A Farewell to Alms: Overview of My Critique
I’ve finally finished Gregory Clark’s A Farewell to Alms. Like everyone else, I agree that it’s well-written and addresses important topics. And I think lunch with Clark would be fun. But frankly, I can’t find much else good to say about this book. Every major argument that I can evaluate without getting knee-deep in the data is over-stated at best, and usually deeply misguided. His data-intensive arguments might be fine, but since Clark didn’t build up much credibility with me elsewhere in the book, I’m skeptical.
I’m going to start with a quick overview of my position, which I’ll flesh out in future posts.
1. Malthusianism. Clark adamantly argues that the Malthusian model explains human history until 1800. A key assumption of the model is that, for humans as for hyenas, more population means lower per-capita income. Other than a brief dismissal of Kremer’s endogenous growth theory, Clark literally seems unaware that anyone disagrees with this assumption.
Even worse, Clark repeatedly misstates the implications of his own model. He delights in counterintuitive claims like “[I]n 1776, when the Malthusian economy still governed human welfare in England, the calls of Adam Smith for restraint in government taxation and unproductive expenditure were largely pointless.” To the contrary, even in a Malthusian model, more production and less waste is unambiguously good for living standards. Population growth eventually returns living standards to their original level, but that may take generations.
2. Efficient Institutions. Clark repeatedly scoffs at the importance of institutions/policies for growth. He argues both that (a) Good institutions/policies failed to cause growth in important cases, and (b) Institutions naturally evolve toward efficiency anyway. His “proof” consists in some examples where good institutions/policies failed to produce rapid growth, and some examples where extremely inefficient institutions disappeared after a couple centuries.
Clark makes no effort to explain why other economists might have come to the opposite conclusion. He ignores the large differences in economic freedom, corruption, etc. between rich and poor countries. He ignores the compelling work of e.g. Sachs and Warner showing that, at least in the post-war era, avoiding a short list of bad policies has been virtually a sufficient condition for growth. He also ignores massive, long-lasting policy disasters like Communism; comparisons between West and East Germany, and North and South Korea; and can’t even acknowledge post-Mao Chinese growth as a mind-blowing demonstration of the power of policy.
In the face of all this evidence, Clark throws up his hands and says that economists don’t know how to create growth. Give me a break. If voters and politicians around the world since 1800 had just done what Adam Smith told them to do in The Wealth of Nations, poverty would already be a thing of the past. Economists have known how to create growth for centuries. The problem is that, all too often, non-economists choose not to listen.
3. How Important Is Labor Quality? Clark repeatedly dismisses competing theories by pointing out the imperfect predictions of their most simple-minded formulations. But he goes a lot easier on his own story. Why are rich countries so much richer than poor countries, according to Clark? Because they have lower-quality workers.
Obvious objection: If that’s the problem, why does moving these low-quality workers to the West quickly raise their wages from $1/day to $40/day? Yes, that’s below average for the West, but it’s in the same ballpark. If that isn’t iron-clad proof that institutions/policy matter a lot, what is?