Quotulatiousness

March 18, 2024

Life among the WEIRD

Filed under: Books, Economics, History — Tags: , , — Nicholas @ 04:00

Rob Henderson reviews The WEIRDest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous by Joseph Henrich:

The word “WEIRD” stands for “Western, Educated, Industrialized, Rich, Democratic.” It is also a convenient way to communicate that people from such societies are psychologically different from most of the rest of the world and from most humans throughout history.

In short, the Western Church (Henrich’s term for the branch of Christianity that rose to power in medieval Europe) enacted a peculiar set of taboos, prohibitions, and prescriptions regarding marriage and family. This dissolved Europe’s kin-based institutions, and gave rise to a more individualistic psychology, which in turn spurred the creation of impersonal markets in which people grew used to interacting with and trusting unrelated strangers, and propelled the development of voluntary institutions, universally applicable laws, and innovation.

Characteristics of WEIRD people

WEIRD people are hyper-individualistic, self-obsessed, nonconformist, analytical, and value consistency. We try to be “ourselves” across social contexts and prize “authenticity”.

The book reviews research indicating that Americans rate those who show behavioral consistency during interactions in different contexts as more “socially skilled” and “likable” compared to those who are more behaviorally flexible. In contrast, non-WEIRD people view personal adjustments as reflecting social awareness and maturity.

In addition to valuing behavioral consistency, WEIRD people are more likely to feel guilt than shame. In contrast, non-WEIRD people are more likely to experience shame as opposed to guilt. Shame is the result of not living up to the expectations of one’s community. Guilt is a private emotion that results from falling short of our own expectations, rather than the community’s.

Relatedly, a recent study found that people can experience shame for being accused of actions they didn’t commit. The accusation alone was enough to elicit this powerful emotion. Shame is a reaction to others believing we did something bad rather than a reaction to actually doing something bad.

Delayed gratification also appears to be more prevalent in WEIRD societies. When researchers offered WEIRD people the choice between a smaller monetary payment up front, or a larger sum later, they tended to choose the larger sum. In contrast, most non-WEIRD people preferred the immediate, smaller, reward.

Interestingly Henrich relays data suggesting that greater patience is most strongly linked to positive economic outcomes in lower-income countries. Put differently, the tendency to defer gratification seems to be especially more important for economic prosperity in countries where formal institutions are less effective. This pattern holds within countries as well, such that patient people obtain higher incomes and more education. Patience is related to success after controlling for IQ and family income, and, even within the same families, more patient siblings obtain more education and higher earnings later in life.

Moreover, WEIRD people are more likely to adhere to rules even in the absence of external sanctions. The book reports that until 2002, U.N. diplomats from other countries were immune from having to pay parking tickets in New York City. Diplomats from the UK, Sweden, Canada, and other countries received a total of zero parking tickets. But diplomats from Bulgaria, Egypt, and Chad, among other non-WEIRD countries accumulated more than 100 tickets per member of their respective delegations. When diplomatic immunity was lifted, parking violations declined, but the gap between countries persisted.

But while they may be patient and rule-following, WEIRD people are more likely to be fair-weather friends. Relative to other populations, WEIRD people assign higher value to impartiality and show less favoritism toward friends, family members, and co-ethnics. We are more likely to abhor nepotism and believe in universally applicable principles.

Slimy “nudgers” want to manipulate the food you buy by “denormalizing” what you enjoy

Filed under: Britain, Business, Food, Media — Tags: , , , , — Nicholas @ 03:00

Christopher Snowden on the self-imagined elites’ desire for you dirt people to eat a different diet than you would voluntarily choose for yourselves:

On Thursday, Legal & General Investment Management’s senior global environmental, social and governance (ESG) manager told Nestlé to sell less sugar. It’s not for want of trying. In 2018, Nestlé launched Milkybar Wowsomes with 30% less sugar than a Milkybar. The company described it as a “great tasting product” that was the result of “a scientific breakthrough” but when it was discontinued in 2020, Nestlé lamented that demand for it had been “underwhelming”. In 2021, it launched a non-HFSS version of Shreddies called Shreddies The Simple One which contained just four ingredients. The company said:

    We know that consumers are looking to eat more healthily, especially following the pandemic. Shreddies The Simple One is an exciting new addition to the breakfast table that caters to growing demand, with a delicious taste consumers will love.

Consumers did not, in fact, love it and it was withdrawn from sale the following year.

Today, the King’s Fund has added its voice to the call for mandatory reformulation targets enforced with heavy fines. The King’s Fund’s job has traditionally been to get more money for the NHS but it is under new management with Sarah Woolnough, a former trustee of Action on Smoking and Health and former CEO of Cancer Research UK, so it is now involved in lifestyle regulation.

    Compelling food manufacturers to strip out large amounts of fat, salt and sugar would help “denormalise” the routine consumption of unhealthy food, Sarah Woolnough, the chief executive of the King’s Fund, told the Guardian.

The word “denormalise” is taken straight from the anti-tobacco playbook. See how it works yet?

As the Guardian points out, the King’s Fund has done some polling which finds that reformulation is hugely popular in the abstract.

    Overall, 67.3% of Britons agree that the government should require companies to reduce the amount of fat, salt and sugar they put in their products, a survey for the influential health thinktank undertaken by Ipsos Mori found. Only 5% disagreed.

This is a beautiful example of the difference between stated preferences and revealed preferences. People love the idea of fat, salt and sugar being removed from food. Who wouldn’t, so long as the food tasted the same? But it doesn’t taste the same. It tastes considerably worse. And when reformulation isn’t physically possible — for example, with nearly all confectionery, biscuits and cakes — the only way to meet the target is by shrinking the product. Some chocolate bars are now so small that a dual pack is the default (and so, as with the sugar tax, big business is doing rather well out of it). And, yes, that is because of the government’s reformulation scheme.

If pollsters asked people if they are in favour of shrinkflation, I doubt many would say yes. As for reformulation, the only way to get an informed opinion would be to do a taste test using the “before” and “after” versions of popular food products and ask people whether the government should mandate the reformulated version and ban the original version. Again, I doubt many people would give unqualified support for reformulation.

Fortunately, we don’t need to carry out such experiments because the public have been offered reformulated products many times in the real world. Sometimes they become popular — in which case there is no need for government coercion — but very often they are a flop, and in many cases they cannot even be attempted.

The British public have put up with a lot from meddlesome puritans in the last 20 years, but I strongly suspect that if the government tried to force us to eat the likes of Milkybar Wowsomes and Shreddies The Simple One, the thin blue line would finally snap.

March 10, 2024

QotD: Sustainability

Filed under: Economics, Environment, Quotations — Tags: , , , — Nicholas @ 01:00

I would argue that financial stability has everything to do with environmental sustainability (though I will admit that this comparison is a bit hard since environmentalists seem to bend over backwards to NOT define “sustainability” very precisely). In fact, I think that sustainability is baked right into the heart of capitalism.

The reason for this comes back to the magic of prices. Of all the amazing, wondrous things we celebrate in the world, prices may be the most overlooked. Just think of it: with no governing structure or top down ruling board, a single number encapsulates everything most everyone in the world knows about a particular product: both its utility and relative scarcity, both now and as anticipated in the future. It is a consensus derived voluntarily between millions of people who never meet with each other and likely never communicate with each other.

It is amazing to me that people who talk so much about their concern for scarcity tend to be the same folks who ignore prices and even eschew markets and capitalism. But in prices we have a number that gives us a single metric telling us the world’s consensus on the current and future scarcity of any commodity.

We do know that prices can miss some things. Perhaps most relevant today, they can fail to include the cost of emissions (ground, water, air) associated with that commodities extraction, refining and processing, and use. But compared to the effort of trying to create some alternate structure for managing product scarcity, this is a relatively simple problem to fix (simple technically, but not necessarily politically). Estimates of these pollution costs can be added as a tax (e.g. a carbon tax on fossil fuels to take into account climate effects of CO2 emissions) and prices will continue to work their magic but with these new factors added.

Warren Meyer, “Sustainability Is Baked Right Into the Heart of Capitalism”, Coyote Blog, 2019-10-10.

February 29, 2024

QotD: The fallacy of “engineering” economic growth

Filed under: Economics, Quotations — Tags: , — Nicholas @ 01:00

[The] ability to achieve the commercial exploitation of new scientific knowledge is heavily dependent also upon – as Deirdre McCloskey explains – people’s attitudes toward market-tested innovation, creative destruction, and progress.

Economic growth – while it is made possible by, and itself makes possible, countless impressive mechanical and technological feats – is not itself a mechanical, technological feat. Sustained economic growth cannot be engineered as can successful missions to the moon. The economic, legal, and social institutions required for there to be sustained growth are many, indescribably intricate and complex, and largely unseen (and, hence, unappreciated). To observe with one’s senses, statistics, and measuring instruments a successful economy, or even just a successful firm within a successful economy, is to observe only the surface of economic and social reality. A vast, deep ocean of complex attitudes and margins of adjustments swirls beneath.

Among the many, typically unappreciated implications of this reality is this: even if people in country B manage to acquire, by whatever means, all of the intellectual property belonging to the people of economically successful country A, the people of country B do not thereby gain any sure means of successfully “growing” their economy.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2019-08-19.

January 31, 2024

QotD: The inner-most “zones” outside a typical pre-modern city

Filed under: Economics, Europe, Food, History, Quotations — Tags: , , — Nicholas @ 01:00

Diagram of von Thünen’s model from The Isolated State, after Morley (1996), 62. The agriculture ring is subdivided by intensity (intensive, long-lay and three-field), but here I have merged them for simplicity. The agriculture zone is wider because it did, in fact, tend to cover a larger area. The fade in the pastoralism zone is meant to indicate shifts from ranching to transhumance.

We’ll start at the inside, right next to the city and move outward. Imagine each “zone” as a wider concentric circle, moving outward from the city (see the image to the right). Because transportation costs (especially overland) are so high, distance from the city plays a dominant role in how the land is used and thus consequently what the countryside around the city looks like. As you move further and further away, transportation costs interact with the structure of agriculture to make different activities make more sense, creating somewhat predictable patterns.

Land very close to the city is valuable because its produce can reach the market with much lower transportation costs (and pretty much always in a single day’s walk). As a result, if the land can support any kind of productive use, it will not be left empty. Instead, the land is going to be put to the most productive use possible. Improvements that – because of cost or labor – might not be attempted on less valuable land further out will likely be done in close proximity to the city. Stepping out of our ideal model for a moment: this is especially true of irrigation, since cities tend to be on waterways (especially rivers) anyway, making irrigation both more valuable due to low transport costs and easier to accomplish.

Thus land in this innermost zone is likely to be heavily improved (irrigation, terracing to get maximum space out of hills, etc). Labor use will also be intensive, both because it is readily available (you are right next to the major population center) and because labor costs are small compared to the high value of the land. If you have managed to get some farmland right outside the city gates, it is very much worth your time to hire whatever labor you need to get the most out of it, so as to recoup the cost of buying or holding such valuable land.

The other improvement one is likely to do in this zone, at least for growing crops, is make extensive use of fertilizer, which in this case generally means manure. The good news is that this zone is directly next to the city, with its intense concentration of animals and people producing manure, making manure cheaper (yes, people did pay for it). Extensive use of manure lets the fields stay under cultivation more often – being fallowed less frequently. At greater distance, the cost of the manure for this begins to outweigh the value of the extra crops, but so close to the city, land this valuable ought to be kept producing as much as possible.

So what kinds of land use does this lead to? The two key activities that von Thünen identifies are horticulture and dairying, to which I’ll add trough-fed animals like pigs (not quite dairy, but as we’ll see, similar from an economic perspective). Why? Horticulture – the intensive growing of fruits and vegetables, often in small “market gardens” – is labor intensive and offers a high economic yield for the space. Land used for horticulture can be kept under almost continual cultivation (if manured, but see above), but gardens can be fussy and demand quite a lot of labor, compared to hardier plants (like maize corn or wheat). Likewise, dairy animals (which, up close to a large city, will be stall-fed rather than grazed or else transported in “on the hoof” and grazed much further out) and pigs (fed by trough) don’t require much space and offer a high economic yield. Both also produce manure which is in demand near the city for the reasons described above.

The other reason to keep these activities so close to the city is access to the market, for two related reasons. First, fresh dairy products, meats and vegetables spoil rapidly, so they must be gotten to market quickly. Remember that this is a world without refrigeration, so as soon as the plant is picked, the cow is milked or the pig is killed, the clock is ticking on spoilage (yes, there are ways to preserve meat, of course – but we’re talking fresh animal products). Precisely because these foods don’t travel or keep well, they tend to be luxury products as well – something produced for the market and bought by rich non-farmers who live in the city.

So what kind of terrain should we see here? Not open grassland or nice wide open fields. Instead, expect small plots, with clustered buildings, typically clinging to the roads leading into the city. Now – especially in the post-gunpowder age – there might be laws forbidding certain kinds of structures close to the city walls (if the city is walled), which might create some open space (but typically not vast). Likewise, when looking at historical city maps, also be wary: this innermost land-use zone was often contained within the city walls of smaller cities.

The next zone – also quite close to the city in von Thünen’s model is – perhaps somewhat surprisingly – a forest zone. That’s not to say that this is generally wild, uncontrolled forest. The reason for a forest zone at such close distance to the city is to provide wood, particularly firewood for heating. Trees might be arranged intentionally along field separations or on spots of agriculturally marginal land close to the city. Forests like these in the Middle Ages would often have been coppiced or pollarded – that is, the trees would have been intentionally cut to produce lots of long, thin straight branches which can be easily harvested to produce nice, evenly sized bits of wood.

Wood is obviously at no risk of spoiling, but it is heavy and bulky, making a close supply valuable. Moreover, the city will need quite a lot of it, for cooking and heating. That said, trees can often be grown either on very marginal (for agriculture) land or else between fields and farms outside of the city, so these patches of forest might often go on land that is a touch too rough or poor for intensive agriculture, or otherwise be squeezed in between land used for other purposes. Still, it is quite common to find spots of forest next to cities and villages alike.

(To answer a quibble in advance: of course this assumes wood is a key heating element. Societies in more arid climates often lack sufficient wood and might use dung, while wet enough areas may use peat. Historically, London shifted over to using mineral coal earlier than most places. All of these choices will impact the role and importance of forest near the city.)

Bret Devereaux, “Collections: The Lonely City, Part I: The Ideal City”, A Collection of Unmitigated Pedantry, 2019-07-12.

December 26, 2023

QotD: The economic lessons of A Christmas Carol

Filed under: Books, Britain, Economics, History, Quotations — Tags: , , , — Nicholas @ 01:00

Sometimes A Christmas Carol is read as a critique of capitalism, which is understandable. Dickens had, for example, seen firsthand the horrors of 19th-century English coal mines, where young children sometimes slaved away in darkness and despair. Rather than throw out capitalism, however, Dickens may have sought to soften its harsher edges. The Economist magazine once suggested the tale was not so much a Karl Marx-style attack as it was the work of a reformer.

After all, Tiny Tim and the street children of London don’t run Scrooge out of town like a pariah. Nor does Scrooge abandon his business to dedicate his life to eastern philosophy. Rather, he learns to voluntarily spread his wealth around, not so differently than Bill Gates or MacKenzie Scott might do today.

One could draw the conclusion, therefore, that a businessman who has accumulated vast wealth can do many great things through charity. Today, the “Giving Pledge” signed by Warren Buffet and others, as well as elements of the “Effective Altruism” movement, adopt a model of this sort, which essentially says the best way to do good is to make a lot of money. Scrooge’s belated charitability never would have been possible if London had been home to communist breadlines.

The idea goes beyond charity. In The Constitution of Liberty, the great economist Friedrich Hayek argued that it’s socially beneficial to have a leisure class of wealthy individuals pursuing their idiosyncratic passions or even vanities. Today, Jeff Bezos and Elon Musk plan to take us to the stars with SpaceX and Blue Origin. Will they make it to Mars or beyond? They might not beat the odds, but it can’t happen if they don’t try.

One might apply the same logic to cryptocurrencies. Like Scrooge’s wealth, they make some people uncomfortable, and at the moment they can resemble online gambling. But that doesn’t mean they should be banned or replaced by a boring, government-run alternative. Like Musk and Bezos’s space aspirations, there’s potential for the technology to revolutionize an aspect of life — in this case, financial transactions on the internet. That potential is just as-of-yet unfulfilled.

James Broughel, “The Hidden Economic Lesson in A Christmas Carol“, Foundation for Economic Education, 2021-12-24.

December 8, 2023

QotD: Prices as information

Filed under: Economics, Quotations — Tags: , , , , , — Nicholas @ 01:00

Price = information, gang. Adam Smith said that any item’s real value is what its purchaser is willing to pay, and this is exactly the kind of thing he was talking about.

Let’s all take another huge toke and return to our Libertarian paradise, where all conceivable information is both completely accurate and totally free to circulate. And since we’re now all so very, very mellow, let’s give Karl Marx due credit. One of his main gripes with “capitalism” is that it “commodifies” everything. Everything has its price under “capitalism”, Marx said, even stuff that shouldn’t – human life, human dignity. Since this is a college classroom and I’m the prof, I can assign some homework. Go google up “kid killed over sneakers”. You can always find stories like that. Put your natural, in-many-ways-admirable young person’s urge to rationalize aside, and simply consider the information. What were those Air Jordans really worth, based on the stuff we’ve learned today?

See what I mean? Marx had a point. What are those sneakers worth, considered from the standpoint of “demand”? Obviously more than whatever a human life is worth, considered from the same standpoint. Hence Marxism’s enduring appeal to young people whose hearts are in the right place. “Commodificiation”, or “reification” as he sometimes called it, is very real, and very nasty …

Severian, “Velocity of Information (I)”, Founding Questions, 2020-12-26.

November 23, 2023

QotD: The Austrian and Chicago schools of economics

Filed under: Economics, History, Liberty, Quotations — Tags: , , , — Nicholas @ 01:00

[Bureaucracies will always expand far beyond the “problem” they were instituted to address] was, anyway, the view of that “Austrian school economist”, Ludwig von Mises, proponent like the rest in that school of “classical liberalism”. His hatred of bureaucracy was a wonderful, animated thing. In his great book, Human Action, and many others, he could become almost boring on the topic. What distinguishes the Austrian school from, say, the famous Chicago school of Milton Friedman and his ilk, was its European origin. (They were, however, consciously allied.) The “Austrians” go back, to Catholic antecedents, and their interests are not reducible to “pure economics” (scare quotes because there is no such thing). Over time it extended to broad social questions, and through a constant interest in the history of ideas. These were multilingual and multicultural, in the manner of the old Habsburg empire; where our American classical liberalism has been almost unilingually English, provincially distrustful of foreign thinkers, and buzzing with statistics. (You’ll need a degree in math.)

War propelled the “Austrian” thinkers westward, and the fall of the Berlin wall propelled the “Chicago” school east. The terms no longer have geographical significance.

What all classical liberals have in common is the passionate vindication and defence of human freedom. That is what makes them, unlike progressives, readable in subsequent generations. Their subject matter cannot become dated. The “Austrians” are also necessary to understand modern history, positively as well as negatively, in the evolution of, for instance, the Christian Democratic movement that conceived a peaceful post-war Europe, in defiance of secularizing bureaucratic trends and mass-man “ideals”. Alas, this was overall defeated by the Eurocratic trend-setters, determined to build a magnificent autocratic monument to themselves.

I have the most enchanting memory of opening the box that contained an American reprint of Human Action (big thick book), which I had ordered at the age of fifteen. I no longer own a copy, but gather it still stands as a monument to the resistance — a study of “praxeology”, or purposeful human choices, stretching so wide that even religion and morality could be touched. (Conventional economics has no time for either.) A half-century later, I can even remember the construction of an earnest reading list, that was soon abandoned when I went on the road.

One may see the great division in Western thought and politics, which the Austrian-school Friedrich Hayek traced back to Bacon and Descartes, and can be traced farther to the Nominalists of the later Middle Ages. Humans live in freedom and make choices, to be restrained only by the plainest moral codes. Or, by the alternative thesis, we are components of a machine, which the man with Power can monkey with, by implanting stimuli here and there.

We are creatures of God, or — we are replaceable parts in a bureaucracy.

David Warren, “Austrian schoolboy”, Essays in Idleness, 2019-09-17.

November 22, 2023

Marginal Thinking and the Sunk Cost Fallacy

Filed under: Business, Education — Tags: — Nicholas @ 02:00

Marginal Revolution University
Published 1 Aug 2023

Thinking on the margin is one of the most fundamental concepts in economics – and a valuable everyday tool for making optimal decisions.

For such an important idea, the meaning of marginal thinking is surprisingly simple: when faced with a decision, you should compare the marginal benefit of a possible action to its marginal cost. If the marginal benefit is greater than the marginal cost, do it!

Marginal thinking is best illustrated by some examples of everyday decisions. The volume you choose when you watch TV, the pricing strategy of a clothing shop, or even the decision to walk out of a boring film are all informed by marginal thinking.

The “Sunk Cost Fallacy” is a common failure to apply marginal thinking. Focusing on past decisions – the price we paid for an item, the time we’ve already invested in a relationship – can lead us astray. We can’t change the past, so only the potential marginal benefit and marginal cost of the next possible action are relevant to decision-making.
(more…)

November 18, 2023

QotD: Teaching Marx’s Labour Theory of Value in university

You have to deal with Marx and Marxists in every nook and cranny of the ivory tower, of course, but when you teach anything in modern history you have to confront him head on. Since Marx was a shit-flinging nihilist pretending to be a philosopher while masquerading as an economist, economics is the easiest entry point to his thought. So I’d go at him head-on.

The Labor Theory of Value makes intuitive sense, especially to college kids, who consider themselves both idealists and socially sophisticated. So, I’d tell them, we all agree: Nike’s sneakers cost $2 to make, but sell for $200; therefore, the other $198 must be capitalist exploitation, right? In a socially-just world, sneakers would never cost more than $2, since that’s the amount of “socially useful” labor that went into making them.

To really get them thinking, at that point I’d offer to trade them my shoes, which were of course the butt-ugliest things I could find, bought special at the local Salvation Army just for that purpose. “These cost $2,” I’d tell them. “They’re my social justice shoes. Who’s willing to trade? Oh, nobody? Why ever not?” Or I’d come to class in a plain Wal-Mart t-shirt, on which I’d written “I Heart [This University]” in Magic Marker. Same deal, I’d tell them. “The stuff you guys are wearing sends the same message, but I’ve been in the bookstore, I know for a fact that the hoodie you’re wearing [pointing to the most dolled-up Basic Becky I could find] costs $75. My shirt only cost $2. We’re both telling the world that we love [this university], but yours cost a whole lot more. You, Becky, are taking like $73 out of the mouths of poor people by wearing that … right?”

Repeat as often as needed, until they get the idea that “price” isn’t the same thing as “cost”. This isn’t physics class, I’d tell them, where we can assume away important real-world stuff like friction. Out here in the real world, we have to take stuff like “overhead” and “taxes” into account, such that even if those ugly sneakers or that crappy college-logo t-shirt only “cost” $2 at the point of manufacture, getting them onto the shelves at the the store here in College Town adds a whole bunch more. And then there’s demand, which we’ve already covered. I offered to trade y’all my shoes. Hell, I offered to give away my homemade t-shirt, and nobody took me up on it. You might change your tune if you were naked – and here we will note that this was the kind of situation Karl Marx was putatively addressing – but if you have any choice at all you’ll stick with what you have, because nobody in his right mind wants to wander around campus in a homemade t-shirt …

In short, I’d tell them, price is information. Done right – in an absolutely free market, the capital-L Libertarian paradise, which is of course as bong-addled a fantasy as Marx’s – price is perfect information. Nike’s sneakers don’t sell for $200 because that’s what it cost to make them. The $200 is the aggregate of all those costs we talked about before – cost of materials, labor, transportation, taxes, and, as we’ve seen by the fact that y’all still won’t trade me shoes, the most important piece of information, demand.

Severian, “Velocity of Information (I)”, Founding Questions, 2020-12-26.

November 17, 2023

QotD: The essential meaninglessness of “happiness” surveys

Filed under: Economics, Quotations — Tags: , , — Nicholas @ 01:00

The reality identified here … is the reason why good economists pay no attention to so-called “happiness studies”. Human wants being unlimited, each and every person – apart from, perhaps, the rare Gandhi – always experiences a vast array of unsatisfied wants. This lack of satisfaction is felt, by many, as a kind of unhappiness – at least as a kind of unhappiness that will strike many people to report it as such on “happiness surveys”.

The good economist understands that ever-greater prosperity does not bring ever-greater felt happiness. But the good economist also understands that people are indeed better off, in a real sense, the higher is their material standard of living. Greater material prosperity brings opportunities to experience new wants, wants that people less prosperous never experience. Inability to satisfy all of these new wants makes many people feel “unhappy”. But were these same people less materially prosperous, they would be at least equally “unhappy” for want of ability to satisfy needs that their current higher level of material prosperity enables them to satisfy.

Another piece of reality revealed by Rogge’s point is that worries about technology or trade destroying opportunities to work are misguided. As long as human beings have unmet desires and unfilled wants, human beings will have opportunities to work.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2019-08-02.

November 10, 2023

QotD: Economic distortions of slavery in the Antebellum South

Filed under: Economics, History, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

This notion that slavery somehow benefited the entire economy is a surprisingly common one and I want to briefly refute it. This is related to the ridiculously bad academic study (discussed here) that slave-harvested cotton accounted for nearly half of the US’s economic activity, when in fact the number was well under 10%. I assume that activists in support of reparations are using this argument to make the case that all Americans, not just slaveholders, benefited from slavery. But this simply is not the case.

At the end of the day, economies grow and become wealthier as labor and capital are employed more productively. Slavery does exactly the opposite.

Slaves are far less productive than free laborers. They have no incentive to do any more work than the absolute minimum to avoid punishment, and have zero incentive (and a number of disincentives) to use their brain to perform tasks more intelligently. So every slave is a potentially productive worker converted into an unproductive one. Thus, every dollar of capital invested in a slave was a dollar invested in reducing worker productivity.

As a bit of background, the US in the early 19th century had a resource profile opposite from the old country. In Europe, labor was over-abundant and land and resources like timber were scarce. In the US, land and resources were plentiful but labor was scarce. For landowners, it was really hard to get farm labor because everyone who came over here would quickly quit their job and headed out to the edge of settlement and grabbed some land to cultivate for themselves.

In this environment the market was sending pretty clear pricing signals — that it was simply not a good use of scarce labor resources to grow low margin crops on huge plantations requiring scores or hundreds of laborers. Slave-owners circumvented this pricing signal by finding workers they could force to work for free. Force was used to apply high-value labor to lower-value tasks. This does not create prosperity, it destroys it.

As a result, whereas $1000 invested in the North likely improved worker productivity, $1000 invested in the South destroyed it. The North poured capital into future prosperity. The South poured it into supporting a dead-end feudal plantation economy. As a result the south was impoverished for a century, really until northern companies began investing in the South after WWII. If slavery really made for so much of an abundance of opportunities, then why did very few immigrants in the 19th century go to the South? They went to the industrial northeast or (as did my grandparents) to the midwest. The US in the 19th century was prosperous despite slavery in the south, not because of it.

Warren Meyer, “Slavery Made the US Less Prosperous, Not More So”, Coyote Blog, 2019-07-12.

September 25, 2023

QotD: The economics of American slavery

Filed under: Economics, History, Quotations, USA — Tags: , , , , — Nicholas @ 01:00

Growing cotton … unlike sugar or rice, never required slavery. By 1870, freedmen and whites produced as much cotton as the South produced in the slave time of 1860. Cotton was not a slave crop in India or in southwest China, where it was grown in bulk anciently. And many whites in the South grew it, too, before the war and after. That slaves produced cotton does not imply that they were essential or causal in the production.

Economists have been thinking about such issues for half a century. You wouldn’t know it from the King Cottoners. They assert, for example, that a slave was “cheap labor”. Mistaken again. After all, slaves ate, and they didn’t produce until they grew up. Stanley Engerman and the late Nobel Prize winner Robert Fogel confirmed in 1974 what economic common sense would suggest: that productivity was incorporated into the market price of a slave. It’s how any capital market works. If you bought a slave, you faced the cost of alternative uses of the capital. No supernormal profits accrued from the purchase. Slave labor was not a free lunch. The wealth was not piled up.

The King Cotton school has been devastated recently in detail by two economic historians, Alan Olmstead of the University of California at Davis and Paul Rhode of the University of Michigan. They point out, for example, that the influential and leftish economist Thomas Piketty grossly exaggerated the share of slaves in U.S. wealth, yet Edward Baptist uses Piketty’s estimates to put slavery at the center of the country’s economic history. Olmstead and Rhode note, too, from their research on the cotton economy that the price of slaves increased from 1820 to 1860 not because of institutional change (more whippings) or the demand for cotton, but because of an astonishing rise in the productivity of the cotton plant, achieved by selective breeding. Ingenuity, not capital accumulation or exploitation, made cotton a little king.

Slavery was of course appalling, a plain theft of labor. The war to end it was righteous altogether — though had the South been coldly rational, the ending could have been achieved as in the British Empire in 1833 or Brazil in 1888 without 600,000 deaths. But prosperity did not depend on slavery. The United States and the United Kingdom and the rest would have become just as rich without the 250 years of unrequited toil. They have remained rich, observe, even after the peculiar institution was abolished, because their riches did not depend on its sinfulness.

Dierdre McCloskey, “Slavery Did Not Make America Rich: Ingenuity, not capital accumulation or exploitation, made cotton a little king”, Reason, 2017-07-19.

August 28, 2023

Why Britain Advanced Before Other European Nations | Thomas Sowell

Filed under: Britain, Economics, History, Law, Technology — Tags: , , , — Nicholas @ 02:00

Thomas SowellTV
Published 17 Dec 2021
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August 14, 2023

The WEIRDos – Western, Educated, Industrialized, Rich and Democratic societies

Filed under: Books, Economics, History — Tags: , , — Nicholas @ 03:00

Another anonymous book review at Scott Alexander’s Astral Codex Ten considers The Weirdest People in the World: How the West Became Psychologically Peculiar and Particularly Prosperous by Joseph Henrich:

Coming as he does from the scientific side of the aisle, Henrich isn’t just going to tell a story. He has a hypothesis about an empirical puzzle. The puzzle is the most important question, the big one, the one that once you think about it’s hard to think about anything else, the economists’ Holy Grail since Adam Smith: why are some countries rich and others poor?

His hypothesis comes from cross-cultural psychology. The West got rich because Westerners are different. People from Western, Educated, Industrialized, Rich and Democratic societies are WEIRD – the acronym comes from a previous article of his. In particular, compared to everyone else in the world and in history, modern Westerners:

  • Are individualist, not collectivist or conformist
  • Feel more guilt and less shame
  • Explain people’s actions by their innate dispositions, not their social role
  • Reason analytically not holistically
  • Follow more universal norms and less relationship-specific norms
  • Are more patient
  • Trust strangers more and are more honest.

This psychology might make societies richer, for fairly well-known and plausible reasons. The Weirdest People in the World (henceforth just WEIRD) sets out a causal chain from cultural change to psychological change to modern economic growth. The start of that chain is surprising: an obscure set of rules pushed by the medieval Catholic church, which banned marriage between cousins. The most important argument of the book is that these rules created WEIRD psychology.

How it worked: these marriage regulations served to dismantle intensive kin networks, which are the social cement of society almost everywhere else in the world. For most people in history, family hasn’t just been the place where children grow up and couples spend time together. Family has been the basic human group, and there have been extensive and precise rules dictating who counts as family (or clan) and how each person should act with respect to different relatives. The Church’s regulations, the Marriage and Family Programme (MFP), aimed to replace intensive kinship, and over many centuries it was more or less successful in doing that. We’ll come back shortly to why it wanted to.

So, the causal chain looks like this:1

WEIRD‘s key evidence is the link between the places where the Church promulgated the MFP and a set of psychological and social outcomes: the level of cousin marriage, the psychology of people living in those places today, social capital and economic growth. This is the scientific story of European history, and Henrich’s answer to the most important question in the world.

These maps from one of the scientific articles behind WEIRD show the basic causal claim: the medieval church reduced the intensity of kinship institutions.

He tells it with an extraordinary mastery of a very wide range of sources from anthropology, psychology, behavioural economics, economic history, and historical narrative. This book is for everyone, but the connoisseur will enjoy the bibliography: if you think it’s important and relevant, it’s probably in there, and there was also plenty of work which I did not know, and now feel I should. It takes a very smart person to keep this many balls in the air. Being at Harvard probably doesn’t hurt either – that’s the “collective brain” of the human network, which makes an appearance later on in the book.

So this book really sets down a marker: the anthropologists are returning from the Amazon, the Sudan and Polynesia, and coming for Western history and economics. It will be interesting to see how those target disciplines react.

Is it true?

Economists and historians think about Western history very differently.

Historians love irony and contingency. They enjoy byways. Triumphalist, linear narratives of progress are distrusted as “Whig history”. Growth economists, by contrast, are all about the linear bigness. They have a relentless focus on the one question of how the West got rich, and if you call that triumphalist, they will take out a chart of South Sudanese child mortality and laugh at you.

Both historians and historical economists — a more appropriate name than “economic historians” nowadays — are interested in causality. But economists have a crunchier, more “scientific” standard for what counts as proof of causality. You’ve got to have a treatment and a control group, and by default if you claim there are no confounds, they won’t believe you. You need you some plausible exogeneity. A random river where Napoleon’s armies stopped. The distance from Wittemberg where Luther nailed up his theses. And then, how does that affect something that matters today (if it doesn’t, then who cares?) Of course, the longer ago the exogenous treatment, the more impressive the result.

You can see the incentives that these disciplinary demands might set up, and that might worry you. At worst, you might get a kind of “underground river” concept of history, where

  1. X happened long ago
  2. [underpants gnomes whispering]
  3. Y is correlated with X today

Indeed this does seem to skip all the interesting, contingent bits:

On the other hand, if you want to explain an all-important outcome like the take-off into modern economic growth, then you can’t just mumble “one damn thing after another” or “irony and contingency”. That a hundred things randomly conspired to make the West Educated, Industrialized, Rich and Democratic is not a satisfying story. Why would the die rolls keep favouring this one place? (And you can’t invoke the law of large numbers. There are only five continents in the world, and modern economic growth did not have to happen anywhere at all.)


    1. It’s a bit more complex than that. In particular, the end of intensive kinship directly helps economic growth because it clears the way for voluntary associations to thrive. But the psychology angle is what’s really unique to WEIRD – in particular, Francis Fukuyama has previously argued that kin institutions might be a problem for higher-level cooperation.

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