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An Interview with Art Carden

An interview of Art Carden

Discover how Western countries achieved economic growth and what we can do to further enrich our lives.

Art Carden is Margaret Gage Bush Distinguished Professor of Business and Medical Properties Trust Fellow at Samford University in Birmingham, Alabama. He is a co-editor of the Southern Economic Journal and a Fellow with numerous research, education, and outreach institutions including the American Institute for Economic Research and the Independent Institute. He is also the author (with Deirdre Nansen McCloskey) of Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World and Strangers With Candy: Observations From the Ordinary Business of Life. Our Simon Sarevski exchanged e-mails with him about the origins of the wealthy and developed West, economic growth, what we can and need to do to further enrich our lives.

Simon Sarevski: We talk of the “hockey Stick of economic growth” and how life has changed for the better ever since the industrial revolution. One might ask, what made it possible for the industrial revolution to happen. Moreover, what were the key reasons for its emergence at that particular point in history, specifically in the Western world?

Art Carden: Deirdre McCloskey identifies four Rs that we summarize in Leave Me Alone and I’ll Make You Rich. The printing press meant an explosion of reading material. The Protestant Reformation changed how people think about our relationship to God and our relationships with one another. The Dutch Revolt and Revolutions in England, the United States, and France made political institutions more egalitarian, and we slowly but surely embraced innovation where we used to either reject it or be highly suspicious of it. Today, everyone wants to be a “disruptor,” and even though the regulatory environment is pretty clogged with rules and restrictions, people still at least appreciate innovation and innovators in general even if they look askance and some specifics.

Despite the world’s overall wealth, significant disparities persist among countries and regions. Why do some nations continue to struggle with poverty and destitution, particularly in an increasingly globalized world, while others have experienced remarkable progress?

Art Carden: There are a lot of necessary conditions for growth, namely, institutions like secure property rights and the rule of law. A lot of countries don’t have this, and their markets are even more heavily regulated than they are in the United States and Europe. The good news is that the rest of the world is catching up, and over the last few decades we’ve seen an emerging global middle class.

What strategies can less affluent nations employ to improve their prospects and outcomes? Additionally, how can already prosperous nations address the sluggish growth rates they have encountered in recent decades?

Art Carden: Stop trying to fix it and leave people alone. Look for what is preventing people from getting jobs and opening businesses, like regulations and licensing requirements. As I write this, I’m helping my teenage son navigate the world of child labor regulations as he tries to get a job. I’ve long known that restrictions on child labor are about protecting incumbent workers rather than children: they reduce competition and drive up workers’ wages at the expense of customers who pay higher prices and society more generally because we get less output. I learned that in Alabama, where we live, my son basically needs permission from his school to work, and the permission only applies to one employer at one location. If he wanted to get a job elsewhere or even move to a different location, he would need a new form. Restrictions on child labor—and I doubt anyone thinks of teenagers working at fast food restaurants when they think about “child labor”—gouge customers and employers while reducing output. Rules like the permission requirement I just described create monopsony power for employers by making it harder for their employees to switch jobs. This makes them more likely to accept restrictions that make it harder for them to hire in the first place, but it makes the market less competitive and, therefore, less efficient.

Among the remedies you have discussed, which ones are primarily theoretical, representing a best-case scenario, and which ones are politically achievable in the short-to-mid-term?

Art Carden: I doubt full-scale deregulation will happen in my lifetime. However, I’ve become convinced that the best way to serve others is probably just to work more: take what you’re already doing well, and do more of it. I discuss this in a paper with Gregory W. Caskey and Zachary B. Kessler that appeared in Business Ethics Quarterly in 2022.

The lower and middle classes in advanced economies have faced challenges in recent decades, as evidenced by events such as Brexit, the election of President Trump, and the rise of economic nationalism worldwide. Do these developments indicate a lack of understanding among the affluent about our current situation and overall richness we are living in, or do they point to genuine troubles we are facing?

Art Carden: I’m not sure. I don’t have a good grasp on why we’ve seen a populist surge in the last few years, but I think we might be harvesting some of the fruit of rules and restrictions making it harder for people to find meaningful work. In terms of regulation, this includes things like what I discussed above that just make it harder for people to work without licenses and permissions. In terms of rhetoric, I think there is kind of an elite dismissal of entry-level “McJobs” that needs to change. All productive work has dignity, even if it’s just cleaning toilets at a fast food restaurant, and it’s a mistake to think of any job as a “dead-end” job because jobs give people the opportunity to get experience just being in the labor force.

Is the trend of economic growth under threat due to the actions of Big Business that often collude with political institutions to obtain special privileges, thereby restricting market competition?

Art Carden: That has always been the case. I think the regulatory explosion that started in the 1970s has created a lot of “Bootlegger and Baptist” coalitions that now have a vested interest in the whole mess. This is why I think it’s a mistake for policymakers to ask “the business community” what it wants and whether or not regulations are too onerous. You limit valuable information by only talking to survivors. They need to be talking to people who have tried to start businesses and failed for regulatory reasons as well as people who look at the regulatory thicket they have to clear and decide not to try in the first place.

Could the current material affluence and prosperity be artificial and unsustainable due to heavy reliance on debt and central banking? In other words, are we living on borrowed time?

Art Carden: I’m not sure, but the real burden of public spending is the spending, not necessarily how it is financed, though there is a bias toward debt because future taxpayers don’t vote. I think we will continue to grow, but perhaps not as rapidly as we would without heavy spending burdens and central bank intervention.

Greta Thunberg famously stated, “all we can talk about is money and fairy tales of eternal economic growth.” Keeping this in mind, are there any inherent limitations to economic growth, particularly concerning environmental, social, and cultural considerations?

Art Carden: No, there are not. Human creativity is to the economy as the sun is to the natural environment: a source of constant and sustained “new energy.”

Finally, even though not directly related to the general topic of today’s conversation, I have to ask you this: How to find freedom in an unfree world?

Art Carden: Recognize that things could be a lot worse, and they typically have been. I’m in my mid-40s now, and I was thinking earlier about my trajectory and whether or not it describes a lot of other people. When I was a teenager and young adult, I was outraged that things aren’t much better. After spending a couple of decades studying economics and history, I’m absolutely amazed that things aren’t much worse.

And among the things I would tell my much younger self: listen to people who are a lot older than you and who have more experience. It’s good that you’re passionate about making the world a better place, but perhaps show that you can raise a few kids successfully and pay your bills before thinking you can be trusted to reorganize the world.  

Author

The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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