I often enjoy reading Harvard economist Kenneth Rogoff’s commentaries. He strikes me as someone who kind of “gets it” about capitalism but who is unable, for whatever reason, to draw the logical conclusions. The final paragraphs of his column entries that point to some serious flaw in capitalist economic arrangements are almost always anticlimactic disappointments.
His latest piece, a brief exposé of how capitalist forces contribute to bad diets and poor health titled “Coronary Capitalism”, serves as a great example of his unsatisfying lessons. The piece starts off digging into an important economic matter. After noting that decreased life expectancy is bad for economic growth, he explains that making people fat and sick is probably a net boon to the economy, all aspects considered. Here’s the nut:
Highly processed corn-based food products, with lots of chemical additives, are well known to be a major driver of weight gain, but, from a conventional growth-accounting perspective, they are great stuff. Big agriculture gets paid for growing the corn (often subsidized by the government), and the food processors get paid for adding tons of chemicals to create a habit-forming – and thus irresistible – product. Along the way, scientists get paid for finding just the right mix of salt, sugar, and chemicals to make the latest instant food maximally addictive; advertisers get paid for peddling it; and, in the end, the health-care industry makes a fortune treating the disease that inevitably results.
Coronary capitalism is fantastic for the stock market, which includes companies in all of these industries. Highly processed food is also good for jobs, including high-end employment in research, advertising, and health care.
So, who could complain? Certainly not politicians, who get re-elected when jobs are plentiful and stock prices are up – and get donations from all of the industries that participate in the production of processed food. Indeed, in the US, politicians who dared to talk about the health, environmental, or sustainability implications of processed food would in many cases find themselves starved of campaign funds.
Okay, all of this rings true. But doesn’t it sound like the problem is pretty deep? Doesn’t the problem even seem inherent to capitalism?
Not for an economist steeped in the religion of markets — “free” or otherwise. For these cats, the market — regulated or not — has to form the basis of any solution to an economic problem… even when the market causes the problem in the first place. Rogoff is so conventional in his mindset, he seems to think market forces are actually an excuse for problems, rather than ever being able to draw the conclusion that markets are the problem. Look at the way he almost gives food pricing a pass:
True, market forces have spurred innovation, which has continually driven down the price of processed food, even as the price of plain old fruits and vegetables has gone up. That is a fair point, but it overlooks the huge market failure here.
Let’s explore the first sentence, which is so strangely structured as to imply that lowering food prices through subsidies, monocropping, and over-processing is a positive in any way — like, cheap food = good, so it counts for something. But let’s give Rogoff the benefit of the doubt. I think it’s fair to define “innovation” as developments that make something more economically efficient or profitable but not necessarily “better”. Still, I’d bet most people think of innovation as inherently “good”. It would make sense to take pause here and consider that in capitalism, innovation is something that helps capitalists. It may incidentally help workers, but usually it does not. And it doesn’t necessarily help consumers at all; it might even harm them. So finding cheaper ways to get junk food out to people is an innovation — one that is killing us.
But Rogoff acknowledges the “market failure” — so why am I picking on him for allegedly not recognizing that markets are the failure? Am I just nit-picking? Rogoff goes on:
… [P]roducers have few incentives to internalize the costs of the environmental damage that they cause. Likewise, consumers have little incentive to internalize the health-care costs of their food choices.
As far as I can discern, producers have no incentives to internalize the costs of environmental damage of their economic activity. I would love to see Rogoff’s list of the few incentives he thinks they do have. But where is this division coming from, concerning who has what incentives to internalize “externality” costs? This divide between producer and consumer is very real in our society, but how unimaginitive does an economist have to be — or how logically manipulative — to divvy up who bears what costs of bad economic behavior? Rogoff seems to be suggesting, by implication, that producers should have to internalize environmental costs and consumers should have to internalize health care costs of bad agricultural, food-processing, and dietary practices. Consumers somehow aren’t responsible for the production of their food, and producers aren’t responsible for the consumption of their goods (even though previously he notes that advertising is a significant force in the equation). This is the best analysis a conventionally “progressive” orientation on economics produces: bizarre, irrational surface conclusions drawn about a system that is fundamentally flawed at its core.
So what are Rogoff’s disappointing, vague, intangible suggestions for addressing the latest problem he has rightfully (if not rightly) exposed? Well, you can bet he will suggest reforming the “pathological regulatory-political-economic dynamic that characterizes” the food industry, for starters. It isn’t the market, you see; it’s our failure to regulate that pesky rascal. Indeed, Rogoff insists,
We need to develop new and much better institutions to protect society’s long-run interests.
That’s the only sentence we get on the matter, so we’re left to presume he’s talking about regulating bodies of some sort, to rein in the market, or manipulate it so that it works the way centuries-old magic-imbued dogmas suggest it should… you know, intervene to make markets do what they’re supposed to do precisely as long as we don’t intervene.
But even this cop-out directive comes with a familiar warning.
Of course, the balance between consumer sovereignty and paternalism is always delicate. But we could certainly begin to strike a healthier balance than the one we have by giving the public far better information across a range of platforms, so that people could begin to make more informed consumption choices and political decisions.
And that’s it. It’s all he offers. I don’t know Rogoff so I won’t presume to know what goes on in his mind, but it wouldn’t surprise me if the constraints of a neoclassical economics education, a current gig at Harvard, and a couple of stints at the IMF, have limited Rogoff’s imagination so that he can’t fathom there might be another way to manage production, consumption, and allocation in a modern society. Standard forms of centrally planning are too “paternal” to consider; I’d agree with that. And I’d even suggest that having a thoroughly undemocratic government like the United States republic intervene to coerce policy in a major sector of the economy would be rashly paternalistic, with mixed and confusing impact.
So what does that leave us with? Oh, if only there was a way to plan production, consumption, and allocation in a democratic manner, averting the paternalism problem altogether. Information for consumers is indeed a good start. But short of people actually organizing in their dual capacities as consumers and producers, let’s not pretend we can change much just by making smarter purchases. The idea of using the blunt instrument that is “voting with our dollars” to affect the agricultural and manufacturing policies of the handful of conglomerates that dominate our food supply is just plain ridiculous. Change will require collective action to tear down existing institutions and replace them with a foundation of alternatives.