Category: History

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.

Many MR readers have asked for commentary on this very interesting piece by Scott Winship.  Scott makes a number of points but here is one in particular:

As nations become wealthier, it is harder for them to sustain high rates of growth. That doesn’t mean that the United States is in decline, or even stagnating. When a nation is as rich as ours, it can realize larger absolute gains than it did in the past and larger gains than other nations even if it has lower growth rates. That’s because a growth rate of, say, 2.5 percent represents a larger increase in absolute wealth the richer an economy becomes. In 1900, a 2.5 percent increase in gross domestic product (GDP) per capita would have translated into about $150 in today’s dollars for every man, woman, and child in the United States. In 2010, it would have been roughly $1,200, reflecting the fact that in the aggregate, we are about eight times wealthier than we were 110 years ago.3 By focusing too much on growth rates and too little on absolute increases in wealth, we have failed to appreciate the magnitude of economic gains in recent decades.

A few remarks in response:

1. First, this is not so far from my own view, for instance Scott cites me as writing: “Life is better and we have more stuff, but the pace of change has slowed down compared to what people saw two or three generations ago.”

2. I still think this — to the extent it is true — is tragic.  Just imagine the future potential loss that would result from the disappearance of compound growth.  People one hundred years out would be much worse off, relative to exponential growth, and their ability to fix the environment or elevate poor countries to wealth, also will be much lower.  In essence economics would be surrendering the gain it won from the victory over Malthus.  “Hey, Reverend, you were right, growth will be only an arithmetical progression, not geometric as we had thought from 18?? through to 19??.  But you were wrong about one other thing: the populations of many of the best countries in the world are shrinking!”  I find that response horrible and depressing, not heartening.

3. Many features of our budgeting, especially from the public sector, rely on exponential rates of economic growth.  For better or worse, we are not about to back our way out of those.  We also may need exponential growth to pay off the growing power of special interest groups.

4. Most importantly, I think high rates of economic growth will resume, at some (unknown) date in the future.  Note that in a very broad data sample, stretching across centuries, rates of growth for the technological leaders are on average rising, as shown by Paul Romer.  It was a big deal in the 17th century when England started to manage an average of about one percent growth a year, but today we would call that a kind of stagnation.  The Great Stagnation is a temporary slowdown in growth, not the permanent end of new ideas.

We live in a diverse world:

Reborn culture started around 1990, with people stripping the paint and hair off store-bought vinyl dolls and painstakingly reworking them to be more lifelike. Now some people use kits with doll parts that when assembled are weighted to feel like a real infant when held.

After discovering this movement, Ms. Martinez bought her own doll for research and started exploring the burgeoning subculture, attending conventions, photographing baby-beauty contests, baby showers, owners and artisans.

“In general, most of the women are Anglo, conservative, Christian and right-to-lifers,” Ms. Martinez said. “All of the things that I’m not.”

When Ms. Martinez travels, she will sometimes bring one of her own five reborn dolls to photograph people’s reactions. She prefers to carry them in open bags because she feels uneasy putting them into closed containers, and her suitcases are always searched by airport security if a doll shows up in a scan. This leads to unusual encounters — like when other people in line get upset thinking that a real baby is about to be harmed by X-rays as they pass through security.

The full story, interesting throughout, is here.

Armen Alchian has died. Alchian was both clever and wise, an unusual combination. His 1950 paper Uncertainty, Evolution and Economic Theory applied basic insights from evolutionary theory to suggest new approaches to economic ideas.  Alchian, particularly with Demsetz, began the analysis of property rights not only what property rights do but how they evolve with changing circumstances (the link goes to Alchian’s entry on this topic in the CEE). Alchian’s textbook with Allen, University Economics which became Exchange and Production, is a classic; never a bestseller among students but avidly read by masters. The Alchian-Allen theorem, sometimes called the third law of demand, continues to bedevil theorists despite its simplicity. I am a fan of his paper Costs and Outputs which generalized some ideas about production and time and inspired Fisher Black.  I never met Alchian but have always profited from reading his papers and I was truly grateful and also thrilled when he blurbed my book Entrepreneurial Economics. Fred McChesney has a good appreciation including Alchian’s pioneering event study which was suppressed for national security reasons; Bob Higgs remembers Alchian’s legendary class at UCLA and here is Larry White interviewing William Allen about A Life Among the Econ his memoir of UCLA economics during its glory years.

You can find all of these works and more in Alchian’s Collected Works.