In 1930, in a little essay titled “Economic Possibilities for Our Grandchildren,” John Maynard Keynes predicted that the “economic problem” could be solved within 100 years. Given steady growth, the standard of living in the developed world would be “between four and eight times” higher than in 1930. With this new wealth, human beings would be free from the Malthusian struggle for survival for the first time in the history. People could afford to work only three hours a day. The love of money would become passé. Homo economicus could be packed away and economics could become a harmless profession like dentistry.
For a piece written as the Great Depression was beginning, Keynes’s optimistic vision of economic growth was remarkably accurate. Real incomes in the United States are now more than eight times what it was in 1930. But Keynes’s intriguing predictions about how we would occupy ourselves once we became rich fell wide of the mark. Only eight percent of full-time US workers work fewer than 40 hours a week and last I checked, the pursuit of money was still in vogue.
It’s UC presidential campaign season at Harvard. The sandwich boards outside the Science Center are plastered with promises of reform, free food, and alcohol funding. Facebook newsfeeds are awash with flashy campaign logos. And at a recent Crimson-hosted debate, current President Gus A. Mayopoulos ’15 could be seen swigging from a flask.
To their credit, all the Undergraduate Council presidential tickets have tackled serious financial issues in their campaign platforms. But there has been disappointingly little use of economic reasoning this election season. In this new Clark-Mayopoulos-Goffard era of comedic governance, Homo Economicus thought he could kill two birds with one stone by offering some lighthearted campus improvements based on economic theory. So, how could an economist improve Harvard?
Economics and love have had something of a dysfunctional relationship. Which is to say, economics keeps sending texts while love is so over economics already.
Scholars of love have always looked at economics with skepticism. In “On the Present Age”, the 19th century Danish existentialist Søren Kierkegaard lamented the modern preoccupation with money over love. Personal growth could come only from love and spirituality, nor the worldly pursuit of wealth. The 20th century philosophers McCartney and Lennon concluded along similar lines that “money can’t buy me love.”
A sterile term like “secular stagnation” could strike fear only into the heart of an economist. But it could be the malaise that defines the economic prospects of our generation.
Secular (here used in the sense of “persistent”, not “nonreligious”) stagnation refers to a long-term climate of low economic growth. In the conventional wisdom, booms should follow busts; recessions should be followed by a periods of high employment and inflation. America technically exited recession in 2009, but the past five years certainly haven’t felt like a boom. In fact, there’s every indication that the economy is operating far from its full potential. Until recently, unemployment has remained stubbornly high, and inflation has stayed low. This continued under-performance in the face of conventional theories about the business cycle is secular stagnation.
Since September, tens of thousands of pro-democracy protesters have taken to the streets of Hong Kong. The protesters argue that the Chinese Communist Party has broken its legal obligation to hold free elections for the city’s Chief Executive. Beijing’s election proposal would limit candidates to a select few vetted by a committee loyal to the central government, while the protestors clamor for open nominations.
Seen from the narrow confines of “Homo Economicus,” Hong Kongers’ dissatisfaction with the status quo is puzzling. On a per-capita basis, Hong Kong is one of the world’s richest economies; its residents enjoy some of the best health care outcomes in the developed world. The conservative Heritage Foundation’s 2014 Index of Economic Freedom even ranked Hong Kong first—eleven spots ahead of the United States.