All Commentary
Wednesday, April 1, 1998

The Paradox of Progress: Can Americans Regain Their Confidence in a Prosperous Future? by Richard B. McKenzie

We Need Not Be Pessimistic about the Future

Oxford University Press • 1997 • ix + 244 pages • $27.50

Paul Heyne teaches economics at the University of Washington, Seattle. He is the author of The Economic Way of Thinking (Prentice-Hall, eighth edition, 1997).

Why do so many Americans today believe that the prosperity previous generations have enjoyed will not be available to future generations? In The Paradox of Progress Richard McKenzie tries both to answer that question and to demonstrate that pessimism with regard to our prospects for the future is unwarranted.

One reason we live in “the age of diminished expectations” is that we have just passed through an era of exaggerated and unsustainable expectations. Another is that pessimism sells better than optimism. Some people, including apparently most of McKenzie’s university colleagues, find that gloomy projections buttress their political positions and particularly their contempt for the 12 years of Reagan and Bush. McKenzie maintains that, despite our current “sense of woe,” prospects for the future are extremely bright for most of us. He makes extensive and effective use of the studies produced by Michael Cox and Richard Alm at the Federal Reserve Bank of Dallas to show that, in the title words of one Cox and Alm report, these are the good old days. By almost every measure we can devise, the physical and material well-being of Americans has improved in recent years. There are problems, of course, and for some among us the problems are severe. But as McKenzie observes, “People simply have a knack of extending themselves until they create problems that must be solved.” Most people probably want challenge more than they want satisfaction; the latter would quickly produce boredom.

For the first half of this country’s history, the frontier provided that challenge as well as opportunities and escape routes for those who were not satisfied with the limitations and constraints of their situations. Now, says McKenzie, a new frontier is opening before us, one not of geography but of “virtual reality.” Computer technology is enabling us all to go more places, do more things, gather more knowledge, cooperate more easily, and further more effectively whatever projects happen to interest us. It is abolishing traditional constraints, including the constraints imposed by governments, which increasingly cannot even monitor the activities they would like to control. McKenzie finds the prospects liberating and exciting for those willing and able to take advantage of them.

Willingness seems to be more important than ability, in McKenzie’s view, because he thinks willingness will usually create ability. He italicizes his advice to the workers of the world:

“Become more productive. Work harder and get smarter. Get more education and skills. Get competitive. Do more than others have been doing or will likely do. Stop complaining.”

But is this enough? Can Americans regain their confidence in a prosperous future by heeding these exhortations? McKenzie’s ebullient tone becomes more restrained in the concluding chapters where he discusses the ethical or moral foundations of a prosperous society. Markets don’t work well in a society whose members do not behave in accord with appropriate ethical rules: take responsibility for your actions, fulfill your promises, respect the rights of others. McKenzie fears, along with many others, that the moral infrastructure of American society has begun to collapse, and he doesn’t know how to repair it. That, he admits, provides grounds for substantial pessimism.

This reviewer also doesn’t know how to repair our collapsing moral infrastructure. But McKenzie makes the problem even more difficult than it is by assuming that ethical behavior will regularly be irrational and contrary to the interests of the person acting. He refers to Adam Smith as one who understood the importance of morality to the functioning of market systems; but he has badly misunderstood Smith on this point. Smith did not believe that acting in one’s own interest was inconsistent with behaving ethically, because Smith thought that self-respect was a primary interest of most people and that self-respect ordinarily could not be obtained except by behaving in accord with a socially informed conscience, or what Smith called “the impartial spectator” or “the man within the breast.”

“I have noted the difficulties some groups will likely experience if they don’t adjust,” McKenzie writes on the last page of his book, “if they cannot get their act together and abide by reasonable rules of conduct.” The wicked will fail, in short—but it will be their own fault. He slights the distinct possibility that those individuals within a society who do not “get their act together” will ruin the system for those who do. The more disturbing feature of his argument, however, is his belief that the morality which is such an important prerequisite for the effective functioning of a market economy ultimately cannot be defended or argued for. Individuals and societies either have it or they do not. Those who have it will succeed, those who don’t have it will fail.

Space does not permit an adequate discussion of the issue here. I shall only state that McKenzie, who has been extensively influenced by Friedrich Hayek, seems to have surrendered to some of the unfortunate arguments Hayek put forward at the end of his career, especially in The Fatal Conceit, where he described ethical convictions as little more than the fortunate heritage of religious beliefs now largely abandoned. If the ethical rules that McKenzie and this reviewer deem vital to the effective functioning of a free, prosperous, and progressive society cannot be given a better defense than this, McKenzie’s optimism about the future looks a great deal like wishful thinking.