Progressivism as protestantism

October 22, 2010

Ferdinand has some thoughts that go nicely with some of my recent posts.

“American children only beat other countries in terms of self-esteem”

October 22, 2010

The genius Taiwanese animators explain school reform in DC

Review of “National System of Political Economy” by Friedrich List

October 21, 2010

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.

The priests of the American religion have spoken

October 21, 2010

. . . and Juan Williams cannot work in their midst anymore.

If this story doesn’t convince you that Americas’ elites are all members of a specific religion (. . . "ultracalvinists believe in the universal brotherhood of man" . . .), nothing will.

The decline and fall of the American Empire

October 21, 2010

Diamond teeth edition:

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.

More murders Americans won’t commit

October 21, 2010

I was sort of hoping Vox would continue with this series. I’d like to submit this report from Stratfor:

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.

Peter Thiel vs. Mark Zuckerberg

October 20, 2010

Interesting thoughts:

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

On gentrification

October 20, 2010

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.

Conceptions of value

October 20, 2010

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.


October 20, 2010

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.