Some useful reminders from Professor Somin.
Here is a nice piece from The Economist. Most of it deals with the switch from hunter/gatherers to farmers, which was initially difficult, but offered high rewards relative to the alternative. The same logic can be applied to the industrial revolution:
Notice a close parallel with the industrial revolution. When rural peasants swapped their hovels for the textile mills of Lancashire, did it feel like an improvement? The Dickensian view is that factories replaced a rural idyll with urban misery, poverty, pollution and illness. Factories were indeed miserable and the urban poor were overworked and underfed. But they had flocked to take the jobs in factories often to get away from the cold, muddy, starving rural hell of their birth.
Eighteenth-century rural England was a place where people starved each spring as the winter stores ran out, where in bad years and poor districts long hours of agricultural labour—if it could be got—barely paid enough to keep body and soul together, and a place where the “putting-out” system of textile manufacture at home drove workers harder for lower pay than even the factories would. (Ask Zambians today why they take ill-paid jobs in Chinese-managed mines, or Vietnamese why they sew shirts in multinational-owned factories.) The industrial revolution caused a population explosion because it enabled more babies to survive—malnourished, perhaps, but at least alive.
It also discusses the high levels of violence and environmental destruction associated with hunting and gathering – which contradicted the long held intellectual view of primitive peoples living happily with each other and with nature. The major evidence for this view seems to have been the desires of these intellectuals for it to be true.
The article offers some parting wisdom as well:
There is a modern moral in this story. We have been creating ecological crises for ourselves and our habitats for tens of thousands of years. We have been solving them, too. Pessimists will point out that each solution only brings us face to face with the next crisis, optimists that no crisis has proved insoluble yet. Just as we rebounded from the extinction of the megafauna and became even more numerous by eating first rabbits then grass seeds, so in the early 20th century we faced starvation for lack of fertiliser when the population was a billion people, but can now look forward with confidence to feeding 10 billion on less land using synthetic nitrogen, genetically high-yield crops and tractors. When we eventually reverse the build-up in carbon dioxide, there will be another issue waiting for us.
Here’s a nice piece that I saw on Arts and Letters Daily:
To Prof. Peterson, though, belief is not optional. And regardless of the specific belief, he maintains it is as necessary as air and water.
At its most basic level, belief acts like a set of headlights to guide us through a foggy universe that “is far more complicated than we are smart.” So belief is eradicable, he said, because there will never be a time when we know everything.
I like to think that the only thing I have faith in processes in which failure is easily identifiable and eliminated.
Per the recent discussion on the gold standard, the Fed’s process of setting interest rates doesn’t meet this standard. The Fed giveth and the Fed taketh away.
Paul Krugman, of Princeton University, has recently argued* that contemporary America's widening income gap is ushering in a new age of invidious inequalities. But a peek at the numbers behind the numbers suggests that Mr Krugman has been misled: far from a new Gilded Age, America is experiencing a period of unprecedented material equality. . . .This compression is the predictable consequence of innovations in production and distribution that have improved the quality of goods at the lower range of prices faster than at the top. New technologies and knock-off fashions now spread down the price scale too fast to distinguish the rich from the aspiring for long.This increasing equality in real consumption mirrors a dramatic narrowing of other inequalities between rich and poor, such as the inequalities in height, life expectancy and leisure. William Robert Fogel, a Nobel prize-winning economic historian, argues that nominal measures of economic well-being often miss such huge changes in the conditions of life. “In every measure that we have bearing on the standard of living…the gains of the lower classes have been far greater than those experienced by the population as a whole,” Mr Fogel observes.Some worrying inequalities, such as the access to a good education, may indeed be widening, arresting economic mobility for the least fortunate and exacerbating income-inequality trends. Yet even if you care about those aspects of income inequality, the idea can send misleading signals about the underlying trends in real consumption and the real quality of life. Contrary to Mr Krugman's implications, today's Gilded Age income gaps do not imply Gilded Age lifestyle gaps. On the contrary, those intrepid souls who make vast fortunes turning out ever higher-quality goods at ever lower prices widen the income gap while reducing the differences that matter most.
We should hope that the tie survives. It is too noble a garment to let go for light and transient, or dark and sinister, causes. The good news is that Mr. Obama's foray into tielessness does not stem from deeply held ideology. When it really counts, he does the right thing. No doubt, should he make it to the end, his neck will be covered on inauguration day. Just like JFK's head.
In my response to Dr Cowen’s post on Ron Paul below, I didn’t say much about his charge of anti-intellectualism against Dr Paul.
Yet the historical record of intellectuals controlling the reins of government aren’t great. Jonah Goldberg’s review of Amity Shlaes’ book The Forgotten Man in the newest Claremont Review of Books is a good reminder. The economic advisors at the time who suggested wage and price freezes, and the advisors who controlled the Fed, didn’t exactly help out.
Might Dr Paul’s position that we take whatever hardships are caused by the free functioning of the of the market and in exchange give up the massive screw-ups that are caused by incorrect expert opinion be a position that has some historical validity, anti-intellectual as it is?
Here comes the heat on Dr Paul’s monetary views from some serious libertarians, whose views are always worth taking seriously. Here’s my attempt at a response from someone who is genuinely undecided on this issue:
My fundamental concern is that once a libertarian opens the door to governmental control over currency, they’ve opened the door to governmental control over virtually everything.
What is more complicated than the money supply, after all? And, if government is capable of managing the money supply – from a Hayekian informational standpoint and from a “credible steward” standpoint (to use Ms McArdle’s words) – then what isn’t it capable of managing?
In other words, if government has enough “knowledge” to determine the precise amount of money needed at all times in the economy, then it must be an amazing aggregator of information. If we trust government not to manipulate the money supply, which is an easy way for it to increase its take of our wealth and a necessary condition for the massive growth of government that we have seen in the decades since the decline of the gold standard, then certainly we would have to trust it under basically all circumstances to act in a noble un-self-interested manner.
All my libertarian instincts tell me that there is no way government can have enough information to set the money supply properly and that there is no way government can be trusted to use its massive powers in this area appropriately. Where am I going wrong here? And, if we, as libertarians, grant government this much power in this arena, how do we deny it lesser powers in lesser arenas without being incredibly contradictory?
Besides practical objections, there are moral objections as well. Interest rate cuts and increases clearly benefit and harm distinct groups in our society. Giving government power over this area necessarily means that its actions will help some at the expense of others. This power provides, I believe, the fertile for Dr Paul’s conspiracy theories, with which Dr Cowen is correctly concerned.
Further, if I grant that fiat currencies are the best monetary system, then logically the question of how many fiat currencies we should have follows. Should the world have only one fiat currency or should each person issue their own fiat currency or should there be one currency for every 100 or 1000 people? It seems like one currency per nation based on current national boundaries (or economic cooperatives) is unlikely to be the correct answer.
Update: more here.
[You can see my reviews of Murray Rothbard’s works, which I have just finished reading, below. I think they fairly represent Dr Paul’s position and provide a better source of his claims than snippets on his campaign website. After all, issues like the gold standard aren’t particularly conducive to political sound bites – at least not since the 19 th Century.]
I generally agree with Ms. McArdle, but when she says “the dollar is not declining because of Fed policy.” I’m at a loss.
The Fed has decided to increase the money supply to help with a slowing economy. They calculate that the inflationary pressures associated with this increase will be offset by other factors (cheaper production from outsourcing has been the cause of late). If they were concerned with inflation, they wouldn’t increase the money supply.
The more dollars there are, the cheaper they will be. The Fed is printing more dollars at time when other central banks are not printing more of their respective currencies, therefore the value of the dollar falls.
From The New Yorker.
I agree with a lot of the points the article makes, but I think it is perhaps a good example of why people read less.
It’s really long. The big section in the middle on orality and discussion on evolution seem not particularly relevant – beyond the point that reading is not an evolutionary development (which i just made in one sentence).
It, along with much in The New Yorker, has a smug attitude. This attitude seems prevalent in a lot of today’s literature. It’s as if our intellectuals write books that are specifically designed to offend and aggressively challenge (and sneer at) the majority of people in society and then get surprised and offended that people aren’t reading more.
Those points aside, I do think the decline in reading is a big problem, but I don’t think it’s one that technology (especially the internet and portable readers) with better laws (loosening of copyrights) and better writing won’t be able to solve.
Also, don’t tell my wife this:
According to the Department of Labor, American households spent an average of a hundred and sixty-three dollars on reading in 1995 and a hundred and twenty-six dollars in 2005.
(Let’s just say I spend a little more than that and we’re fast approaching the point where we will have to seek a larger living space to accommodate the books)