Cowen’s Manifesto

Note: This is the second of several blog posts reviewing Tyler Cowen’s book “Big Business: A Love Letter to an American Anti-Hero.”

Now that we have gotten the appendix out of the way (see my previous post), let’s proceed to Chapter 1 of Tyler Cowen’s beautiful book on Big Business. This first chapter is titled “A new pro-business manifesto,” and to the point, Professor Cowen’s powerful manifesto can be reduced into a single tweet (p. 1): “First, business makes most of the stuff we enjoy and consume. Second, business is what gives most of us jobs.

Indeed, Cowen’s manifesto can be further boiled down into two words: “prosperity” and “opportunity”!

In other words, business firms are largely responsible for our livelihoods and for our material wealth. Let me say, right off the bat, that Professor Cowen’s succinct manifesto captured my imagination and deserves to be shouted from many Ivory Tower rooftops. Why? Because his manifesto explodes a common fallacy committed by progressive college professors and idealistic college students alike–what the late great Robert Nozick once referred to as the-manna-from-heaven fallacy in his classic work Anarchy, State, and Utopia. Although ASU is chock-full of many important ideas (almost all of which we have explored on this blog), to my mind the manna-from-heaven fallacy is Nozick’s single-most important contribution to contemporary debates about income inequality and the role of business in society.

Consider, by way of example, the issue of “affordable housing.” Put aside for the moment the fact that the lack of affordable housing in most U.S. cities is due to unconstitutional zoning regulations and self-serving NIMBYism by existing homeowners. For now, I just want note the loud calls for affordable housing from all quarters. After all, who can be against affordable housing or affordable prescription drugs or affordable whatever? Of course, no one. My point here is to show how calls or demands for more X, where X is housing or health care or whatever, are fallacious. Why are these demands fallacious? Because, before we can figure out the best way of distributing X to the people, someone has to produce that X in the first place.

In other words, progressive academics and statist politicians both commit the same fallacy, the manna-from-heaven fallacy, when they demand free stuff or promise to provide such stuff. The problem is, as Nozick and now Cowen make clear, we cannot simply assume the existence of a sufficiently large economic pie that is worth dividing while simultaneously ignoring the all-important question of incentives for production. Simply put, my dear friends, prosperity and opportunity do not fall from the sky. Goods and services must be produced by someone, and that someone are business firms. Professor Cowen, having thus started off on the right track, deserves our full attention. But does he deserve our assent? We shall proceed to Chapter 2 in my next post.

Exodus 16:1-18, Manna from Heaven | Toward a Sane Faith - Kevin ...

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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8 Responses to Cowen’s Manifesto

  1. Certainly a well written. I couldn’t agree more. As someone who works for a large corporation, I can say this is true.

    I have worked for a small startup previous, no comparison. Better pay and nonmonetary (health benefits) for a similar degree of labor. Clearly I am better off working for the larger firm.

    I am going to invoke Austrian economists that study entrepreneurship (such as Peter Kline). The entrepreneur, whether managing a small or large firm ,assumes the risk and time to generate opportunities and material wealth. I will interject my own opinion the only difference being that the risk/reward ratio being squared on the sizes of the firm. Due to the fact generally larger firms are more productive from a revenue standpoint. Hence why I make more working for a “big firm”.

    The entrepreneur not only generates opportunity but operates as a risk absorbing shield. The worst thing that can happen to an employee is the lose their job. If a business owner fails they are financially ruined. I would assume also still legally responsible for certain aspects of the business (merely assumption, I am not well versed in business. I cannot make any definitive statements).

    Ironically, I am veering off course here, some products are of better quality if produced by a small firm and vice versus. A large variety of consumer goods (options) correlates highly with material well being. I am something of a beer and whisk(e)y enthusiast. No, not for the inebriating properties of the beverages. As a home brewer I can tell you better beer is made in smaller quantities. Due to stricter quality control and less restrictions on creativity. Whisk(e)y is generally better if it comes from a larger company. Why? A lot of micro-distilleries place younger bottles of whiskey on the market. This decision to sacrifice quality is spurred by the combination of the needing to bring in revenue/ the fact most of these companies are less than 15 years old. Typically single malts really hit their stride around 15-18 years. Generally with craft whiskey you are paying the price for a 12-15 year old whiskey ( if produced by a major company) that is only 2-5 years old.

    It is easy to deplore big business for instances of cronyism and other transgressions. However, that is more of a government issue than a business issue. If elected officials could reduce/ eliminate corporate. In addition to remain firm on rejecting policy that favors anticompetitive advantages, it would be a major help. Then again, this is mostly wishful thinking.

    • Your comment would make an excellent stand-alone blog post! Also, although I generally agree with Cowen’s pro-business manifesto (if only to avoid falling into the “manna from heaven” fallacy that progressives are always falling into), I also criticize Cowen harshly, especially his defense of CEO pay vis a vis worker pay.

      • Considering no idea is perfect, it is important to provide criticism when it is warranted.

        I know I struggle with this at times personally. Sometimes I allow my ideological tendencies to cloud my judgement on other moral considerations.

        While it’s important to avoid the “manna from heaven fallacy”. That doesn’t give those in big business a free pass to mimic the conduct of the Enron’s former upper management.

      • Good points. What I would like to know is this: are Enron, Wells Fargo, Theranos, etc. just a few bad apples, or were they just the ones who got caught?!

      • That is almost a philosophical question. Mirroring “if a tree falls in a forrest and no one is around to hear it does it make a sound?”.

        Difficult question to tackle. However, those who didn’t get caught made society worse off. The stakes are a lot higher on your question. What we perceive may not necessarily be true. There is a large price to pay for erroneously assuming bad actors are harmless. Merely because we can’t see through their subterfuge.

      • Those are good points. I like to analogize to the world of sports: name me a champion or MVP (Lance Armstrong in cycling, Mark McGuire in baseball, Tom Brady in football, Ben Johnson in track and field, etc. etc.) and I will name you a cheater! So why should the world of business be any different?

      • Is it safe to assume that you can’t making to the top without cheating? Also, would you say that all these instances of cheating, is it more an indictment of the rules or the players?

        The rules could in some circumstances be unreasonable. However, some players will cheat regardless of whether the rules arrest reasonable.

      • Excellent point. The Tom Brady cheating incident with the under-inflated footballs is a good example of what you are asking: was that just a technical violation of a silly rule, or did that rule violation go to the integrity of the game (fair play and same rules for all)? If the latter, if air pressure of footballs goes to the integrity of the game, then why is each team allowed to inflate its own footballs! Either way, it is a stupid rule or a poorly-designed one!

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