Category Archives: books and book reviews

What I’m Reading

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1. Philosopher John R. Searle’s The Making of the Social World, published in 2010. One excerpt:

How do governments, so to speak, get away with it? That is, how does the government manage to be accepted as a system of status functions superior to other status functions?. . .governmental power is a system of status functions and thus rests on collective recognition or acceptance, but the collective recognition or acceptance, though typically not itself based on violence, can continue to function only if there is a permanent threat of violence

…All political power is a matter of status functions, and for that reason all political power is deontic power.

For some reason, my brain keeps wanting to read “deontic” as “demonic.”

Anyway, I think of a status function as a social convention that assigns people or objects certain properties. I think of a deontic power as a right or obligation.

So, imagine a busy intersection. We could put up a traffic light and by general consent give it a status function to regulate traffic flow. Or we could let an individual direct traffic. For the status function to work, we need to be willing to follow the social convention of obeying the signals, either from the stoplight or from the individual.

Next, suppose that we recognize that the individual wears a uniform and a badge, and we recognize that the individual is permitted to impose fines on people who do not obey. These are stronger deontic powers, and they will deter drivers from trying to cheat the system. We can think of that move as a metaphor for government by consent (although the consent may not be explicit or universal).

As of this writing, I have yet to finish the book. By the time this post goes up, I may have finished a first read, but the book will require some re-reading. It seems to me that Searle is likely to turn out to be on my side of a disagreement with Michael Huemer.

2. Ryan Avent’s new book (not yet out) The Wealth of Humans. I attended a discussion of the book the other night. As the conversation jumped around, I found myself frequently thinking, “Show me the model.” That is out of character for me, because I have spent a lot of the last few years criticizing economists’ use of formal models. But as people tried to speculate about capital accumulation, wealth distribution, and productivity differentials, I found that I could not follow what was being said. I needed to think in terms of supply and demand curves crossing, income adding up to output, and output equal to labor input times output-per-worker. It was hard to get that in a purely verbal discussion, particularly when people were speaking extemporaneously.

An Abundance of Workers?

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I received an advance electronic copy of Ryan Avent’s forthcoming The Wealth of Humans. I have not read very far, but he seems to say that a major social problem these days is an over-abundance of workers. However, consider this WSJ blog post.

traits that are hard to define, but ever-present among good employees: professionalism, determination and adaptability and the ability to communicate, work together and take criticism. Or even just show up on time and follow a dress code.

The claim as that these soft skills are in short supply.

I am going to be old-school and say that whenever you see a “shortage” or an “over-abundance” you should ask what is wrong with the price mechanism. If you are having trouble finding workers with the traits that you want, then you are not paying enough for those traits.

Back to Avent. If there appears to be an over-abundance of workers, then what is going wrong? Maybe those individuals have, in Tyler Cowen’s evocative phrase, Zero Marginal Product. Also, it could be that the required marginal product is high because of minimum wages and labor market regulation. Or it could be that labor supply is reduced because of government programs that subsidize non-work and tax work.

Avent wants to assign a large causal role to capital equipment, especially smarter capital equipment. I think that is only one of the four forces, the others being: a shift toward the New Commanding Heights (education and health care) where soft skills matter more; factor-price equalization, meaning that foreign workers now compete more with domestic workers; and assortive mating, which breeds greater inequality.

When journalists and academics warn of a future with a job shortage, the cynic in me is inclined to say, “You mean a shortage of jobs that journalists and academics think of as appropriate for themselves.” Keep in mind that many colleges attempt to indoctrinate students that business is unfulfilling and profit is evil. But profit-seeking businesses are motivated to find uses for otherwise-idle productive resources. The fate of the next generation of Ryan Avents is not to be unemployable. Rather, some of them may end up in business jobs that journalists and academics might have trouble picturing themselves doing.

Economies are Embedded in Cultures

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Peter Richerson, et al, write,

Economic competition is an important and typically peaceful form of CGS.

CGS is “cultural group selection.” Pointer from Joseph Henrich in comments on a Tyler Cowen post.

In my view, cultural group selection fits well with Austrian economics but poorly with Chicago economics. Hayek and others pay attention to cultural norms, while Chicago economics is more purely individualistic. See Erwin Dekker’s book.

For example, if you take the Chicago view that focuses on atomistic optimization by individuals, then racial discrimination seems to be unlikely in a market economy. Someone who is willing to hire blacks seems likely to out-compete someone who only hires whites.

However, suppose that you have a group norm in which refusing to hire blacks is considered cooperation and hiring blacks is considered defection. Also, suppose that groups that are more effective at rewarding cooperators and punishing defectors tend to be more successful. In that case, racial discrimination could persist because of cultural group selection.

The theory of cultural group selection can create discomfort if you like to believe that social outcomes are purely deterministic. Instead, with group selection a wider range of outcomes becomes possible, with the potential for norms and practices to survive that seem arbitrary or even counter-productive. While one might object that this makes the theory messy, I think it is realistic.

I believe that one of the important limitations of what in Specialization and Trade I disparage as MIT economics is that it ignores cultural context. Instead, I believe that the fact that economies are embedded in cultures is very important.

Reviewing a Cold-War Era Book

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I review The Quest for Community, by Robert Nisbet.

Nisbet warned that weakening of ties of work, family, and religion would give people a sense that they have lost control of their destinies, producing this sort of alienation. It seems to me that the support in this year’s Presidential primaries for the socialist politics of Bernie Sanders and the caudillo politics of Donald Trump, which shocked many observers, would not have surprised Nisbet. Nor would the recent work of Robert Putnam or Charles Murray on cultural decay.

Modernity is a Package

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I have just started reading Leviathan 2.0, by Charles S. Maier. I could not find a Kindle edition when I was ordering the book. Here is a quote from p.5-6:

The winners were the well-organized representatives of Europeans and their American or African or Asian descendants organized into the most efficient engine of expansion and governance that the world had seen for centuries: the modern nation-state. This was a large-scale unit organized to permeate and master territory, to pursue sedentary agriculture and industrial technology, possessing complex legal systems that allowed the preservation and transmission of family and individual property, the salaried employment of large-scale private and public workforces, the rapid communication of commercial and policy decisions by electrical telegraph, the ministerial archives and records that ensured institutional memory, and ideologies of rivalry and group purpose that generated intense loyalties.

Reading this passage, I came up with a catch-phrase “Modernity is a package.” Libertarians see the evils of the state–wars, inefficient and harmful policies, rent-seeking–and they imagine a utopia with a minimal state or no state at all. Progressives see the evils of capitalism, and they imagine a utopia with minimal or no use of markets.

But both capitalism and the state are deeply embedded in modernity. To eliminate either is to pull the rug out from under the system that supports prosperity an innovation.

To take a less politically fraught example, consider urbanization. We know that in small villages people feel a stronger sense of community. They know one another’s names. When they meet on the street, they take time to have a conversation, whereas in a large city people hurriedly rush past one another–friends might say “Oh, hi! We should have lunch, strangers might mutter “good morning.” People look out for one another.

And yet, the overwhelming majority of people who migrate from one to the other move from small villages to large cities, not the other way around. The city offers better employment opportunities, more variety of consumption options, and more overall effervescence.

The city represents the package of modernity, both good and bad. You cannot enjoy both the pre-modern charm of the small village and the modern wonders of the city in the same place.

A Sentence about Tetlock’s Famous Study

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Jason Collins writes,

However – and this point is one you rarely hear in commentary about the book – the experts outperform unsophisticated forecasters (a role filled by Berkeley undergrads), whose performance is truly woeful.

Read the entire book review.

Herbert Stein wrote a memoir in which he summarized what he had learned is that economists do not know very much, but non-economists know even less.

The challenge is to get people to admit what they do not know. A non-economist who is quite ignorant is only dangerous if he or she tries to engineer the economy. Most economists, believing that they can engineer the economy, are dangerous.

What I’m Reading

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A review copy of Erwin Dekker’s The Viennese Students of Civilization. He places Mises and Hayek in the intellectual circles of Vienna between the two world wars, as they watch a once-great civilization collapse. Capitalism and democracy simply could not take root in that part of Europe. I will have more to say about the book once I have finished.

Meanwhile, support for capitalism and democracy among young people in the U.S. is not exactly robust. Timothy Taylor reports,

In both the US and in Europe, young adults have become less likely to say that it is “essential” to live in a democracy.

It is, as Winston Churchill said, the second worst form of government.

Gary Johnson and a Liberal Tension

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He said,

But if we allow for discrimination — if we pass a law that allows for discrimination on the basis of religion — literally, we’re gonna open up a can of worms when it come stop discrimination of all forms, starting with Muslims … who knows. You’re narrowly looking at a situation where if you broaden that, I just tell you — on the basis of religious freedom, being able to discriminate — something that is currently not allowed — discrimination will exist in places we never dreamed of.

If I understand him correctly, he would be ok with prosecuting a wedding cake-baker who refused to bake a cake for a gay wedding.

I am reminded of Jacob Levy’s thesis that rationalism and pluralism are in tension with one another. A pluralist would say that the cake-baker has a right to discriminate. The rationalist would say otherwise. For more on Levy’s thesis, see this discussion forum, listen to this podcast, or read his (very expensive) book.

I am currently reading Robert Nisbet’s The Quest for Community (for an obvious reason). Nisbet saw individualism and statism as going together, part of the process of “liberating” people from the oppression of traditional communal institutions. What Levy calls rationalist liberalism is consistent with that. Nisbet did not view this “liberation” as such a wonderful thing.

Rights and Consequences

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I read the latest (final? I hope not, because I have some critical comments) draft of Tyler Cowen’s Stubborn Attachments, which he describes as follows:

I outline a true and objectively valid case for a free and prosperous society, and consider the importance of economic growth for political philosophy, how and why the political spectrum should be reconfigured, how we should think about existential risk, what is right and wrong in Parfit and Nozick and Singer and effective altruism, how to get around the Arrow Impossibility Theorem, to what extent individual rights can be absolute, how much to discount the future, when redistribution is justified, whether we must be agnostic about the distant future, and most of all why we need to “think big.”

One of the issues that Tyler raises that I think ought to be resolved somewhat differently is that of the role of rights in consequentialism. In a sense, basic rights, like property rights, dangle awkwardly in a consequentialist philosophy. If I can create more happiness by giving your corn to someone else, why should you have the right to keep it?

I am inclined to give a Hayekian account of why you should have the right to choose whether to eat, plant, trade, or donate your corn. That is, you are likely to know the best of use of your corn, including the best moral use of it, thanks to your local knowledge. Thus, the consequences are likely to best if you make the decision rather than I make the decision.

In fact, in cases where we think that you are not competent to make the decision (a child, or someone with severe mental deficiencies), we do not treat property rights as absolute. Thus, our intuition about rights is tied up with the issue of how much we respect the person’s local knowledge.

One view of moral philosophy is that our intuitions are basically right, and it is the philosopher’s job to come up with a system of thought that accounts for and perhaps codifies our intuitions. While I would not go to this extreme, it is always something to consider in moral philosophy.

On the other hand, if you told me that economists’ intuitions about what constitute high-quality research are basically right, and the job of economic epistemology is to come up with a system of thought that accounts for and perhaps codifies our intuitions, I would be inclined to object. But perhaps I am willing to say that it something to consider in economic epistemology.

Does War Improve Cooperation?

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I review Peter Turchin’s book from 2005. My final paragraph:

For libertarians, these are crucial questions. In order for markets to function well, they must be embedded in cultures that promote pro-social behavior and are conducive to trust. If the absence of external conflict weakens the bonds that prevent internal conflict, then the libertarian goal of peaceful cooperation in all domains will prove elusive.

Coincidentally, the Journal of Economic Perspectives that just came out has an article on this topic by Michal Bauer, Christopher Blattman, Julie Chytilová, Joseph Henrich, Edward Miguel, and Tamar Mitts. They conclude,

Most of the papers in this emerging literature agree on one central matter: that the data strongly reject the common view that communities and people exposed to war violence will inevitably be deprived of social capital, collective action, and trust. Across the 16 studies from economics, anthropology, political science, and psychology, the average effect on a summary index of cooperation is positive and statistically significant, if moderate in magnitude.