Science Alone Will Not Create Prosperity

By Donald J. Boudreaux

My son Thomas graduated on May 11th from High Point University with a bachelor’s degree in computational physics. (Pardon me for a moment while I continue to brag: In September Thomas will start the Phd program in physics at Dartmouth.)

The fates smiled on Thomas for his graduation, for High Point’s 2019 graduation speaker was City University of New York physicist Michio Kaku. Since Thomas was a young boy he watched many television documentaries featuring Kaku, who has a knack for explaining complicated scientific ideas to the general public. During his years in high school Thomas read Kaku’s popular books.

Prof. Kaku’s speech was filled with good humor and delivered beautifully to an audience of mostly non-scientists. And at least as far as I can judge, his science - although much-simplified given the audience - was solid. (Thomas expressed a few small reservations with some of Kaku’s simplifications, but nothing major.)

Our World Is Indeed Filled with Technological Splendors

My professional critical faculties did, however, kick in when Kaku ventured into economics.

He wasn’t terrible - which is more than can be said for many excellent natural scientists who opine on economics. But Kaku nevertheless made some telling errors.

Kaku rightly celebrated modernity and the many material blessings that we moderns enjoy. And he avoided the wearisome preaching of many scientists about how we humans greedily and myopically are allegedly destroying the natural environment.

And I positively cheered when Kaku described taxation as a zero-sum activity (his words!). Taxing Peter to enrich Paul does not, Kaku correctly explained, increase overall wealth.

But to myself I sneered when Kaku then said “If you ask economists what causes wealth, many will say ‘Print more money.’” While he’s correct, of course, that printing more money is emphatically not a source of increased wealth, Kaku is deeply mistaken in his description of economists’ understanding of wealth creation. Only a discredited, tiny fringe of economists believe that real wealth is created merely by smearing ink on paper and declaring the result “Legal Tender.”

While economists disagree amongst each other over the precise causes of - to quote Adam Smith - “the wealth of nations,” nearly all economists recognize that wealth creation always involves reallocating resources from uses that produce fewer and less-desirable outputs to uses that produce greater quantities of more-desirable outputs.

Kaku agrees that wealth creation requires using resources differently and more smartly. But his explanation for what, over the past few centuries, caused resources to be used differently and more smartly is totally wrong. In Kaku’s telling, the cause of both the industrial revolution and of modern prosperity is physicists.

I neither deny nor discount the benefits of greater knowledge of how the physical world operates and of how to apply this knowledge productively. But modern knowledge of physics clearly is not a sufficient condition for mass prosperity. If it were, Soviet citizens in the 20th century would have been just as prosperous as American and Canadian citizens.

Indeed, if the cause of wealth is physicists, then it’s nearly impossible to explain why today’s ordinary Americans and Canadians are materially richer than are today’s Poles and South Koreans, and why today’s Poles and South Koreans are richer than are today’s Hondurans and North Koreans. Knowledge of physics, after all, once discovered spreads fast and nearly free of charge. North Koreans aren’t poorer than South Koreans because modern knowledge of physics has yet to reach North Korea or because North Korea has fewer physicists.

Something else is at work - something big and historically recent.

Academic and Laboratory Ideas Don’t Become Economic Outputs Automatically

In my view, the “something else” that is responsible for modern mass prosperity is an individualistic culture that respects private property, upholds freedom of contract, regards as honorable for-profit commerce (including financial-market activities), and tolerates creative destruction. Societies with such institutions and such a culture are more prosperous than are societies that lack these institutions and culture. And the more firmly rooted and widespread are these institutions and culture, the more prosperous is society.

It’s true that physicists in societies with pro-market institutions and culture are encouraged to deepen their knowledge and to apply that knowledge to practical affairs. But modern prosperity did not start because of the discovery and application of greater scientific knowledge of the physical world. As necessary as such knowledge is to the creation of products such as transistors, microwave ovens, and jet engines, this knowledge is more a result of a bourgeois, innovative, and prosperous market society than a cause of such a society.

I suspect that Kaku would reject my argument. Being a physicist, he sees a direct connection between the work of physicists and our ready access to televisions, cell phones, and MRI machines. But I suspect that Kaku misses the less scientifically breathtaking, but much more economically important, activities that ensure our access not only to obviously marvelous products such as TVs, smartphones, and advanced medical care, but also to the no less marvelous likes of indoor plumbing, hard floors and roofs, and ample supplies of food, potable water, and clean clothing.

The executive who introduces a new inventory-management system – the financier who finds a way to direct more capital to start-up firms; the vice-president of operations who creatively figures out how to shave a few cents off of the cost of manufacturing ball-bearings or quarter-inch screws; the entrepreneur who riskily arranges for the production and offering for sale of an entirely new product -– market participants such as these ensure that technological discoveries aren’t confined to university laboratories but are transformed into readily available consumer goods and services.

None of these – and countless similar – commercial activities is the work of physicists. But without such efforts, each one typically (if wrongly) regarded as mundane, the genius ideas of physicists would never find their way into the everyday goods and services that make modernity the marvel that it is.

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Donald J. Boudreaux

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He is the author of the books The Essential Hayek, Globalization, Hypocrites and Half-Wits, and his articles appear in such publications as the Wall Street Journal, New York Times, US News & World Report as well as numerous scholarly journals. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.