The Quality Imperative
Stephen Roach
Economist
The very construct of social science is an unfortunate oxymoron. It was always a stretch to think we could model and predict human behavior with any precision. As a practicing economist for nearly 50 years, I have never been more struck by this contradiction than today. The confluence of a devastating pandemic, America’s racial catharsis, and the mounting perils of climate change draws the supposed rigor of our discipline into profound question.
The culprit: A penchant for elegant mathematical modeling. The basic economic problem — the efficient allocation of scarce resources — has led to the development of models that emphasize the quantity dimension of the growth experience, stressing the speed and efficiency of economic activity. More labor, more capital are generally viewed as the keys to economic success. The faster the resulting growth rate, the greater the apparent success.
If it were only that simple! Dwelling on quantity obscures considerations on the quality side of the growth equation. With COVID-19, under-investing in public health is an especially glaring example. Notwithstanding a long history of pandemics — namely, a world that has been afflicted by 13 major outbreaks involving at least 100,000 deaths since the 14th century — disease prevention is viewed as a costly threat to growth that should be minimized.
And that is exactly what has happened. One study puts pandemic preparedness at less than 1% of total global development assistance in 2019. Moreover, with national leaders drawing validation from the speed of economic growth, they tend to reject the early signs of an emerging pandemic. After all, leaning against outbreak — the lockdown in its extreme form — threatens the speed of economic growth, the sustenance of political power. That was certainly the case as the coronavirus emerged in both China and the United States.
The same applies to two other seemingly existential threats to the quantity of economic growth — America’s racial upheaval and global climate change. Addressing systemic racism does not just entail a moral awakening but also requires money and time. With recent Black Lives Matter protests now the largest demonstrations in US history, there can be little doubt of the moral support of the American public. But as passions hopefully get converted into action, will the inevitable pushback take a familiar form and be framed in terms of costs to the speed, or quantity, of economic growth? The same questions arise about climate-change, with political pushback to environmental protection often couched in terms of foregone GDP and jobs.
In short, quality shocks, such as pandemics, racial catharsis, and climate change, don’t fit the script of modern-day economics. Steeped in a fixation on the quantity of economic growth, modeling has lost much of its relevance. That need not be the case. It may be a stretch to find greater meaning in this horrific public health crisis. But to the extent the lockdown frees up time for contemplation, awakening, and reprioritization of choices impacting the quality of our lives, might COVID be a blessing in disguise? Might it also offer redemption for a generation of misguided economists?
Stephen S. Roach, a faculty member at Yale University and former Chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China (2014).