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.