Morbid Externalities

Robert Solow’s growth model, the crux of Macroeconomic Theory (180.302) here at Hopkins, teaches us that an economy’s long-run, steady-state rate of growth is driven entirely by the growth rate of technological progress, g. Innocent as it may seem, little g has also been the culprit of today’s most harrowing crises in public health. After giving birth to the profession more than a century ago, built on scientific innovations such as the polio vaccine, it has since challenged the new science with a mirage of unforeseen negative externalities – indeed, public health’s most dire crises.

Severe Acute Respiratory Syndrome (SARS) is an example of this phenomenon. Transportation gave it wings to fly around the world. What would have been confined to a flock of chickens – were g stalled somewhere before the Wright brothers – is now a deadly epidemic and seasonal concern worldwide.

Solow’s growth model captures the sexy side of g: economic growth, development, information technology, labor efficiency, entrepreneurship, etc.; in essence, g’s bundle of positive externalities. But often not analyzed in the same light is its similar bundle of negative externalities: globalization of infectious diseases, chronic diseases, ammonia-spiked cigarettes, junk foods and obesity, and of course, every shade of moral hazard. Historically, technological progress has been necessitated by the urgent need for novel solutions to respond to negative externalities, which in turn creates more negative externalities in a cycle both virtuous and vicious, depending on the externality at hand.

For example, Ford rolls out the Model T. Great! But excessive ownership creates excessive automobile accidents. Bad! Seat belts are then sown onto automobile frames and mortality declines. Great again. But wait, moral hazard further proliferates reckless driving, now creating a dramatic rise in non-fatal injuries from non-fatal accidents. Or consider smoking. Farming innovations generate surplus tobacco and a consumption boom in the first half of the twentieth century; great for the economy. But out comes lung cancer, mouth cancer, throat cancer, liver cancer, stomach cancer, gum disease, and second-hand smoke poisoning -- extremely bad. To counter this, we call chemotherapy to the rescue, an effective treatment for cancer patients! But now look again at the other side of the coin: there goes 17% of GDP on health care expenditures.

Perhaps g’s most demanding externality today is obesity, derived partly from g’s invention of sedentary entertainment. Assuming g gives us a new tool to combat obesity, a super treadmill for example, what externality, in turn, could that produce tomorrow? Perhaps regular global blackouts from its super electrical motor?

Ultimately, when human civilization itself reaches a long-run steady state, it will become apparent whether g’s bundle of positive externalities, from the spear and arrow to what’s in today’s technology page, will have been worth it. The question, however, is will we be there to see it? If AIDS consumes the world, then civilization is in steady state. If nuclear warfare incinerates mankind, civilization is also in steady state. But these aren’t the visions we desire. Is g worth the destruction of life, even as it gives life its modern meaning? Technological progress has traditionally marched to the tune of small steps for man, giant leaps for mankind (forward). This forward assumption, however as SARS proved, does not hold ubiquitously.