American Acceleration vs Development

post by Maxwell Tabarrok (maxwell-tabarrok) · 2024-03-22T13:01:50.365Z · LW · GW · 0 comments

This is a link post for https://www.maximum-progress.com/p/american-acceleration-vs-development

Contents

  Impact
  Tractability and Neglectedness
  Counterarguments
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Progress studies and metascience focus on reforms which will accelerate growth in the US. The US is a small portion of the world’s population and these few are already the world’s most prosperous. Development economics and effective altruism put more effort into health and growth interventions in the developing world.

There is enough mistargeted philanthropy and state capacity to increase the resources committed to both progress studies and EA, so we don’t have to pick just one. But there are always tradeoffs eventually and the comparison is interesting. Global health interventions and catchup growth in the developing world have precisely measured huge benefits. So what justifies the focus on getting the rich richer by accelerating American innovation when there are others who are far more in need?

Impact

The local benefits of accelerating growth in America are large. Tens of millions of people would directly benefit from cheaper rent and higher wages if we deregulated housing in American cities, for example. These large benefits go to people who already have lots of resources, though, so dollar-for-dollar they aren’t as impactful as cash transfers to the developing world. But that’s just the local benefits. Increasing American growth has massive positive externalities on the rest of the world.

Even small accelerations in frontier growth compounds into large amounts of wealth and resources. Profit seeking investment sends large quantities of this wealth to the developing world. More American growth means more of this investment. From 1982 to 2022 the amount of direct investment from the US to other countries increased by ~30x from 207 billion to 6.5 trillion. The amount of direct investment from the US to India increased 170x over the same period. This is mostly due to the fraction of foreign investment flowing from a larger pool of wealth but investment outflows as a percent of GDP also grew from .2 to 1.7%.

In addition to profit seeking investment, American growth is the largest source of funding for philanthropy and international aid. Frontier growth pays for Open Philanthropy, the World Bank, the IMF, and the UN. If these philanthropic contributions are a constant fraction of GDP, then increasing the US growth rate from 2% to 3% would double the amount that Americans commit to these efforts in 20 years.

Reforms which increase growth and innovation in the developed world also lead to technological advances that quickly diffuse around the world. The internet, vaccines, automobiles, solar energy, fertilizer synthesis etc. These and other technologies, which were created in the richest countries in the world, are responsible for the lion’s share of welfare gains in the developing world. Accelerating this innovation is a high leverage way to improve lives around the world.

The paradigmatic examples of the positive externalities of American growth are smallpox eradication and the Green Revolution. Both relied heavily on American innovations in medicine or agriculture. Both were funded primarily by the US either through international organizations like the WHO or philanthropies like the Rockefeller foundation. Both of them also required thousands of dedicated people working on development and global health, so a singular focus on American growth would not have been sufficient. But motivation to improve the world by diffusing new medicines and agricultural techniques was not and is not the binding constraint. The binding constraint was the existence of new medicines, agricultural techniques, and the resources required to manufacture them. American growth was and is the best way to address these constraints.

Interventions in the developing world and US-focused progress studies or metascience do not necessarily trade off with one another. In fact, the great advantage of new institutions, cultural movements, and innovations in the US is that they produce huge positive spillovers to developing countries and the organizations which try to help them.

Tractability and Neglectedness

Even if American growth is more impactful, it might still be worth focusing on global health and development if these are much easier to improve on the margin.

Direct interventions like cash transfers or malaria vaccination definitely have an advantage in tractability. These are reliable and precisely measurable ways to save lives and improve the world. Improving long-term economic growth rates, institutions, or innovative capacity in the developing world is far less tractable.

Accelerating American growth through policy change seems low on tractability and neglectedness. It looks better when you consider that most of the investment in policy changes currently is a zero-sum tug-of-war along one left-right ideological dimension. The recommendations of progress studies and metascience aren’t very correlated with left-right tug of war and can make big changes by “pulling the rope sideways.” The group of researchers and policy advocates pulling in this direction is small.

Improving growth rates is hard in general, but the tractability of getting more frontier growth and the positive externalities that come with it looks higher in the US than anywhere else in the world for two reasons. First, the US has high state capacity/rule of law so on-paper institutional reforms are likely to be followed and implemented if they can be passed. Second, institutional reforms are sufficient for accelerating growth in the US. Raising the H1-B cap or removing housing regulations in the US, for example, would lead to an instant inflow of skilled workers and a construction boom that would quickly translate into new technologies and productivity growth. Better regulations in Bulgaria or Botswana wouldn’t have the same effect because the demand to move or build there isn’t that high to begin with.

Counterarguments

Reverse feedback loops

Frontier growth has big spillovers to the developing world, but there might be big spillovers in the other direction too. Development can create new frontier leading countries and discover new technologies e.g Japan. Although again perhaps the best way to help Japan develop was to make the US powerful and innovative since Japan relied on American power to invest, diffuse tech, and enforce good institutions. It’s also not clear how successful these countries have been in maintaining a world-leading innovation ecosystem. Japan’s patenting rate has been declining for three decades. There are lots of wealthy, developed countries with little innovative capacity.

The importance of this counterargument depends on how you think innovation arises. If it’s just about getting the institutions right and starting up feedback loops, then spreading the right institutions and conditions for economic growth around the world is really important. If innovation arises from a rarer, more path dependent combination of institutions, culture, history, geography, etc. then feeding the flame that’s already lit is the best way to improve the world.

Population growth

The developed world is aging. Population is the most important input into innovation in our best models of economic growth. Japan and Italy’s stagnating populations and economies are foreshadowing. Unless fertility trends reverse or AI obviates population as an input into innovation, most of the world’s potential for growth lies in India and Africa rather than in the developed world. This counterargument pulls at least as strongly towards more immigration into the developed world as to development effort in the original countries though.

The direct focus of progress studies and metascience is almost exclusively on the US, even though the majority of the world’s people and the vast majority of the world’s poverty exists outside of it. This is not due to a narrow moral circle which excludes the rest of the world. A close focus on the institutions and culture of the US is justified even under a wide moral circle because the positive spillovers from increased frontier growth and innovation are so large and the potential for this growth resides primarily in America.

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