less likely to happen again. The wars of the future are far more likely to be the kind we've seen in recent years - peacekeeping operations in failed states and asymmetric conflicts with non-state actors like al-Qaeda - for which large conventional weapons systems are useless. Even if we were expecting to fight more wars like those of the past, our spending vastly outstrips any plausible enemy. How, then, can we possibly give a moral justification for such massive, reckless spending on weapons that, in all likelihood, we will never need? (The F-22, for example, has never been used in combat.)
America needs to relearn the concept of opportunity cost. This idea has been ignored by posturing elected officials who huff that "no price is too high to pay for security". But this is obviously false: every dollar we spend on the military is a dollar we can't spend on something else. And there are countless actual, urgent issues our country is facing where that money could be spent to make a major positive difference right now, as opposed to the entirely theoretical possibility of a distant future war that might require these weapons.
Consider how much good that trillion dollars could do if spent in other areas. We could rebuild the entire nation's energy grid with clean alternative power, ending global warming and severing the dependence on foreign oil that poses a significant threat to our security in and of itself. We could enshrine universal healthcare and create an educational system that would make Americans the healthiest, best-educated, most secure people on the planet and an envy of the other nations. We could even apply it to areas of legitimate security concern, like inspecting more of the shipping and transit that passes through our ports - a plausible target of major terrorist attacks, and an area where our current precautions are woefully inadequate. Yet all these grand plans are viewed as too expensive, too "socialist", too unlikely to yield a benefit, by the same elected officials who think nothing of handing out hundreds of billions of dollars each year to well-connected lobbyists and corporations.
The easy excuse is to blame the politicians and assume that wealthy corporations have hopelessly rigged the system in their own favor. But this is too simplistic.
As debased as it is, America is still a democracy, and we still have the power to vote out any politician who offends us. The real problem is how we, the voters, evaluate risk and hold our government to account. Politicians assume, usually correctly, that any vote against the military budget will be used against them in attack ads. Wealthy lobbyists supply the cash needed to run expensive modern campaigns. And voters who would otherwise take their representatives to task for waste and corruption will cheer on almost any spending, no matter how frivolous, if it's justified by repeating the words "national security".
These attitudes create an environment that favors candidates who will vote for massive, wasteful military budgets instead of spending to address real needs. When the voters see the senselessness of this, when we're willing to vote for politicians who pledge to slash the military budget to only what is genuinely necessary for defense, we can dismantle the military-industrial complex and divert that spending into areas where it will truly benefit all of us.
Other posts in this series:
Back in 2007, I wrote a post on optimistic populism, or how free markets can be a force for good: by spurring efficiency and innovation, they increase the total amount of wealth in the world, making it possible to raise the standard of living for all people. I also noted the irony that libertarians, the fiercest defenders of the free market, so often misunderstand this. In their jeremiads against taxation, they're implicitly buying into the view that wealth cannot be created and that the economy is a zero-sum game where the only way to help some people is to harm others.
Today, I want to talk some more about how markets can be harnessed as a power for good. But first, consider the scope of the problem:
According to the CIA Factbook, the world's GDP was estimated at $69.5 trillion in 2008. If divided by the current world population of around 6.7 billion, that would yield a global per capita income of just over $10,300. This doesn't seem like much, but it would actually be a vast improvement - the World Bank estimates that in 2001, 2.7 billion people lived on less than $2 a day. (This number has undoubtedly gone down somewhat with the rise of China and India, but is still substantial.)
Of course, achieving this level of income equality would require pooling all the world's wealth and then redistributing it equally to every person - a proposal which is unlikely ever to be implemented, for a wide variety of reasons. But there's a bright side to this as well: the fact that billions of people eke out a living on so little means that total income equalization is not necessary. Even a small degree of redistribution would be enough to produce a drastic improvement in the standard of living for the world's poorest and most desperate.
"Redistribution" is a dirty word in the minds of libertarians and conservatives, who think of it solely as direct aid to developing nations funded by taxation. But that's an incomplete definition. Any program, public or private, that results in money flowing from the world's wealthy nations to the developing ones is a form of redistribution. Kiva is one example, a microfinance organization that makes loans to entrepreneurs and businesses in the developing world, which it funds with donations from citizens of wealthy nations.
Wealth-creating free markets have enormous potential to improve the lives of the world's poor. But billions of people who need those benefits most are unable to tap into them, because poverty is self-perpetuating. People in poor countries can't access the credit and lack the infrastructure that are needed to create successful businesses. Meanwhile, most of the wealth that's created in the industrialized world stays in that world, circulating among a small pool of rich stockholders and investors. The U.N.'s target for a meager 0.7% of GDP to be given as aid has been consistently missed by almost all rich nations. Private giving improves these numbers somewhat, but the amount that the rich nations give, compared to what we could give, is still pitifully small - and the wealth gap between rich and poor continues to widen.
To make real progress in ending poverty, we need a different vision of capitalism. We need businesses with a different mission: not to enrich the already wealthy, but to redistribute their profits in beneficial ways. I'm not talking about non-profit foundations that subsist on charity, but real businesses, making a profit by selling goods and services that people need, competing with each other for market share, just as we have now. These businesses would, however, make it a part of their charter to donate all or part of their profits to some worthy cause. Even pledging to donate as little as 10% or 20%, from a large corporation, could be a significant sum.
We already have exemplar companies, like Newman's Own, which donates all profits to charitable causes. But rather than just a few companies out of many doing this, it should be the norm. Why doesn't every business have a designated cause which they support? Why isn't philanthropy part of the core mission of every company, rather than a side pursuit engaged in mainly for the favorable publicity?