A Case Against Alarmism

The New York Times reported last week that movie and television producer Tyler Perry penned 200 different television episodes in all of six months this past year. The feverish writing coincided with a 43-city Madea farewell tour; Madea arguably the best-known character ever written by Perry. The productivity of individuals in today’s hyper-technological world never ceases to amaze. One guesses Perry’s output would have been quite a bit less robust in the 1970s when typewriters were still somewhat advanced, and the internet still a very distant object. 

Perry’s herculean productivity rates consideration as a response to the hand wringing among certain members of the right about “budget deficits” and alleged “fiscal insolvency” that supposedly looms for the U.S. Think about it for a second. Almost as regularly as Perry pens television episodes, self-proclaimed limited government types pen op-eds about a “bankrupt United States,” and “unfunded entitlement programs” that will be impossible to pay for given the “demographic outlook” for the U.S. that is supposedly dire thanks to Americans not making enough babies. 

While lefties routinely warn of apocalyptic, “world is ending” results if we don’t embrace the horrid living conditions that would come with a cessation of carbon consumption, members of the right point to a brutal future springing from – try not to laugh – low birthrates. The claim from the normally more sober is that lower birthrates promise substantially reduced production that will lead to falling government revenues, government debt defaulted on, and a “Greece-like” fiscal future for the richest country in the world.

It’s in response to alarmism like this that I wrote my soon-to-be-released book, They’re Both Wrong. Market signals mock the nail-biting alarmism of both sides. If global warming really threatened the world’s coastal locales as hysterical lefties presume, starving writers would once again heavily populate extraordinarily cheap beach communities like the Hamptons, Malibu and Nantucket, while landlocked cities Dallas and Phoenix would be the new New York and Los Angeles. And then if the U.S. Treasury truly faced a bleak, plummeting-revenue future (funny, all this time I thought libertarians and conservatives yearned to “starve” the proverbial beast), Treasury yields would be soaring to reflect growing investor pessimism about the ability of the U.S. Treasury to pay off its debts. Except that Treasury yields have been falling for decades; the latter a signal of growing investor confidence that federal debt is very small relative to future government revenues.

Up front, what’s been said so far should not be construed as an endorsement of government spending. Or rising government revenues. Not at all. Government spending is a shame simply because precious resources are being allocated sans the market discipline that drives investment and consumption in the private sector.

My dispute with deficit alarmists is that they would be so obtuse as to pretend there’s some big difference between taxes levied to pay for government waste versus borrowing in order to pay for it. With the former wealth is extracted without compensation, while with the latter Treasury pays for the right to allocate resources minus the guiding hand of the market. To be clear, the spending is the problem, not how the resources are accessed. Though if given the choice, I would prefer that the feds paid for the right to waste through borrowing, as opposed to taxing.

But that’s a digression. Low birthrates are global warming for conservatives and libertarians. They again claim reduced procreation will bring about slower economic growth, falling revenues, default, Greece (!), etc.

Implicit in their alarmism is that human beings are static creatures, with no capacity to increase their output. This is odd coming from conservatives who’ve long lamented static revenue projections when it comes to tax cuts and revenues. They’ve in the past pointed out with good reason that “tax cuts bring about behavioral changes,” that “people will work more if they’re taxed less.” No argument there. Taxes penalize work, but more important is that they penalize investment.

Investment is italicized above mainly as a reminder of how baseless are birthrate/demographic worries. Investment is all about achieving higher-productivity outcomes with fewer and fewer hands. Investment is about matching talented minds with capital on the way to technological advances that boost human productivity in staggering fashion.

Which brings us to the oxen. As the Washington Post’s Christopher Ingraham reported last week, the “domestication of oxen” around 4,000 B.C “revolutionized farming by allowing people to work much larger plots of land. Before, farmers had to till soil by hand using hoes or other simple tools. But an ox, harnessed to a plow, could do the same amount of work in a fraction of the time.”

Ingraham goes on to quote Oxford University’s Amy Bogaard that with the accession of oxen by certain farms, “a single family’s output ‘would be multiplied by a factor of 2, 5, or even 10-plus.’” It seems investment from 6,000+ years ago was rendering the humans who drive progress the opposite of static in their production.

Ingraham’s brilliant story of the oxen’s impact on productivity, and the inequality surge between the oxen “haves and have-nots” (the quotes are mine), should have birtrate alarmists rethinking their horror stories about demographic doom. No doubt birthrates have fallen in modern times, but the productivity of those born has skyrocketed. Goodness, if something as primitive as the oxen could prove a productivity game-changer, what’s the impact of WiFi, smartphones and automobiles on modern man?

The reality is that investment-driven technological advances promise to render tomorrow’s worker quite a bit more productive than the individuals of today, and the higher birthrate past. Birthrates were obviously much higher in the past precisely because productivity per human was so much lower. Voluminous hands were needed to produce meager amounts of food. Taking nothing away from procreation, that birthrates are much lower today in the developed world is a sign of progress, not a recessed future.

As always, both sides need to relax. People are wise. They get it. Markets are a nice guide for what the combined wisdom of the world is. They’re much smarter than policy types who have solutions for everything. At present they haughtily look down on warming and birthrate hysteria that so excite policy scholars.

Even oxen turn their noses up to the birthrate worriers. Humans aren’t static as Tyler Perry’s almost-tiring-to-think-about productivity attests. The birthrate obsessed should look for another “problem” to worry about, and likely be wrong about.

This article originally appeared in RealClearMarkets

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