Untimely Observations

Optimism and the Long Run

Matt Ridley's new book The Rational Optimist has been widely noted in the media. (Richard Hoste ably reviewed it.) He provides a precis of the book in Down with Doom: How the World Keeps Defying the Predictions of Pessimists.

When I was a student, in the 1970s, the world was coming to an end. The adults told me so. They said the population explosion was unstoppable, mass famine was imminent, a cancer epidemic caused by chemicals in the environment was beginning, the Sahara desert was advancing by a mile a year, the ice age was retuning, oil was running out, air pollution was choking us and nuclear winter would finish us off. There did not seem to be much point in planning for the future. I remember a fantasy I had - that I would make my way to the Hebrides, off the west coast of Scotland, and live off the land so I could survive these holocausts at least till the cancer got me.

And yet:

Not only are human beings wealthier, they are also healthier, wiser, happier, more tolerant, less violent, more equal. Check it out - the data is clear. Yet if anything the pessimists had only grown more certain, shrill and apocalyptic. We were facing the `end of nature', the `coming anarchy', a `stolen future', our `final century' and a climate catastrophe. Why, I began to wonder did the failure of previous predictions have so little impact on this litany?

Since the start of the Industrial Revolution, almost every measure of human well-being has massively improved, and even within our lifetimes, the rate of improvement seems to have increased. So far, so good: Ridley is correct that the doomsayers have been proven wrong. There's been no population bomb, pollution has decreased, acid rain is no longer much discussed, we still have oil.

Yet human beings do not necessarily live in the long run. Left out of Ridley's narrative of progress are little items like wars, famines, and totalitarian dictatorships. Someone who was born in Russia in the early 20th century would have lived his whole life under a brutal repressive state, assuming that it didn't kill him first or send him off to die in World War II. Likewise for one born in Germany in the early part of the century: if WW I didn't kill him, he would have been impoverished by the Weimar inflation, and then seen the rise of the Nazis, WW II, and the virtual destruction of his nation.

Also left out of Ridley's narrative is who was responsible and under whose protection most of this progress has occurred: the nations of Western Europe and the United States. We can now see that the future of Europe as Europe is in some doubt, whether from the mass immigration of culturally incompatible peoples, or from sovereign defaults and subsequent social unrest or wars, or some combination of these and other factors. The United States currently suffers from some of the same disabilities.

To be sure, the engine of progress may well move its center to China or elsewhere in Asia, but that will be cold comfort to the hundreds of millions living in deteriorating or failed states, individuals who after all have limited lifespans and who will not be able to wait for the seemingly inevitable march of progress to lift them out of their difficulties.

Jeremy Siegel, finance professor at Wharton and author of Stocks for the Long Run, has made an argument similar to Ridley's in that since 1800, stocks have steadily risen and provided a rate of return superior to all other assets. But the problem is that investors have limited lifespans, and along the way in the upward march of stocks, many have become impoverished due to depressions and economic collapses. They've seen their wealth subject to 90% drawdowns or even 100% in some countries. Stocks for the long run looks like an empty promise when waiting 30 years for one's assets to recover, assuming they do at all.

While it's obviously important to remain objective and keep a sense of perspective in looking at the world, human beings don't always live long enough to see wars replaced by peace, depressions overcome by prosperity.

And one should also keep in mind that progress of the sort Ridley discusses doesn't just automatically occur - not that he would disagree with that - but take place in nations that provide safety, security, and a sound economic environment.