History

Dennis was actually the first stagnation theorist I read, at about the age of eighteen, due to a recommendation from Walter Grinder.  His strength is to tie stagnationist claims into the political economy of war.  This is from 1940 (book link here), I hope it is no longer relevant:

The importance of clearly understanding the dynamic and purely unmoral function of change cannot be exaggerated at a time like this when the major problem is stagnation.  America’s problem of unemployment could be solved by rebuilding America or going to war with Japan.  The war with Japan is more likely.  Why?  The answer is that our social philosophy recognizes a need for national defense but not for social dynamism.

And:

…stagnation in any culture is far more normal or usual than what we have been accustomed to think of as progress.

I found this interesting:

A civilization must exalt a tradition of heroism.  This it may do in war or pyramid building.  Liberalism never glorified heroism in theory but, in its frontier empire-building days, it exemplified heroism in its practice.

You can read Dennis as an extension of the Henry George model, except he is more bullish about population growth and adds the variable of war.  In the George model, there are increasing returns and so city life becomes crowded and the scarce factor of land captures the social surplus.  Think San Francisco or Singapore.  Dennis assumes diminishing returns, and so the frontier is usually more potent than the city, if only a frontier can be kept open and alive.  But that is hard to do because it runs against the natural desire of so many human beings for stasis, and thus capitalism tends to evolve into a kind of socialistic fascism.

Dennis, by the way, had an interesting life.  Unlike most “alt right” writers, he was half black, but his skin was pale so he was able to pass for white.  (In fact he started life as a child preacher, touring the south, accompanied by his African-American mother.)  He spent some of his energies trying to convince his “fellow travelers” to support civil rights for blacks, but without much success, and he also was desperately afraid of being unmasked.

Early in his career, he was accepted into mainstream American intellectual life and hung out with elites, rising to the top through the State Department and Wall Street.  As the 1930s passed, he became more extreme and the center became more hostile to fascist and semi-fascist ideas, especially if bundled with tolerance for potentially hostile foreign powers.  His career had a long downward trajectory, and during World War II he was tried for sedition, though he got off and later died in obscurity, after a final gig as a critic of the Cold War.  Gerald Horne wrote a very interesting biography of Dennis.

I’ll have to put this under the fold, because I can’t say anything without giving away everything… Read More →

Back in Gyeongju, Kim had the spy arrested, tortured, and executed…The rest of Kim’s story, as far as we know it, is true: He conquered Baekje in 660 and Goguryeo in 668 with the help of the Tang armies, then had to give the Tang the Manchurian half of Goguryeo.

Modern nationalist historians have criticized Silla for relying on China’s help in the first place, saying it set a historical pattern whereby Koreans instinctively call on outside powers to help solve internal problems.

That is from the new book by Michael Breen, The New Koreans: The Story of a Nation, a very good introductory treatment to that part of the world.

A great many of the impulses which now lead nations to go to war are in themselves essential to any vigorous or progressive life. Without imagination and love of adventure a society soon becomes stagnant and begins to decay. Conflict, provided it is not destructive and brutal, is necessary in order to stimulate men’s activities, and to secure the victory of what is living over what is dead or merely traditional. The wish for the triumph of one’s cause, the sense of solidarity with large bodies of men, are not things which a wise man will wish to destroy. It is only the outcome in death and destruction and hatred that is evil. The problem is, to keep these impulses, without making war the outlet for them.

All Utopias that have hitherto been constructed are intolerably dull….[Utopians] do not realize that much the greater part of a man’s happiness depends upon activity, and only a very small remnant consists in passive enjoyment. Even the pleasures which do consist in enjoyment are only satisfactory, to most men, when they come in the intervals of activity. Social reformers, like inventors of Utopias, are apt to forget this very obvious fact of human nature. They aim rather at securing more leisure, and more opportunity for enjoying it, than at making work itself more satisfactory, more consonant with impulse, and a better outlet for creativeness and the desire to employ one’s faculties.

That is from Principles of Social Reconstruction, 1916.  The pointer is from Alex, our Alex.

Here is the award citation, here is one excerpt from it:

Donaldson’s paper “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure?” (American Economic Review, forthcoming) investigates the economic benefits from building transportation infrastructure studying the case of railways in 19th century India. This paper is widely viewed as both a methodological breakthrough and substantively important paper in the field. Donaldson assembled a new and rich data set from archival sources about the expansion of railroads in India through the 19th and early twentieth century and the volume of inter-regional trade in the same period. He then uses the data to look the effect of access to railroads on real agricultural incomes. To check that this effect does not come from building railroads where the growth was predicted to be, he uses the fact that a number of proposed lines did not get built or did not get built when they were proposed to be built. Assuming that the proposal was based on what the contemporary experts thought were the areas of greatest demand for transportation, these un-built railroads should also have an effect if they were any good at predicting growth. He finds no such effect.

The second part of the paper builds a quantitative model where the effect of trade on real agricultural GDP is fully captured by one sufficient statistic: the share of expenditure that each Indian district allocates to goods produced in the district. When that share is low, it indicates that the relative price of imports in the district is low, and in turn, that the welfare gains from trade are large. Controlling for shocks to technology (mainly rainfall in this case), he finds that observed changes in real GDP following access to the railroad move almost one for one with the sufficient statistic predicted by the model, thereby making the case that the benefits of the railways is indeed the result of increased trade.

There is much more of interest at the link.  Here are copies of the papers, overall I am delighted to see a Clark Award that so prominently features economic history, not to mention India and trade.  Donaldson is at Stanford, here is his home page.  An excellent pick, but this one was a surprise to me.

Outside my apartment a cobbler has a sidewalk shop where he sits and fixes shoes. One of the things that interests me in this photo is the picture the cobbler hangs behind him, that’s BR Ambedkar. In the Cobblerindependence movement BR Ambedkar was the leader of the Dalit (untouchable) class and the guiding force in writing the Indian constitution, which in India makes him a combination of Martin Luther King and James Madison.

Ambedkar died in 1956 but he continues to be highly regarded, especially, but by no means solely, among the Dalits. Indeed, of the great triumvirate, Gandhi, Nehru, and Ambedkar, only Ambedkar seems to have grown in stature since his death. Gandhi is given lip service but his image no longer carries meaning. As Arundhati Roy put it, “Gandhi has become all things to all people…he is the Saint of the Status Quo.” The image of Ambedkar, however, still signals a demand for justice and an insistent claim that not all is yet right.

Today is Ambedkar’s birthday and at the stroke of midnight my neighborhood, which happens to be on Ambedkar Road, erupted in a party and parade that lasted until two in the morning.

Of the great triumvirate, I’ve always been partial to Ambedkar. He had a PhD in economics from Columbia where he worked under Edwin Seligman and later also graduated from the London School of Economics writing another dissertation under Edwin Cannan. Ambedkar was not a free market advocate and he didn’t write much in pure economics after the 1920s but he was an early supporter of monetary rules because he had a sophisticated understanding of the distributional consequences of monetary interventions and feared government manipulation.

A managed currency is to be altogether avoided when the management is in the hands of the government.

Ambedkar also wrote insightfully on the problem of India’s small farms, a problem that continues to plague India (although some of his solutions such as government ownership of land actually don’t fit the problem, lack of capital, that he emphasized).

So why does Ambedkar continue to resonate in modern India? Ambedkar never had Gandhi’s worship of the village and tradition. He understood that progress would come with cities, industrialization and education. Exactly the forces that are transforming India today. Ambedkar did not mince words:

The love of the intellectual Indian for the village community is pathetic. What is the village but a sink of localism, a den of ignorance, narrow mindedness, and communalism?

Most importantly, quoting Luce’s excellent In Spite of the Gods (still the best introduction to modern India):

Ambedkar gave India’s most marginalised human beings their first real hope of transcending their hereditary social condition. He saw the caste system as India’ greatest social evil, since it treated millions of people as sub-humans by the simple fact of their birth.

But even as the caste system declines in importance (in some ways), there remain those who are marginalized and downtrodden. Ambedkar, for example, resigned as law minister in post independence India when his bill to bring greater equality and property rights to women was rejected. Even today, Ambedkar’s vision is not complete. Ambedkar was a modernist, a rationalist, a believer in the principles of liberty, equality, and the rule of law for all, and for these reasons he remains relevant in modern India.

In a previous column on India, and how it suffered under colonialism, I mentioned:

If you are looking for the upside of British colonialism, you are more likely to find it in the wealthier and better-treated Singapore or Malaysia.

Why might this have been true?  Part of India’s colonial curse was its high population, which meant the British viewed it as a source of soldiers, and a captive market for goods, rather than an area whose value could be internalized through direct economic development.

When it comes the British history in India, I think of “letting the interior fester” as a big part of the core problem.  Most of India was and still is interior.  You might look at the coastal regions, but given that British policy forced India to accept free trade for British goods, without receiving the same privileges in return, the coastal regions became rent-seeking imperial clusters more than possible rivals to Hong Kong or for that matter Manchester.

Singapore, in contrast, was built around its port, and the British encouraged further developments in that direction, even as early as Raffles in the 1820s.  The city didn’t/doesn’t have much of an interior or for that matter much population (about 1,000 when the British took over).  Keeping the people servile didn’t seem worth the trouble, because they could neither fight nor buy in great numbers.  Instead, you can think of British policy as trying, selfishly, to maximize the value of Singaporean land to the British.  But that wasn’t such a nasty process, as the British Navy made Singapore more focal as a trade center, with a later boost from the opening of the Suez Canal.  Note that as late as the mid-1960s, just before independence, about 20 percent of Singaporean gdp was British defense spending.

Singapore as port and entrepot developed “the entire nation,” all the more as the induced spirit of enterprise later spread to manufacturing.  This in turn gave the territory the possibility of a relatively inclusive and egalitarian future.  Unlike with India, the British rulers never imagined a future where Singapore might threaten them economically, or politically, and so they could just let matters rip.  The British felt, more or less correctly (until the Japanese invasion), that improvements in the value of Singapore would be captured by them.

So it was “keeping an option on captive buyers and fighters” (India) vs. “maximizing the value of the land for Empire” (Singapore).  Both were selfish strategies, but the latter did better for the colony in question.  Hong Kong seems to fit comfortably into this framework, though other cases might be considered (Barbados vs. Guyana?  Ghana vs. Uganda?).

Singapore also benefited from having most of its relevant colonization come later, whereas India had a damaging East India Company period in the 17th and 18th centuries, when imperialism often was more brutal and less sophisticated.

Non-Singaporean Malaya/Malaysia would require a post of its own.  In that case, and also with Singapore more narrowly, an evaluation of British rule cannot be separated from major changes in the exports and also corresponding changes in the ethnic composition of the territory.  The Singaporean national anthem is still a song written in Malay, and by law it must be sung as such.

That is the topic of my latest Bloomberg column, here are a few bits, these are all highly imperfect metrics:

For much of the 18th and early 19th centuries, under British rule, Indian economic performance was mediocre at best. It has been estimated that the yearly agricultural wage was higher in 1810 than in 1946. It’s difficult to prove how much of that decline was because of the British, but it is hardly a ringing endorsement.

And:

Another way to make the historical comparison is to consider which Southeast Asian economy never fell under colonial rule. That would be Thailand, which has a per capita income in the range of $16,300 by World Bank estimates, compared with India’s $6,100. Again, that single comparison is not dispositive, but it hardly favors the British record in India.

And:

Another possible comparison is between British-ruled India and India’s “native states,” namely the numerous territories and principalities where British involvement in direct rule was minimal. To be sure, those regions still were embedded in a broader nexus of British control, and there is no comprehensive database. Nonetheless, historian Jon Wilson, in his recent book “India Conquered: Britain’s Raj and the Chaos of Empire,” offered this assessment: “Economic growth and institutional dynamism occurred in the places that were furthest from the rule of British bureaucrats.” For instance, Tata Steel Ltd. put India’s first modern steel plant in Jamshedpur, a tributary area outside of British rule. Another study found that the independent areas had better performance in terms of education and health care during the post-colonial era.

Maybe you can twist all of those back to neutral, but the data make it surprisingly hard to make a case for British rule in India.

Patrick is co-founder and CEO of Stripe, based in San Francisco.  I recently told a reporter he was one of the five smartest people I have known; he is so smart, in fact, that he asked to interview me rather than vice versa, and so he and I created a new episode of Conversations with Tyler (transcript and podcast at that link, alas no video, and note that was recorded in January so on a few points the timeline may feel off).

We discuss whether macro is underrated, what makes Silicon Valley special, optimal immigration policy, whether Facebook is beneficial for society, whether I might ever vote for Donald Trump, how to start a new religion, Peter Thiel, Brian Eno, where I differ from Thomas Schelling, Michel Houllebecq, how to maintain your composure in an age of Trump, the origins of this blog, how I read so much, why Twitter is underrated, and the benefits of having a diverse monoculture, among many other topics.

Here is one bit:

COLLISON: …You’ve written a lot about how the study of economics has influenced your appreciation for the arts, and for literature, and for food, and all of the rest. You haven’t written as much about the influence in the reverse direction. How has your appreciation for and study of the arts influenced your study of economics? And is this a version of that?

COWEN: This is a version of that. Here would be a simple example: If you think about Renaissance Florence, at its peak, its population, arguably, was between 60,000 and 80,000 people. And there were surrounding areas; you could debate the number. But they had some really quite remarkable achievements that have stood the test of time and lasted, and today have very high market value. Now, in very naive theories of economics, that shouldn’t be possible. People in Renaissance Florence, they didn’t produce a refrigerator that we’re still using or a tech company that we still consult.

But there’s something different about, say, the visual arts, where that was possible, and it was done with small numbers. So there’s something about the inputs to some kinds of production we don’t understand. I would suggest if we’re trying to figure out, like what makes Silicon Valley work, actually, by studying how they did what they did in the Florentine Renaissance is highly important. You learn what are the missing inputs that make for other kinds of miracles.

Ireland and writing would be another example.

…COWEN: And I worry now that people in Ireland hear too much American English, too much English English, and that style of writing, talking, joking, limericks, is becoming somewhat less distinct. Still many wonderful writers from Ireland, but again, it’s like an optimal stock depletion problem, and maybe we’ve pressed on the button a little too hard.

COLLISON: The transaction costs should be higher?

And here is another:

COLLISON: Do we just need a sufficiently obfuscated version of the UBI and then we’re fine?

COWEN: We call it “disability insurance.”

And:

COWEN: Well, I voted on each of these hires. I voted for them. For a lot of them, I was on the hiring committee. Robin Hanson’s a good example. When we hired Robin, he was much older than a typical assistant professor would be. And of course, we don’t practice age discrimination, and neither does anyone else, but . . .

[laughter]

COWEN: Robin was going to have a tough time being hired. And I gave Robin some of my papers to read. He came in. He was a little, actually, obnoxious to me. Though he’s one of the nicest people you’d ever want to meet. He sent me back comments on my papers, that they were all wrong.

[laughter]

COWEN: There was no preliminary politeness: ‘I thought this was interesting, but…’ I thought this was great. So I thought, “We need to hire Robin. Robin is different.” And Robin wrote papers I thought were crazy, but he clearly also was a genius. I pushed very hard to hire Robin, and he made a good impression on a lot of other people. He’s been with us ever since.

COLLISON: Were the papers in fact all wrong?

COWEN: Robin’s criticisms were all good points.

[laughter]

COWEN: But they weren’t entirely wrong.

Self-recommending!

From Oswald Spengler’s The Decline of the West, vol.II, p.99, from “The Soul of the City”:

The stone Colossus “Cosmopolis” stands at the end of the life’s course of every great Culture.  The Culture-man whom the land has spiritually formed is seized and possessed by his own creation, the City, and is made into its creature, its executive organ, and finally its victim.  This stony mass is the absolute city.  Its image, as it appears with all its grandiose beauty in the light-world of the human eye, contains the whole noble death-symbolism of the definitive thing-become.  The spirit-pervaded stone of Gothic buildings, after a millennium of style-evolution, has become the soulless material of this daemonic stone-desert.

These final cities are wholly intellect.

And on p.107, these cities are described as:

Rootless, dead to the cosmic, irrevocably committed to stone and to intellectualism, it develops a form-language that reproduces every trait of its essence — not the language of becoming and growth, but that of a becomeness and completion, capable of alteration certainly, but not of evolution.

Good thing this is such a silly book!

“The clue to many contrasts in British geography,” wrote the geographer Halford Mackinder in 1902, “is to be found in the opposition of the south-eastern and north-western — the inner and outer faces of the land.  Eastward and southward, between the islands and the continent, are the waters known to history as the Narrow Seas; northward and westward is the Ocean.”  The happy conclusion he drew from this is that Britain has the best of both: “as liberty is the native privilege of an island people, so wealth of initiative is characteristic of a divided people.”

Tradition divides Britain diagonally, demarcating the south/east from the north/west, and imputes great significance to the contrast between these regions in the composition of British identity.  For some, the tension between the two is creative, and Britain’s ingenuity benefits from facing both the Atlantic and Europe.  Celtic was the term coined in the eighteenth century for the Atlantic-facing arc of Scots, Welsh, Manx and Irish…

This is of note:

Since 1821 the population of the Celtic arc of the north and west has declined as a proportion of the population of the United Kingdom, from 46 per cent in 1831, to 20 per cent in 1911, to 16 per cent in 2014, due to famine, independence and emigration.  This is a configuration of the country which we have been losing for nearly two centuries.

That is from the rewarding Love of Country: A Hebridean Journey, by Madeleine Bunting.

Here is from a new research paper by Christina Starmans, Mark Sheskin, and Paul Bloom:

…despite appearances to the contrary, there is no evidence that people are bothered by economic inequality itself. Rather, they are bothered by something that is often confounded with inequality: economic unfairness. Drawing upon laboratory studies, cross-cultural research, and experiments with babies and young children, we argue that humans naturally favour fair distributions, not equal ones, and that when fairness and equality clash, people prefer fair inequality over unfair equality.

As I said in a talk at Harvard Business School a few days ago, “if you hear the word “inequality,” the chance that what follows will be wrong is at least 3/4.”

For the pointer I thank Michelle Dawson.

That is the theme of new research by Karl Halvor Teigen, et.al., here is the abstract:

Events are temporal “figures”, which can be defined as identifiable segments in time, bounded by beginnings and endings. But the functions and importance of these two boundaries differ. We argue that beginnings loom larger than endings by attracting more attention, being judged as more important and interesting, warranting more explanation, and having more causal power. This difference follows from a lay notion that additions (the introduction of something new) imply more change and demand more effort than do subtractions (returning to a previous state of affairs). This “beginning advantage” is demonstrated in eight studies of people’s representations of epochs and events on a historical timeline as well as in cyclical change in the annual seasons. People think it is more important to know when wars and reigns started than when they ended, and are more interested in reading about beginnings than endings of historical movements. Transitional events (such as elections and passages from one season to the next) claim more interest and grow in importance when framed as beginnings of what follows than as conclusions of what came before. As beginnings are often identified in retrospect, the beginning advantage may distort and exaggerate their actual historical importance.

Now let me tell you how I first became interested in this paper…we’ll leave aside why it didn’t quite convince me…

Recently I read was Peter Gaskell’s Artisans and Machinery, from 1836 (later reprinted).

So much of his discussion of handloom weavers could come out of an Atlantic Monthly article from 2015, albeit with different historical references.  However today’s stories typically claim that automation favors tech skills, whereas Gaskell argues power weaving put the skilled workers out of jobs and empowered the less skilled machine supervisors.

Just as Bill Gates called for the taxing of robots, back in the early 19th century many people called for the taxing of machinery.  Gaskell believes this would help labor in the short run but in the longer run actually stimulate more innovation — to avoid some of the tax by lowering capital costs — eventually making labor’s lot all the worse.

Gaskell dives into sociology and suggests that the earlier, less technology-intensive workers were more religious, more devout, and less likely to make political trouble.  Distinctions of rank were in fuller force, and children were less likely to be pressured to work outside the home.  Insofar as the man worked inside the cottage as a sole proprietor, this encouraged an ethic of individual responsibility.  Society was truly decentralized, and those were “the golden times” of manufactures.  The downside is that such individuals were less likely to be literate, and of course output was lower, including food output, and prices were higher.

Since women and children also could work the new power looms, that increased the supply of labor and put downward pressure on wages and on male wages in particular.  Collectively speaking, it would have been better to preserve division of labor within the household, and keep male wages relatively high, and female household production relatively high.

One of the more charming sections of this book was the chapter on how factories spur too much of the animal passions, as men and women are working together long hours and will eventually…dine with Mike Pence.  Furthermore, factory work leads to new norms where women can have premarital sex and still expect to marry someone else later on, without much fear of a reputational penalty.  Premarital sex then rises all the more, and then the looser norms are passed down to the children, worsening the problem all the more.  Eventually England will end up with the sexual norms found in the “warmer climates.”

Overall, Gaskell paints a picture of a world where there are positive social externalities from having individual males tied to pieces of land.  Along those lines, he offers a kind of Georgist critique of the countryside, where too much land has been tied up in speculative enclosures.

Given ongoing mechanization, only in the long run can a society find a “healthy and permanent tone” once again.  He is optimistic about the long run, but not about the transition.

I don’t exactly agree with all of these perspectives, but I was impressed by the intricacy and also clarity of the analysis in this book, which usually does not receive significant mention in the history of economic thought.

Here are various copies of the book.  Even Maxine Berg doesn’t cover Gaskell much.

A fundraising plan to hold a mock crucifixion of members of the public in Manchester city centre has been cancelled after Church of England clergy raised concerns it was blasphemous and unsafe.

Organisers of the Manchester Passion Play, which will tell the story of Christ’s crucifixion in the city’s Cathedral Gardens on Saturday, offered “the full crucifixion experience” for £750.

The offer, posted on the Manchester Passion 2017 Crowdfunder site, was removed after members of the play’s organising committee, which includes C of E clergy, expressed concerns it was potentially dangerous and blasphemous.

Reverend Falak Sher, a canon at Manchester Cathedral and chairman of the organising committee, said he vetoed the idea when it came to light.

He said: “When I saw it I did not like it, I thought it was disgraceful. The whole message of the cross is hope and love. When I saw this I was not very happy and asked the committee to take this one down.

“We didn’t like promoting the event in this way for £750. I thought it was not a very positive message when dealing with a message of love and hope.”

And yet the article gets better, and indeed draws upon economic analysis:

Stewart-Clark, who runs a business importing timber, said that the event had grown since it was first conceived to include a cast of 120, and 80 stewards. “The whole thing just got bigger and bigger and, of course, with that comes the infrastructure cost,” he said.

“Instead of being a £20,000 play it became a £55,000 play and the burden on raising money then falls on us. We were trying to think up some ideas, just bouncing around what would be good, and someone came up with the idea of letting people be crucified for £750.”

Stewart-Clark said that he did not think the idea was blasphemous, but that it was on “the grey line” and tasteless. “You have clergy wanting to play it safe and businessmen like me trying to raise the funding,” said Stewart-Clark. “There was a difference of opinion and what was a small disagreement has got out of all proportion.”

I enjoyed this sentence:

He said that he had never known anyone to fall off such a cross.

And this one:

Stewart-Clark said there were plenty of other bad fundraising ideas that were scrapped, including charging people a fee to sit next to the bishop to watch the play.

Here is the full article, interesting throughout, and with a photo of the initial fundraising ad.  For the pointer I thank John B.