Transportation, Divergence, and the Industrial Revolution

Tuesday, October 21st, 2014

Nick Szabo explores transportation, divergence, and the Industrial Revolution:

After about 1000 AD northwestern Europe started a gradual switch from using oxen to using horses for farm traction and transportation.  This trend culminated in an eighteenth-century explosion in roads carrying horse-drawn carriages and wagons, as well as in canals, and works greatly extending the navigability of rivers, both carrying horse-drawn barges. This reflected a great rise in the use of cultivated fodder, a hallmark of the novel agricultural system that was evolving in northwestern Europe from the start of the second millennium: stationary pastoralism.  During the same period, and especially in the seventeenth through nineteenth centuries, most of civilized East Asia, and in particular Chinese civilization along its coast, navigable rivers, and canals, faced increasing Malthusian pressures and evolved in the opposite direction: from oxen towards far more costly and limited human porters. Through the early middle ages China had been far ahead, in terms of division of labor and technology, of the roving bandits of northern Europe, but after the latter region’s transition to stationary pastoralism that gap closed and Europe surged ahead, a growth divergence that culminated in the industrial revolution.  In the eighteenth century Europe, and thus in the early industrial revolution, muscle power was the engine of land transportation, and hay was its gasoline.

Metcalfe’s Law states that a value of a network is proportional to the square of the number of its nodes.  In an area where good soils, mines, and forests are randomly distributed, the number of nodes valuable to an industrial economy is proportional to the area encompassed.  The number of such nodes that can be economically accessed is an inverse square of the cost per mile of transportation.  Combine this  with Metcalfe’s Law and we reach a dramatic but solid mathematical conclusion: the potential value of a land transportation network is the inverse fourth power of the cost of that transportation. A reduction in transportation costs in a trade network by a factor of two increases the potential value of that network by a factor of sixteen. While a power of exactly 4.0 will usually be too high, due to redundancies, this does show how the cost of transportation can have a radical nonlinear impact on the value of the trade networks it enables.  This formalizes Adam Smith’s observations: the division of labor (and thus value of an economy) increases with the extent of the market, and the extent of the market is heavily influenced by transportation costs (as he extensively discussed in his Wealth of Nations).

How to see into the future

Saturday, October 18th, 2014

So, what is the secret of looking into the future?

Initial results from the Good Judgment Project suggest the following approaches. First, some basic training in probabilistic reasoning helps to produce better forecasts. Second, teams of good forecasters produce better results than good forecasters working alone. Third, actively open-minded people prosper as forecasters.

But the Good Judgment Project also hints at why so many experts are such terrible forecasters. It’s not so much that they lack training, teamwork and open-mindedness — although some of these qualities are in shorter supply than others. It’s that most forecasters aren’t actually seriously and single-mindedly trying to see into the future. If they were, they’d keep score and try to improve their predictions based on past errors. They don’t.

This is because our predictions are about the future only in the most superficial way. They are really advertisements, conversation pieces, declarations of tribal loyalty — or, as with Irving Fisher, statements of profound conviction about the logical structure of the world.

Some participants in the Good Judgment Project were given advice, a few pages in total, which was summarised with the acronym CHAMP:

  • Comparisons are important: use relevant comparisons as a starting point;
  • Historical trends can help: look at history unless you have a strong reason to expect change;
  • Average opinions: experts disagree, so find out what they think and pick a midpoint;
  • Mathematical models: when model-based predictions are available, you should take them into account;
  • Predictable biases exist and can be allowed for. Don’t let your hopes influence your forecasts, for example; don’t stubbornly cling to old forecasts in the face of news.

Why is Football More Popular than Ever?

Thursday, October 16th, 2014

Why is football more popular than ever?

In practice getting people to watch spot advertising means programming that has to be watched live and in practice that in turn means sports. Thus it is entirely predictable that advertisers will pay a premium for sports. It is also predictable that the cable industry will pay a premium for sports because must-watch ephemera is a good insurance policy against cord-cutting. Moreover, as a straight-forward Ricardian rent type issue, we would predict that this increased demand would accrue to the owners of factor inputs: athletes, team owners, and (in the short-run) the owners of cable channels with contracts to carry sports content. Indeed this has basically all happened.

Here’s something else that is entirely predictable from these premises: we should have declining viewership for sports. If you’re the marginal viewer who ex ante finds sports and scripted equally compelling, it seems like as sports get more expensive and you keep having to watch ads, whereas scripted gets dirt cheap, ad-free, and generally more convenient, the marginal viewer would give up sports, watch last season’s episodes of Breaking Bad on Netflix, be blissfully unaware of major advertising campaigns, and pocket the $50 difference between a basic cable package and a $10 Netflix subscription.

The weird thing is that this latter prediction didn’t happen. During exactly the same period over which sports got more expensive in absolute terms and there was declining direct cost and hassle for close substitutes, viewership for sports increased. From 2003 to 2013, sports viewership was up 27%. Or rather, baseball isn’t doing so great and basketball is holding its own, but holy moly, people love football. If you look at both the top events and top series on tv, it’s basically football, football, some other crap, and more football. I just can’t understand how when one thing gets more expensive and something else that’s similar gets a lot cheaper and lower hassle, that you see people flocking to the thing that is absolutely more hassle and relatively more money.

Empire of the Summer Moon

Thursday, October 16th, 2014

Scott Alexander reviews Empire of the Summer Moon, about the Comanche Indians:

When Mexico took over from Spain and tried to colonize Texas, the Comanches beat them so soundly that they decided to get some “help” by inviting Anglo-Americans to come in and colonize, leading to the Texas revolt, the Mexican War, and so on. Through the first thirty years or so of American Texas, American control only extended through the eastern half of the state, with the western half being totally Comanche and almost totally unexplored. The border was so feared that places like Fort Worth, Texas were originally a line of actual forts intended to protect the Texans from Comanche raids.

These raids were probably the most disturbing part of the book. On the one hand, okay, the white people were trying to steal the Comanches’ land and they had every right to be angry. On the other hand, the way the Comanches expressed that anger was to occasionally ride in, find a white village or farm or homestead, surround it, and then spend hours or days torturing everyone they found there in the most horrific possible ways before killing the men and enslaving the women and children. Sometimes people were scalped alive. The women would usually be gang-raped dozens of times, and then enslaved, carried off to Comanche territory, and gang-raped some more. Children were forced to watch as their parents were raped and tortured and killed, or vice versa.

Their favorite pastime was to find a remote farm somewhere, ride in dressed in full war gear, communicate some version of “Oh, hi, I know what this looks like but actually we’re just stopping by, mind giving us a bite to eat?”, enjoying a lavish feast put on by extremely nervous settlers, and then saying “Very good, in exchange for this feast we give you a five minute head start”, then giving them five minutes to run away before riding them down and torture-killing the entire family in the manner described earlier.

On the other hand, the Comanches fit the classic pattern of hunter-gatherer civilizations of simultaneously being really mean to people outside the tribe while showing deep and heartfelt kindness to everyone within. We know this because sometimes if there were very young children, and the Comanches were feeling a bit low on headcount, they would capture the children and adopt them as full Comanches (after torture-killing the parents, of course) and some of these children would later grow up to write English-language books about their experience. But this practice definitely led to some awkward situations, and the book centers around one of them: the last great chief of the Comanches, Quanah, was half-white, the son of a Comanche chief and a Texan woman who had been captured when she was nine years old.

So there was a bit of traffic back and forth between America and Comancheria in the 19th century. White people being captured and raised by Comanches. The captives being recaptured years later and taken back into normal white society. Indians being defeated and settled on reservations and taught to adopt white lifestyles. And throughout the book’s description of these events, there was one constant:

All of the white people who joined Indian tribes loved it and refused to go back to white civilization. All the Indians who joined white civilization hated it and did everything they could to go back to their previous tribal lives.

There was much to like about tribal life. The men had no jobs except to occasionally hunt some buffalo and if they felt courageous to go to war. The women did have jobs like cooking and preparing buffalo, but they still seemed to be getting off easy compared to the white pioneer women or, for that matter, women today. The whole culture was nomadic, basically riding horses wherever they wanted through the vast open plains without any property or buildings or walls. And everyone was amazingly good at what they did; the Comanche men were probably the best archers and horsemen in the history of history, and even women and children had wilderness survival and tracking skills that put even the best white frontiersmen to shame. It sounds like a life of leisure, strong traditions, excellence, and enjoyment of nature, and it doesn’t surprise me that people liked it better than the awful white frontier life of backbreaking farming and endless religious sermons.

Alexis de Tocqueville on the Dark Sides of Democracy

Tuesday, October 14th, 2014

Alexis de Tocqueville saw five potentially dark sides of democracy:

One: Democracy breeds materialism

In the society that de Tocqueville knew from childhood, making money did not seem to be at the forefront of most people’s minds. The poor (who were the overwhelming majority) had almost no chance of acquiring wealth. So while they cared about having enough to eat, money as such was not part of how they thought about themselves or their ambitions: there was simply no chance. On the other hand, the tiny upper stratum of landed aristocrats did not need to make money – and regarded it as shameful to work for money at all, or to be involved in trade or commerce. As a result, for very different reasons, money was not the way to judge a life.

However, the Americans de Tocqueville met all readily believed that through hard work, it was possible to make a fortune and that to do so was wholly admirable and right. There was hence no suspicion whatever of the rich, a certain moral judgement against the poor, and an immense respect for the capacity to make money. It seemed, quite simply, the only achievement that Americans thought worth respecting. For example, in America, observed de Tocqueville, a book that does not make money – because it does not sell well – cannot be good, because the test of all goodness is money. And anything that makes a profit must be admirable in every way. It was a flattened, unnuanced view that made de Tocqueville see the advantages of the relatively more subtle, multi-polar status systems of Europe, where one might (on a good day) be deemed good, but poor; or rich, but vulgar.

Democracy and Capitalism had created a relatively equitable, but also very flat and oppressive way for humans to judge each other.

Two: Democracy breeds envy and shame

Travelling around the United States, de Tocqueville discerned an unexpected ill corroding the souls of the citizens of the new republic. Americans had much, but this affluence did not stop them from wanting ever more and from suffering whenever they saw someone else with assets they lacked. In a chapter of Democracy in America entitled ‘Why the Americans are Often so Restless in the Midst of Their Prosperity’, he sketched an enduring analysis of the relationship between dissatisfaction and high expectation, between envy and equality:

‘When all the prerogatives of birth and fortune have been abolished, when every profession is open to everyone, an ambitious man may think it is easy to launch himself on a great career and feel that he has been called to no common destiny. But this is a delusion which experience quickly corrects. When inequality is the general rule in society, the greatest inequalities attract no attention. But when everything is more or less level, the slightest variation is noticed… That is the reason for the strange melancholy often haunting inhabitants of democracies in the midst of abundance and of that disgust with life sometimes gripping them even in calm and easy circumstances. In France, we are worried about increasing rate of suicides. In America, suicide is rare, but I am told that madness is commoner than anywhere else’.

Three: The tyranny of the majority

Typically, we think of democracy as being the opposite of tyranny. It should, in a democracy, no longer be possible for a clique to lord it over everyone else by force; leaders have to govern with the consent of the governed. But de Tocqueville noticed that democracy could easily create its own specialised type of tyranny: that of the majority. The majority group could, in principle, be very severe and hostile to minorities. De Tocqueville wasn’t simply thinking of overt political persecution, but of a less dramatic, but still real, kind of tyranny in which simply being ‘in a minority’ as regards prevailing ideologies starts to seem unacceptable, perverse – even a threat.

Democratic culture, he thought, could easily end up demonising any assertion of difference, and especially of cultural superiority or high mindedness, which could be perceived as offensive to the majority – even though such attitudes might be connected with real merit. In a tyranny of the majority, a society grows ill at ease with outstanding merit or ambition of any kind. It has an aggressively levelling instinct; in which it is regarded as a civic virtue to cut down to size anyone who seems to be getting above themselves.

Four: Democracy turns us against authority

De Tocqueville saw democracy as encouraging strong ideas about equality, to an extent that could grow harmful and dispiriting. He saw that democracy encourages ‘in the human heart a depraved taste for equality, which always impels the weak to want to bring the strong down to their level’.

Five: Democracy undermines freedom of mind

Instinctively, you’d suppose that democracy would encourage citizens to have an open mind. Surely democracy encourages debate and allows disagreements to be resolved by voting, rather than by violence? We think of openness of mind as being the result of living in a place where lots of opinions get an airing.

However, de Tocqueville came to the opposite conclusion: that in few places could one find ‘less independence of mind, and true freedom of discussion, than in America’.

Trusting that the system was fair and just, Americans simply gave up their independence of mind, and put their faith in newspapers and so-called ‘common sense’. The scepticism of Europeans towards public opinion had given way to a naive faith in the wisdom of the crowd.

Income Inequality

Tuesday, October 14th, 2014

Income inequality is low in agrarian, pre-industrial societies, because you need income to achieve income inequality:

The idea is, there is an absolute level of subsistence income for the mass of peasants who are creating value in the traditional society. Above that level is the surplus, or the amount of income which can be expropriated by elites; and below that amount… starvation for the producers in the economy.

Thus, in a very poor society whose average income is close to the absolute survival level, the surplus extracted is pretty small and therefore inequality cannot be very high. But as average income rises, there is potentially more to extract. So the interesting question becomes, did pre-industrial societies at different levels of income have different “extraction levels”? Put another way: did peasant incomes also rise when the average income rose or did the increase simply lead to more elite extraction?

Pre-Industrial Inequality

Incomes may have been more equally distributed in China in 1880 than in England in 1688, but that’s only because the average income was quite low in China. But perhaps more importantly, China in 1880 was closer to its maximum potential inequality than England in 1688 was.

(Hat tip to T. Greer.)

Adam Smith’s Surprising Guide to Happiness (But Not Wealth)

Sunday, October 12th, 2014

Russ Roberts discusses his new book, How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness, with Nick Gillespie of Reason:

Peter Thiel Converses with Bill Kristol

Saturday, October 11th, 2014

Bill Kristol has a conversation with Peter Thiel:

Immigrants Retain Their Social Status

Thursday, October 9th, 2014

The evidence shows that immigrant groups tend to retain the social status that they arrive with, Gregory Clark points out:

The same goes with more recent immigrants to the United States. Due to visa restrictions, certain immigrant groups were permitted entry to the United States only if they could prove they had skills that were needed in the U.S. labor market. For example, the Africans, Chinese, Christian Arabs, Filipinos, Indians, Iranians, and Koreans who did gain entry into the United States were from the upper echelons of their home societies. And, in the United States, they enjoy significantly higher than average social status (as measured, again, by the number of doctors per 1,000 members of the group). Groups who, for various reasons, did not face the same restrictions — including the Hmong, Latinos, and Maya — entered the United States with low social status and have struggled to achieve upward mobility since. Immigration to the United States, in other words, rarely changes one’s social status.

The same pattern is echoed in Europe. In the 1960s and 1970s, Austria, Belgium, Denmark, Germany, and Switzerland created guest worker programs to recruit unskilled workers for basic factory jobs, often from Turkey’s poor, rural areas. Today, the children of those Turkish immigrants all perform worse on language and mathematics tests than domestic populations, which is a reliable indicator of lower social status. The lower status of their parents was thus reproduced in their new home countries.

By the same token, countries that selected elite immigrants to begin with now have high-performing immigrant classes. For example, the United Kingdom selects immigrants based more on education and skills. As a result, African, Chinese, and Indian immigrants outperform their British counterparts; although children of white British parents born between 1963 and 1975 attained on average 12.6 years of education, children of African migrants stayed in school for 15.2 years, those of Indian migrants for 14.2 years, and those of Chinese migrants for 15.1 years.

Adam Smith and the Romance Novel

Tuesday, October 7th, 2014

The novel was the up-and-coming genre of the 18th century:

The cultural ubiquity of the novel in our age makes it hard to remember, first, that it is a genre and not just a word for any narrative (despite what the youth of America seem to think), and second, that it had or ever needed a rise. But rise it did, in the 1730s and ‘40s.

The seminal literary historian Ian Watt was one of the first to study the phenomenon, and to link the rise of the novel to the simultaneous rise of the middle class and of middle class literacy. This new class, accustomed to the typical literary division between tragic aristocrats and royalty on the one hand and comic, lower class characters on the other, needed a place to read about itself, and to see its own values reflected well. They also suddenly had cash, which makes such desires relevant.

The productions that were called novels in the early-18th century were essentially tabloidized versions of the goings on in royal places. Their titles tell you more or less all you need to know about them: Letters From a Nobleman to His Sister (they’re close), The Mercenary Lover, The Secret Memoirs and Manners of Several Persons of Quality of Both Sexes. But a large part of the pleasure of such novels was not in seeing real life sketched in the form of fictional persons. It was figuring out if Countess Vanity-in-her-Wardrobe was meant to stand in allegorically for, say, the opposition leader in Parliament, or refer to some highborn member of the queen’s household.

But in the 1740s, long fictional prose narratives that had previously concerned themselves with aristocrats became … a little less about aristocrats. Starting with Daniel Defoe and really taking off with Samuel Richardson, novels centered on the conflict between politically connected aristocrats and the members of the classes below them.

In Richardson’s extraordinary popular debut, Pamela, Or Virtue Rewarded, a ladies’ maid resists the seductions of her boss so effectively that he marries her. Things take a more tragic turn for the eponymous heroine of Clarissa, or The History of a Young Lady, a woman of the Austenesque gentry class who has the misfortune to run into a degenerate lordling who will feel very bad about himself after he rapes her and drives her to one of those shockingly common stress deaths of the 18th and 19th centuries.

The highborn ladies of the previous nouvelles scandaleuses (we say it in French when sturdy middle-class English won’t do) are often already married, so courtship is really not the point of those novels. The “romance” of the early romance novel is purely in the imagining of oneself enjoying the things that Adam Smith alluded to in his first description of the invisible hand in The Theory of Moral Sentiments: the palaces and equipages of the rich and splendid. It may also lie in the realization that even people who occupy those high states can be unhappy and comically ridiculous, even in the throes of our envy of them.

But with Richardson’s novels, the question of courtship and the ethics of the pursuit of money came under the fiction’s scrutiny, just as they came under Smith’s eye in The Theory of Moral Sentiments and The Wealth of Nations. It’s not the aristocracy that Smith addresses when he talks about the proper attitude towards getting money: They already had it, after all. It’s to that same middle class that was reading Richardson’s tales of aspiring women.

William Morris

Sunday, October 5th, 2014

William Morris Design for Trellis Wallpaper 1862William Morris is known for many things. As a writer and a medievalist, he inspired Tolkien to pen The Lord of the Rings. As a socialist and a craftsman, he dreamed of a post-capitalist world where all labor would provide the gratification assigned, in his lifetime, to art.

Alain de Botton considers him one of the great philosophers:

The 19th-century designer, poet and entrepreneur William Morris is one of the best guides we have to the modern economy – despite the fact that he died in 1896 (while Queen Victoria was still on the throne), never made a telephone call and would have found the very idea of television utterly baffling.

Morris was the first person to understand two issues which have become decisive for our times. Firstly: the role of pleasure in work. And, secondly: the nature of consumer demand. The preferences of consumers – what we collectively appreciate and covet and are willing to pay for – are crucial drivers of the economy and hence of the kind of society we end up living in. Until we have better collective taste, we will struggle to have a better economy and society.

[...]

The experience of building and fitting out his house taught Morris his first big lesson about the economy. It would have been simpler (and maybe cheaper) to have ordered everything from a factory outlet. But Morris wasn’t trying to find the quickest or simplest way to set up home. He wanted to find the way that would give him – and everyone involved in the project – maximum satisfaction. And it fired Morris with an enthusiasm for the medieval idea of craft. The worker would develop sensitivity and skill; and enjoy the labour. It wasn’t mechanical or humiliating.

He spotted that craft offers important clues to what we actually want from work. We want to know we’ve done something good with the day. That our efforts have counted towards tangible outcomes that we actually see and feel are worthwhile. And Morris was already noticing that when people really like their work, the issue of exactly how much you get paid becomes less critical. (Though Morris always believed, in addition, that people deserved honourable pay for honest work.) The point is you can absolutely say you are not doing it purely for the money.

[...]

The [décor] firm [he established] soon encountered a very instructive problem. If you make high quality goods and pay your workers a fair and decent wage, then the cost of the product is going to be higher. It will always be possible for competitors to undercut the price and offer inferior goods, produced in less humane ways, for less money.

If you ask a comparatively high price – to ensure the dignity of work and quality of materials and so make something that will last – you really risk losing customers.

The factories and machines of the Industrial Revolution had brought mass production. Prices were lower, but there was a loss of quality and a dependence on routine, deadening labour in depressing circumstances.

[...]

For Morris the key factor is, therefore, whether customers are willing to pay the just price. If they are, then work can be honourable. If they are not, then work is necessarily going to be – on the whole – degrading and miserable.

So, Morris concluded that the lynchpin of a good economy is the education of the consumer. We collectively need to get clearer about what we really want in our lives and why, and how much certain things are worth to us (and therefore how much we are prepared to pay for them).

An important clue to good consumption, Morris insisted, is that you ‘should have nothing in your houses that you do not know to be useful or believe to be beautiful’.

Morris believed that a good economy should pass the following tests:

  • How much do people enjoy working?
  • Does everyone live within walking distance of woods and meadows?
  • How healthy is the average diet?
  • How long are consumer goods expected to last?
  • Are the cities beautiful (generally, not just in a few privileged parts)?

High Modernism

Friday, October 3rd, 2014

The most tragic episodes of social engineering include these four elements, James C. Scott argues:

The first element is the administrative ordering of nature and society — the transformative state simplifications described above. By themselves, they are the unremarkable tools of modern statecraft; they are as vital to the maintenance of our welfare and freedom as they are to the designs of a would-be modern despot. They undergird the concept of citizenship and the provision of social welfare just as they might undergird a policy of rounding up undesirable minorities.

The second element is what I call a high-modernist ideology. It is best conceived as a strong, one might even say muscle-bound, version of the self-confidence about scientific and technical progress, the expansion of production, the growing satisfaction of human needs, the mastery of nature (including human nature), and, above all, the rational design of social order commensurate with the scientific understanding of natural laws. It originated, of course, in the West, as a by-product of unprecedented progress in science and industry.

High modernism must not be confused with scientific practice. It was fundamentally, as the term “ideology” implies, a faith that borrowed, as it were, the legitimacy of science and technology. It was, accordingly, uncritical, unskeptical, and thus unscientifically optimistic about the possibilities for the comprehensive planning of human settlement and production. The carriers of high modernism tended to see rational order in remarkably visual aesthetic terms. For them, an efficient, rationally organized city, village, or farm was a city that looked regimented and orderly in a geometrical sense. The carriers of high modernism, once their plans miscarried or were thwarted, tended to retreat to what I call miniaturization: the creation of a more easily controlled micro-order in model cities, model villages, and model farms.

High modernism was about “interests” as well as faith. Its carriers, even when they were capitalist entrepreneurs, required state action to realize their plans. In most cases, they were powerful officials and heads of state. They tended to prefer certain forms of planning and social organization (such as huge dams, centralized communication and transportation hubs, large factories and farms, and grid cities), because these forms fit snugly into a high-modernist view and also answered their political interests as state officials. There was, to put it mildly, an elective affinity between high modernism and the interests of many state officials.

Like any ideology, high modernism had a particular temporal and social context. The feats of national economic mobilization of the belligerents (especially Germany) in World War I seem to mark its high tide. Not surprisingly, its most fertile social soil was to be found among planners, engineers, architects, scientists, and technicians whose skills and status it celebrated as the designers of the new order. High-modernist faith was no respecter of traditional political boundaries; it could be found across the political spectrum from left to right but particularly among those who wanted to use state power to bring about huge, utopian changes in people’s work habits, living patterns, moral conduct, and worldview. Nor was this utopian vision dangerous in and of itself. Where it animated plans in liberal parliamentary societies and where the planners therefore had to negotiate with organized citizens, it could spur reform.

Only when these first two elements are joined to a third does the combination become potentially lethal. The third element is an authoritarian state that is willing and able to use the full weight of its coercive power to bring these high-modernist designs into being. The most fertile soil for this element has typically been times of war, revolution, depression, and struggle for national liberation. In such situations, emergency conditions foster the seizure of emergency powers and frequently delegitimize the previous regime. They also tend to give rise to elites who repudiate the past and who have revolutionary designs for their people.

A fourth element is closely linked to the third: a prostrate civil society that lacks the capacity to resist these plans. War, revolution, and economic collapse often radically weaken civil society as well as make the populace more receptive to a new dispensation. Late colonial rule, with its social engineering aspirations and ability to run roughshod over popular opposition, occasionally met this last condition.

A Small Mistake

Thursday, September 18th, 2014

When Mao died, The Economist made a small mistake describing his legacy:

In the final reckoning, Mao must be accepted as one of history’s great achievers: for devising a peasant-centered revolutionary strategy which enabled China’s Communist Party to seize power, against Marx’s prescriptions, from bases in the countryside; for directing the transformation of China from a feudal society, wracked by war and bled by corruption, into a unified, egalitarian state where nobody starves; and for reviving national pride and confidence so that China could, in Mao’s words, ‘stand up’ among the great powers.

The emphasis is David Friedman’s:

The current estimate is that, during the Great Leap Forward, between thirty and forty million Chinese peasants starved to death.

Six Great Things an Independent Scotland Could Do

Wednesday, September 17th, 2014

Nathan Lewis suggests six great things an independent Scotland could do:

Britain, today, is basically Spain or Italy plus the financial industry centered in London. Britain has been in decline for a long time. Eventually, the financial industry will locate elsewhere, most likely Shanghai.

Or, perhaps, Scotland. I think Scotland could again become a world leader in commerce and finance, as it was in the 18th century – along with other unlikely places like Holland, Hong Kong, Japan and Switzerland … or New York … who also had their time in the sun, until they blew it.

But, first Scotland would have to get off the sinking British ship. Here are six great things an independent Scotland could do to become one of the most prosperous places on Earth:

1) Get a rational tax system. There are two basic questions to answer regarding taxes. One is: how much, as a percentage of GDP, do we want to raise in the form of tax revenue? I suggest that about 15% (total government) is a good number, which can provide most of the government services we value today, while also presenting a very manageable burden upon the private economy. Singapore (14%) and China (17%) serve as good examples here.

The second question is: how to raise this amount of revenue in a fashion that causes the least harm and distortion to the private economy? Hong Kong’s flat-tax environment again provides an excellent example, although there are other modalities that could work, including systems based mostly on consumption-related taxes.

2) Get a rational currency policy. As a small country, with a high degree of trade, Scotland would have difficulty with a fully-independent currency. The exchange-rate fluctuation with other major world currencies would be troublesome. However, Scotland could adopt an “open currency” model – in other words, people could officially use any currency they see fit.

Into this “open currency” environment, Scotland’s government (or private entities with government sanction) could introduce gold-based currencies, which people could also use as they wished – or not use, if that is appropriate. In this way, Scotland would be providing an alternative to today’s fiat-currency madness, which people could adopt voluntarily if they felt it was helpful. Or, they could stick with dollars, euros and pounds if they felt that was best. After a few decades, I think many would find that Scotland’s gold-based solution was superior, and would either adopt the Scottish “gold sovereign” as an international currency, or imitate it.

3) Remake public social services. I’ve argued that Japan’s current fiscal problems, related to public pensions, healthcare, and other welfare services, are mostly characteristic of welfare programs that were invented in the late 19th century, and were appropriate for the 1950s and 1960s, but are no longer appropriate today. Independence would be a chance to introduce new public policy structures that are appropriate to today’s reality of long lifespans and low birthrates, without being too expensive. Hong Kong, formerly part of the British Empire, provides universal public healthcare at a cost of 3% of GDP.

4) Get a “competitive advantage” versus other financial centers. Financial surveillance and taxes in the U.S. are becoming intolerable to about everyone. Europe is not much better; besides, people are at risk of being “bailed-in” at any moment. Switzerland was once a haven for wealth and free finance, but that is not so true today. There’s a great market need for a place today that could be what Switzerland, or New York, was in the past. Singapore seems to provide about the best alternative at this point, along with places like the Cayman Islands.

5) Get a great environmental policy. Scotland used to have one of Europe’s great fisheries. In the 13th century, the natural oyster beds of the Forth covered over 129 square kilometers. Alas, by 1957, the Firth of Forth was found to have no oysters at all; they had been harvested to biological extinction. The nice thing here is that oysters (or other fishing) are no longer an important industry, so nobody cares if you ban fishing altogether. Perhaps, after forty years or so, Scotland will have again one of the most bountiful marine environments in Europe, if not the world.

Today, prosperity and abundance don’t necessarily have an environmental cost at all. The coal-burning factories of 19th-century Scotland need not be recreated. Additional progress could be made by phasing out personal automobiles by way of high taxes on petroleum and cars, much like Singapore or Britain today. Essentially, this would be a return to the train-centric arrangements of Scotland in, for example, 1890. Although Scotland is a major oil and gas producer, domestic energy efficiency would allow both greater energy independence and also more revenue from export sales.

6) Respect freedom and liberty. Tired of the surveillance state of Britain, the U.S., and (following close behind) the Eurozone? Move to Scotland.

This should be a familiar list. Indeed, it was the Scottish “political philosophers” who put much of it into words, a long time ago. The world then was also characterized by oppressive, militaristic statism, notably in the case of Louis XIV of France (1638-1715) and also James II of England (1633-1701). The Scots took a different path, and began their first era of world-beating success.

Scotland (population 5.3 million) could become much like Singapore (5.4 million) or Hong Kong (7.2 million), or even Monaco (36,000), a popular alternative to oppressive statism and economic decline throughout the developed world.

Along the way, Scots could get rich.

The Han Logistics Machine

Saturday, September 13th, 2014

The logistics machine the Han created to defeat the Xiongnu is one of the marvels of the ancient world, T. Greer explains:

Each of the Han’s campaigns was a feat worthy of Alexander. Alexander only pushed to India once. The Han launched these campaigns year after year for decades. The sheer expanse of the conflict is staggering; Han armies ranged from Fergana to Manchuria, theaters 3,000 miles apart. Each campaign required the mobilization of tens of thousands of men and double the number of animals.