How eurocentric is Tyler Cowen?

Chris Brunk, an all-too-loyal MR reader, writes to me:

I developed a thought experiment that I wanted to share with you.  I call it “The Grand Gameshow”.

In this thought experiment you are a contestant on a gameshow.  The host of the gameshow (let’s call him Alex) has a notecard that says whether or not god exists and to what extent he is involved in the affairs of mankind.   You start with $1,000,000 that you must allocate across five possible categories:

  • Category 1 – Scriptural literalism.  Bet into this category if you believe that one of the religious texts is precisely accurate.
  • Category 2 – God is omnipresent.  Bet into this category if you believe that god is everywhere and intimately involved in our lives.
  • Category 3 – God as a guide.  Bet into this category if you believe that god is only there for the major turning points in life and/or when we reach out in prayer.
  • Category 4 – God as a watchmaker.  Bet into this category if you believe that god set the universe in motion but is no longer around.
  • Category 5 – Atheism.  Bet into this category if you believe that god does not exist.

You can distribute the money however you like (e.g. all $1,000,000 in one category or $200,000 in each).  After you’ve allocated your $1,000,000 Alex flips over the notecard and reveals which of the five categories is correct.  You keep any money that you’ve allocated into the correct category.

Some footnotes.  For the purposes of playing this gameshow assume that your financial situation is that of a farmhand in Mexico.  You earn about $4,000 per year and have no substantial savings or degrees.  I classify simulism as being category 4.

I would be very interested to hear how you’d allocate your funds versus say, Russ Roberts or Robin Hanson.

What about Thor? Or Taoism? Or Buddhism? Or multitheism?

Privileging Judeo-Christian traditions just makes you look silly to me. Any teleology makes you look stupid; one which implies that world religions reached some sort of apogee in one particular messianic jewish cult which happened to be adopted by one particular  medium sized, medium-duration empire of premodern Eurasia makes me just plain sad.

The USSR, Congolese Tribes, Trayvon Martin and Patent Reform all in one post

I’ve been reading Why Nations Fail, the blog and book. I’ve reached the section on the Soviet Union and the Lele and the Bushong – the discussions linked to above are from Paul Krugman and James Robinson, but are on very similar lines.

The Soviet Union achieved economic growth in the 1920s-1970s by moving resources, very, very violently, out of low productivity agriculture into high productivity industry. From 1930 to 1960 the Soviet Union saw growth rates of 6% a year, probably the fastest sustained rate ever seen at that time.

The Bushong and Lele are tribes that live on opposite banks of the Kasai river. The Bushong are far wealthier, more peaceful and more technologically advanced than the Lele. This was because in the early seventeenth century, on just one side of the Kasai, Shyaam formed the Kuba Kingdom. This was an absolutist and centralised collection of the local warring villages.

What links both is that in the Soviet Union, and on the Bushong side of the Kasai, elites came to power who had the incentive to move resources to high productivity sectors in order to extract more wealth for themselves. Both societies eventually stagnated – the Soviet Union at the level of a poor industrial society, the Bushong at the level of a rich agricultural one – because both lacked institutions that gave citizens incentives to innovate and invent.

Acemoglu and Robinson argue, at length and convincingly, that wealthy capitalist countries are successful because institutions in these countries are politically inclusive, giving everyone a stake in their functioning, and economically inclusive, giving everyone a chance to take whatever employment suits them and experiment to see what innovations they can make work. Only this combination creates sustained economic growth. There are echoes of Eric Jones’ Growth Recurring, which I have discussed before.

I’ve also just read Richard Seymour‘s history of lynching and its importance in understanding the murder of Trayvon Martin. Richard underlines the long tradition of American citizens being deputised into violently upholding America’s  racial hegemony. Lynching was just one part of the system of exploitation and repression blacks faced in the US.

The murder of Trayvon Martin should be seen as part of the continuation of this tradition of separating white and black space by violence in the United States. Florida’s law allowing racists to kill black people and avoid arrest if they can convince local law enforcement they were under some sort of threat. These are exclusionary political institutions in action.

The manifestly exclusionary political institutions the US still has – see also the incarceration of blacks in the US – took an even worse form in the past. These exclusionary institutions and extractive economic institutions did not however seem to significantly retard growth or innovation – although even in the US, evidence for Acemoglu and Robinson’s thesis is available, the more repressive south is poorer than the less repressive north.

The 1930s were a tragic decade macroeconomically but were the most technologically progressive decade in history, never had productivity grown so quickly. So, despite manifestly extractive institutions and exclusionary political institutions existing in the US in this period (for women as well as blacks remember) there was an explosion of innovation.

There seems to be a disconnect between incentives being important for innovation at the societal level and incentives being important for promoting innovation at the individual level. I don’t take this as evidence against the importance of institutions which promote innovation, some people had the incentive to innovate, and they pursued it with enthusiasm. The question all this seems to pose is: to what extent were these innovations individual endeavours?

What this makes me think is that many inventors do not deserve to capture the full results of their innovations. Ideas seem to be more “in the air” than the product of individual efforts. Even if inventors don’t deserve their ideas protecting, and even if it doesn’t make much sense to label something someone’s idea because they perfected it, or submitted a patent a few months or years before someone else, it may still make sense to offer them patent protection and so on to achieve the maximum possible economic growth. What policy implications this notion of desert has then is unclear.

However, synthesising Marxist analyses of race and space and the life’s work of Daron Acemoglu, James Robinson and Alexander Field isn’t something you get to do everyday. So although policy prescriptions are lacking, I hope you find the above thought-provoking.

Jesus Matt… “When is Cooking from Home Illegal?”

Dafna Kory first sold her homemade jalapeño jam at a clandestine farmers market in San Francisco. The jam was a hit and so was the Underground Farmers Market that brought it to consumers. But the market was shut down by the Department of Public Health because the sellers did not comply with city and state regulations.

Their crime? Most of the vendors produced their products in home kitchens.

See Emily Voigtlander’s piece for much more on this, but the question I always have about bans on commercial sale of home kitchen output is if these home kitchens are so unsafe then how is it that we’re allowed to use them at all? I eat food cooked in my own kitchen all the time, and even serve it to friends and family on a fairly regular basis. It seems like there should be some kind of standard as to what constitutes a safe facility to cook in, but if it’s safe it’s safe.

…I mean, the logic is very simple, even if I think it is stupid.

If you are cooking for yourself and your family you are likely to take greater care than if you are cooking for strangers who you may never see again and who will have difficulty identifying you as a source of infection if they do become ill subsequent to eating your food.

This one isn’t exactly rocket science.

Why complicate things further?

A heuristic is something that makes a complicated thing easier to understand – they usually involve simplifying things so that complicated things become easier to understand. But sometimes I think people mistake for a heuristic something which in facts makes things more complicated.

Chris’s adoption Marglin and Bhaduri terminology of “stagnationist” and “exhilarationist” for describing post-war economic institutions looks like a heuristic but really makes things more complicated. The theory goes that up until the 1970s capitalists gained from statist interference and support for the working class as the economy would have otherwise stagnated. This flipped in the 1980s as capitalists needed a more easily exploitable working class and they used the state to weaken the bargaining power of the working class.

I have two critiques.

One is that the post war world was one with incredible investment opportunities, lots of easily monetizable technological progression with a great deal of catch-up growth possible too: the UK never caught up with the US in terms of living standards. US standards of living and rates of investment were clearly seen as sustainable from this side of the pond so why state support would be necessary is unclear.

To make my second point, I have negotiated the thicket of the ONS. The vast, vast majority of economic activity is so utterly mundane that it seems bizarre to suggest that it is possible for the economy to be “stagnationist” or “exhilarationist.” Most sectors just plug along, so any “stagnationist” or “exhilarationist” impulses would be driven by very small sectors of the economy.

The top seven or so categories of production in the national accounts are: Total government, health and education; Total distribution, transport, hotels and restaurants; Total production; Total professional and support; Wholesale, retail, repair of motor vehicles and m/cycles; Total manufacturing; Real estate; Financial and insurance; Total human health and social work activities.

That is some mundane shit and I’m not sure that the heuristics mentioned above are useful in describing an economy so boring.

Bastards

Minimum alcohol pricing – bloody arseholes – and I say that in a professional and personal capacity.

The pricing of alcohol at 40p a unit, given modern booze taxes (about £1.90 on a bottle of wine), amounts to a ban on loss leaders. In other words, it solves a coordination problem for supermarkets. This is one reasons Tesco supports minimum pricing; they no longer have to sacrifice margin to attract customers from Sainsbury’s etc.

So, what we have is a transfer of wealth from most people who drink, but especially from heavy and thrifty drinkers, to supermarkets’ bosses and shareholders. Interestingly, given supermarkets’ size and prominence, this means it is a transfer of wealth to people with private pensions which will tend to be at least somewhat invested in supermarket stock.

Three conclusions:

  1. This should stunt innovation at the bottom end of the booze market, so never expect to stumble upon a cheap but actually very nice drink again.
  2. Setting up a bureaucracy to enforce a minimum price is more costly financially and politically than increasing the price of that floor – so don’t expect the 40p limit to last long. Swedish beer prices here we come.
  3. More importantly, distributionally, this cannot but be a transfer from the very poorest people who have no pension to people on middle and higher incomes who do, however pitiful their provision.

Slow hand clap for the Tories – combining socialism for the rich; innovation stunting regulation and the shittiest part of Scandinavia since their post-war embrace of eugenics.

I, for one, would welcome this technocratic overlord

First, stimulus. Mr Osborne has been boasting of his plans to reduce taxes and spending simultaneously. This is precisely the opposite of what is required at a time of weak aggregate demand, and every bit as foolish as when Gordon Brown increased both taxes and spending in a boom. I will unveil a package of spending on roads, railways, primary schools in oversubscribed areas and social housing. In many cases this will simply mean implementing pre-existing plans, so the building work can start without delay. By utilising spare resources in the economy, this plan will stimulate demand and provide urgently needed infrastructure at a low cost to the wider economy. On the “stitch in time” principle it will also reduce the total need for public spending over the next decade and beyond.

More at the FT from Tim Harford.