Ferdinand has some thoughts that go nicely with some of my recent posts.
The genius Taiwanese animators explain school reform in DC
The book is here.
You can read all about List and his economic thought here.
List is very critical of Adam Smith, but it was interesting to read a non-Leftist critique of Smith. I didn’t know that such a thing existed!
In short, List believes that Smith and his followers neglect the way that the world works in their understanding of economics. The neglect leads to conclusions that would be irresponsible for the leaders of a nation to pursue.
Smith and his followers assume "a state of things which has yet to come into existence." They assume "the existence of a universal union and a state of perpetual peace, and deduce therefrom the great benefits of free trade."
List agrees that free trade is beneficial to some nations in some circumstances. He also believes it is beneficial to the world as a whole. However, he does not believe that it is always beneficial to all nations at all times. This seems like a reasonable position, but it puts him at odds with Smith and his followers.
List also believes that Smith errs in focusing on wealth as opposed to focusing on the ability to produce wealth, "the power of producing wealth is therefore infinitely more important than wealth itself; lt insures not only the possession and the increase of what has been gained, but also the replacement of what has been lost. This is still more the case with entire nations (who cannot live out of mere rentals) than with private individuals."
Finally, List believes that leaders of nations must focus on the long-term welfare of the nation. A Smith-based approach will be too focused on short-term gains at the expense of long-term prosperity.
To this last point, one can’t help but think that List would be sad, but not surprised to see, modern America losing all her manufacturing jobs in favor of jobs that create transitory wealth at best (in honor of GBFM, think of girls in short-skirts selling subprime mortgages).
Much of the book is devoted to historical examples of development. List makes a very convincing case that development requires some period of protectionism. The US own system was based on List’s ideas. It seems to have worked here.
Here, from the introduction to List’s work, is a summary of his view of how nations develop:
In the first stage they must adopt free trade with the more advanced nations as a means of raising themselves from a state of barbarism and of making advances in agriculture. In the second stage they must resort to commercial restrictions to promote the growth of manufactures, fisheries, navigation, and foreign trade. In the last stage, after reaching the highest degree of wealth and power, they must gradually revert to the principle of free trade and of unrestricted competition in the home as well as in foreign markets, so that their agriculturists, manufacturers, and merchants may be preserved from indolence and stimulated to retain the supremacy which they have acquired. Writing in 1841, [List] concludes the survey: ‘In the first stage, we see Spain, Portugal, and the Kingdom of Naples; in the second, Germany and the United States of North America; France apparently stands close upon the boundary line of the last stage; but Great Britain alone at the present time has actually reached it.’
List was an early discoverer of the importance of institutions and the make-up of the population for economic growth:
One thing alone was wanting to Italy to enable her to become what England has become in our days, and because that one thing was wanting to her, every other element of prosperity passed away from her; she lacked national union and the power which springs from it. The cities and ruling powers of Italy did not act as members of one body, but made war on and ravaged one another like independent powers and states. While these wars raged externally, each commonwealth was successively overthrown by the internal conflicts between democracy, aristocracy, and autocracy. These conflicts, so destructive to national prosperity, were stimulated and increased by foreign powers and their invasions, and by the power of the priesthood at home and its pernicious influence, whereby the separate Italian communities were arrayed against one another in two hostile factions.
. . .
Everywhere and at all times has the well-being of the nation been in equal proportion to the intelligence, morality, and industry of its citizens; according to these, wealth has accrued or been diminished; but industry and thrift, invention and enterprise, on the part of individuals, have never as yet accomplished aught of importance where they were not sustained by municipal liberty, by suitable public institutions and laws, by the State administration and foreign policy, but above all by the unity and power, of the nation.
Nor does he ignore power:
And power is more important than wealth. That is indeed the fact. Power is more important than wealth. And why? Simply because national power is a dynamic force by which new productive resources are opened out, and because the forces of production are the tree on which wealth grows, and because the tree which bears the fruit is of greater value than the fruit itself. Power is of more importance than wealth because a nation, by means of power, is enabled not only to open up new productive sources, but to maintain itself in possession of former and of recently acquired wealth, and because the reverse of power —namely, feebleness—leads to the relinquishment of all that we possess, not of acquired wealth alone, but of our powers of production, of our civilisation, of our freedom, nay, even of our national independence, into the hands of those who surpass us in might, as is abundantly attested by the history of the Italian republics, of the Hanseatic League, of the Belgians, the Dutch, the Spaniards, and the Portuguese.
. . .
England has got into her possession the keys of every sea, and placed a sentry over every nation : over the Germans, Heligoland; over the French, Guernsey and Jersey; over the inhabitants of North America, Nova Scotia and the Bermudas; over Central America, the island of Jamaica; over all countries bordering on the Mediterranean, Gibraltar, Malta, and the Ionian Islands. She possesses every important strategical position on both the routes to India with the exception of the Isthmus of Suez, which she is striving to acquire; she dominates the Mediterranean by means of Gibraltar, the Red Sea by Aden, and the Persian Gulf by Bushire and Karrack. She needs only the further acquisition of the Dardanelles, the Sound, and the Isthmuses of Suez and Panama, in order to be able to open and close at her pleasure every sea and every maritime highway. Her navy alone surpasses the combined maritime forces of all other countries, if not in number of vessels, at any rate in fighting strength.
So was it England’s power or England’s economic system that made it the dominant force in the world? List’s answer is power.
West explained to Ellen DeGeneres on her chat show that he had asked the dentist to remove his bottom row of teeth and replace them with diamonds.
I never thought one sentence could so perfectly encapsulate the reasons for our fall.
It must also be recognized that any attempt to quantify the death toll in the Mexican cartel wars is quickly complicated by the fact that the cartels have gotten very good at disposing of bodies. Many victims simply disappear, and their murders are never confirmed. For example, in December 2008, American anti-kidnapping consultant Felix Batista disappeared from a meeting at a restaurant in Saltillo, Coahuila state. Batista reportedly was murdered, but no trace of his body was ever found. In addition to dumping bodies in mass graves, using wood chippers or feeding them to vultures, Mexican cartels also have developed innovative ways to dispose of their victims’ corpses. Santiago “El Pozolero” Meza Lopez, a Tijuana cartel enforcer arrested in January 2009, admitted to Mexican authorities that he was responsible for dissolving at least 300 bodies in sodium hydroxide, a process known as making “guiso,” Spanish for “stew.” The cartels can either dispose of a body or mutilate it and leave it to be found, depending on the specific message they wish to send.
If the average four-year college costs $100,000 to attend, in a sense Thiel is actually offering to pay these kids $200,000 apiece. And if he’d framed this generous offer as something like a $200,000 “real life scholarship,” he may well have escaped Weisberg’s ire.
In contrast, Facebook founder Mark Zuckerberg passes muster with Weisberg for throwing $100 million of good money after bad into a failing state school system. Indeed, it’s supposed to be a indication of his maturity and regard for others
Megan McArdle echoes some of the thoughts I’ve posted on this blog (her neighborhood is in an earlier stage of gentrification than my own, to put it nicely):
Yesterday, I rode the bus for the first time from the stop near my house, and ended up chatting with a lifelong neighborhood resident who has just moved to Arizona, and was back visiting family. We talked about the vagaries of the city bus system, and then after a pause, he said, "You know, you may have heard us talking about you people, how we don’t want you here. A lot of people are saying you all are taking the city from us. Way I feel is, you don’t own a city." He paused and looked around the admittedly somewhat seedy street corner. "Besides, look what we did with it. We had it for forty years, and look what we did with it!"
Ms McArdle was dumbfounded by this statement from a black person, largely because only a racist white person would have said something like this.
I ripped on Half Sigma’s conception of value earlier in the week. I think it would be helpful to explain various conceptions of value, as misconceptions of value cause most of the worlds’ economic problems.
Let’s keep using the same example that HS used. Assume that Professor Mankiw gives an economics speech and is paid $1000.
Mainstream economists: Mainstream economists say that the value of the speech is $1000. Note that this allows them to do all sorts of fancy calculations and modeling exercises. Marvelous consequences follow from the belief that economics speeches = $1000. Unfortunately, this belief is incorrect.
Marxist economists: Marxist economists believe that the price paid is not the true value. For these economists, the price paid represents the value and profit. Such economists would have some way (which they generally don’t define) of determining what portion of the $1000 is "profit." Generally, they would grant that Professor Mankiw’s time spent giving the speech and preparing for the speech is worth something of value. The rest is profit, which represents a loss to society.
Half Sigma: His conception of value transfer is basically the Marxists’ conception of profit. However, HS goes further and does not allow that Professor Mankiw’s time spent writing the speech, for example, is worth anything. Presumably, under this methodology, if Professor Mankiw gave a speech for free, HS believes that no one would come – after all, the value of the speech is zero. (I suppose if a person’s only other alternative activity had a negative value, such a person might attend a free Mankiw speech. However, my point is that if HS was correct, we would expect to see no one attending Mankiw speeches).
Austrian economists: For Austrians, value is ordinal. So, from the speech example, all we can conclude is that Professor Mankiw valued $1000 more than not giving a speech. Similarly, the person that paid for the speech valued a Mankiw speech more than $1000. From this, we cannot conclude that speech = $1000 (or $1001, etc). The professor may have been willing to give the speech for $900 and the organizer may have been willing to pay $1200. Also, we cannot conclude that $x of the $1000 is profit. We simply do not have enough information to make such a conclusion.
In one sentence:
It’s a bit hard for your opponents to paint you as crazy when the guy who sat next to you at the debate has his beard sculpted to look like a pair of testicles.