Powerful ideas drive political debate


John Hood - Contributing Columnist



RALEIGH — The science fiction pioneer H.G. Wells once observed that “human history is, in essence, a history of ideas.” This is a wise observation — and it speaks to the political debate we’ve been having here in North Carolina over the past several years.

Wells himself was an influential purveyor of ideas. Some were praiseworthy, such as his exploration of the effects of technological change. Other ideas Wells embraced, such as socialism and eugenics, were abhorrent. Still, by engaging in a serious discussion of important ideas, Wells contributed not only to the development of science fiction as a literary genre but also to the realization that human affairs cannot be reduced to a mechanistic clash of impulses and interests.

Lots of “experts” disagree. They think that when politicians or intellectuals argue for or against a particular policy, they’re just putting up a rhetorical smokescreen to disguise what are really self-serving actions. No doubt you’ve heard this kind of cynical analysis many times. You’ve heard that a particular faction or political movement is just saying and doing whatever its paymasters demand.

Impulses and interests matter, of course, but so do ideas. Consider the recent debates about how best to accelerate and broaden economic growth in our state. Liberals and Democrats tend to argue that North Carolina will prosper to the extent it spends more money on public services intended to increase the productive capacity of the economy. Conservatives and Republicans tend to argue that North Carolina will prosper to the extent it reduces the tax and regulatory barriers that keep entrepreneurs, investors, and highly productive professionals from creating and expanding businesses in our state.

This is not simply a clash of personal or institutional agendas. It reflects a longstanding debate about the economics of growth. Generally speaking, you can group the various theories into three categories, each bearing the name of an influential thinker:

• Smithian growth from scale. In 1776, Adam Smith famously argued that economic progress comes from broadening the scope of production and trade. That allows people to specialize in the tasks they do best, trade what they make with others (either within a company or around the world), and make each other better off as a result.

• Solovian growth from investment. Beginning in the 1950s, Robert Solow, an economist at the Massachusetts Institute of Technology, co-created an influential model for explaining long-term growth that included changes in population, capital formation, and technology. In public policy circles, this model has often been used to argue for more government spending on infrastructure (physical capital), research and development (intellectual capital), and education (human capital).

• Schumpeterian growth from entrepreneurship. Joseph Schumpeter, an Austrian-born economist at Harvard University during the first half of the 20th century, argued that economic trends were impossible to explain without recognizing the “creative destruction” led by individuals who respond to previously unforeseen opportunities in the marketplace by creating, financing, or managing new enterprises.

These ideas aren’t incompatible. Indeed, it would be truly odd for anyone to dismiss the economic benefits of trade, capital formation, or entrepreneurship. The debate is about emphasis and priorities. Trade, for example, is a net positive but the effects typically aren’t gigantic. On capital, economies with significant investment clearly grow more rapidly over time than do economies with little to no investment. But after a certain point, spending more money — particularly in the public sector — doesn’t produce enough gain in productivity to offset the cost of the expenditure.

These are ideas well worth more study and discussion. You can expect North Carolina policymakers, scholars, and journalists to do just that for years to come. You can also expect the cynics to continue to deny that there is any important debate to be had — that abstract ideas and intellectual arguments are irrelevant to the real business of policymaking, which is driven purely by power and interest.

For people who disdain the value of persuasion, they appear to spend an extraordinary amount of time and effort trying to persuade the rest of us that they’re right.

John Hood is chairman of the the John Locke Foundation.

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John Hood

Contributing Columnist

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