Are Human Beings Better Off Today?
While it was raining beautifully outside, my two friends and I were inside a coffee shop deliberating on the question "are human beings better off today?"
The guy friend who I was with insisted that people today are generally better off than people in the past thanks to technological developments and increased productivity. He said that human beings as a whole are wealthier today thanks to more efficient enterprises such as Walmart.
I agreed that it is probably true that human beings as a whole are wealthier today thanks to our ability to produce more with less. However, I pointed out that the world is not necessarily better off just because we are materially wealthier.
(I am not going to say anything new. In fact, most things that I have said and will say are based on developed concepts in Microeconomics.)
Capitalism is the system that encouraged technological developments which lead to improvements in productivity. Along with the benefits of technological advancements, however, capitalism has also caused wealth to be more concentrated to a few. The combination of the increase in wealth and the increase in the wealth disparity among people did not necessarily result in a better off society.
The Microeconomics concept of the Diminishing Marginal Rate of Utility (DMU) is the concept that can partly explain why human beings are not necessarily better off today. According to the DMU concept, the utility or welfare that you get from a "good" (something good like food, shelter, clothing) diminishes as the number of goods you get increases. For instance, according to the theory, you should get more satisfaction from the first bottle of water that you drink than from the second, and more from the second than from the third.
To explain how it is possible for people to be worse off in spite of the increase in wealth using the DMU theory, let us create a hypothetical world where the only thing of value are cabbages. All we need on Earth are cabbages and we get the following amount of utility from cabbage consumption:
1st cabbage = 1 utility
2nd cabbage = .6 utility
3rd cabbage = .36 utility
4th cabbage = .22 utility
5th cabbage = .13 utility
Now, let us say that 100 years ago, there were only 10 people on Earth. Seven of the 10 people had 1 cabbage each while 3 of them each had 2 cabbages. The people 100 years ago had a total of 13 cabbages. If you use the chart to compute for the total of each person's utility from owning their cabbage or cabbages, you will find that the total utility is 11.8.
Today, assume that there are still 10 people on Earth. One of the 10 people has 5 cabbages while the rest only has 1 cabbage each. The total number of cabbages owned by these people is now 14. As a whole, they are wealthier than all people combined 100 years ago in terms of cabbages. However, if you add up the utility each person got from their cabbage or cabbages, you will find that the total is only 11.31.
As you can see, the total utility of the 10 people who owned a total of 13 cabbages 100 years ago is higher than the total utility of the 10 people who owned a total of 14 cabbages today. People, as a whole, in this hypothetical world today, are wealthier but worse off in terms of utility. In the same way, human beings as a whole in the real world today could be worse off.
In my opinion, the world is too large and too complex for anyone to say for sure that the world is better or worse compared to the past. To be able to make an objective comparison, one would have to measure utility from all the "goods" and "bads" which is an impossible task.
7 comments:
Hmm, DMU applied to "things are better / worse" is quite an interesting idea. Something you didn't bring up, but is certainly happening is the increase in lifespans. People are generally living longer then before.
It could be the case that after a certain point, lets say 40 years, each additional year of life is just a bit less satisfying. But at the same time science has made improvements in those later years, so perhaps their utility hasn't decreased (things like arthritis meds & viagra etc).
Hey Rohit,
That's an interesting issue that you raised. . .longer life span. Hmmm. . .I'm going to have to give that some more thought.
Thanks for the comment.
Ches
Interesting analogy Cheshing with the cabbages.
I want to point out that in the second scenario, the total utility for the person with 5 cabbages is 2.31. This is higher than in the first scenario where he/she have just 1.6 utility.
DMU is an aggregated measure. We as a whole could be worse off, but there are those few now who are much better off than before. Maybe those who are better off by making the rest worse off.
Thank you for your comment Fareen. I have no objections there.
I would just like to comment that if capitalism does not come with the side effect of increased disparity between those who have and those who do not have, then it will probably good for human beings as a whole.
This scenario however seems unrealistic. In the first place, what drives innovation (increase in productivity) is the incentive for people to "get ahead" or "have more" than others.
But other forms of economic systems produced wealth disparity without the benefits of capitalism such as increase in resources.
I am only pointing to material wealth which is easier to quantify than spiritual wealth or emotional wealth.
Speaking of material wealth, it's easy to point out that we're wealthier than the last empress of china was. we have air condition, we have better medicines, cars, computers, air transport, television, refrigerators, microwave, light bulbs and etc.
Of course, that doesn't mean we're more powerful. Obviously, the empress was still more powerful since she can command virtually the entire chinese to do as she pleases where as we cannot.
So that goes to how you define better off. do you define you better off in terms of power or material wealth?
"But other forms of economic systems produced wealth disparity without the benefits of capitalism such as increase in resources."
It is true that the productivity brought about by capitalism is unmatched. As for the part about wealth disparity, in past Marxist socialist states (the People's Republic of China and the Soviet Union), I believe there were disparities between the proletariat and the ruling "class". However, among the proletariats who probably made up 90% over of the population, they were more or less equal. Statistically, the disparity was probably much lower in marxist socialist states.
"I am only pointing to material wealth which is easier to quantify than spiritual wealth or emotional wealth."
Like I said, materially, we are probably wealthier. I still wonder though sometimes. . .
For instance, I wonder if on average, people eat better today than people did in the past. What do you think? I think there is a chance that people on average eat less today not out of choice. Don't you think food there should be more weight on food when measuring material wealth?
I just want to point out and add a few more things.
One, I would like to add that the goods brought about by mankind's innovations and inventions produced other "negative" side effects apart from higher wealth disparity among human beings. For instance, a big part of the air pollution that we breathe everyday is a side effect from the invention of cars. To quantify utility or welfare, we have to take these things into consideration as well.
Two, if the world is indeed worse off today, I would just like to say that capitalism is not the only culprit. High population growth rates, for instance, are also to blame for the disparity in wealth among people today. I'm sure there are other factors apart from these ones I've mentioned that may have caused a decline in humankind's total welfare.
Three, I think that capitalism is the only sustainable form of economic system in spite of its short-comings. It's the most natural economic system. Think about it, from the beginning of time, human beings have been capitalists.
I wish, however, that certain socialist elements in modern capitalist structures are improved so that the gap between rich and poor is lessened. I believe that widely available and good public educational systems will help lessen this gap significantly. Unfortunately, although it sounds simple enough, providing free quality education proves to be a tough challenge. (Just look at the public school system in the Philippines and you'll see what I mean.)
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