TCS Daily

The Party of Life

By James K. Glassman - October 9, 2002 12:00 AM

Editor's note: the following is a paper delivered to the Mont Pelerin Society Meeting this week in London.

USA Today reported on its front page recently:

Millions of copies of 'Atlas Shrugged' that have been sold over 45 years are being dusted off by executives under siege by prosecutors.... Executive headhunter Jeffrey Christian says many of his clients are re-reading the 1,075-page novel to remind themselves that self-interest is not only the right thing to do from an economic standpoint but is moral as well. CEOs put the book down knowing in their hearts that they are not the greedy crooks they are portrayed to be in today's business headlines but are heroes like characters in Rand's novel.

Fine sentiments. Good reading. But why do business executives - and I mean the honest ones (Ayn Rand was clear on this point: "Neither love nor fame nor cash is a value if obtained by fraud" ) - need a refresher course in the importance of freedom? Of defending it? Of extending it? Of understanding that few of us would be here in London, 55 years after the founding of the Mont Pelerin Society, without it?

Nor, without freedom, would technological change be so abundant. Technology encourages freedom and freedom encourages technology. There is a symbiosis here, a virtuous circle, and by examining it, we can find ways to preserve the circle and to accelerate the activity within it - to speed up the flow inside the loop.

Specifically, in this paper, I establish, first, that technology is a force for good; second, that free individuals will naturally develop better technology; and third that the major roadblocks to technological development are political. I offer two examples of how political interference impairs technology, and I end with an exhortation to clear the impediments.

Technology's Benefits

Friedrich von Hayek was very careful about how he used the word freedom. The Constitution of Liberty begins with a quotation from Abraham Lincoln: "The world has never had a good definition of freedom." And Hayek agrees. He frequently uses "freedom" as a personal state of being - one "in which a man is not subject to coercion by the arbitrary will of another or others." This will do.

As for technology, a good definition is "the application of science, especially to industrial or commercial objectives." But these days, we think of technology involving applications that are innovative or exotic. Just 10 years ago, for example, there were only 23 million wireless phones in use worldwide; today, 1.4 billion. In just five years, the number of global Internet users has gone from 96 million to 650 million, with more than half in Asia; within a year, users are forecast to reach one billion. Dell Computer Corp., started by a college student in his Austin, Texas, dormitory room, sold $31 billion worth of computer hardware and software last year, compared with less than $3 billion in 1993 - and none of it through a store. Microsoft Corp., whose founder would have been using his dorm if he hadn't dropped out of college in the mid-1970s, democratized the computer and last year - after growing at an average rate of 37 percent annually for a decade - earned $10 billion in profits and had a balance sheet graced with $40 billion in cash and no debt. In 1965, Gordon Moore, the co-founder of Intel Corp., predicted that, every 18 months, the processing power of a silicon chip would double as transistor density increased, a forecast that has proven uncannily accurate. Over 30 years, the cost of sending 1 trillion bits of information has dropped from $150,000 to 17 cents.

The technology of computers and advanced forms of telecommunications speed information throughout organizations, lowering costs by reducing uncertainty and the need for redundancies. But there are other, more direct examples of technology improving human welfare. Currently, biotech seeds, created with technology that was first put into practical use in 1995, account for 75 percent of the acreage planted in soybeans in the United States, saving time, money, fertilizer, pesticides and topsoil. And new technology now makes nearly every machine more productive. "Today, a Ford Taurus car contains more computing power than all the mainframe computers used in the Apollo Space Program."

Technology is a tool. Like a pencil or an ax, it can be put to good uses or bad. But, in general, technology has vastly improved the welfare of individuals because, allowed to pursue their own choices, individuals choose technology that will improve their lives. For example, mainly because of technology that insured the safety of water supplies and spread sanitation, the number of deaths from influenza and pneumonia per 100,000 people fell in the U.S. from 202 in 1900 to 33 in 1997; deaths from tuberculosis, from 194 in 1900 to 0.4 in 1997. The United States, year after year, produces record amounts of coal, and coal remains the number-one source of energy in the country, yet because of new technology, the number of coal miners killed at work has dropped from an average of more than 2,000 per year between 1900 and 1940 to just 32 in 1997.

But is it naïve to view technology as generally beneficial? For example, in 1921, Ludwig von Mises famously argued that "economic calculation is impossible in a socialist society." The contention of Mises was that knowledge of the production functions of a large economic system could not be acquired, not to mention properly put to use, by a central planning board the way it can by individual dispersed entrepreneurs and managers. In support of Mises, Friedrich von Hayek wrote, "What the planning authority would have to know would not be the mere totals but the distinct, peculiar conditions prevailing in each enterprise which affect the information about values transmitted through market prices but would be completely lost in any statistical information about quantities that might reach the authority from time to time."

Imagine, however, that technology could make all this data available and collectible. In his essay 20 years ago rebutting Oskar Lange's 1936 criticism of Mises, Hayek described just how complicated the problem of gathering the information would be, then wrote, "Even today, the solution of 100,000 equations is still an unachieved ambition of the constructors of computers." No more. A decent personal computer can zip through 100,000 equations of this sort quite easily, thanks to Moore's Law. Perhaps Joseph Schumpeter was right when he wrote in 1942 that is "possible to derive, from the data and from the rules of rational behaviour, uniquely determined solutions."

Still, Hayek's overall refutation stands. Each entrepreneur acts on the facts separately, through differentiated personal knowledge (Hayek's "knowledge of the particular circumstances of time and place") that, very simply, cannot be aggregated by any planning board.

However, doesn't the existence of advanced technology provide an incentive to a central government to try to exert more control? To limit freedom? The short answer is yes. But technology also provides countervailing power. While government may now have the power to eavesdrop on conversations a mile away, the speakers themselves now have the power to block the reception. Government can intercept Internet messages, but the senders of those messages can encrypt them in a way they could never encrypt written messages.

In the end, technology provides, at the very least, a draw between individuals and overweening governments - and, more likely, gives the upper hand to individuals who want to be left alone. Much computer technology, after all, is distributed - that is, it does not rely on a single gigantic mainframe. It is true that central governments can disrupt communications (In China, for example, which will soon have the most Internet users in the world, blocks access to certain websites, including, I learned, that of the Washington Post but not of my own far more subversive free-market technology site,, but it is not difficult for clever users to work their way around the roadblocks. The more important point is that computers allow work and information to be distributed widely, rather than funneled through one channel that can be monitored and controlled by the state.

So, the first assertion is that, at base, technology is a force for good. It decentralizes power, and it creates wealth and health, which are both conditions of freedom and products of free society. Robert Fogel recounts how David Landes began his first lecture each year to students in Economics 10, a popular introductory course at Harvard: "Look to the left of you and to the right of you. If it were not for the Industrial Revolution, two out of three of you would not be alive." Landes himself posits the idea of "Technophysio Evolution," a process that has allowed humans to gain "an unprececdented degree of control over their environment" through a "synergism between the changes in technology and improvements in human physiology," which produced "enormous advances in health and life expectancy."

How Technology Develops

The second assertion is that technology emerges from a process, undirected by the state or any other central authority, that encourages variety, spontaneity and discovery through trial and error. The incentives that motivate this process depend on free minds operating within free markets. William J. Baumol, in his new book, makes the extended argument that societies that are not free, such as medieval China, may be hotbeds of scientific discovery, but without market forces to encourage the actual production of these innovations, technology falters.

As for the process itself, the most articulate description comes from Paul Romer, a Stanford economist. "Economic growth occurs whenever people take resources and rearrange them in ways that are more valuable," Romer writes. Romer's metaphor is the recipe. By rearranging ingredients, new products, new systems emerge. These creations, which often amount to new technology, spring "from better recipes, not just from more cooking."

What's remarkable is the vast variety of recipes that emerge from a limited number of resources:

To get some sense of how much scope there is for more such discoveries, we can calculate as follows. The periodic table contains about a hundred different types of atoms, so the number of combinations made up of four different elements is 100 x 99 x 98 x 97 or about 94 million. A list of numbers like 1, 2, 3, 7 can represent the proportions for using the four elements in a recipe. To keep things simple, assume that the numbers in the list must lie between 1 and 10, that no fractions are allowed, and that the smallest number must always be 1. Then there are about 3,500 different sets of proportions for each choice of four elements, and 3,500 x 94 million (or 330 billion) different recipes in total. If laboratories around the world evaluated 1,000 recipes each day, it would take nearly a million years to go through them all.

Virginia Postrel points out that "an ordinary deck of cards can be combined 168 different ways - one followed by 68 zeroes - which means that any time you shuffle a deck of cards, that particular order has probably never come up before in the history of cards. And...52 is a relatively small number."

Romer's ideal combination is a chemical refinery that can convert cheap, abundant and renewable resources into a product that humans value. In dreaming up such an ideal refinery, he writes, "it would be smaller than a car, mobile so that it could search out its own inputs, capable of maintaining the temperature necessary for its reactions within narrow bounds, and able to automatically heal most system failures. It would build replicas of itself for use after it wears out, and it would do all of this with little human supervision." Give up? It's a cow. "And if nature can produce this structured collection of hydrogen, carbon and miscellaneous other atoms by meandering along one particular evolutionary path of trial and error,... there must be an unimaginably large number of valuable structures and recipes for combining atoms that we have yet to discover."

New combinations produce new technology. The best example of all is pharmaceuticals, where molecules, combined one way, can produce an effective drug; another way, a poison or a dud. Only by trying - by making the combinations and seeing if they work as well as they possibly can - does technology advance. Postrel is fond of quoting the engineer Henry Petroski: "Form follows failure."

It stands to reason that accelerating the formation and testing of combinations will accelerate technology. The question is how to encourage more and more such combinations.

Political Interference

Market forces and private property will produce these results as long as states do not interfere. Consumers want the best combinations at the lowest prices, and producers have the incentive to make these combinations - as long as they have clear ownership.

But states do interfere. They decide what can be made, how it is made, who can make it and where it is sold. Politicians are judged "progressive" if they behave as technocrats, guiding technology in the "right" direction. Remember President Clinton's "bridge to the 21st Century"? Why did we need a bridge? We would come to the 21st Century in due course, the year after the 20th Century ended. A bridge indicated a structure going from one specific geographic point to another. But why build it there? And why build it at all?

Technology, in fact, brings out the worst impulses in politicians. They say they want to nurture and protect their constituents, but, in fact, their great fears are, first, their own irrelevancy and, second, the uncertainties that technology casts on the system in which they thrive. Arthur Schlesinger Jr., the historian who served as an advisor to President Kennedy, wrote in 1997, "The computer turns the untrammeled market into a global juggernaut crashing across frontiers, enfeebling national powers of taxation and regulation, undercutting national management of interest rates and exchange rates, widening disparities of wealth within and between nations, dragging down labor standards, degrading the environment, denying nations the shaping of their own economic destiny, accountable to no one, creating a world economy without a world polity." Whew!

As far as I can tell, technology has done none of these things. For instance, so far, anyway, it has not enfeebled national powers of taxation and regulation (though we can hope), and it has improved, not degraded, the environment. What is important about Schlesinger's lament is not its accuracy, but its hysterical tone. Establishment intellectuals and politicians see technology as a threat - not to the wealth, health and happiness of individuals - but to their own authority.

What was the initial response of the U.S. Congress to the Internet? To try to tax it by changing the rules by which sales taxes are collected and to try to limit its content through something called the Communications Decency Act. Both attempts failed. But technology's political discontents are legion. Here are two examples.

Genetically Modified Food

Americans have been eating genetically modified (or GM) corn, potatoes and soybeans since the mid-1990s with no adverse consequences (and lots of very good ones). Typically, GM plants will carry genes that make them resistant to pests, weedkillers and insecticides or that make them grow faster and surer. In some cases, the plants can be modified to allow the delivery of important vitamins to those who eat them. Between 1994 and 1998, the European Union approved the use of nine GM plants, including varieties of corn, tobacco, chicory (a kind of lettuce) and soybeans. According to a European Commission report, "No peer-reviewed scientific article reporting adverse effects on human health as a result of eating GM food has appeared." A commission memo stated, "The safety record [of genetically modified organisms] worldwide over some 30 years has been very good with no reported accident or unanticipated event. Genetic engineering is now routinely used in many thousands of research laboratories worldwide and has resulted in many novel products and processes such as industrial enzymes and medicines such as insulin and vaccines."

Nevertheless, four years ago, the EU slapped a moratorium on approval of all new GM organisms in Europe. Despite the fact that the European Environmental Commissioner, Margot Wallstrom, called the moratorium "illegal and unjustified," it remains in effect. Governments of the individual European countries have apparently decided to pander to Greens, who often wield power in shaky social-democratic coalitions.

Europeans led the agricultural revolutions of the past, inventing crop rotation and better plows and unlocking the mysteries of genetics. It was a team led by a Swiss scientist, after all, that developed "golden rice" - a GM breed that fights blindness and malnutrition by introducing a beta-carotene gene into rice, which is now being tested in Asia and Africa. Currently, about 50 percent of soybeans worldwide are grown from GM seeds. The biggest enthusiasts, one U.S. government official told me, are farmers' wives, who get to see their husbands more often. More sensible environmentalists are happy too, since GM farming means bigger crop yields, preserving land, and lower fertilizer use, keeping chemicals out of streams. Most of all, genetics makes farming easier - especially for small farmers in developing countries. They don't have the resources to monitor their crops constantly and to dose them with precisely the right amount of fertilizer and pesticides, and, with GM methods, they don't have to.

But the moratorium has stopped GM farming in places like Africa dead. Why should Africans make an investment in GM foods if they can't sell to a prime market like Europe? Greenpeace and other extreme environmental groups have focused their efforts on Africa, spreading horror stories, trying desperately to keep the continent GM-free. So far, they are succeeding, and people may be dying as a result. As a famine spread in southern Africa last summer, 13 million people risked starvation. The U.S. pledged 490,000 metric tons of food for the drought-stricken region, about one-third of it GM corn. But the president of Zambia, under pressure from Green groups and worried that the corn might "contaminate" his country's crops and make them ineligible for export to Europe, turned down the food aid. Journalists reported that corn piled up in warehouses while people nearby were starving.

Andrew Natsios, administrator of the U.S. Agency for International Development, blasted the European environmental romantics in a speech while I was in Johannesburg in August. "People are scared in Zambia because all these rumors are going around," he said, "and they've been fomented by people from outside groups.... "I have never seen, in my 30 years of public service, such disinformation and intellectual dishonesty. I think it's appalling. It's frightening people into thinking there is something wrong with the food, and the consequence is that it's slowing the famine relief in a very disturbing way."

But the scandalous story of Zambia fits into the broad context of European resistance to GM. What's behind it? Partly romanticism and a growing aversion to sound science - qualities we also find in discussions of climate change, another kind of hysteria, which has led to a policy, shamefully supported by many misguided international companies, of advocating expensive measures to limit greenhouse gases, including carbon dioxide, which might, many decades from now, raise surface temperatures on Earth to dangerous levels. Another, more straightforward motivation of the Europeans in blocking biotechnology is to thwart the U.S. in business competition by erecting non-tariff trade barriers. The use of environmental arguments to prevent competition through freer trade is nothing new - nor is it strictly a European phenomenon. In 1993, Gary S. Becker and Guity Nashat Becker observed the same tactics used by U.S. firms that did not want competition from Mexico. The Beckers also noted, in the same piece, that "regulations desired by most citizens do not get enacted in developing nations controlled by dictator or cliques." Unfortunately, nations with long democratic traditions also block the flow of new technology through free trade - in part because matters of technology and the environment are seen as the realm of experts, where voters can't make the right choices.
Thanks to genetic technology, Africans and Asians could become intensely competitive with European farmers, but, fearing the political power of the farm lobby (and of Greens), European politicians would rather try to placate the people of their former colonies with financial aid than buy their goods. Milton Friedman commented on just this technique, at least as it relates to aid given by the U.S., many years ago:

Though foreign economic aid may win us temporary allies, is playing into our enemies' hands and should be abolished. Instead, we should concentrate on promoting worldwide economic development through means that are consonant with the American tradition itself - strengthening of free market domestic economies in the less-developed nations, the removal of obstacles to private international trade, and the fostering of a climate favorable to private international investment."

Jocelyn Webster, a researcher with AfricaBio, a group based in Pretoria, South Africa, said at the United Nations World Summit on Sustainable Development in Johannesburg that she was "absolutely horrified at the negative tone" of summit delegates toward genetically modified foods.... In America, millions of people eat GM foods when they eat their breakfast cereal, but that kind of food is not good enough for starving Africans."

The day I arrived at the Johannesburg conference, about 200 poor farmers from Africa and India were protesting high trade barriers - including biotech barriers - erected by Europe. "We want the freedom to grow what we want, when we want, with what technology we want, and without trade-distorting subsidies or tariffs," said Barun Mitra, an Indian quoted by Reuters.

Ultimately, it is developing nations that have the most to gain from the virtuous circle of freedom breeding technology and technology breeding freedom. There are certainly no cultural impediments. As Hayek wrote:

From what I have seen of the world the proportion of private persons who are prepared to try new possibilities, if they appear to them to promise better conditions, and if they are not prevented by the pressure of their fellows, is much the same everywhere. The much-lamented absence of a spirit of enterprise in many of the new countries is not an unalterable characteristic of the individual inhabitants, but the consequence of restraints which existing customs and institutions place upon them. This is why it would be fatal in such societies for the collective will to be allowed to direct the efforts of individuals, instead of governmental power being confined to protecting individuals against the pressures of society.

The Case of Microsoft

Microsoft Corp. is the world's largest software maker and the developer of the operating system used by the vast majority of the world's personal computers. While that firm has certainly prospered - its founder, Bill Gates, is almost certainly the most successful technologist of the past half-century - it has also been under siege from governments acting as those institutions of restraint that Hayek talked about. A long-running lawsuit, filed during the Clinton Administration by the U.S. Department of Justice, for example, tried to break the company into several parts. The suit began with complaints by competitors that Microsoft was bundling an Internet browser with its computer operating system. The Internet has now become such an integral part of personal computing that the charge seems absurd on its face, but the suit has dragged on, causing severe damage, not just to Microsoft, but to technology in general.

The latest attack on Microsoft is nearly as pernicious and as dangerous to the overall development of new technology. Politicians, in league again with Microsoft competitors, are trying to encourage their governments to adopt what is called Open Source Software. The OSS model allows software developers to use source code developed by others but then, "when the resulting software product is distributed, its creator must make the entire source code base freely available to everyone, at no additional charge." It is hard to see such a model working, unless it has backing from governments that require its use.

"Two decades of experience have shown that an economic model that protects intellectual property and a business model that recoups research and development costs have shown repeatedly that they can create impressive economic benefits and distribute them very broadly," says Craig Mundie, a Microsoft senior vice president. Microsoft clearly has an ax to grind here, but it is an ax wielded in an important fight for technology and freedom.

The opponents do not merely want to make the option of Open Source software to be available; instead, they want to require government procurement preferences. A bill filed in the legislature in Argentina, for example, states that "all government entities will use only free programs [software] for their systems and IT equipment." In Italy, legislation requires that, "in choosing computer programs needed to perform its activities, the Public Administration shall favour free software programs, or alternatively open source ones" and shall "give detailed reasons for choosing non-free source software." Some still haven't learned that free choice, competition and property rights are the foundation of technological innovation and economic growth.

Fear of the Unknowable Future

There are other worries as well, but they come down to this: Those who wield government power fear change and unpredictability - and thus technology forged in a free-market crucible. In the end, lovers of freedom are those with the courage to embrace the unknowable future - to understand that they won't know how it all turns out. "Competition," said Hayek in a speech in Chicago 34 years ago, "is valuable only because, and so far as, its results are unpredictable and on the whole different from those which anyone has, or could have, deliberately aimed at. Further, that the generally beneficial effects of competition must include disappointing or defeating some particular expectations or intentions."

With such vast possibilities - so many combinations to try - technology will inevitably disappoint and defeat and benefit and thrill. It is why the party of technology is the party of freedom and, in Hayek's wonderful phrase, the "party of life."

Fifty-five years ago, members of the Mont Pelerin Society first met to confront the spread of totalitarianism and the growing, insidious power of states around the world. Communism today is in its final death throes, but as Hayek knew, the urge to limit freedom, to control and coerce others, lives on. To oppose these threats in the realm of technology is, I am convinced, the most urgent item on the agenda of the party of life.



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