Category: History
Why economics was late in starting
I’ve already posed the question, I’d like to add two points. First, sustained economic growth in the Western world starts in 17th century England, as shown by Greg Clark. Interest in economic reasoning then comes rapidly, first from the mercantilists, then in Adam Smith and some earlier free trade thinkers, such as Dudley North and Nicholas Barbon.
Second, the idea of "private vices, publick virtues" was central for eighteenth century economic thought and for social science more generally. This came from Bernard Mandeville (drawing upon the French Jansenists) in 1720. It’s no accident that Mandeville lived in the Dutch Republic, which had very little censorship. No, I am not a Straussian but the merits of that viewpoint are often overlooked.
The School of Salamanca had an excellent marginal utility theory in 17th century Spain, the framework simply did not go anywhere. For that matter we can look later and see that Samuel Bailey, Mountifort Longfield (1834), and others had critical components of Marshall. But no one really cared because they could not yet see how important those contributions would turn out to be. This is a central theme in why the growth of economic thought took so long.
It also suggests that today we might have some very important ideas amongst us, we simply cannot yet see how fruitful they will be. Their own proponents may not even know it.
Was Avner Greif right about the Maghribi traders?
Jeremy Edwards and Sheilagh Oglivie write:
Economists draw important lessons for modern development from the medieval Maghribi traders who, according to Greif, enforced contracts multilaterally through a closed, private-order ‘coalition’. We show that this view is untenable. The Maghribis used formal legal mechanisms and entered business associations with non-Maghribis. Not a single empirical example adduced by Greif shows that any ‘coalition’ actually existed. The Maghribis cannot be used to argue that the social capital of exclusive networks will facilitate exchange in developing economies. Nor do they provide any support for the cultural theories of economic development and institutional change for which they have been mobilised.
Here is the paper, which if it is correct amounts to a stunning refutation of what was once a seminal contribution to economic history and the theory of social norms. Thanks to a loyal MR reader for the pointer.
Adverse selection of slaves
I find the expected quality of a slave who was sold was just 61 percent of the quality of his unsold cousin.
Here is much more, thanks to Eric Crampton for the pointer.
Retribution, by Max Hastings
In the course of the war, Germany lost 781 submarines, Japan 128. By contrast, the Japanese navy sank only 41 American submarines, 18 percent of those which saw combat duty. Six more were lost accidentally on Pacific patrols. Even these relatively modest casualties meant that 22 percent of all American sailors who experienced submarine operations perished — 375 officers and 3,131 enlisted men — the highest loss of any branch of the wartime U.S. armed forces.
The subtitle of this book is The Battle for Japan, 1944-45. Have you ever wondered what kind of peace the Japanese expected (before losing), how the battle for the Philippines unfolded, why the Japanese treated their POWs so badly, or what it is like to be in a submarine surrounded by falling depth charges?
Every year there are five or six books that just wow me. This is one of them. It is as gripping as a first-rate novel and I learned something on almost every page. Here is one review. You can buy it here.
The Cone of Silence
Jason Kottke quotes from Arsenals
of Folly, the new Richard Rhodes book about the nuclear arms race. The scene is the
1986 meeting between Gorbachev and Reagan in Reykjavik, Iceland.
Back at the American Embassy, Shultz assembled Donald Regan, John Poindexter,
Paul Nitze, Richard Perle, Max Kampelman, Kenneth Adelman, and Poindexter’s
military assistant, Robert Linhard, inside what Adelman calls "the smallest
bubble ever built" — the Plexiglas security chamber, specially coated to repel
electromagnetic radiation and mounted on blocks to limit acoustic transmissions,
that is a feature of every U.S. Embassy in the world. Since the State Department
had seen no need for extensive security arrangements for negotiating U.S.
relations with little Iceland, the Reykjavik Embassy bubble was designed to hold
only eight people. When Reagan arrived, the air-lock-like door swooshed and
everyone stood up, bumping into each other and knocking over chairs in the
confusion. Reagan put people at ease with a joke. "We could fill this thing up
with water," he said, gesturing, "and use it as a fish tank." Adelman gave up
his chair to the president and sat on the floor leaning against the tailored
presidential legs, a compass rose of shoes touching his at the center of the
circle.
The permanent tax revolt
…the fractional assessment of homes was easily the largest single government housing subsidy in the postwar era, and it was among the largest categories of social expenditure of any kind, direct or indirect. Fractional assessment of residential property provided a subsidy that was forty times greater than federal spending for public housing. It was ten times greater than the home mortgage interest deduction. It was five times as costly as more controversial "welfare" programs like Aid to Families with Dependent Children. Although fractional assessment did not show up on official government budgets, on the eve of the tax revolt it was providing more benefits than any other social policy in America except for the twin blockbusters of the federal budget, Social Security and Medicare.
That is from the new book The Permanent Tax Revolt: How the Property Tax Transformed American Politics, by Isaac Martin. The main thesis of this book is overstated, namely that the professionalization of property tax assessments is the root cause of American exceptionalism on tax politics; nonetheless I found this a very informative and stimulating read.
Good books on trade policies
Jason, a loyal MR reader, asks me in an email:
What is a good economic history of commerce and trade? I’m looking for a book, preferably recent, with lots of historical examples of what trade policies can do. It would be a bonus if it integrated theory in with the examples, but that isn’t necessary. I’d also prefer a book written by an economist rather than a historian, since historians tend to get their theory wrong. Rosenberg’s How the West Grew Rich comes to mind, but I wonder about other examples.
I say "Ask and ye shall receive." You could try William J. Bernstein’s new A Splendid Exchange: How Trade Shaped the World. Readers, do you have other suggestions?
Mad Men
Thomas Schelling showed that it could sometimes pay to be irrational, or at least to appear to be irrational. If they think you’re crazy then in a game of chicken it’s your opponent who will backdown.
It’s known that Nixon understood the theory but in an frightening article in Wired we learn the insane extent to which the theory was practiced.
Frustrated at the state of affairs in Vietnam, Nixon resolved to:
…threaten the Soviet Union with a massive nuclear strike and make its
leaders think he was crazy enough to go through with it. His hope was
that the Soviets would be so frightened of events spinning out of
control that they would strong-arm Hanoi, telling the North Vietnamese
to start making concessions at the negotiating table or risk losing
Soviet military support.
Much more was involved than words, at one point nuclear bombers were sent directly towards Soviet airspace where they triggered the Soviet defense systems.
On the morning of October 27, 1969, a squadron of 18
B-52s – massive bombers with eight turbo engines and 185-foot wingspans
– began racing from the western US toward the eastern border of the
Soviet Union. The pilots flew for 18 hours without rest, hurtling
toward their targets at more than 500 miles per hour. Each plane was
loaded with nuclear weapons hundreds of times more powerful than the
ones that had obliterated Hiroshima and Nagasaki.
The Soviets went nuts but following Nixon’s orders Kissinger told the Soviet ambassador that the President was out of control.
Apparently neither Nixon or Kissinger had absorbed another Schelling insight – if you want to credibly pretend you are out of control then you have to push things so far that sometimes you will be out of control. The number of ways such a plan could have resulted in a nuclear war is truly frightening. After all, Nixon was gambling millions of lives on the Soviets being the rational players in this game.
Next time you are told how a madman threatens the world remember the greatest threats have come from our own mad men.
Many people embarrass themselves over Fidel Castro
Here is one menagerie, with Brad DeLong parrying ably. A simple checklist would start with the question of whether an apologist has visited both the Dominican Republic and Cuba. And a non-communist Cuba could have done much better than the DR. It is a fascinating place for visitors, but right now the quality of life in Cuba isn’t close to that of the DR or for that matter Honduras, the second-biggest Latino mess in the hemisphere. While we’re at it, let’s not forget northern Mexico or even central Mexico. It’s time to stop apologizing for communist dictatorships; are you really so taken with the idea of confiscating property as to overlook decades of tyranny, impoverishment, and human misery? Yes I am familiar with the UN social indicators; I say you need to visit each of these countries, preferably speaking Spanish, and then report back to me.
Why no Industrial Revolution in China?
John Darwin gives it a shot:
The best answer we have is that it [Kiangnan and China] could not surmount the classic constraints of pre-industrial growth. By the late eighteenth century it faced steeply rising costs for food, fuel and raw materials. Increasing population and expanding output competed for the produce of a more or less fixed land area. The demand for food throttled the increase in raw cotton production. Raw cotton prices probably doubled in the Yangtze delta between 1750 and 1800. The demand for fuel (in the form of wood) brought deforestation and a degraded environment. The escape route from this trap existed in theory. Kiangman should have drawn its supplies from further away. It should have cut the costs of production by mechanization, enlarging its market and thus its source of supply. It should have turned to coal to meet the need for fuel. In practice there was little chance for change along such lines. It faced competition from many inland centres where food and raw materials were cheaper, and which could also exploit China’s well-developed system of waterway transport. The very perfection of China’s commercial economy allowed new producers to enter the market with comparative ease at the same technological level. Under these conditions, mechanization — even if technologically practical — might have been stymied at birth. And, though China had coal, it was far from Kiangnan and could not be transported there cheaply. Thus, for China as a whole, both the incentive and the means to take the industrial "high road" were meagre or absent.
In other words, who really knows? The excerpt is from Darwin’s new book After Tamerlane: The Global History of Empire Since 1405, which should be read by anyone…who…reads books with titles like that. It is most interesting on the Indian and Arabic collapse of the 18th century and on fitting the Russian conquest of Central Asia into the more general history of European imperialism. I didn’t find any revelations in the book, but it was consistently interesting and readable throughout.
Animal Spirits
Keynes kept two sex diaries. The first documents people…
The other sex diary is more puzzling and, in a way, more informative. An economist to the core, Keynes organized the second sex diary also year-by-year, but this time in quarterly increments.
Unfortunately for us, however, this second sex diary is in code. And as far as I know, no one yet has been prurient enough to crack it.
Here’s what Keynes’ tabulation looks like. For every quarter-year from 1906 to 1915, he tallies up his sexual activities and totals them under three categories: C, A, and W.
…according to Keynes’ tabulation, what he did most frequently and consistently was C. It happened seventeen times from May to August of 1908, twenty-eight times (!) from August to November that year, twenty times from February to May of 1909, and so on. That’s a lot of C. The high numbers for C loosely (but not consistently) correlate to university holidays, the break at Easter and the longer summer holiday, when Keynes would have had more leisure to pursue and enjoy his bouts of C.
More here. I debated whether to close comments on this post but I trust Marginal Revolution readers to keep to their high standards.
Hat tip to Kottke.org.
Is 2008 like 1971?
This is funny, via Ezra Klein (who is also funny), but of course it misses the point. One big difference is that we use energy much more efficiently than we used to. Expensive oil needn’t crush us. The second big difference is that the Federal Reserve is far more competent today than in the 1970s. That is true even if you are not a Ben Bernanke fan. The third big difference is that a negative shock or financial collapse from China could crush us today, but not in 1971. Whoops, forget that third difference.
My email to Don Boudreaux and David Henderson
Take 1900 to 2008, minus the few years of deflation near the Great Depression [and a few others] and of course wartime is odd so cut that out too.
Any single year there has been inflation, from one year to the next.
From 1900 to 2008 there has been radical *deflation*, for instance in the Sears catalog. You’d rather spend 10K in the modern catalog than in the old catalog.
If you are spending a million dollars (in either 1900 or 2008), there is very radical deflation. If you are spending $5, you might prefer the Sears catalog of 1900, at least get a few good white shirts.
I don’t think it all quite adds up.
Polynesian chickens in Chile
…radiocarbon dating and DNA analysis of a chicken bone excavated from a site in Chile suggest Polynesians in oceangoing canoes brought chickens to the west coast of South America well before Europe’s "Age of Discovery."
The full story is here, via Jason Kottke. And I still think those Olmec heads are portraits of Africans…
The tastiest sentence I read today
The trigger for the large, calorie-hungry brains of ours is cooking,
argues Richard W. Wrangham, the Ruth B. Moore Professor of Biological
Anthropology at Harvard University’s Peabody Museum of Archaeology and
Ethnology.
Here is another bit:
…it turns out that there are no records of people having a large amount of their food come from raw food.
Here is much more, interesting throughout. Thanks to Yan Li for the pointer.