Category: History

*Worldly Philosopher*

by  Tyler Cowen in

The author is Jeremy Adelman and the subtitle is The Odyssey of Albert O. Hirschman.  This is the book I have looked forward to most all year and so far (p.153) it does not disappoint.  Here is one excerpt:

If there was one author who captured Hirschmann’s imagination, it was Michel de Montaigne.  The highly personal vignettes, meditations, and moral reflections shook Hirschmann to his core.  He immediately grasped the power of the essays — Montaigne questioned absolute forms of knowledge by submitting everything to the interrogating eye of the observer, starting by looking at himself, turning himself over and over to capture the multiple points of perspective or the multiple forms of the self.  “We are never ‘at home’: we are always outside ourselves,” Montaigne wrote.  “Whoever would do what he has to do would see that the first thing he must learn to know is what he is.”

I am pleased that this book has 740 pages and I am wishing for more.  Here is a WSJ review.  Here is a good UK review.  Here is a review from The Economist.

Mexico’s economy: current prospects and history

by  Tyler Cowen in

That is a new MRUniversity course, taught by University of Oklahoma Professor Robin Grier (with a small number of guest videos from me, too).  It is absolutely excellent and I recommend it highly.  The course outline is this:

1 An Overview of the Mexican Economy

2 Colonial Legacies: Obstacles to Growth after Independence
3 Development Strategies
4 Social Issues
5 Land & Agriculture
6 The Debt Crisis of the 1980s
7 The State Retreats: Reform in the 1980s & 1990s
8 The Peso Crisis

9 NAFTA & the Mexican Economy

The early videos are now on-line and new videos will be appearing regularly.  You can view them on your own or register sign up for email updates at the link.  You can check out our other courses at the home page of MRUniversity.com.

*How Revolutionary were the Bourgeois Revolutions?*

by  Tyler Cowen in

This is quite an extraordinary book, remarkably informationally dense, interesting on almost every page, though I would pass on the extended discussions of methodological Marxism.  Did the so-called bourgeois revolutions have relatively little to do with the bourgeoisie?  (This leads some readers to the further question, namely if so, how should this reshape our understanding of “neo-liberalism” today?)  What is a bourgeois revolution anyway?  This far-ranging book is a kind of esoteric blockbuster, to be worshiped by the handful of people who are familiar with Hotman’s Francogallia and its role in 1570s French politics, or who carry around in their heads some underlying sense of why 17th century Scottish and Polish feudal rule might have had significant common features.

Ideally, CrookedTimber should do a symposium on this book, though I am not sure they can find commentators who are up to the task.

Enthusiastically recommended, sort of, to some of you, maybe.

The author is Neil Davidson, a Scot, and the Amazon link is here.

Irish bank strikes 1966-1976

by  Tyler Cowen in

That is the title of this Wikipedia entry:

The Irish bank strikes between 1966 and 1976 were three strikes of about a years total duration which closed down all the clearing banks in the Republic of Ireland. The strikes provided economists a unique opportunity to study the functioning of a modern economy without access to bank deposits.[

The strikes affected all the associated banks which comprise of the Bank of Ireland, the Allied Irish Banks, the Northern Bank and the Ulster Bank. The strikes lasted from:

  • May 7 – July 30 1966
  • May 1 – November 17, 1970
  • June 28 – September 6, 1976

The longest strike was of six months in 1970. The Central Bank made limited facilities available to non-associated banks to issue cash. Not just financial transactions were affected, many property deals were also affected because the documents were kept in the banks. The country came through reasonably well in business terms despite the bank strike, a large firm Palgrave Murphy failed when the strike ended and settlements were made but its failure was probably inevitable anyway. The strike had little effect on the main economic concerns which were unemployment and industrial unrest caused by inflation.

Of course in contrast to current-day Cyprus, these were not banks otherwise attacked by runs and subject to insolvency.  So it is far from obvious that this Irish success (relatively speaking, that is) would be repeated.  Still, it is one example of how an economy copes once its banking system is shut down.

Here is further information about Ireland, note that “a highly personalized credit system without any definite time horizon for the eventual clearance of debits and credits substituted for the existing institutionalized banking system.”  Furthermore “Public houses and shops emerged as a substitute banking system.”

A short history of bank deposit levies

by  Tyler Cowen in

In July 1992 Italy’s Socialist Prime Minister Giuliano Amato imposed a one-off levy on bank accounts. It was a mere 0.6% in comparison with Cyprus’s scheme, and it still left a lasting scar on the country’s financial psyche. In 1936 Norway experimented with a bank deposit tax, but it caused an exodus of cash from the country. There are also some Latin American examples (Brazil in 1992, Argentina at the turn of the millennium) but most were combined with capital controls, and were last-ditch efforts to rescue the financial system when all else had already been tried.

That is from Edmund Conway, here is more.  From Carola Binder, here is a history of capital levies in fiscal crises, and via Google here is what Hungary did in 1920.

Good sentences about John Stuart Mill

by  Tyler Cowen in

He was so bewildered by his lack of books that he even began sleeping late, once not getting up till nine o’clock.  One of the daughters [in Toulouse] pitying his plight gave him Legendre’s Geometry.  He dissected it eagerly, although its muddled thinking on Ratio took away a good deal of its merits as an elementary work.  The confusion in the house grew worse; a dog went mad and terrorized the servants.  To John’s orderly mind the Benthams seemed to live in a state of constant uproar.  They were always interrupting him for other things.  He was never left to himself.  They took him to see peasant dances…

That is from Michael St.John Packe, The Life of John Stuart Mill.

Testing Doux Commerce in the Lab

by  Alex Tabarrok in

In a famous priming experiment it was shown that changing the name of a prisoner’s dilemma type problem from “The Community Game” to “The Wall Street Game” reduced the amount of cooperation. The suggestion is that Wall Street evokes in the mind concepts of exploitation and self-regarding behavior thus making these behaviors more likely. Wall Street is a very particular aspect of capitalism, however, what about the idea of markets and trade more generally? Montesquieu famously noted that

Commerce is a cure for the most destructive prejudices; for it is almost a general rule, that wherever we find agreeable manners, there commerce flourishes; and that wherever there is commerce, there we meet with agreeable manners.

In fact, market economies are associated with greater levels of trust and cooperation, so might we not expect markets and trust to be associated in the mind? Al-Ubaydli, Houser, Nye, Paganelli, and Pan (the list includes several GMU colleagues) prime experimentees with words associated with markets and then have them play a trust game; they find evidence in support of the hypothesis:

Using randomized control, we find evidence that priming markets leaves people more optimistic about the trustworthiness of anonymous strangers and therefore increases trusting decisions and, in turn, social efficiency. Given the general mechanisms by which priming affects behavior–that an individual’s mental representation of markets is the result of the individual’s experiences with markets–we can interpret our results as evidence in favor of the hypothesis that market participation increases trust.

…Absent markets, economic interactions with strangers tend to be negative. Market proliferation allows good things to happen when interacting with strangers, thus encouraging optimism and leading to more trusting behaviors. Participation in markets, rather than making people suspicious, makes people more likely to trust anonymous strangers. Our results seem therefore to corroborate the idea of doux commerce….We stress, however, that this is cautious evidence; a wider array of evidence is necessary for the solidification of this conclusion.

Questions that are rarely asked

by  Tyler Cowen in

So, my libertarian devotees of evolutionary psychology, you can’t have it both ways.  If feminism is wrong to think we can and/or should resist the dispositions that evolution has given us, then why is it wrong for defenders of the classical liberal order to think we can and/or should resist those dispositions when it comes to our evolved instincts toward the morality of socialism?  Or put the other way around:  if resisting our evolved moral instincts and obeying the rules of just conduct work to generate a civilized, cooperative economic order, why should gender issues be any different?

That is from Steve Horwitz.

Bill Gates reviews Acemoglu and Robinson

by  Tyler Cowen in

He doesn’t like the book so much. Here is his bottom line:

This points to the most obvious theory about growth, which is that it is strongly correlated with embracing capitalistic economics—independent of the political system. When a country focuses on getting infrastructure built and education improved, and it uses market pricing to determine how resources should be allocated, then it moves towards growth. This test has a lot more clarity than the one proposed by the authors, and seems to me fits the facts of what has happened over time far better.

He also objects to the critique of foreign and, and the review closes with this:

As an endnote, I should mention that the book refers to me in a positive light, comparing how I made money to how Carlos Slim made his fortune in Mexico. Although I appreciate the nice thoughts, I think the book is quite unfair to Slim. Almost certainly, the competition laws in Mexico need strengthening, but I am sure that Mexico is much better off with Slim’s contribution in running businesses well than it would be without him.

The pointer is from Jeffrey Sachs.

The more things change…

by  Tyler Cowen in

Malthus argued that redemption of the public debt wold be unwise given England’s economic circumstances, which were characterized by an excess of capital relative to aggregate demand and, consequently, a low rate of profit.

That is from Nancy Churchman, her full piece is here.  Referring to the early 19th century, she also writes:

There was broad agreement that the debt had reached a dangerously high level and that action of some sort should be taken to address it.

There is good ‘ol Lord Lauderdale, circa 1803:

He constantly links the welfare of the country with the continuance of a high rate of yield to holders of the public debt.

(Source here, jstor)  How about J.B. Say?  From Wikipedia:

Say himself advocated public works to remedy unemployment, and criticized Ricardo for neglecting the possibility of hoarding if there was a lack of investment opportunities.

And turning to Ricardo:

Ricardo’s theory of public loans then was based on an emphasis of the fact that the primary burden to the community was derived from the wasteful nature of public expenditure itself rather than from the methods adopted to finance such expenditure.

I like this one from Ricardo, in favor of tax rather than debt finance, from his Essay on the Funding System:

When the pressure of war is felt at once, without mitigation, we shall be less disposed wantonly to engage in an expensive contest.

Ho hum, ho hum.  Go back and read the classics, and hang your heads in despair.

As I’ve mentioned, it sometimes feels like we are living in the early 19th century.

Are we living in the early 19th century?

by  Tyler Cowen in

I frequently make this reference in talks, though I can’t recall having blogged it yet.

Here is one report from the front today:

Corporate earnings have risen at an annualized rate of 20.1 percent since the end of 2008, he said, but disposable income inched ahead by 1.4 percent annually over the same period, after adjusting for inflation.

“There hasn’t been a period in the last 50 years where these trends have been so pronounced,” Mr. Maki said.

If we turn to the industrial revolution, what do we see?  Relatively high productivity from “restructuring,” (machinery replacing labor) but relatively low productivity from innovation or total factor productivity.  Robert C. Allen, in his “Engels’ pause: Technical change, capital accumulation, and inequality in the British industrial revolution” (pdf, the final version is in Explorations in Economic History, 2009) estimates TFP from the time at about 0.69% a year, hardly a stunning number (the number runs in the 2%-3% range for the 1920s and 1930s) and actually that early number is close to what we are seeing today for TFP.

From 1780 to 1840, output per worker rose 46% and the real wage index rose by only about 12%, noting that none of these numbers are close to exact.  (Contra Ricardo, the share going to land is declining steadily and capital is capturing the gains.)  The significant real wage gains come after 1840 and — in my view — even more after 1870.  After 1830 TFP is growing at the higher rate of about 1% a year, still not impressive by the standards of the early 20th century however.

During the early 19th century, there is much creative ferment, but much less in terms of products which translate into gains in living standards for the average person.

By the way, you also have theorists — Malthus, Lauderdale, Chalmers, Attwood, and others — who thought the main problem was simply lack of aggregate demand, which Malthus called effectual demand.  They were absolutely right about part of the picture in the short run but missed most of the larger truths.

Eventually all of the creative ferment of the industrial revolution pays off in a big “whoosh,” but it takes many decades, depending on where you draw the starting line of course.  A look at the early 19th century is sobering, or should be, for anyone doing fiscal budgeting today.  But it is also optimistic in terms of the larger picture facing humanity over the longer run.

Kimchee wars

by  Tyler Cowen in

The popularity of kimch’i in Japan greatly stimulated the South kimch’i processing industry.  Ironically, it was Japanese attempts to capitalize on manufacturing kimch’i that inflamed Korean claims to its ‘ownership’.  This dispute, commonly known as the ‘Kimch’i‘ War…began in 1996 when Japan proposed designating kimuchi (the Japanese pronunciation of kimch’i) an official Atlantic Olympic food.  By then Japanese-Korean trade relations were already under stress due to the fact that Japan had already been involved in exporting the Japanese instant version of kimch’i, which lacked the distinctive flavor from the fermentation process.  In response, South Korea filed a case with the Codex Alimentarius Commission (CAC), pat of the United Nations Food and Agriculture Organization, arguing that there was a need to establish an international kimch’i standard.

That is from Cuisine, Colonialism and Cold War: Food in Twentieth Century Korea, by Katarzyna J. Cwiertka.  This is an excellent book on Korean-Japanese relations, the early history of Korean industrialization, and the rise of industrial food, as well as the evolution of Korean food in recent times, all rolled into a scant 237 pp.  A good author can do wonders…

Napoleon Chagnon and his *Noble Savages*

by  Tyler Cowen in

I started reading Napoleon Chagnon’s Noble Savages: My Life Among Two Dangerous Tribes — the Yanomamo and the Anthropologists.  The first fifty pages are excellent fun and well-constructed, though I cannot speak to the details of his claims about the frequency of conflict or the motivation of conflict by sexual competition for women.  At some point, however, I realized I don’t want to read an entire book on either tribe, at least not at this moment.  I am not suggesting that the book gets worse, but my interest did ebb.

I do not have a view about the controversies surrounding Chagnon, and ultimately that is what should decide the merits of this work.  Here is Dreger’s systematic defense of Chagnon.  Here is a survey of the Chagnon disputes.  I wonder if he has ended up with less credibility from having the first name “Napoleon”?