Quotulatiousness

December 28, 2019

American railways are simultaneously world-beating and terrible

Filed under: Business, Economics, Government, Railways, USA — Tags: , , , , — Nicholas @ 03:00

That’s because, as Sean Smith and Peter Earle point out, there are two very different entities running on America’s rails:

Burlington Northern Santa Fe (BNSF) locomotive 5399, Kansas City Southern (KCS) 4807, and 1890 westbound on the BNSF Emporia Sub near Timberland Blvd West of Northgate Street in Olathe, Kansas.
Photo by Tyler Silvest via Wikimedia Commons.

American railways are the envy of the world.

Many might shake a collective head at that statement. In the case of passenger rail that is an appropriate reaction. Since it was pieced together – a government-constructed Franken-rail system built of numerous bankrupt railways which were essentially nationalized – Amtrak has been a reliable money sink, losing tens of billions of dollars since 1970.

Any traveler that has used Amtrak to any significant extent has firsthand experience with the crumbling infrastructure, frequent delays, and general unpleasantness that accompanies U.S. passenger rail service. Even the oft-cited bright spot of Amtrak, the “high speed” Acela system (which shuttles between Boston and Washington D.C) pales in comparison when compared to high-end passenger rail systems in Western Europe, Japan, and China.

Bullet trains routinely travel at least 200 mph, whereas Acela trundles along at a pedestrian 84 mph, and there is no indication (and probably no intention) of that gap closing anytime soon.

U.S. passenger rail services in general are money-losing and antiquated versus their global counterparts, an inarguable (and to public transport proponents, embarrassing) fact. Passenger rail is just one part of the story, and serves as an excellent example of how not to manage a rail system. In fairness, efforts to turn Amtrak around (mainly through aggressive cost cutting) do seem to be having an impact, as current year losses total a shade under $30 million. It’s an admirable effort to be sure, but decades of losses, poor service, and general mismanagement cannot be ignored.

The U.S. freight railway system, conversely, is the envy of the world, and this is not hyperbole or chest thumping; the facts back it up. Since the Staggers Act of 1980, which deregulated freight rail, improvements have been substantial. U.S. freight railways carry 81% more ton-miles of freight, and costs have fallen 46%. (It isn’t common for an industry to increase its capacity by 81% while reducing costs by nearly half.) That level of success has even been noted by the Community of European Railway and Infrastructure Companies, which might be surprising, given the common assumption that Europe has a monopoly on rail excellence.

Compared side by side, it seems a conundrum: Amtrak limps along, still relying upon billions of dollars worth of taxpayer-financed subsidies, while U.S. freight railways evince growing profitability and capacity amid rapidly falling costs. Why are U.S. freight rails so profitable when U.S. passenger rail – sometimes traveling the same routes, on some of the same rails – remains a perennial money pit?

New Amtrak Viewliner diner Atlanta deadheading on the eastbound Capitol Limited at Point of Rocks in November 2017.
Photo by Mark Levisay via Wikimedia Commons.

December 27, 2019

QotD: The perils of tax reform

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

Deductions are the Cheez Doodles of tax policy: Everyone likes them; everyone who studies the matter knows they are not good for us; and nonetheless, most people will get very indignant if you attempt to replace them with something more wholesome.

This is why deductions rarely go away, no matter how stupid and detrimental to the fiscal and economic health of the republic. For example, virtually every wonk in Washington, from radical libertarian to fervent socialist, can agree upon at least one thing: the tax deductibility of employer-sponsored health insurance is a terrible idea. On the one hand, it costs the government a packet of money every year, money that has to be raised by higher taxes on someone else. On the other hand, it encourages employers to load as much compensation as possible into the health benefit package, which distorts our economy and contributes to ballooning costs. There is nothing nice to be said about this particular tax deduction, except that it undoubtedly seemed like a good idea during World War II.

And yet, when it comes time to, say, pass a major health-care reform, or reform the tax code, do our nation’s legislators start with the obvious, and get rid of this egregiously stupid deduction? I regret that there is no way to convey my hollow, despairing laugh in pixel form. Of course they don’t touch it. The very egregiousness of its immense costs, the massive distortions it has induced in American consumption patterns, mean that getting rid of it would be far too disruptive.

Megan McArdle, “Republicans Turned the Tax Code Into a Weapon”, Bloomberg View, 2017-11-03.

December 25, 2019

Repost – The market failure of Christmas

Filed under: Economics, Government — Tags: , , , , — Nicholas @ 03:00

Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:

Christmas gifts under the tree.
Photo by Kelvin Kay via Wikimedia Commons.

In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.

But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us — and who are spending other people’s money — perhaps can’t.

So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?

December 23, 2019

The lousy economics of gift-giving – “non-cash is a poor receipt of value”

Filed under: Economics — Tags: , , — Nicholas @ 05:00

Tim Worstall explains why gift-giving at Christmas is so economically inefficient:

Christmas gifts under the tree.
Photo by Kelvin Kay via Wikimedia Commons.

The point being made is dual, that individuals have agency and that utility is entirely personal.

To unravel that jargon.

Individuals, peeps, are able to make choices. We delight in making choices in fact, “agency” is the opposite of “anomie”, that feeling that society determines what we may or can do that so depresses the human spirits. We get to choose to get up at 6 am or 8. Have coffee or tea when we do. Go buy the latest platters from the newly popular beat combo, pay the ‘leccie bill or have the coffee out at an emporium.

Having choices, making them, makes people happier.

Secondly, utility. The result of those choices, which of them will maximise happiness, is different for each and every individual. Sure, we can aggregate some of them – food is usually pretty high up everyones’ list, that first litre of water a day tops most. But the higher up Maslow’s Pyramid we go the more tastes – and thus happiness devoured – differ.

So, we make humans happier by their having the choice to do what they want, not what others think they should want or have.

Thus, give people cash at Christmas not socks.

Balancing that is the obvious point that the care and attention with which a present is considered is part of that consumption of happiness. The boyfriend who actually listens to the type of clothing desired and goes gets it provides that joy that a bloke has, for once, been listening. Or the book that would never have been individually considered but was chosen because it might – and does.

Sure.

But the point isn’t about Christmas at all. That’s a way of wrapping the point so it can be left underneath the tree of knowledge.

December 21, 2019

The Treaty of Versailles And The Economic Consequences Of The Peace I THE GREAT WAR 1919

Filed under: Books, Economics, Germany, History, USA, WW1 — Tags: , , , , , , — Nicholas @ 06:00

The Great War
Published 19 Dec 2019

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John Maynard Keynes was an economist and part of the Paris Peace Conference in 1919. He had high hopes for a new post-war order but when he realized what Georges Clemenceau, David Lloyd-George and Woodrow Wilson were planning, he resigned from the conference. And then wrote a book about it: The Economic Consequences of the Peace became a bestseller and is one of the best known critiques of the Versailles Treaty.

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» SOURCES
Demps, Lorenz and Materna, Ingo (eds.). Geschichte Berlins von den Anfängen bis 1945. Berlin, 1987.
Eichengreen, Barry. Golden Fetters. The Gold Standard and the Great Depression 1919-1939. New York 1995.
Horn. Britain, France and the Financing of the First World War, 2002.
Hudson, Michael. Trade, Development, and Foreign Debt: Volume 2. Pluto Press, London, 1992.
Hudson, Michael. Superimperialism: The Origins and Fundamentals of U.S. World Dominance. Pluto Press, London 2003.
Keynes, John Maynard. The Economic Consequences of the Peace. Harcourt, Brace and Howe, New York, 1919.
Kinzer, Stephen. The True Flag: Theodore Roosevelt, Mark Twain, and the Birth of American Empire. St. Martin’s Griffin, 2018
Shirer, The Rise and Fall of the Third Reich. 1960.
Skidelsky, Robert. John Maynard Keynes, 1883-1946: Economist, Philosopher, Statesman. Penguin Books, New York, New York, 2003.
Skidelsky, Robert. John Maynard Keynes Volume I — Hopes Betrayed. Penguin Books, New York, 1983.

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December 17, 2019

“Oh, shut-up. Pound sand, you scowling urchin”

Filed under: Economics, Environment, Politics — Tags: , , , — Nicholas @ 03:00

I don’t often find myself nodding along with Kurt Schlicter‘s writings, but I have to agree that Greta Thunberg’s fifteen minutes must surely be up by now?

Clearly Greta Thunberg is being exploited by her cynical puppetmasters, but equally clearly she’s a tiresome, bizarre Marxist scold whose exploitation of the hapless dummies who buy into the climate change hoax is part of what is an increasingly violent plot to undermine capitalism and freedom. Recently, the cretins at TIME, which shockingly still exists in 2019, named her “Person of the Year.” That’s appropriate, since 2019 has been a very annoying year.

In 2029, after the world hasn’t ended but her usefulness has, she’ll be a Jeopardy question and probably shacked up with an unemployed performance artist named Björn in an Oslo suburb. Fun fact: “Greta Thunberg” is Swedish for “Cindy Sheenhan.”

But today, we’re all supposed to fall over ourselves over Pippi Longnagging – at least that’s what our betters command – yet it’s unclear why. Teenagers are notoriously ignorant, and ones spewing recycled Marxism are the worst of all. But the idea is not that this tiresome truant is some visionary thinker. The idea is to leverage her youth and awkwardness to keep you from speaking the indisputable truth that she’s a weird brat who presses for an ideology that butchered 100 million people in the last century. And now, she is hinting she wants to run up that score.

Trump mocked her and a zillion pearls were clutched. How dare you … criticize the Luddite pest who presumes to tell you how to live, leveraging the full benefit of her nearly 17 years of experience to explain to you how stuff should be. How dare you!

Oh, shut-up. Pound sand, you scowling urchin.

The kid is a fanatic, and though that’s no fault of her own – she’s a victim of her pinko exploiters – she is still spewing bloodstained poison.

Bloodstained poison, really? Isn’t she just a nice Eastern Norwegian who wants a better world with love and hugging? Or is she yet another aspiring fanatic ready to kill for the kreepy kommie climate kult?

The other day, this malignant muppet “told cheering protesters … ‘we will make sure we put world leaders against the wall’ if they fail to take urgent action on climate change.” Now, maybe her English is bad, or maybe she’s just ignorant, but then again the murder of opponents is the Marxist way.

December 14, 2019

Who will “Big Dairy” push as the next Conservative leader?

The Canadian supply management system is a classic case of concentrated benefits and diffused costs … all Canadians pay more for milk, cheese, and other dairy products, but the extra profits go to those who hold the quota allotment for production. During the last federal Conservative leadership race, the “temporary conservatives” were enough to push the Milk Dud over the top to defeat Maxime Bernier — because Bernier was outspoken in his opposition to the whole supply management cartel and threatened those guaranteed profits for the insiders. The Milk Dud has announced he’s stepping down, so who will Big Dairy choose to replace him?

Andrew Scheer, paid tool of Big Dairy, chugs some milk during a Press Gallery speech in 2017. I’ve called him the “Milk Dud” ever since.
Screencapture from a CTV video uploaded to YouTube.

To my mind the defining image of Andrew Scheer’s efforts to become prime minister of Canada, which officially came to an end Thursday, comes from the 2017 Press Gallery Dinner in Ottawa. “There’s some suggestion out there that I’m beholden to a certain group within the Conservative family,” he told the crowd, grinning. And then, dimples at maximum, he took a swig from a one-litre carton of Neilson two-per-cent milk.

It’s nice when politicians can poke fun at themselves. Most are really bad at it, betraying only their own ego. Scheer’s routine, by contrast, reportedly brought the house down. The problem is that, by all the evidence, Scheer was utterly beholden to the dairy industry. And absent the effects of alcohol, that’s not really very funny.

We knew at the time that, days before, Scheer had barely beaten Maxime Bernier in the party leadership contest with help from a few thousand votes from people whom Bernier not unreasonably called “fake Conservatives” — i.e., people who had purchased memberships for the sole purpose of voting for Scheer, for the sole purpose of maintaining supply management in the dairy industry (which Bernier opposes) intact.

We came to know later, thanks to a Dairy Farmers of Canada briefing book discovered by an aggrieved delegate to the 2018 party convention in Halifax, that the dairy lobby considered Scheer a “safety net.” Regardless of any vote by the party membership that might recommend freer markets in dairy, the book alleged, the farmers had Scheer’s commitment never to undermine supply management in an election platform.

Scheer denied any such deal existed, of course. But it seemed doubtful the dairy industry’s notoriously fearsome, professional and effective lobbyists could have been so misinformed.

It ought to have been a liability from the start: Here was the self-styled middle-class alternative to Justin Trudeau, the man who knows what it’s like to plan a family budget around the breakfast table, to scrimp and save, whose parents didn’t own a car, declaring his fealty to a cartel dedicated to inflating milk prices for the benefit of wealthy businesses. Har, har, har.

December 13, 2019

QotD: Labelling matters a lot in political discussions

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

If a nice name comes to be attached to a nefarious policy, even those people who are harmed by that policy can be misled into mistaking that policy as being one that works in their favor – or as being at least a policy that is admirably motivated or that achieves commendable outcomes for the public at large. Who, after all, dares oppose trade that’s “fair”? Who can object to “level” playing fields? Who would not want the government to prevent its citizens from being “dumped” on by foreigners? Who would applaud prices that are “too” low? These labels sneak in the false conclusion both that what is so labeled really exists as such, and that the accompanying policies actually achieve the results implied by their labels.

Don Boudreaux, “Quotation of the Day…”, Café Hayek, 2017-11-09.

December 12, 2019

“Socialism” and “Capitalism” in the United States

Filed under: Economics, Government, Politics, USA — Tags: , , , , , , — Nicholas @ 05:00

Antony Davies and James R. Harrigan look at the supposed conflict between sharing, caring socialism and raw, heartless capitalism in the context of the American political theatre:

These terms were once very clearly defined. Socialism is state control of the means of production. The intent is that these means are to be used for the public good. By contrast, capitalism is simply private ownership of the means of production. The intent is that these means are to be used to advance the interests of those who own them, which will in turn create conditions of general prosperity that can be enjoyed by all.

When polled, Americans express relatively well-defined views on both. And while nowhere near a majority of the American electorate favors a completely socialist system, a recent Gallup poll indicates that more than four in ten Americans think “some form of socialism” is a good thing. But what is “some form of socialism?” A society is either socialist or it isn’t. The state either owns the means of production or it doesn’t. There is no middle ground. Even our openly socialist politicians rarely advocate anything near as drastic as government control of the means of production.

[…]

And just as transferism is not actually socialism, the system against which transferists rail isn’t capitalism, either. When they think of “capitalism,” transferists imagine a monied class that defrauds customers, pollutes the environment, and maintains monopoly power, all because the monied class is in bed with government. But capitalism is simply the private ownership of the means of production. What people are actually describing is something more appropriately called “cronyism,” which can manifest in a socialist system as easily as in a capitalist one. Cronyism isn’t a byproduct of the economic system at all; it is a byproduct of politics.

For current examples, one need look no further than North Korea, Cuba, and Venezuela. Socialists say these aren’t examples of “real socialism,” and they’re not. There was a time when these countries were indeed socialist, just as there was a time when the United States was capitalist. But cronyism has overtaken these countries’ economic systems, just as it did in humanity’s grandest socialist experiment: the Soviet Union. Life was simply different for inner-party members than it was for workers. This is the real danger that all countries face, regardless of the animating principles of their economic and political structures.

[…]

We need to answer the core question: how much transferism do we want?

In order to figure this out, we need to come to terms with the fact that any transfer is a confiscation of wealth from the people who created it. That confiscation will decrease wealth creation in the long term by decreasing an important incentive to take the risks necessary for creating wealth. Second, we have to recognize that transferism is addictive. No matter how much we transfer, people will always want more. The United States’ $23 trillion debt, the largest debt the world has ever seen, has come about because of American voters’ voracious appetite for transfers combined with politicians’ obvious incentive to provide them.

The solution politicians have found is to pass off the cost of the transfers to taxpayers who haven’t yet been born by borrowing the money, thereby leaving to the next generation the problem of repaying the debt or enduring unending interest payments. It’s a house of cards to be sure, but from their perspective, it will be someone else’s house of cards.

In the end, we have polluted our political discourse with two words that no longer have much meaning: socialism and capitalism. In the process, we don’t call the animating principle of modern American politics what it actually is: transferism. The only winners have been the politicians who manage to gather votes by keeping the electorate in a near-constant state of friction. And they keep winning if people keep thinking in categories that ceased to have any real meaning years ago.

Explaining the decline in library usage

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

At the Continental Telegraph, Tim Worstall refutes the claims that it’s the evil right wingers (in this specific case, British Tories) that are driving the library out of business:

“Nottingham central library” by JuliaC2006 is licensed under CC BY 2.0

Despite spending more money, library use, measured in terms of at least one visit per year, fell from 48.2% of adults to 39.7% of adults. I make that as roughly 1/5th of the adults that were using them not doing so in 5 years. 17% sounds slightly on the conservative side.

And if this was about “austerity”, you’d expect visits to be rising, rather than falling from 39.7% to 32.9% since the Conservatives/Lib Dems took over. Because the thing with libraries is that they suit the time rich and cash poor. If you’ve not got much else to do, you can spend time walking to a library, getting a book, walking home and easily finding time in the fortnight to read it. And 9-5 hours don’t bother you. There’s areas of the country, like Weston-Super-Mare, stuffed full of retired people and libraries are popular.

If you’re working all week you have to get to a library in your day, park your car, pay for parking, same on return, and make sure to set aside the time to do the reading, you might decide libraries aren’t that convenient.

The decline of libraries is a success story for us. We created them because books were very expensive once. Owning a giant library was the mark of a rich man. Paper was expensive, printing was expensive, binding was expensive. Over the decades, we figured out how to do this cheaper. Then we figured out how to do retailing cheaper. And then we got e-books which take production costs to near zero. Books are cheap. Cheap enough that most of us don’t want the faff of libraries. So, close some of them.

QotD: Economic sophistication in ancient Greece

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

Let us take the case of Thales of Miletus (c620-c546 BC), one of the earliest of Greek philosophers. This story is told of him by Aristotle:

    There is the anecdote of Thales the Milesian and his financial device, which involves a principle of universal application, but is attributed to him on account of his reputation for wisdom. He was reproached for his poverty, which was supposed to show that philosophy was of no use. According to the story, he knew by his skill in the stars while it was yet winter that there would be a great harvest of olives in the coming year; so, having a little money, he gave deposits for the use of all the olive-presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest-time came, and many were wanted all at once and of a sudden, he let them out at any rate which he pleased, and made a quantity of money.

Whether this is a true story about Thales, or even of market conditions in Miletus, is of no importance. What is important is the unvoiced background to the story. It cannot easily be taken as an instance of the predatory capitalism that Polanyi and Finley are willing to grant to the ancient world. Thales decided that there would be a good olive crop. He did not buy olive presses. Instead, he took out options on them. He and those who dealt with him, seem to have understood the nature of the deal made. When it turned out that Thales had predicted right, he seems to have had no trouble enforcing his contracts. This assumes a familiarity of the courts with such contracts, and a commercial state of mind either among the peoples of Chios and Miletus, or — assuming the story is apocryphal — among Aristotle’s Athenian audience.

Many of the Greek city states were considerable trading centres. They lack any detailed commercial histories. Certainly, no ancient writer thought it consistent with the dignity of history to describe their economic structure and the causes of their commercial greatness. But this casual anecdote must stand in place of the unwritten histories as evidence for thriving and sophisticated financial economies.

Sean Gabb, “Market Behaviour in the Ancient World: An Overview of the Debate”, 2008-05.

December 3, 2019

Canada and China

Filed under: Cancon, China, Economics, Politics — Tags: , , , , — Nicholas @ 05:00

Ted Campbell discusses Canadian foreign policies — or perhaps more accurately Canada’s lack of policies — on China:

“The Chinese People’s Liberation Army is the great school of Mao Zedong Thought”, 1969.
A poster from the Cultural Revolution, featuring an image of Chairman Mao, published by the government of the People’s Republic of China.
Image via Wikimedia Commons.

There were many things that history might find regrettable about the Mulroney years but I doubt that it will fault him for having a principled and coherent foreign policy.

That all changed with Jean Chrétien, who was almost a neo-mercantilist, and for whom principle could never stand in the way of profit.

In the modern (Chrétien-Martin-Harper-Trudeau) era, Conservatives have been, broadly, anti-China, sometimes for reasons that are less than coherent or principled, and Liberals have been too prepared to “go along to get along” with China. This is because both parties reflect the incoherent views of the whole country. But political leaders shouldn’t (mustn’t) just reflect the views of their voters ~ that sort of populism is nonsensical ~ they must, as Edmund Burke said, bring his or her “unbiased opinion … mature judgment … [and] … enlightened conscience” to bear on each issue. But I’m afraid that too many (most?) modern Canadian political tacticians hold all those things in scant regard.

In the 2020s Canadians must listen to a few clear voices who will tell them that China is a competitor in many “markets” including in the marketplace of ideas, ideals, institutions and values. The current Chinese leadership is overtly hostile to Weterm liberal-democratic values and is not unwilling to punish any country with which it disagrees. It is protectionist, relatively rich and growing in military, political and economic power, but, still, somewhat cautious, and Xi Jinping’s China seems to be able to separate its own short-term political interests from its firm, long term, strategic goals. China, as Kevin Rudd reminded us just a few days agois contemptuous of weakness and prevarication,” which explains why it is so obviously contemptuous of Justin Trudeau’s Canadian government.

It is a fact that the Sino-Canadian relationship is “unbalanced:” China is a great power, Canada is not; China is an autocracy, Canada is a democracy; and so on but, as Kevin Rudd said (link just above) “China too has net strengths and weaknesses of which … [our] … strategists should be aware in framing our own strategy … [and we] … should be equally aware of our own strengths, weaknesses and vulnerabilities.” Canadian strategists need to educate Canadians about China so that a solid, informed majority will want a coherent and principled policy ~ one that puts our national vital interests first […]

Our policy towards China needs to be just one part of a coherent, principled foreign policy which Canadians understand and, broadly, support, and that, in turn, needs to be part of a Canadian grand strategy that aims to secure a place, as Paul Martin suggested, “of pride and influence in the world” ~ that, of course, was a place we enjoyed under St Laurent, Diefenbaker and Pearson, all of whom were acutely aware of the many and varied (and very divergent) views about Canada in the world that existed then and persist today in Canada’s many and varied communities.

“Useful idiots” during the Cold War

Robert Reilly reviews Judgement in Moscow: Soviet Crimes and Western Complicity by Vladimir Bukovsky, which has recently been republished in English:

Krushchev, Brezhnev and other Soviet leaders review the Revolution parade in Red Square, 1962.
LIFE magazine photo by Stan Wayman.

Judgment In Moscow contains autobiographical elements but is principally concerned with providing and analyzing documentary evidence for what should have been the USSR equivalent of what the Nuremberg Trials had been for Nazi Germany. In 1991, Bukovsky returned to the Soviet Union to take part in the “trial of the communist party” that was held in 1992. In an audacious move the Communist Party had sued then-President Boris Yeltsin to get its property back. To prepare a defense, Yeltsin ordered that the secret Central Committee archives be opened to Bukovsky. The order was obeyed, but only partially and for a short time. The trial fizzled, but Bukovsky, with the aid of a hand-held scanner, was able to gather many thousands of pages of top-secret Central Committee and Politburo documents and get them out of Russia. Some of these key documents are what we have in this priceless book. They are eye-opening.

During the Cold War, we had to speculate as to why, for instance, the Soviet Union invaded Afghanistan and how the decision was made. Now we know for certain. Bukovsky provides the minutes of the Politburo meetings in which the invasion was decided. The Reagan administration was highly skeptical of détente and was therefore criticized for war-mongering. The skepticism was well-placed because, as the documents reveal, détente was simply a façade for advancing Soviet power and manipulating Western publics and governments against the Reagan plan to place Pershing IIs and cruise missiles in Europe to defend it against burgeoning Soviet power, including the SS-20s.

The revelations of the extent to which the Soviet Union manipulated the “peace” movement in the West should be an embarrassment to its participants, who may have been too naïve at the time to know how they were being used. Others, of course, acceded to being used, or even cravenly sought to be used. The names of some of these useful idiots are in the documents.

Another thing these documents disclose, much to the embarrassment of many American Sovietologists, is that there were no “hawks” and “doves” in the Kremlin — a premise on which they had banked their academic careers. The unanimity of the Politburo decisions reveals that the senior Soviet leaders were all of one stripe. It was to their advantage to create the impression that there were hawks and doves so that they could game the policies of Western governments and the opinions of its publics. For instance, providing Western credits to the USSR — it was thought by many so-called Russian experts in the West — would strengthen the doves in the Kremlin, whereas denying credits would empower the hawks. By buying this line of thought, the West was induced to keep the Soviet Union on life-support for more than a decade past what would have been its earlier collapse, according to Bukovsky.

No one was a greater master of this deception than Mikael Gorbachev. The minutes from many Politburo meetings chaired by Gorbachev show that glasnost and perestroika were façades constructed to ensure the continued existence of the Soviet Union through even more Western subsidies. And it worked to the extent that credits and subsidies ballooned under the Western illusion that Gorbachev had to be supported to ensure his success — ignorant of the fact that Gorbachev conceived of success in ways inimical to Western freedom.

H/T to Blazing Cat Fur for the link.

December 2, 2019

QotD: Evidence of markets in classical civilizations

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

If someone were to claim that market behaviour was peripheral to life in eighteenth century England, it would be easy to laugh at him. This is not to say the claim has not been or will not be made. But if it were made, it could be refuted with a mass of government and private statistics, of newspaper reports and law reports, of high literature, of sermons, speeches and letters, of descriptive and analytical surveys, of biographies and novels, and of physical remains. Ludicrous claims can always be based on selective and misread evidence. In this case, the weight of the evidence must be decisive.

If we turn, however, to the ancient world, the evidence must almost always be indecisive. Very few ancient writings have survived. Obviously, two thousand years are a long time; and ancient civilisation did collapse. Add to this that far fewer documents relating to economic matters were produced or could be preserved than has been the case with us. There was no printing: everything had to be copied by hand. The best writing material was papyrus, which was both expensive and fragile. The normal writing materials for accounts and administrative documents were waxed tablets, which were scraped and reused, and thin wooden sheets, which were thrown away once they had served their purpose.

The literary remains of Greece and Rome which have come down to us through generations of copying and recopying are the products of a rather snobbish culture, and contain little direct information about economic behaviour. The great writers, as Finley observes, do seem to have lacked the conceptual framework for intelligent discussion of finance and commerce. Even otherwise, these were matters they regarded as beneath the notice of history. Thucydides, for example, gives full discussion to the political causes of the Peloponnesian War, but says nothing of what we know from the archaeological evidence was the complete Athenian displacement of Corinth in the pottery markets of the Western Mediterranean world.

During the past century or so, the rubbish dumps of Egypt have revealed a mass of the everyday documentation we have for no other area of the ancient world. There are tax records, and commercial correspondence, and administrative commands, among much else. The problem here is that Egypt was always an exception. From its earliest history, its geography opened it to capture and exploitation by rent-seeking élites. The Pharaohs were worshipped as gods and given whatever they demanded. The Ptolemies organised the country into one gigantic state enterprise and used the proceeds for making a big noise in the Hellenistic world. The Roman Emperors kept up the monopolies and requisitions, treating Egypt as their personal property, and so far as possible isolating it from the rest of the Empire. The documentary evidence, therefore, we have from Egypt may not be representative of the ancient world as a whole.

But this, plus the material archaeology, is all we have. And if we want to know anything for economic motivations and behaviour, we must press the evidence we have as hard as we can. The history of the ancient world is, in many important respects like a mosaic that has been broken up with many of its tiles thrown away. The whole must be reconstructed from the parts remaining. It is a difficult enterprise, but it can be attempted.

If there is little direct, there is much indirect evidence. This is scattered through the surviving body of ancient literature. It consists of casual remarks, illustrations to arguments, even comments that are in themselves foolish. It is a question of looking for this evidence, and of knowing how to use it.

An interesting example of how evidence can be extracted and used comes not from our own ancient world, but from pre-Columbian South America. Deirdre McCloskey has looked at the geographical distribution of Mayan obsidian tools. She notes that, the farther from the sources of their obsidian, the smaller was the ratio of blade weight to cutting length. She comments:

    By taking more care with more costly obsidian the blade makers were earning better profits; as they did by taking less care with less costly obsidian.

What we have here, then, is evidence that illiterate, stone age toolmakers were at least as conscious of opportunity cost as any Victorian mill owner, and rather more so than the average socialist planner of the next century. So long, of course, as this is evidence — this is, so long as the tools are distributed as claimed — we have empirical reason for doubting the Polanyi claim that,

    previously to our time no economy has ever existed that, even in principle, was controlled by markets…. Gain and profit made on exchange never [before the nineteenth century] played an important part in human economy.

Sean Gabb, “Market Behaviour in the Ancient World: An Overview of the Debate”, 2008-05.

November 30, 2019

QotD: Comparative advantage

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

Business schools, which focus naturally on the fortunes of the individual firm, teach that “competitiveness” is all. They believe it follows that government, not price signals from the world economy, should choose winners. The economists in the business schools have had hard time persuading their colleagues that the pattern of trade and specialization is determined, on the contrary, by “comparative advantage,” which has nothing to do with absolute advantage, and which professors of management and of history regularly mistake it for. Pakistan exports clothing to the United States, the economists preach (without much effect on editorial boards and politicians), not because it is better per hour at making socks and sweaters but because it is comparatively better at them than at making jet airplanes and farm tractors.

Deirdre McCloskey, Bourgeois Equality, 2016.

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