Wednesday, May 31, 2017

Book Review: The Complacent Class

Don't get me wrong--I thoroughly enjoyed reading Tyler Cowen's recent book, The Complacent Class. It's full of facts, figures, recent trends, and conversation that is all food for thought, presented in a lively and entertaining style. As usual, Mr. Cowen takes a relatively pessimistic view of our current circumstance, but unlike with some of his previous books, I am more willing to accept it.

Still, I got issues, the first being the title. The word class (especially coming from an economist) implies some kind of socioeconomic status, or perhaps one of the poles in a dialectical struggle. David Brooks, in his classic Bobos in Paradise, describes just such a group, bourgeois bohemians, whom he could have dubbed complacent if he'd wanted to.

But not so in Mr. Cowen's book. Never does he define who belongs to this class, nor do we meet any doughty dynamicists who stand in opposition. We're all more or less happy with the status quo, regardless of social position. It's not so much a class that he's talking about, but more an era or a zeitgeist. I'll happily concede that The Complacent Zeitgeist doesn't trip off the tongue, so I don't totally blame Mr. Cowen for his moniker. But let's be clear: it's a literary conceit, and not a term or category to be taken seriously.

Another (unwieldy) title Mr. Cowen could have chosen is The Herrnstein Centrifuge Goes Into Overdrive. For his book describes more or less precisely what Richard Herrnstein and Charles Murray predicted back in 1994 in The Bell Curve. Mr. Herrnstein forecast that people with high IQs would marry other people with high IQs, they would have really smart children and then segregate themselves into neighborhoods with other people with really smart children. This is what has happened, as documented by Mr. Cowen, and also by Charles Murray himself in Coming Apart.

Arguably The Bell Curve oversimplified things a bit by emphasizing only IQ. In reality, social segregation depends on lots of personality traits, not just IQ. As Mr. Cowen says,
For instance, intelligence, ambition, conscientiousness, and some personality traits all seem to possess some degree of heritability or at least intergenerational transmission. We have perhaps the best estimates for intelligence, and there the degree of heritability seems to run in the range of 40 to 60 percent, depending on which studies you consult.
Mr. Cowen takes Herrnstein's idea and generalizes it into what he calls matching. The Internet allows us much greater choice, not just in marriage partners, but in all sorts of other things--where to live, schools, restaurant choices, even pets. The net result is that people are more segregated than ever, with ever more power to select their friends, neighbors, and lifestyles--the centrifuge on steroids.

He has some new (to me) things to say about matching. It is well known that measured total factor productivity has declined markedly since 1970. Why? Mr. Cowen treats matching not just as a social phenomenon, but also as an economic one. He cites the usual litany of improvements in our lives that the statistics may not capture, e.g., the ready availability of free search engines. But then he suggests that the ability to match is much more important than anything on that usual list. If there really is an improvement in productivity, it likely shows up in better matching as much as anyplace else.

I think this is an important point. Thus a very important new aspect to our lives--arguably the most important new aspect to our lives--contributes nothing to GDP. So economic statistics don't catch the important consequences of the IT revolution.

But perhaps Mr. Cowen doesn't take his insight as far as he could. For example, Google-Waze technology has noticeably improved my life by sparing me many hours sitting in traffic jams. I pay (nearly) nothing for this service. But by participating in Waze, my data is used to to help other people match their travel to available roadways--I'm trading my information (my location and speed in traffic) for their information (fastest possible route to my destination). So this is in effect a direct consumer to consumer exchange, albeit with no money changing hands. It is a form of barter.

Similar statements can be made about Yelp, TripAdvisor, and even All of these are direct economic trades from one consumer to another, unmediated by money. We pay only a small amount to support the platform, which is the only bit that shows up in the statistics. The value of these trades must be enormous, which implies that productivity statistics are woefully short of the mark.

I'm not sure complacent is the appropriate adjective for this. Revolutionary might be a better description. I'm grateful to Mr. Cowen for the insight.

Mr. Cowen maintains that however much we may enjoy good matches as individuals, there is net harm to society as a whole in the form of Herrnstein's centrifuge. Call this a market failure. No doubt there are winners and losers from the centrifuge. The poor are losers precisely because they get centrifuged out. But then the poor can't buy Mercedes-Benz cars either, and nobody calls that a market failure. I'm not at all convinced that society as a whole is worse off. Matching makes (most) people both happier and richer, and less reason for the government to come in and regulate it. (Which is no reason not to help the poor.)

The weakest chapter in the book is “Why Americans Stopped Rioting and Legalized Marijuana.” The obvious problem is that the word marijuana is never mentioned in the chapter at all besides the title. So it doesn’t deliver. I would have enjoyed learning about Mr. Cowen’s take on the opioid epidemic--surely as complacent a drug as can be imagined.

Then he attributes the stunning decline in the crime rate since 1970 to "complacency," suggesting that other explanations (incarceration, better policing, eliminating lead from the consumer environment, etc.) can’t explain the phenomenon. I’m not sure I believe him--I don’t know how one can measure the magnitude of a hypothetical with any precision. Then later in the book he refutes his own argument, suggesting that crime isn’t down as much as it has changed. Today we’re afflicted with cybercrime instead of street crime.

Another point he could have made is that street crime is less lucrative today--neither people nor stores carry as much cash as they used to. I think in this chapter he carries his complacency theme a bit too far.

The most compelling section of the book comes at the end, on the topic of global affairs. I’ll rephrase his point in my own words:

We, being complacent and rich, have absolutely no desire to go to war. After all we have the most to lose. North Korea has nearly nothing to lose--it would be hard to knock out their non-existent electricity system. So psychopath Kim Jong-un is using that asymmetry to blackmail us, knowing full well that all-out war will hurt us far more than it would hurt him (assuming he can save his own skin).

Our very complacency is leading us (nearly) inevitably toward war.

Nothing I say here should deter you from reading Mr. Cowen’s book. It’s a wonderful read, you’ll learn a lot, and you’ll probably reach different conclusions from me. Enjoy.

Further Reading:

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