Quotulatiousness

February 9, 2023

“Prediction is very difficult, especially about the future” … but sometimes it’s almost prophetic

Filed under: Books, Business, Education, History, USA — Tags: , , , , , , — Nicholas @ 05:00

Once again, Ted Gioia’s Honest Broker Substack has something interesting I’d like to share with you (I wouldn’t blame you at all for cutting out the middleman and just subscribing for yourself):

Today I want to focus on a single paragraph published in 1960.

You’re asking yourself: How much can a single paragraph matter — especially if it was written 63 years ago? But read it first and judge for yourself.

It’s a chilling paragraph.

[…]

By any measure, [Paul Goodman] was one of the most eccentric thinkers of the era. Yet he anticipated our current situation with more insight than any of his peers.

Let’s look at this one paragraph from the Preface to Growing Up Absurd. It’s a long paragraph — it takes up most of two pages. So we will break it down into pieces.

Goodman begins with a puzzle he needs to solve — society is stagnating everywhere, and we all can see it. But there’s no action plan to fix it. There’s a lot of huffing and puffing and finger-pointing everywhere, but nobody has even started on developing a practical agenda.

According to Goodman, this is because people “have ceased to be able to imagine alternatives”. Everybody accepts that the current system “is the only possibility of society, for nothing else is thinkable”.

Now comes his analysis, and — to my surprise — Goodman begins by talking about music. This was the last thing I expected in a social critique, but for Goodman the manufacturing of hit songs is a metaphor for everything else that’s wrong in a stagnant society.

He writes:

    Let me give a couple of examples of how this [inability to imagine healthy alternatives] works. Suppose (as is the case) that a group of radio and TV broadcasters, competing in the Pickwickian fashion of semi-monopolies, control all the stations and channels in an area, amassing the capital and variously bribing Communications Commissioners in order to get them; and the broadcasters tailor their programs to meet the requirements of their advertisers of the censorship, of their own slick and clique tastes, and of a broad common denominator of the audience, none of whom may be offended: they will then claim not only that the public wants the drivel that they give them, but indeed that nothing else is being created. Of course it is not! Not for these media; why should a serious artist bother?

When I first read this, I was dumbstruck. Goodman wrote this during the winter of 1959 and 1960, when radio stations were independent and freewheeling. Back in my teen years, a single business was only allowed to control one AM station and one FM station. In 1985 this was increased to 12 stations on each band. And in 1994 this was raised again, this time to 20 AM stations and 20 FM stations.

But then all hell broke lose when the Telecommunications Act of 1996 passed in the Senate by a 91 to 5 margin and was signed into law. Now the sky was the limit — and all the airwaves it contained.

Soon Clear Channel Communications owned more than 1,200 radio stations in some 300 cities. The company began the process of standardizing and homogenizing our musical culture. We still suffer from that today.

Even after radio started losing influence in the Internet Age, huge streaming platforms (Spotify, Apple Music, etc.) ensured that access to the ears of America would be controlled by a tiny number of huge corporations. A musical culture that was once local, indie, and flexible has become centralized, corporatized, and stagnant.

How could Paul Goodman even dream of such a scenario back in 1960? That future was decades away at the time.

But we are only at the start of this visionary paragraph. Goodman now explains that the same thing will happen in universities.

Colleges and schools were small and non-bureaucratic back in 1960. Yet Goodman sees a crisis looming. On the next page Goodman warns against “the topsy-turvy situation that a teacher must devote himself to satisfying the administrator and financier rather than to doing his job, and a universally admired teacher is fired for disobeying an administrative order that would hinder teaching”.

Administration at US colleges has grown exponentially in the last two decades and has turned almost every academic institution into a plodding bureaucracy — but how in the world did Goodman anticipate this in 1960?

Now let’s return to our chilling paragraph. Immediately after discussing radio stations, Goodman adds a gargantuan sentence. It jumps all over the place but hits the target at every twist and turn:

    Or suppose again (as is not quite the case) that in a group of universities only faculties are chosen that are “safe” to the businessmen trustees or the politically appointed regents, and these faculties give out all the degrees and licenses and union cards to the new generation of students, and only such universities can get Foundation or government money for research, and research is incestuously staffed by the same sponsors and according to the same policy, and they allow no one but those they choose, to have access to either the classroom or expensive apparatus: it will then be claimed that there is no other learning or professional competence; that an inspired teacher is not “solid”; that the official projects are the direction of science; that progressive education is a failure; and finally, indeed — as in Dr. James Conant’s report on the high schools — that only 15 per cent of the youth are “academically talented” enough to be taught hard subjects.

Here in a nutshell is the credentialing crisis of our times. Learning is replaced by exclusionary certification programs that limit career opportunities — unless you take out loans and “purchase” the necessary credential from these academic gatekeepers.

This has become so destructive in our own time that many are crushed by student loans, and others seek ingenious ways of bypassing college entirely. There’s no way that Goodman could have grasped this in 1960 — when only 7.7 percent of Americans had college degrees.

Nor could he have known about the replicability crisis in science or the destructive games now played in awarding of scientific grants. Those are the problems of our times — not his.

But somehow Paul Goodman saw it coming.

February 4, 2023

A lobster tale (that does not involve Jordan Peterson)

Filed under: Britain, Economics, Europe, Food, Government, History — Tags: , , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes relates some of his recent research on the Parliament of 1621 (promising much more in future newsletters) and highlights one of the Royal monopolies that came under challenge in the life of that Parliament:

European lobster (Hommarus gammarus)
Photo by Bart Braun via Wikimedia Commons.

One of the great things about the 1621 Parliament, as a historian of invention, is that MPs summoned dozens of patentees before them, to examine whether their patents were “grievances” — illegal and oppressive monopolies that ought to be declared void. Because of these proceedings, along with the back-and-forth of debate between patentees and their enemies, we can learn some fascinating details about particular industries.

Like how 1610s London had a supply of fresh lobsters. The patent in question was acquired in 1616 by one Paul Bassano, who had learned of a Dutch method of keeping lobsters fresh — essentially, to use a custom-made broad-bottomed ship containing a well of seawater, in which the lobsters could be kept alive. Bassano, in his petitions to the House of Commons, made it very clear that he was not the original inventor and had imported the technique. This was exactly the sort of thing that early monopoly patents were supposed to encourage: technological transfer, and not just original invention.

The problem was that the patent didn’t just cover the use of the new technique. It gave Bassano and his partners a monopoly over all imported lobsters too. This was grounded in a kind of industrial policy, whereby blocking the Dutch-caught lobsters would allow Bassano to compete. He noted that Dutch sailors were much hardier and needed fewer provisions than the English, and that capital was available there at interest rates of just 4-5%, so that a return on sales of just 10% allowed for a healthy profit. In England, by comparison, interest rates of about 10% meant that he needed a return on sales of at least 15%, especially given the occasional loss of ships and goods to the capriciousness of the sea — he noted that he had already lost two ships to the rocks.

At the same time, patent monopolies were designed to nurture expertise. Bassano noted that he still needed to rely on the Dutch, who were forced to sell to the English market either through him or by working on his ships. But he had been paying his English sailors higher wages, so that over time the trade would come to be dominated by the English. (This training element was a key reason that most patents tended to be given for 14 or 21 years — the duration of two or three apprenticeships — though Bassano’s was somewhat unusual in that it was to last for a whopping 31.)

But the blocking of competing imports — especially foodstuffs, which were necessaries of life — could be very controversial, especially when done by patent rather than parliamentary statute. Monopolies could lawfully only be given for entirely new industries, as they otherwise infringed on people’s pre-existing practices and trades. Bassano had worked out a way to avoid complaints, however, which was essentially to make a deal with the fishmongers who had previously imported lobsters, taking them into his partnership. He offered them a win-win, which they readily accepted. In fact, the 1616 patent came with the explicit support of the Fishmongers’ Company.

It sounds like it became a large enterprise, and I suspect that it probably did lower the price of lobsters in London, bringing them in regularly and fresh. With a fleet of twenty ships, and otherwise supplementing their catch with those caught by the Dutch, Bassano boasted of how he was able to send a fully laden ship to the city every day (wind-permitting). This stood in stark contrast to the state of things before, when a Dutch ship might have arrived with a fresh catch only every few weeks or months, and when they felt that scarcity would have driven the prices high.

October 16, 2022

QotD: State monopolies

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

Competition leaves people with choices. But under the New Socialism, people will really discover what it means to be unfree when they only have this choice: work for the state and spend your falling wages on government-supplied goods — or starve. And to whom does the unhappy citizen turn when there is only one healthcare provider, one landlord, and one education system? The state monopolies under socialism offer a kind of subjugation and submission far greater than that in competitive markets. The faceless corporate decision makers that trouble professor Robin are far less sinister than government bureaucrats who can block all exit options. Imagine how poorly the Post Office would function without competition from Federal Express and UPS.

Richard Epstein, “The Intellectual Poverty of the New Socialists” [PDF], 2018.

May 16, 2022

The Hudson’s Bay Company in Canadian history

Filed under: Britain, Cancon, History — Tags: , , — Nicholas @ 03:00

As a kid growing up in the late 60s and early 70s, “The Bay” was just a department store. It wasn’t as upscale as Eaton’s, but had different stock than Eaton’s or Simpson’s so occasionally you’d find something there that wasn’t available in the other major central Canadian department stores. It took me an embarrassingly long time to make the connection between the big retail store in the mall and the company that owned vast swathes of what eventually became Canada in the seventeenth and eighteenth centuries. At Terra Nullius, Ned Donovan tries to put that massive geo-political organization into context:

At the turn of the 17th Century, felt hats were all the rage and felt hats are made of beaver skin. At the time, this relied on Russia’s long-established fur trade. But as demand grew, quality dropped significantly as the native European beaver population began to be hunted out of existence. Within decades, it was very difficult for merchants to find high quality felt from Russia, and customers in England were complaining that they were having to wear felt made from rabbit instead.

Approximate extent of Prince Rupert’s Land in the late 17th to early 18th century – note that this is the range of the company’s trappers and traders, not military or political control.
Image from Wikimedia Commons.

But around the same time, irregular and rare shipments began to arrive from the European colonies in North America where beaver – mostly trapped by French settlers and Indigenous Americans – was still plentiful and of very good quality. In 1669, the ship Nonsuch dropped anchor in the Thames with a large shipment of some of the highest quality furs London had ever seen, selling them immediately for £1,233 (equivalent to around £1 million in 2022). The Nonsuch had led an expedition invested in by some of London’s richest merchants and sponsored by Prince Rupert, a first cousin of King Charles II. It had done its trapping in Hudson’s Bay in the north of what is now Canada. The purpose of the expedition was to demonstrate that the issues with fur supply could be solved if its trapping in North America could be optimised, leaving behind the slow and traditional approach of the French and First Nation trappers.

This was not the first time Prince Rupert had seen to make money from exploiting colonised lands, having poured large amounts of his wealth into the slave trade from West Africa and sitting on the board of the Royal African Company. With this financial success made from trading in human lives, he turned his interest to North America and helped put together the syndicate that sent the Nonsuch to Hudson’s Bay. In 1670, his cousin King Charles II granted the syndicate a royal charter to form the Hudson’s Bay Company, giving the company a monopoly over “Prince Rupert’s Land” made up of the land drained by rivers and streams flowing into Hudson’s Bay – or 3,861,400 square kilometres.

In short order, the company had established trading posts throughout its monopoly, known as factories (as each was controlled by a company official known as a factor). The only thing that mattered to these factories and its parent company was beaver. Nothing could stand in the way of ensuring the safe passage of furs and pelts to Europe. By 1690, the demand in England for hats and caps was five million per year – or one per person. Hundreds of thousands more would be exported onwards from England to Europe such was the demand for the well-known quality of the Hudson Bay beaver. For example in 1756, Portuguese customers spent more than £20 million in today’s money on English beaver felt hats.

As Prince Rupert’s Land was largely still wilderness, besides company staff it was inhabited only by European and First Nations trappers and as a result there was only a barter economy, to both subjugate indigenous residents and prevent private wealth. There were standardised prices throughout Prince Rupert’s Land and instead of a normal currency, the company instead pegged everything against the unit of 1MB (1 Made Beaver). For three made beaver pelts, you could be given one clay pot in exchange at a company store, or for 10 you could get a gun. Private trading was outlawed and all beaver pelts that left Prince Rupert’s Land traveled through the warehouses and accounts of the Hudson’s Bay Company.

April 27, 2022

QotD: Competition

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

In a normal industry (e.g., restaurant ownership) competition should drive profit margins close to zero. Want to open an Indian restaurant in Mountain View? There will be another on the same street, and two more just down the way. If you automate every process that can be automated, mercilessly pursue efficiency, and work yourself and your employees to the bone – then you can just barely compete on price. You can earn enough money to live, and to not immediately give up in disgust and go into another line of business (after all, if you didn’t earn that much, your competitors would already have given up in disgust and gone into another line of business, and your task would be easier). But the average Indian restaurant is in an economic state of nature, and its life will be nasty, brutish, and short.

This was the promise of the classical economists: capitalism will optimize for consumer convenience, while keeping businesses themselves lean and hungry. And it was Marx’s warning: businesses will compete so viciously that nobody will get any money, and eventually even the capitalists themselves will long for something better. Neither the promise nor the warning has been borne out: business owners are often comfortable and sometimes rich. Why? Thiel says it’s because they have escaped competition and become at least a little monopoly-like.

Thiel hates having to describe how businesses succeed, because he thinks it’s too anti-inductive to reduce to a formula:

    Tolstoy opens Anna Karenina by observing “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Scott Alexander, “Book Review: Zero to One”, Slate Star Codex, 2019-01-31.

April 3, 2022

King James I and the problem of gold and silver thread in England

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

In the latest Age of Invention newsletter, Anton Howes began to research what appeared to be a minor economic issue that very quickly took over his time going deep down the gold and silver market rabbit hole:

A hammered silver sixpence of James I dated 1603 from the first coinage with a thistle mintmark. Obverse features a right facing crowned bust with the numerals VI behind and the inscription JACOBVS*DG*ANG*SCO*FRA*ET*HIB*REX. The reverse has a shield with the royal arms and the date 1603 above. The reverse inscription is EXERGAT* DEVS*DISSIPENTVR*INIMICI.
FindID 510696 – https://finds.org.uk via Wikimedia Commons

When England’s Parliament met in 1621, it was mainly supposed to vote King James I the funds to fight a war. His daughter’s domain, the Palatinate of the Rhine, had just been invaded, and the European Protestant cause was under grave threat. As I set out two weeks ago, however, the House of Commons had seized the chance to pursue a scandal. Jealous of the Crown’s challenge to their status as local power-brokers, and hoping to embarrass the king’s favourite, the Marquess of Buckingham, MPs opened an investigation into Sir Giles Mompesson’s patent to license inns.

When it came to inns, I argued that the case against Mompesson was flimsy (making me perhaps the only person to have defended him for over four hundred years). He appears to have been a trusted and able bureaucrat, the source of his downfall being his sheer effectiveness. But the flimsiness of the case against him was not enough to stop the political witch-hunt. Next on the list was a project he had administered for making gold and silver thread.

It sounds obscure, and I was fully expecting to write up a short overview of a niche industry that just happened to be thrust into the limelight of 1620s politics. That was a month ago, when I first started drafting this piece. But pulling on the golden thread revealed a desperate, decade-long battle between the City and the Crown, over who would get to control the financial stability of the realm. I’m sorry for the delay in publishing it, but I hope I’ve made it worth the wait.

January 14, 2022

Industry with 1% profit margins accused of earning “record profits”

Filed under: Business, Economics, Media, Politics, USA — Tags: , , , — Nicholas @ 03:00

Joe Lancaster on Senator Elizabeth Warren’s renewed assault on the top-hatted, monocle-wearing robber barons of the grocery business:

“Piggly Wiggly” by afiler is licensed under CC BY-SA 2.0

… Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was “expanding profits” due to its “market dominance.”

In actuality, for much of the last year, grocery stores have seen enormous boosts in revenue, but not increased profitability, for the simple reason that everything has been costing more: not just products, but transportation, employee compensation, and all the extra logistical steps needed to adapt to shopping during a pandemic. Couple that with persistent inflation — which Warren also recently blamed on “price gouging” — and it is no wonder that things seem a bit out of balance.

Warren has had an itchy trigger finger for antitrust laws for some time. In 2019, as part of her presidential platform, she called for using the laws to forbid retailers from selling their own products. This would affect industry leaders like Amazon and Walmart, but ironically, it would have a devastating impact on grocery stores as well: Grocers increasingly rely on their own proprietary goods to stock cheaper alternatives alongside name brands. This provides not only less expensive options for consumers, but lower costs to the stores themselves. Store brands also help fill gaps created by external supply shortages.

December 4, 2021

When King James VI became King James I and VI

Filed under: Britain, History — Tags: , , , , — Nicholas @ 03:00

In his latest Age of Invention newsletter, Anton Howes discusses how the King of Scotland succeeded to the English throne as well:

King James I (of England) and VI (of Scotland)
Portrait by Daniel Myrtens, 1621 from the National Portrait Gallery via Wikimedia Commons.

It’s late March 1603, and an exhausted messenger arrives in Edinburgh bearing a sapphire ring. He has ridden for over two days straight, over hundreds of miles, and his hair and clothes are matted with blood — on the way he had fallen from his horse, a hoof striking him directly in the head. It’s a miracle he’s alive, but he knows it has been worth it. He is the very first to tell you that your childless first cousin twice removed — the killer of your mother, whom you never knew — is finally dead. You, King James VI of Scotland, are James I of England as well.

[…]

James’s accession was a frenzy. From the very moment of Elizabeth’s death, her entire patronage network was turned on its head. Her chief ministers, the Privy Council, were relatively safe. Some of them had been corresponding with James for years. But they could only look on, anxiously, as a rush of would-be cronies went north to meet their new king. The exhausted messenger with the sapphire ring, Sir Robert Carey, was just the first. Carey had been related to Elizabeth I on her mother’s side — he was her first cousin once removed. (Carey’s grandmother was the “other Boleyn girl”, played by Scarlett Johansson in the 2008 film — although there’s no solid evidence, it’s not totally impossible that Carey was actually related to Elizabeth on her father’s side instead …) But that family connection meant nothing now that the queen was dead.

The sudden reset of the source of all patronage meant that the earlier the access to the new king’s person, the greater the chance of gaining his favour. Carey may have angered the Privy Council by riding ahead of their formal letters to James, but his exertion won him an on-the-spot appointment as a gentleman of the bedchamber, and his wife became a lady in waiting to James’s queen. The Careys were soon charged with the care of the royal couple’s younger sickly child, and when that child eventually became Charles I, Carey was made Earl of Monmouth. Not a bad result for a head wound and a two days’ ride, though I’m sure the horses would disagree. An old proverb about England was that it was “a paradise for women, a purgatory for servants, and a hell for horses” — something that James’s accession really put to the test. One teenage noblewoman reported how she and her mother killed three horses in a single day, pushing them hard despite the heat, in their rush to meet the new queen.

Just as courtiers flocked to James, however, the king wanted to win friends and allies too. So he handed out favours like confetti. Before he had even reigned a single year, he had created 934 knighthoods — already more than the 878 that Elizabeth I, her generals, and her lord deputies in Ireland had created over the course of her entire 45-year reign. One morning, during his journey down to London, James knighted more people than Elizabeth had in her first five years — all before he’d even had his breakfast. The sheer volume of new knighthoods prompted Francis Bacon — one of about 300 to be knighted in London ahead of the coronation — to call it a “divulged and almost prostitute title”.

The same went for peerages. Elizabeth, over her long reign of almost half a century, had created only 18 new titles. James, before he had even been crowned, had already created 12 — mostly turning knights into lords, and raising some lords into earls. Along with the honours came grants of land, annual pensions, and one-off gifts — not only to James’s new English courtiers, but to his old Scottish favourites too. James’s arrival was an explosion of largesse. (Not all were happy about the relative loss of favour, of course […] at least one pro-invention courtier got involved in a treasonous plot against the new king and ended up losing his head.)

James’s largesse even extended to policy. As he triumphantly marched into London, he issued a proclamation to immediately suspend all of Elizabeth’s patent monopolies, to be re-granted pending review. (This did not apply to patents for trading corporations or guilds.) Rather than leaving the validity of patents to be tested in the common-law courts, at great legal cost to those affected, he would have his Privy Council systematically examine them first, only allowing them if they were in the public interest. He characterised it as a continuation — even a “perfecting” — of Elizabeth’s partial measures a couple of years earlier, which we discussed in Part II. With his proclamation also condemning various other unpopular things, like high court fees, his new subjects were overjoyed.

But the honeymoon was not to last.

November 27, 2021

King James I and his hatred of tobacco smoking — “so vile and stinking a custom”

Filed under: Americas, Britain, Health, History — Tags: , , , , , , , — Nicholas @ 03:00

Anton Howes recounts some stories he uncovered while researching English patent and monopoly policies during the Elizabethan and Stuart eras:

… some of the most interesting proclamations to catch my eye were about tobacco. Whereas tobacco was famously a New World crop, it is actually very easy to grow in England. Yet what the proclamations reveal is that the planting of tobacco in England and Wales was purposefully suppressed, and for some very interesting reasons.

James I was an anti-tobacco king. He even published his own tract on the subject, A Counterblaste to Tobacco, just a year after his succession to the English throne. Yet as a result of his hatred of “so vile and stinking a custom”, imports of tobacco were heavily taxed and became a major source of revenue. Somewhat ironically, the cash-strapped king became increasingly financially dependent on the weed he never smoked. The emergence of a domestic growth of tobacco was thus not only offensive to the king on the grounds that he thought it a horrid, stinking, and unhealthy habit — it was also a threat to his income.

What I was most surprised to see, however, was just how explicitly the king admitted this. It’s usual, when reading official proclamations, to have to read between the lines, or to have to track down the more private correspondence of his ministers. Very often James’s proclamations would have an official justification for the public good, while in the background you’ll find it originated in a proposal from an official about how much money it was likely to raise. There was money to be made in making things illegal and then collecting the fines.

Yet the 1619 proclamation against growing tobacco in England and Wales had both. The legendary Francis Bacon, by this stage Lord High Chancellor, privately noted that the policy might raise an additional £3,000 per year in customs revenue. And the proclamation itself noted that growing tobacco in England “does manifestly tend to the diminution of our customs”. Although the proclamation notes that the loss of customs revenue was not usually a grounds for banning things, as manufactures and necessary commodities were better made at home than abroad, “yet where it shall be taken from us, and no good but rather hurt thereby redound to our people, we have reason to preserve”. Fair enough.

And that’s not all. James in his proclamation expressed all sorts of other worries about domestic tobacco. Imported tobacco, he claimed, was at least only a vice restricted to the richer city sorts, where it was already an apparent source of unrest (presumably because people liked to smoke socially, gathering into what seemed like disorderly crowds). With tobacco being grown domestically, however, it was “begun to be taken in every mean village, even amongst the basest people” — an even greater apparent threat to social order. James certainly wasn’t wrong about this wider adoption. Just a few decades later, a Dutch visitor to England reported that even in relatively far-flung Cornwall “everyone, men and women, young and old, puffing tobacco, which is here so common that the young children get it in the morning instead of breakfast, and almost prefer it to bread.”

[…]

Indeed, policymakers thought that the domestic production of tobacco would actively harm one of their key economic projects: the development of the colonies of Virginia and the Somers Isles (today known as Bermuda). Although James I hoped that their growth of tobacco would be only a temporary economic stop-gap, “until our said colonies may grow to yield better and more solid commodities”, he believed that without tobacco the nascent colonial economies would never survive. Banning the domestic growth of tobacco thus became an essential part of official colonial policy — one that was continued by James’s successors, who did not always share his more general hatred of smoking. Although the other justifications for banning domestic tobacco would soon fall away, that of maintaining the colonies — backed by an increasingly wealthy colonial lobby — was the one that prevailed.

November 25, 2021

QotD: Corporate coercion can be just as dangerous as state coercion

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

So many libertarians […] have a simplistic, dare I say dualistic notion about bad-things-done-by-private-business and bad-things-done-by-the-state. One is met with “so start up a rival company” the other with “an outrageous example of state overreach that must be opposed politically.”

And in an ideal world, yes, that makes sense. We do not live in anything resembling an ideal world.

In an era when three (two really) credit card companies and a handful of payment processors have an off-switch for pretty much any on-line business they take a dislike to (unless they are called Apple or Amazon), as more and more of the economy goes virtual, what we have is turn-key tyranny for sale to the highest bidder, and the highest bidder is always going to be a state. I am uncertain what the solution is, but as we do not live in a “free market”, not convinced “so go set up your own global credit card and payment processing network” adds anything meaningful to the discussion. It is a bit like saying when the local electric provider turns off the power in your office (or home) because they disapprove of what you are doing “so go set up your own electric supply company”, as if that would be allowed to happen.

Perry de Havilland, “This is what so many libertarians cannot understand …”, Samizdata, 2021-08-22.

October 23, 2021

The English Statute of Monopolies gets far more credit than it actually deserves

Filed under: Britain, History, Technology — Tags: , , , , , , , — Nicholas @ 03:00

The Statute of Monopolies (1624) is often said to have been critical in helping to start England on the road to the Industrial Revolution, but in the latest Age of Invention newsletter Anton Howes argues it is far more complicated than it seems:

Letters Patent Issued by Queen Victoria, 1839. On 15 June 1839 Captain William Hobson was officially appointed by Queen Victoria to be Lieutenant Governor General of New Zealand. Hobson (1792 – 1842) was thus the first Governor of New Zealand.
Constitutional Records group of Archives NZ via Wikimedia Commons.

One of the most frequently mentioned landmarks in the history of intellectual property is the Statute of Monopolies, passed by the English parliament in 1624. I’ve often seen it lauded as the beginning of the system of patents for invention, or the first patent law. I remember giving a talk a few years ago where I downplayed the role of formal institutions in encouraging the Industrial Revolution, prompting an outraged economist in the audience to point to the law as a sort of gotcha — “here’s a better explanation: with patents you incentivise invention, and the Brits had just invented patents”.

Which is all to illustrate that the Statute of Monopolies is often fundamentally misunderstood. So what, exactly, did it actually do? It’s a tale of opportunism, corruption, and court intrigue, with some actual innovation inbetween. The whole saga ended Francis Bacon’s political career, led to a major constitutional crisis, and set the scene for how inventors were to behave and act for well over a century. In this first part, I’ll give the context you’ll need to really appreciate what was going on, and I’ll publish the rest in the weeks to come.

First off, the Statute of Monopolies was certainly not the first patent law. Venice’s senate had enacted a law on monopolies for invention as early as 1474. But even then, we shouldn’t be looking for statutes at all. The history of patents does not begin in 1474, but much earlier, with plenty of monopolies over new inventions having already been granted by the ruling grand council of Venice, and by the authorities of other Italian cities like Florence. The key thing to recognise about early patents is that they were not a creation of parliaments or their statutes, but of those in charge. They were the creation of sovereigns, a creature of kings and queens (or in the case of republics like Venice, of governing councils).

As regular readers of this newsletter might remember, patent monopolies for invention had already had long history in England, well before 1624. Patents in general were a very ordinary tool of English monarchs, used to communicate their will. By issuing letters patent, monarchs essentially issued public orders, open for everyone to see. (Think “patently”, as in clearly or obvious, which comes from the same root.) Monarchs used letters patent to grant titles and lands, appoint or remove people as officials, extend royal protections to foreign immigrants, incorporate cities, guilds, even theatre troupes — in general, just to rule.

And, eventually, English monarchs copied the Venetians by issuing letters patent to grant temporary monopolies to particular people, to encourage them to make discoveries, publish books, or introduce new industries or inventions to the realm. It’s only over the passage of centuries that we’ve come to refer to patents for invention — a mere subset of letters patent, and really even a mere subset of patent monopolies for all sorts of other creative work — as simply patents. Intellectual property was thus a ruler-granted privilege, created in the same way that a town gains the official status of a city, or a commoner becomes a knight. English monarchs began granting monopolies for discovering new territories and trade routes from 1496, for printing certain books from 1512, and for introducing new industries or inventions from 1552 (with one weird isolated exception from as early as 1449).

October 14, 2021

The quasi-monopolies of the “web giants”

Filed under: Australia, Business, Media, Technology, USA — Tags: , , , , , , , — Nicholas @ 03:00

Arthur Chrenkoff runs afoul of automated “community standards” enforcement on social media, getting locked out of his Twitter account for something that any actual human being would be able to instantly decide was not at all any kind of violation of normal human interactions online or in-person. Of course, if you’ve been in this position yourself, you won’t be surprised to find that launching an appeal of the bot’s action does not get immediate response … and sometimes never gets any attention from a human. He’s aware of this, and he’s still of the belief that this does not call out for any kind of government intervention:

“Automotive Social Media Marketing” by socialautomotive is licensed under CC BY 2.0

I remain broadly sympathetic to the free market argument that competition will, in time, cure any problems that business activity throws up from time to time, such as market domination or underhand practices. The mighty will be brought down low, new players will offer new products, consumer preferences will change, creative (or destructive) equilibrium will be restored. We can all argue, of course, to what extent free market and free competition exist in any particular setting at any particular time. If “real socialism” has never been tried, “real free market” (as opposed to capitalism, which is not necessarily the same thing) might be equally rare in practice. It is certainly true that comparing the lists of top 50 biggest companies one hundred, 50, 20 years ago and today will indicate a lot of economic change, but might not tell us very much about the reasons for that change, which can be quite complex.

The tech giants might not be historically unique as far as their size and power are concerned, but they’re not the norm either. They are not exactly monopolists, but their domination of their particular sections of the market elevates them from the domain of mere companies to something akin to public utilities. Google, Facebook and YouTube, for example, account for 80 per cent of digital advertising in Australia. There are alternatives to all these providers but they are so tiny by comparison as to defeat their main purpose for many users, which is to provide the biggest possible reach and exposure to the world. If you get demonetised or banned by YouTube, other video-sharing platforms can give you only a fraction of the traffic and the eyeballs, which impoverishes you literally and the internet users metaphorically, since they are now less likely to be exposed to the broad range of content. There are other social networks, but only Facebook has “everyone” on it, including your grandma, school friend from primary, and that couple you’ve met on the trip to Spain. Sure, if you get banned from Facebook, you can still try to keep in touch with all these people via many separate channels but it’s so much more difficult, disjointed and time consuming. For that same reason, Facebook’s Marketplace has a much better reach than other platforms that are focused exclusively on online ads. If Marketplace continues to shadow ban me, I can try Craigslist or Gumtree or Locanto, but – certainly in the categories I’m interested in – they all have significantly smaller audiences.

The traditional response to bad customer experience has been “try somebody/something else”. You don’t like Facebook – or Facebook doesn’t like you? Try another similar service. But I’m not sure if most of my friends would be able to name even one alternative to FB, and the chances they are on it are even slimmer. So telling people to stop whining and use an alternative to the tech giants is akin to telling someone “Oh, you can’t have a mobile (cell) phone? So what, no one is stopping you from writing a letter!” It’s the same but different. This is the consequence of the domination of the internet by the Googles and the Facebooks. And the internet now does play an essential role – for better or worse – in our lives and work. Hence the comparison to public utilities. Facebook might not be quite like electricity or running water, but it’s very close to, say, phone service. Yes, you can opt for another social network, but compared to Facebook this would be like a phone company that only makes it possible for you to contact one in twenty people instead of just about everyone, and even then maybe only once a week, at a time predetermined by the provider. It’s a service of sorts, but so inferior in every way to the main game in town as to be incomparable.

I’m not offering any solution to this problem. Many, both on the left and the right, are increasingly of a mind that, like Standard Oil of more than a century ago, the tech behemoths of today need to be broken down into smaller and less powerful units. That could solve some problems but won’t solve many others. Like mine, for example; a somehow “smaller” Twitter and Facebook can still be unresponsive and unaccountable. And as we know from other areas of economy, greater involvement and control by the supposedly impartial government does not guarantee better outcomes either. Big government, like big business, is run by human beings who, quite apart from their own characteristics as individuals, work within a particular culture, which has its own values, agendas and preferences. Government is a monopolist too in many ways, and for all the politics, is not necessarily responsive and accountable either.

September 25, 2021

Will Mars become the equivalent to Earth that India and the East Indies once were for Europe?

Filed under: Economics, Europe, History, India, Space — Tags: , , , , , — Nicholas @ 03:00

In the latest Age of Invention newsletter, Anton Howes goes a long way in both time and space away from his normal Industrial Revolution beat to consider what might happen as humans attempt to colonize Mars:

The first true-colour image generated using the OSIRIS orange (red), green and blue colour filters. The image was acquired on 24 February 2007 at 19:28 CET from a distance of about 240 000 km; image resolution is about 5 km/pixel.
Photo taken by the ESA Rosetta spacecraft during a planetary flyby.

The other week I attended an unconference, which had a session on the implications of establishing colonies on other planets. Although this was largely meant to be about the likely impact on Earth’s natural environment — what will be the impact of extracting raw materials from asteroids and other planets? — some of the discussion reminded me of the challenges faced by the long-distance explorers, merchants, and colonists of four hundred years ago. There are quite a few parallels I can see between travelling to Mars, say, in a hundred years’ time, and travelling between continents in the age of sail.

For a start, there’s the seasonality and duration of the voyages. European ships headed for the Indian Ocean had to time their voyages around the monsoon season; trips across the Atlantic were limited to just half the year because of hurricanes. Round-trips took years. Similarly, the departure window for a voyage from Earth to Mars only comes around once every 26 months, and even the most optimistic estimates place eventual journey times at about 4-6 months. Supposing that Mars can be permanently settled, any colony there will likely be extremely dependent on the regular arrival of resupply craft. There’s only so long that any group can survive in a hostile environment on their own.

[…]

The Portuguese had once been the only Europeans to trade directly into the Indian Ocean, but the structure of their trade — essentially a state-run monopoly with some licensed private merchants — was unable to compete with the arrival of the Dutch. The initial Dutch forays into the Indian Ocean in the 1590s had originally been financed by lots of different companies, often associated with particular cities — similar to the proliferation of billionaire-led space exploration companies today. But the Dutch soon recognised that such a high-risk trade would only be able to survive if it came with correspondingly high rewards — rewards that could only be guaranteed by eliminating domestic competitors (and if possible, foreign ones too). They therefore amalgamated all of the smaller concerns into a single company with a state-granted monopoly on all of the nation’s trade with the region. In this, they actually copied the English model, but then outdid them in terms of the organisation and financing of that company […].

Are we likely to see a similar move towards state-granted monopoly corporations when it comes to space colonisation? I suspect it depends on the potential rewards, and on the strength of the competition. There is certainly precedent for incentivising risky and innovative ventures in this way, through the granting of patent monopolies. Patents for inventions in the English tradition originally even had their roots in patents for exploration. I would not be surprised if such policies end up being used again by countries that are late-comers to the space race, perhaps by granting domestic monopolies over the extraction of resources from particular planets or moons. Although direct state funding can help in being first, like they did for Spain and Portugal in the fifteenth and sixteenth centuries, state-granted monopolies for private actors may again end up being the ideal catch-up tool for laggards, as they were for the English and the Dutch.

How the monopolies are managed will also matter. The English East India Company, for example, was initially more focused on rewarding its shareholders than it was on investing in the full infrastructure with which to dominate a trade route. The Dutch company, by contrast, from the get-go was part of a more coordinated imperial strategy — one that sought to systematically rob the Portuguese of their factories and forts, to project force with the aid of the state. Indeed, if there’s one big lesson for the geopolitics of space, it’s that far-flung empires can be extremely fragile, with plenty of opportunities for late-arriving interlopers to take them over.

Although it’s difficult to imagine space colonies being able to become self-sufficient any time soon, it seems likely that those controlled by particular companies or countries may occasionally be persuaded — by bribes or by force — to defect. What’s to stop them when they’re hundreds of millions of kilometres away from any punishment or help? Ill-provisioned factors, forts, or colonies happily switched sides to whoever might provision them better. As I mentioned last week, such problems curtailed the ambitions of other would-be colonial powers, like the Duchy of Courland and Semigallia. When the Dutch turned up in the Indian Ocean, many of the Portuguese forts they threatened simply surrendered.

I bow to Anton’s far greater historical knowledge in most things, but state monopolies in the 16th to 19th centuries were very different creatures than their potential modern equivalents, and the much more comprehensive degree of state control of the economy now would probably mean that a state monopoly over extraterrestrial activities would be a worst-possible outcome. The greater the powers in the hands of the state, in almost every case, the worse all state-controlled activities have become. The incentives of civil servants are vastly different than those of individuals or businesses and are farcically incompatible with the risk-taking necessary on a dangerous frontier.

August 29, 2021

The competing English and Dutch East India companies

Filed under: Asia, Britain, Economics, History, India, Military — Tags: , , , , , , — Nicholas @ 03:00

In his latest Age of Invention newsletter, Anton Howes considers the odd fact that although the Dutch were the last major seafaring power to extend to the East Indies, they quickly became the most powerful European traders and colonialists in the region:

By the mid-seventeenth century, although the trans-Atlantic trades were still almost entirely in the hands of the Spanish, the European trade to the Indian Ocean had come to be dominated by the Dutch — which is quite surprising, as they had arrived so late. The high-value exports of the Indian Ocean — particularly pepper — had anciently arrived via the Red Sea, the Persian Gulf, or overland, and then been bought up in Egypt or Syria by the Venetians and Genoese, who then sold them on to the rest of Europe. It was then the Portuguese who had supplanted that trade in the late fifteenth century by discovering the direct route to the Indian Ocean around the Cape of Good Hope. The Portuguese monopolised the new sea route around Africa for a century, almost totally undisturbed by other Europeans, entrenching their position by building forts — occasionally with the permission of local rulers, but often without.

The Portuguese seem to have spread the rumour in Europe that they had effectively conquered the entire region, presumably to dissuade others from even trying to break their monopoly. Even as late as the 1630s, when other nations were already regularly trading there, foreign writers took the time to mock such assertions. As the Welsh-born merchant Lewes Roberts put it, the Portuguese “brag of the conquest of the whole country, which they are in no more possibility entirely to conquer and possess, than the French were to subdue Spain when they possessed of the fort of Perpignan, or the English to be masters of France when they were only sovereigns of Calais.” Quite.

[…]

But for all their tardiness, the Dutch arrival in the Indian Ocean was dramatic. The English may have been the first to threaten the Portuguese monopoly, but in the whole of the 1590s they sent a mere two expeditions out east, and in 1600-10 sent only a further eight (seven by the newly-chartered East India Company (EIC), with a monopoly over English trade with the region, and another voyage licensed to break that monopoly in 1604 by the king, which unhelpfully spoiled the company’s relations with local rulers by turning pirate and plundering Indian and Chinese ships). What the English sent out over the course of twenty years, the Dutch exceeded in just five. Between just 1598 and 1603, after the successful return of de Houtman’s first voyage, they sent out a whopping thirteen fleets — and this despite their merchants not even pooling their efforts like the English had until the very end of that period, when in 1602 the various small and city-based Dutch companies were merged to form a single, national joint-stock monopoly, the Verenigde Oost-Indische Compagnie (VOC). The founding of the VOC accelerated the divergence. Between 1613 and 1622 the EIC sent out a paltry 82 ships compared to the VOC’s 201.

The sheer quantity of Dutch ships heading for the Indian Ocean meant that they were soon dominant amongst the European merchants there, capturing forts from the Portuguese, founding further bases of their own, and able to forcibly keep the English out — sometimes by attacking the English directly, other times by simply threatening any of their would-be trading partners. The steady stream of Dutch ships also allowed them to resupply and maintain their factors — the key infrastructure of long-distance commerce, as I explained in last week’s post for subscribers. They were able to have a presence, and project force, in a way that the English could not. By 1638, Lewes Roberts, despite often lauding England’s commercial achievements, and being an EIC official himself, had to concede that in the Indian Ocean “the English nation are the last and least”.

That English weakness was reflected in how EIC merchants had to comport themselves in the region so as to have any share in the trade at all. Despite the EIC’s later reputation for bloodthirsty rapaciousness, in the early seventeenth century they were highly reliant on good relations with the locals. Whereas the Dutch could often afford to use force and bear the repercussions, the English more or less only held on in the early days by ingratiating themselves with local rulers — often by finding common cause against the aggressive and domineering Dutch. The infrequently-supplied English factors were often heavily indebted to local merchants too, including the Indo-Portuguese — a group that they often married into, for access to social networks and support. As the historian David Veevers argues in a new overview of the early EIC (a relatively pricey academic book, but compellingly argued and juicy with detail), the English often went further than just friendliness or integration, subordinating themselves to local rulers too. Of the few early forts that the English managed to establish, for example, that at Madras in 1640 was only built because the local ruler encouraged it, treating the English there as his vassals.

March 30, 2021

QotD: Static societies and disruptive outsiders

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

In 1981, the social scientist Mancur Olson published his magisterial The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities. Olson had already won acclaim for The Logic of Collective Action, which explained why some groups received an outsize slice of the political pie. In his new book, Olson turned to the question of why nations fail. His thesis: nations lost dynamism when insiders managed to stack the rules against disruptive outsiders.

Stable societies with unchanged boundaries, Olson observed, “tend to accumulate more collusions and organizations for collective action over time.” Instead of accepting rules that encourage overall growth, these collusive organizations — trade groups and labor unions were paradigmatic examples — fight to keep what they have, slowing down “a society’s capacity to adopt new technologies and to reallocate resources in response to changing conditions,” thus reducing economic efficiency. Decline follows.

Olson pointed to Japanese stagnation under the Tokugawa shogunate, when, “before Admiral Perry’s gunboats appeared in 1854, the Japanese were virtually closed off from the international economy.” Ruling Japanese society, he writes, “were any number of powerful za, or guilds, and the shogunate or the daimyo often strengthened them by selling them monopoly rights.” The guilds “fixed prices, restricted production and controlled entry in essentially the same way as cartelistic organization elsewhere.”

A second example: Great Britain, “the major nation with the longest immunity from dictatorship, invasion and revolution” and, consequently, Olson explained, suffering “this century a lower rate of growth than other large, developed democracies.” In Olson’s view, the weak performance resulted from limits on change established by a “powerful network of special-interest organizations,” which included labor unions, industrial groups, and aristocratic cliques. By the 1970s, after the conservative government of Edward Heath fell in a losing battle with striking miners, many deemed Britain ungovernable. Olson contrasted the British situation with that of postwar Germany and Japan, where the chaos and destruction of wartime defeat wiped away established industrial and retail groups, leaving the field open to newcomers like Soichiro Honda or the Albrecht family (creators of international supermarket giant Aldi), who could work economic magic.

The word “ungovernable” was also used to describe New York in the 1960s and 1970s, when Mike Quill’s transit union ran roughshod over Mayor John Lindsay’s attempts to control public-sector wage growth. New York was a long-established city with lots of political collusion. The old Tammany Hall could broker deals to keep Gotham going, but Lindsay’s successor, Abe Beame, proved too weak to resist any special interest that wanted more spending or government favors. New York’s spending kept rising even as public services worsened, until bankruptcy loomed and public power wound up in the hands of the unelected Municipal Assistance Corporation. Thankfully, New York reformed itself economically, at least to some extent, under Mayors Rudolph Giuliani and Michael Bloomberg, as Britain did under Prime Minister Margaret Thatcher. Sufficiently strong leaders can buck entrenched insiders.

Edward L. Glaeser, “How to Fix American Capitalism”, City Journal, 2020-12-13.

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