Category Archives: books and book reviews

Meet the Totalitarians

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Jonathan Haidt writes,

Like most of the questions, it was backed up by a sea of finger snaps — the sort you can hear in the infamous Yale video, where a student screams at Prof. Christakis to “be quiet” and tells him that he is “disgusting.” I had never heard the snapping before. When it happens in a large auditorium it is disconcerting. It makes you feel that you are facing an angry and unified mob — a feeling I have never had in 25 years of teaching and public speaking.

You will find me posting quite a bit on Roger Scruton’s recent book, Fools, Frauds, and Firebrands, which is mostly about left-wing European philosophers. I am inclined to dismiss the significance of these characters. However, their totalitarian impulses are frightening, and the way that they have permeated part of the academic culture is depressing.

Douglass North vs. Anarcho-capitalism

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In Institutions, Institutional Change, and Economic Performance, he wrote (p. 58),

players may devise an institutional framework to improve measurement and enforcement and therefore make possible exchange, but the resultant transaction costs raise the costs of exchange. . .The more resources that must be devoted to transacting to assure cooperative outcomes, the more diluted are the gains from trade. . .The more complex the exchange in time and space, the more complex and costly are the institutions necessary to realize cooperative outcomes. Quite complex exchange can be realized by creating third-party enforcement via voluntary institutions. . .ultimately, however, viable impersonal exchange that would realize the gains from trade inherent in the technologies of modern independent economies requires institutions that can enforce agreements by the threat of coercion. The transaction costs of a purely voluntary system of third-party enforcement in such an environment would be prohibitive. . .there are immense scale economies in policing and enforcing agreements by a polity that acts as a third party and uses coercion to enforce agreements. But. . .If we cannot do without the state, we cannot do with it either. How does one get the state to behave like an impartial third party?

Think of two ways to organize a pee-wee baseball league, with players aged 8 to 10. The anarcho-capitalist approach would be to have the players on the teams meet before each game and agree on rules and enforcement mechanisms. The state-based approach would be to have a league commissioner articulate the rules and arrange for their enforcement. If you’ve ever observed 8- to 10-year-olds involved in a discussion over rules, you know that the an-cap league would never play any baseball. The negotiations would occupy all of the time scheduled for the games. What North is saying is that the equivalent would happen to an an-cap economy–it would be buried in the transaction costs involved in trying to enable the sort of market exchanges that we take for granted.

As you know, I am re-reading North because of the overlaps between his work and that of Peter Turchin and other theorists of cultural evolution. I have suggested that North in 1980 anticipated their major insights. The quotation above is from 1990. By that time, some of the seminal papers in cultural evolution had appeared, and North cites them. But no one in the field cites North. If his work were more widely known, I believe that: (a) North would be considered a founder, perhaps even the founder, of the study of cultural evolution; and (b) scholars of cultural evolution would still be mining North’s books for insights.

Virginia Postrel on Martin Gurri

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She writes,

As information becomes abundant, he writes, “the regime accumulates pain points.” By this he means that problems like police brutality, economic mismanagement, foreign policy failures and botched responses to disasters “can no longer be concealed or explained away.” Instead, “they are seized on by the newly empowered public, and placed front and center in open discussions. In essence, government failure now sets the agenda.”

She says that Gurri’s thinking is that notwithstanding their greater awareness of failure, people are expecting more from government and other organizations.

In my mind, I keep going back and forth between seeing our political sectarianism as unprecedented on the one hand and seeing it as a replay of 1968 on the other. In the 1968 election, the public, preferring a representative of the existing order against the forces of rebellion, ultimately turned to a familiar face, even though he was widely disliked and viewed as unscrupulous. Thus, although right now I do not know a single person who is positively disposed toward Hillary Clinton (and almost all of my friends are Democrats!), it is conceivable that she will win a landslide.

Read Postrel’s whole essay. I will put Gurri’s book on my list of items to read. And is Martin any relation to Adam?

Inequality and Team Performance

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An alert commenter points to a more recent study of baseball team performance.

Having a larger Gini coefficient (as you’d see in a stars-and-scrubs roster) is ever so slightly associated with better outcomes over the rest of the season. However, the effect wasn’t large enough to be statistically significant, so this analysis says a team should probably just be indifferent about which approach it uses to build a roster.

I believe that the study that Turchin cited looked at inequality in terms of salary, whereas this study appears to look at inequality in terms of players’ contributions to wins. In any case, this study finds the opposite result, although it is not statistically significant.

Even the original study cited by Turchin does not quite say what he claims it says. The abstract reads,

in the latter part of the 1990s and continuing into the 21st century, the greater the team payroll and the more equally this payroll is distributed among team members, the better the on-field performance of the team.

I interpret this as saying that teams with higher total salaries for players were winning more. Given an aggregate salary level, it was better to have it more evenly distributed among team members. But that might indicate that, other things equal, it was better to have a balanced roster than a stars-and-scrubs roster.

Turchin uses this one study, which he interprets as showing that unequal salaries per se cause poor performance, to argue that inequality will lead to social collapse. Seems like quite a stretch.

Re-Reading Douglass North

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When I read Peter Turchin’s Ultrasociety, I thought that it covered some of the same ground and had some similar ideas as Douglass North’s Structure and Change in Economic History, which appeared in 1981. In fact, it is hard to find anything in Turchin’s book that supercedes North, notwithstanding 35 more years of anthropological research and the new discipline of cultural evolution. It seems that North’s intuition was pretty sound.
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Peter Turchin on Cultural Evolution

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The new book is called Ultrasociety. It has many interesting ideas. However, some of them I find quite unpersuasive.

One of his core ideas is that because groups need to cooperate, competition within groups is harmful. Meanwhile competition among groups is helpful, because it promotes cultural adaptation. So if players on a basketball team or soccer team are competing with one another, the team will do poorly because they are not cooperative. But competition between teams will lead to improvement, as good ideas from one team get copied by another.

Turchin equates inequality within a team to competition within a team. He claims that this has empirical support, in that teams with less unequal salaries tend to win more games. This makes me think of Lebron James getting paid a lot more than a teammate who spends most of the game on the bench. If you really believe Turchin’s analysis, the team would cooperate better and win more games if it did not have Lebron. I call baloney sandwich.

Outside of sports, I am not sure that the terms “group,” “cooperation,” and “competition” can be defined clearly enough. Is a professor of ecology at the University of Connecticut a member of the “UCon group,” cooperating with other members of that group while competing against the “Harvard group?” Or is he a member of the “ecology group,” cooperating with other ecologists while competing against the “economist group” or the “sociologist group?” To me, neither description seems appropriate.

Turchin is quite contemptuous of the “Rank and Yank” personnel policies practiced by Enron, in which employees were ranked and those who did not make the grade are let go. But what is academic tenure other than a “Rank and Yank” system? The top law firms and management consulting firms also tend to operate on a “Rank and Yank” basis. Wouldn’t Turchin’s framework predict the collapse of these institutions?

If and when I review the book, I will have to remark on the irony that it is filled with mood affiliation for progressive attitudes and yet he keeps stumbling on ideas that are part of bedrock conservatism. These include the importance of culture, the fragility of civilized society, the benefits of traditional marriage, and the value of keeping nations culturally homogenous.

Ricardo Hausmann on the Causes of Poverty and Inequality

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He writes,

The poor people are not being exploited. They’re being excluded from the higher productivity activities. It’s not that the capitalists are taking a very large share of what they produce. It’s just that they produce very little in the first place.

Emphasis in the original. What does he mean by “excluded from”?

if somebody is expected to be poor, you don’t want to open a bank account for him because the fixed cost of opening a bank account is not going to be recouped through the little money or the few transactions that a poor person is going to make. So banks decide not to include the poor. The same thing happens with other services: if you are going to consume very few kilowatts or kilobytes, it doesn’t pay to connect you and if your expected wage is low relative to a bus ride, it does not pay to commute to work. As a consequence, this generates a trap in which you don’t connect people because they’re poor and because they’re not connected, they’re unproductive and hence poor.

He concludes:

policies can be very important in determining the universality of access to some inputs. I think it’s very important to have a serious discussion of what are these inputs that need to be accessed universally and what is a reasonable strategy to get there.

There are important ideas here. My thoughts.

1. As a metaphor for these ideas, think of people as either living on the grid (where they can be highly productive) or off the grid (where they live in poverty).

2. The tangible components of the grid grid include water and sewage facilities, electricity, communication and transportation infrastructure, and schools.

3. The less tangible components of the grid include property rights, reliable low-cost financial intermediation, a well-functioning legal system, cultural norms that support economic activity, and what Garett Jones calls the Hive Mind (high average intelligence).

4. Both in theory and in practice, the grid requires a stable, well-functioning government. Sorry, anarcho-capitalists.

5. Nonetheless, the grid is very much an emergent phenomenon. You cannot create the grid from scratch. Sorry, seasteaders and charter-city enthusiasts. Sorry, Ricardo Hausmann?

The Grumpy Case for Conservatism

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John Cochrane said,

Our society codes its experience into its institutions; in a grand edifice we call limited government and rule of law.

His theme is that there is more knowledge embedded in institutions than in individual technocrats. Remember to take note of Joseph Henrich’s anthropological support for that in The Secret of our Success, one of my five favorite books of the year.

The entire talk is moving and masterful, but if there is one sentence with which I would argue it is the first one in the quote below.

People who distrust the government are less likely to vote for the next big personality promising big new programs. Instead, they might be more attracted to candidates who promise restraint and rule of law; to administer competently and to repair broken institutions.

I think that as distrust in government rises, you get more demagoguery, not less.

Thoughts on War

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Not my area of expertise, of course. But Neerav Kingsland, also not an expert, wrote this post on the Ian Morris book, which I have not read, and he wondered if I had thoughts. First, some excerpts from Neerav’s post:

Morris’ thesis is this:

1. Government is the primary source of the reduction of violence in societies.
2. Wars caused societies to merge, thereby increasing the scope, scale, and efficacy of government.
3. It would have been great if societies had figured out a way to merge without war, but this, unfortunately, has rarely happened.
4. So, like it or not, war has been the driver of government innovation.
5. Therefore, wars have been the primary cause of our long-term decline of violence.

…Generally, massive war breaks out when a superpower declines.

My thoughts:

1. If you’re a libertarian having a hard time getting your mind around this, think of war as a way of achieving open borders. That is, before they fight, country X and country Y have borders. After they fight, the winner takes over all the territory, and the borders no longer matter.

2. If you are a Hobbesian, then you believe that only a strong government can produce peace. You might regard the U.S. Navy as the force that made the last 70 years of globalization possible.

3. In the wake of the attacks in Paris and San Bernadino, you would think that Congress should declare war on somebody.

Instead, we have this vague “authorization to use military force.” The most charitable reading I can give of that is that it allows the President maximum flexibility to wage war in a very ambiguous setting, in which enemies do not wear uniforms and they are embedded with civilians. But I personally do not like this approach. Here are two alternatives that I think are better, although it should be clear on reflection that there are major problems with every possible approach.

a) Get rid of the authorization to use military force and legislate a strict non-interventionist policy. I think that has at least two things going for it. First, it is a clear, unambiguous policy. Second, it does not run all of the risks of flawed execution and unintended consequences that flow from interventions. However, it does mean that whatever advantage there is/was from having the U.S. as hegemonic power gets tossed away. For example, we might go through a period of de-globalization, as various conflicts spin out of control.

b) Get rid of the generic authorization to use military force and instead declare war on the Islamic State. One advantage of this is that it designates a specific enemy and implies a finite objective. We would stop sending drones all over the map and instead focus on taking over the territory that now belongs to barbarians. The disadvantages are that this increases casualties in the short run and it probably means that we would have to undertake a long-term military occupation, which has many pitfalls. It exerts no leverage against Syrian President Assad (it probably helps him). It ignores any barbarism that originates elsewhere.

A Commenter Reviews The Midas Paradox

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It’s ‘Handle’:

Any proposed answer to the question of “What really caused the Great Depression” is inevitably pregnant with policy implications, and so is unavoidably incredibly politically charged. That’s one of the reasons so many top economists are so keen on studying it. Big names like Keynes, Hayek, Friedman, and Bernanke, just to name a few.

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