Krugman and Machiavelli

I went off from my original point on this but I think with good reason.  I doubt Krugman would want to be linked to Machiavelli but I believe that when discussing the morality or amorality of systemic issues Machiavelli is one of the better starting points.  I realize Machiavelli is rarely read in this light, it was too far from the moral consensus of his day and today he's mostly remembered for The Prince and for realpolitik, not for what his philosophy had to say about morality.  This is unfortunate, one of the key insights in reading both The Prince and The Discourses on Livy is that Machiavelli is a staunch Republican who hates monarchies, though his love of having a job trumps this, leading to The Prince.  However, I have come across little modern political writing that deals explicitly with the moral issues of both the individual and the individual as a social and political entity, Machiavelli engages with this, if at times clumsily.  So after this brief introduction, on with the regularly scheduled programming.

The second post is most remarkable for its title, Economics Is Not a Morality Play.  This seems to be too frequently forgotten:

The market economy is a system for organizing activity — a pretty good system most of the time, though not always — with no special moral significance. The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty; nonetheless, we accept a system with considerable inequality because systems without any inequality don’t work.

This is very right.  When dealing with any systemic issue in the social sciences, not just economics, it is important to remember that this is all part of the amoral realm.  You're analyzing effects and what works and what doesn't.  It would be nice if things played out so that personal morality could be applied across the system but this is rarely the case.  This observation probably has its earliest detailed explanation in Machiavelli, who gets an unnecessarily bad rap for saying this, who argues that the morality that guides the individual can cause great harm if a ruler acts upon this morality when he is head of state.  The same goes for economics or politics. 

The systemic effects are about the uncoordinated, and often unknown, unintended consequences of our actions.  These are very real and subject to analysis but they have no real agency, they happen because these are the things we aren't thinking about when we do something we intend to do.  On a political level, organizing ourselves to achieve domestic peace and tranquility threatens another state because the high level of organization needed for organized economic and social life can be readily used to create military power.  This can militarize neighboring states, creating an arms race unintended by the economic and social reforms of the originating state. 

On a more individual level, for example, our desire to drive cars can create global warming.  There's no agency, it's a systemic level effect arising from our uncoordinated activities; as one individual making a choice there's nothing wrong with what each of us individually is doing, it's all the other bastards doing the same thing that's causing the problem.  I'm completely clear morally but we are not.  This is where morality can come back into play (I'm actually building off Machiavelli here, I strongly recommend reading The Discourses on Livy, Machiavelli has some very good thoughts on how different moral systems operate at the individual and at the systems level and how these contradict each other, though he uses different terms, unfortunately us moderns rarely think in moral terms anymore so you've got to go back to the Renaissance to get this stuff), how we respond as an organization (this can be a civic group, company, or state, I disagree with the notion that there is much of a difference between "private" and "public" organizations when discussing things on this level) has a distinct moral dimension that is lacking on the individual level.

Which brings us back to Krugman.  The economic system is amoral, we can get out of the slump with any sort of a demand shock, it works, even if it is messy.  However, as rational, social entities we are subject to our conscience and have an obligation to proceed morally.  Which is why there is a difference between getting out of a slump through digging up buried bottles of money, blowing stuff up, or building infrastructure.  The first two mean abrogating our moral responsibility as social beings, while we may still have unclouded consciences as individuals because these choices represented no failing of our individual moral responsibility, the organizations we form as social beings did fail in the second type of organized morality that Machiavelli writes about. 

Far too little thinking is devoted to the second type of morality, earlier moral systems focused almost entirely on the individual, after all few people in most societies used to have any form of power so there was no need for detailed moral systems on the actions of organizations.  However, today with democratic political ideas that give all of us responsibility for the actions of the organizations we are part of, there is a desperate need for moral thinking at this level.  Unfortunately, there is far too little attention payed to morality and moral systems in mainstream modern thought and what there is mostly involves trying to reconcile the earlier, personal form of morality with life in the modern world and participatory political system.  As Machiavelli observes, the moral system that operates at the individual level does not necessarily lead to moral outcomes at the social level, you have some sort of moral system operating here but it is poorly understood (in Machiavelli it comes across that there is some sort of system of responsibilities, he doesn't endeavor to build a system himself however beyond the implication that a system is there, even if he cannot fully explicate it) and certainly operates differently than the moral system for individuals.  I believe many people today perceive this and are bothered by its lack, so far though no attempts at building this system have successfully caught on with the public at large.  If there is a real moral challenge to be faced today that we need a moral and religious revival for it is meeting this need.  So far I see no mass movement in this direction.

Thoughts on a Couple of Krugman Posts: Is it Good to Live in a Destroyed World

There are probably several more useful things I could be doing and several more interesting topics I could take up but I can do this quickly and not those.

Krugman has two recent blog posts both worthy of brief mention.  First, Is It Good to Live in a Destroyed World.  He's simply pointing out that the post WWII weakness of other economies wasn't good for the US economy.  My reaction isn't so much to the post itself as to its leading sentence:

On this blog and elsewhere, I often see assertions that America prospered after the Depression because our competitors were in a state of ruin.

This illustrates a flaw in thinking I see depressingly frequently today.  Modern thought has become so dominated by economics that people seem to have difficulty in distinguishing between economic and political advantages, everything is ultimately tied back into the economy.  While I may be reading too much into this, my thought is that the assertions Krugman is alluding to are based in the rather non-controversial claim that the US was at the height of its relative power at the time.  This is distinct from this situation being good for our economy, it wasn't, but power is relative so if your competitors are weaker you are stronger by default, it says nothing about your absolute position.  However, economic thinking is so dominant people remember this as the US being economically strong, not in power terms where it is relative strength that matters.

What Kind of Change Did American's Vote For?

Just some idle speculation that resulted from watching the Daily Show episode which had a clip of a woman (I don't think it gave her name) saying, "I'm exhausted of defending you, defending your administration, defending the mantle of change that I voted for..."

The first thing that popped into my head was that while a few Americans, mostly on the left, voted for deep change in America, most voters were simply voting for a government that changed so the America already here would work well again (whether or not it was actually the fault of the government that this America is having problems is a separate issue).  Of course, the whole bit about "one of the people we were waiting for" bit implied that America needed to change on all levels for Obama's message of change to work.

I think the Tea Party is a pretty clear message about what the majority of Americans think about this idea.

The Only Healthy Man in Europe

Very good quote from Abdullah Gul in a NY Times article today. 

“Turkey used to be known as the sick man of Europe, whereas Turkey now is the only healthy man of Europe.”

Another other good passages:

In a flurry of speeches and meetings — and one meeting that did not happen — the Turkish president, Abdullah Gul, defended his country’s close ties to Iran, proclaimed Turkey’s intention to become a leader in the Muslim world, and spurned an attempt to mend fences with Israel over its deadly raid on an aid flotilla bound for Gaza.
Turkey’s muscle-flexing has left the United States uneasy...

I've always been a bit of a cheerleader for Turkey.  Partly it's because I find Ottoman and Byzantine history fascinating.  More seriously, Turkey is perhaps the country in the best position to bring a really new perspective to the west.  We talk a good talk about human rights and multilateralism but with the exception of Japan we haven't done a great job bringing other countries fully into our club.  Sooner or later we're going to have to walk the walk and Turkey is a very good ally.  They've long been part of NATO and their history shows a strong desire to be recognized as part of the west.

Of course, there's still a ways for them to go economically and there are some unresolved human rights issues.  Still, they have a lot to bring as a partner.  They're younger than most western countries and their cultural differences are an advantage.  New ideas can only help progress.

This is why we should be pleased they're being more assertive, even if issues like their relations with Iran steps on our toes a little.  Equal partners never see quite eye to eye, some room has to be given for a degree of independence.  It's a very good thing to see friendly countries showing a bit more assertiveness, we should encourage this while still emphasizing the importance of shared interests.  The US will need allies more than ever as other countries rise in power, Turkey will be one of these players and is one that we have a strong historical relationship with.  We need to recognize that moving forward our allies will be stronger and show more independence, there will be more give and take in these international relationships.  This is a good thing and not something that should make the US "uneasy."  Though it would be nice if Europe would help more on integrating Turkey.

Women, Equal Pay, Lawyers, Congress, and Lack of Transparency

A NY Times op-ed today had some good thoughts on the paycheck fairness bill.  I have a couple of thoughts on this.  First, I'm sceptical of the whole gender based stereotypes thing.  Gender roles are different in different societies across different points in time.  These change without the need for legislation.  Let these processes do their work without legislation.

Second, if there is a problem that operates independently of other factors, I'm not sure that legislation making lawsuits easier is the way to go.  I'm highly sceptical that our tort happy culture needs encouragement.  Law has its place but in a Congress dominated by lawyers I think any law being passed that makes bringing lawsuits easier needs to be subjected to a greater level of scrutiny than laws that aren't as likely to create a large number of lucrative new opportunities for lawyers.

Third, if we do want to do something about unequal pay there are probably better ways of going about it.  Personally, I favor transparency for salaries.  It is already done for NY state employees and the sky hasn't fallen.  Why not extend this transparency further?  Start with only high end salaries to focus on where disparities likely have the largest effects and if this has positive effects with few negatives, extend it down the income scale.  Compliance costs will be low and if there is a big pay disparity for women within an organization it will be obvious.  Once pay is transparent I'm fairly confident the negotiating can happen naturally.  If discrimination is occurring, it is being enabled by the information disparities that occur because of employee's lack of knoledge about pay. 

Of course, I do realize there are some real privacy concerns here.  There are also a lot of individuals that won't like this because they feel they have negotiated a very good deal with their employer and don't want to see this end (there will also be a few of these who will find out that they're the suckers, perhaps a greater welfare loss than those who will actually see their pay shift to be closer to the norm.  I think ego tends to trump inflated pay.  Most people value status more than wealth in practice, though few will admit it.).

Ruminations on Politics Inspired by Two Hours Stuck in Traffic

While heading home Saturday from seeing a concert in New York City the night before, I ended up spending over two hours traveling less than 10 miles.  Given my obsession with politics this gave me lots of time to contemplate how traffic jams could be applied as an analogy to political economy.

Specifically, I was considering how our normal day to day life in political society functions much like a road system.  Every car functions the same way as an individual does, it can self navigate through the vast system that is life in a civilized society to reach a vast number of ultimate goals, more choices than any individual can really comprehend.  The system makes it incredibly efficient for any individual to reach any point connected to that road system.  Within the system, the individual has complete autonomy to reach whatever points are desired and is best able to control its own direction, the individual auto is the most efficient unit for selecting and connecting any two points.  As a side note, between a few very well traveled points mass transit can be even more efficient, and an analogy can be made to society at large.  This point shouldn't need further explication by me so I'll proceed onto others.

Of course sometimes it is possible to go off road.  In some cases this is just less efficient, off-roading is much harder on your car than traveling on a road is.  In many other cases however, the terrain is simply too rough for a car to travel.  Without roads, there are many places impossible for a car to get to.  This is comparable to society, within society many, many things are easier to do.  A few things are basically unchanged.  There is also a third set of activities that are impossible without a highly developed society to act within, this sphere of activities expands on a daily basis.

There is another category though where individual action has negative consequences.  This is when some sort of bottleneck causes a traffic jam.  In this situation, the most efficient way through the bottleneck is for everyone to be coordinated so they can proceed in an orderly fashion.  While most people do this naturally, there are always a few who will instead jockey for position.  This has two effects.  First, it makes the situation that much more dangerous for everyone.  In the case of the traffic jam leading to these reflections, in addition to the main accident that caused the slowdown I passed what appeared to be a secondary accident, much less severe, that resulted in further slowdown and that I speculate was caused by the starting and stopping of the traffic jam.

The second effect is that everyone is slowed down by the few people trying to get ahead.  They push to get just slightly ahead of everyone else, often by just a car length.  Doing this forces everyone behind them to slow down, costing the system as a whole far more time than that person saved.  Of course, since it is never just one person doing this that means that the person fighting to get ahead is slowed down more as well since they are being impacted by the systemic effects of the actions of other individuals like themselves.

To bring this back to an analogy for society, these are the situations where coordinated action are necessary.  Many issues are more like the main road system, each individual can maximize their own efficiency by choosing their own path, making their own decisions, and setting their own speed.  Other situations are bottlenecks.  Each individual fighting to get ahead slows everyone else down and is in turn slowed down by others doing the same.  Coordinated action makes everyone better off than competition does.

Of course, society isn't as simple as a road system.  Identifying which goals are more like the endpoints of trips on the main roadways and which are plagued by bottlenecks is tricky.  But this isn't impossible, we're better off trying to identify which are which than we are saying everything is like the open road or that everything is a bottleneck.

A Business vs. a Political View of the World

I'm not going to pretend this observation is particularly enlightening (and has probably been said in more sophisticated terms) even by the low standards of blogging but its been bouncing around in my head the last couple of days and I'm hoping to get it out of there and into text and hopefully have it stay there.

An economic view does have the possibility of being a complex and carefully nuanced view of the world that can take into account the limiting nature of its ceteris paribus assumptions.  This is not the view I'm writing about.  What I have in mind is when the economic worldview gets expressed in mass political terms and specifically in terms emphasizing the role of business or the individual in the economy.  This becomes not so much an economist's view as a business man's.  To be successful in business, one must first of all learn about the world as it is and learn how to take maximum benefit of the world as it is found.  It is a maximizing view that generally views the world as the ceteris paribus part against which the real action happens.  In this view, there is very little that can be changed to make the world different, change can only happen within an existing framework to more easily allow maximization to happen, any change to this framework will fail and only pushes us towards a temporarily lower equilibrium.  Change is seen as occurring but it is change through technology or in individual relations, change in the broader system or culture against which action occurs is largely invisible.

A political view focuses on how to change those ceteris paribus assumptions that form the background of the business man's view.  It generally holds constant what the business man is regarding as changeable for efficiency, business will make do under any change in the social structures against which it operates and reach maximum efficiency eventually, it isn't something to worry about.  In this framework, reality is composed of the social reality against which economic and personal interactions occur, changing the social structures allow for a new set of possibilities for these economic and personal interactions and can close off old possibilities that had largely negative consequences.  People are highly adaptable, there is no particular reason to worry about how business or individuals will react to changes in social and political structures, they'll always manage to do their best.

Both these perspectives have a lot of truth to them and emphasize different levels of analysis.  The business view recognizes change and maximization takes time and effort.  They look mostly to the individual and to small organizations and see the limitless untapped possibilities in the current system.  Even the current system's flaws look like opportunities from this viewpoint, these flaws allow individuals to seek their own advancement by being aware of them when others may not be.  What it fails to see is that a change in social and political structure opens up a new set of possibilities that may be far better than what came before.  It is essentially conservative because any change in existing social structures disrupts previous relationships that were critical to the success of individuals and organizations within the current system.  The ability of change to create new possibilities is seen as wishful thinking and impractical.

The political view places emphasis on broader social forces and systems.  It views how people interact with each other as something that is changeable, not a constant against which to makes plans.  They see the new possibilities that are opened up by social and political change and the ability of these changes to eliminate the flaws in the current society.  What they fail to take into account is that this change will disrupt existing arrangments and that it can take a very long time to adapt to the new situation.  There will also always be unexpected consequences of change that will virtually always make it more costly than was seen at first.  The social disruption caused by change can potentially block the potential benefits from ever materializing, it takes a great deal of effort for a new equilibrium to be reached in a new context.

Both of these views are essentially correct within their own domain, it is recognizing the importance of the other domain as well where both are weak.  Both tendencies must exist for a society to thrive.  The political view is constantly working to expand the horizons within which the business driven view is operating.  The business view is constantly trying to make the reality created by the political view actually work in practice.  Both allow for the other view to exist while simultaneously working at cross purposes, the political view constantly upsets the plans of the business view while the business view constantly seeks to block the dreams of the political view while trying to become more purely what the previous political view wanted us to become.  This tension drives society forward in a workable manner.  If things sway too far to one side or the other, we get either sclerosis or chaos.

Of course, this is just one way of describing people's worldviews and has its own limited domain.  However, with the importance of the economy in most people's thinking today these two contrasting worldviews do seem to include a significant portion of the debate and not one that is perfectly captured by the modern left and right.

Are We About to Start a Trade War

This is just some first impressions from today's NY Times article on some new developments in our dispute with China over currency.

First:

The United States brought two cases to the World Trade Organization on Wednesday, accusing China of improperly blocking imports of a specialty steel product and denying credit card companies access to its markets. The move came just hours before House lawmakers demanded action on the currency issue.

This isn't such a big deal and I like going through the WTO, it enhances the power of and prestige of that organization in advance of when we're really going to need it as one among several similarly sized economies.  I don't think it will get anything done but this is the kind of symbolic action I expect when people are baying for blood and the government knows better than to follow through and give people what they want.  It's not smart economically but giving a show of responsiveness can get people to put the pitchforks down so so far, so good.

This is a little more worrying:

In his testimony, Mr. Geithner is not expected to rule out declaring China a currency manipulator, a finding that could lead to retaliatory trade measures. The administration has so far refused to take such a step, relying instead on persuasion, though with little success.

But still, it's a good idea to not rule out any options in advance of negotiations so I'm not too concerned yet.  Having these notions talked about in Congress makes me a little nervous though because a trade war with China would be a very bad thing.

Next:

The office of the United States trade representative, Ron Kirk, said the timing of the new W.T.O. cases was unrelated to the other economic tensions with China.

(cough)Bullshit(cough)

Not so sure about this:

Mr. Grassley added: “The administration should go one step further and bring a case against China’s unfair currency manipulation at the W.T.O.”

From what I remember about the WTO I don't believe it has very good rules regarding currency manipulation.  Trying to bring this case would result in trying to force the issue into a frame it's not really suited for, which would probably just piss the Chinese off and result in a lost case for us, making both us and the WTO look weak.  Better to propose to renegotiation WTO rules on currency (perhaps a clearer IMF role and powers would be more appropriate?).  This would send a clear enough message that we're very, very serious and give us an option for real action in the future.  Won't solve anything this political cycle but I'm honestly not at all worried about our current deficit with China.  I'm much more concerned about the situation 20 years down the road when we're not as dominant as we are today and this action is trading what is really a minuscule gain today for potentially significantly weakening ourselves down the line.  Best not do this.

Though Mr. Grassley deserves kudos for suggesting multilateral methods which too many aren't recently.  So while I disagree, I still recognize he's making sense.

This is what I was talking about when I mentioned a forced issue:

Mr. Levin urged the administration to bring a case before the W.T.O. arguing that China’s currency policy amounted to an illegal export subsidy. He said he thought the United States could impose countervailing duties against China without violating its own obligations under world trade rules.

Currency manipulation is a bit more complicated than an illegal export subsidy.  I can see the logic as a lowly blogger but I'd be willing to bet it won't fly in formal hearings.  Best not make fools of ourselves in a forum where we aren't the only ones making the case.  This will seem logical in the US Congress where everyone agrees.  It will seem far less logical once the other side gets to talk too.

This is all good information and makes sense:

China permitted the value of the renminbi to rise about 20 to 25 percent against the dollar from 2005 to 2008, before the government reimposed a currency peg to support its export-centered economy after the global financial crisis.

C. Fred Bergsten, director of the Peterson Institute for International Economics, a leading research organization here, told House lawmakers on Wednesday that a similar increase over the next two to three years would create about 500,000 jobs. He said it would reduce China’s current account surplus by $350 billion to $500 billion, and the American current account deficit by $50 billion to $120 billion.

The United States should seek to mobilize the European Union and countries like Brazil, Russia and India to press China to realign the renminbi, and should seek W.T.O. authorization to impose restrictions on Chinese imports if it does not do so, Mr. Bergsten said.

I could quibble a bit with the numbers, some of the reading I've been doing has suggested that the US current account deficit would reduce by less because of import substitution from other low wage countries (Chinese imports compete with other imports for the most part, not domestic US industries) but it's close enough it's not worth arguing about.
 
The last paragraph is particularly notable.  I think the best point of comparison with the current situation in China is the Plaza Accord (in reverse really, but still comparable).  We need to manage this appreciation carefully and that will take widespread international agreements.  We have not chance of doing this bilaterally.  On the simplest level the Chinese give every indication that they are more focused on traditional power roles than they are on simple economics.  Just because the economic determinist camp has taken over here doesn't mean it has everywhere.  Even though a trade war with China will hurt them more economically than it will us, it will hurt us more in other areas, particularly in international prestige, than it will them, so for them this is a winning proposition.
 
The second thing we should keep in mind is that China remains an authoritarian country.  They have a much greater abililty to control and fine tune the adjustments necessary for the kind of interventions that will be part of a trade war over currency.  We're going to have pretty much one shot at whatever we try to do unilaterally before our interest groups go nuts.  While democracy is good at a lot of things, fine economic manipulation isn't one of them.  This plays to their strengths and our weaknesses.  Our only options are multilateral, unilateral action is certain to lead to us looking weak and likely foolish as well so is best avoided.
 
I'm glad to see the NY Times article makes little mention of unilateral action, I'm eagerly awaiting Krugman's next post suggesting we seize the day and attack now to prove I'm not wrong that there's a significant constituency in favor of unilateral punitive action.

New Addition to the Site Page on Political Definitions

I've decided to add a page on how I am using various political terms with contested definitions. I will also be putting in a few more technical definitions for terms which I use with the technical definition in mind rather than the common definition (state and nation come to mind). My first entry is on liberalism and I will be expanding from there. Feel free to suggest any terms that you'd like me to deal with early or critique the definitions I'm posting since I'm trying to give a particular rather than a standard definition.

The new page is on the right side of the screen and labeled A Slightly Irreverent Political Typology and Dictionary.

The first, rather long, entry is reproduced below.


Liberalism

The unifying principle of all liberal thought is that there should not be wide disparities in socially defined personal power between individuals. Disparities in power, whether through birth, political ties, or wealth should be minimized. Competition for power is an essential element of human existence however, so liberals realize that this competition must be limited and channeled. This limitation is achieved by investing power in institutions rather than directly in individuals with individuals exercising power solely through virtue of their role in institutions. Individuals theoretically have equal power in determining the formation of these institutions their later reform. Individual competition is best channeled into the economic realm, which while a potential source of power, can be safely channeled into a non-power based limited competition with strong enough institutional structures. This does not mean that individuals are conceptually equal in all ways or that they will be equal in terms of economic or other types of competition, this equality applies only in reference to power (in the technical definition, to be added later). This theme runs as a constant throughout liberal thought, whether you're discussing early liberals such as Locke, Smith, or Mill, early American liberals such as any of the Founding Fathers, modern institutional liberalism in academia, or self identified liberals in politics.


A major source of misunderstanding liberalism is that it is not sufficiently appreciated how effectively the modern state has channeled the competition for power into solely economic channels. Earlier social institutions failed to achieve this, the modern state however was able to restrict individual competition largely to the economic realm and to a lesser extent into competition for office, which carried carefully specified and time limited opportunities to exercise power. Earlier liberals where primarily concerned with limiting other forms of power which were far more significant in influencing people's daily lives then economic power was. Economic power only became relatively significant and a concern for liberals after other forms of gaining power had been successfully limited.

In addition to the tendency for them to be misunderstood by others, modern liberals, especially in the US, tend to be somewhat muddled in their thinking themselves, even if the basic qualities of liberalism remain identifiable in their thought. This is because thinking about power is currently out of fashion as a major determinant of social actions and problems. Economics is currently the fashionable way of thinking about most developments in society and this is a discipline that gives little theoretical attention to power. Accumulation of wealth does of course have the potential to lead to the exercise of economic power, though this is not an inevitable result of growing wealthy.

This tendency leaves liberals with difficulty forming a clear message. They are very concerned about when wealthy individuals or organizations cross the line from simply acting economically to instead exercising their wealth as power, even when wealth is the source of this power limiting the unequal exercise of power is the essential property of liberalism. However, the distinction between wealth and power is not commonly discussed in modern politics making it difficult to clearly communicate why liberals are concerned with the disparities in power resulting from the actions of economic actors without being opposed to the accumulation of wealth or economic activity itself. This is further complicated by the all too frequent denial that the economic realm is not self limiting and that it can cross from economic competition into the more general competition of power. Since one of the biggest achievement of liberalism was to limit the competition of individuals to economic competition instead of a more general competition for all varieties of power it is extremely important that liberals get their heads straightened out and learn to clearly articulate the difference between power and wealth.

Serfdom and the State

David Brooks had another column today that made me think.  Not so much about the column itself but of the increasingly common usage today of the phrase "road to serfdom" in American politics.  Apparently a strong state is somehow going to create serfdom through expansion of government programs.

While I can understand why people don't like the idea of a strong state and that a strong state has the potential to lead to a relation of the individual to the state that many people wouldn't desire, calling this serfdom is silly.  From a historical perspective, it's the strong, centralized states that succeeded in abolishing serfdom.  Powerful, centralized monarchies such as England were the first to succeed in taming the individually powerful nobility and replacing systems based on personal bonds between individuals, which is ultimately what serfdom is a part of, with an independent yeomanry bound to and protected by the institutions of the state, not private individuals.  As other states emerged from more primitive forms of early government they succeeded in abolishing serfdom as well.

It was the weak states dependent on the good will of privately powerful individuals that were unable to abolish serfdom.  Weak monarchies such as those in Poland, Germany, and Austria-Hungary went through second serfdoms because the political institutions were unable to centralize into a state and remained earlier forms of semi-feudatory governments that were highly decentralized.  While serfdom covers a wide range of actual institutions, a common theme is that the serf is dependent on another individual rather than having a full range of independent rights guaranteed by centralized political institutions. 

So, while it is perfectly sensible to not like the form of social organization that requires a highly centralized state it is just plain incorrect to relate this state to the earlier feudal state of serfdom.  The distinction between social relations dependent on bonds between man and man are far too different from social relations between man and institutions to make the usage of this term sensible.  Talking about serfdom in the context of centralized political institutions is just nonsense.

Brooks on the Genteel Nation Part 2

In addition to the thoughts in my earlier post, there are some other considerations linked to Brooks' column that are worth drawing out.  In many ways, Brooks is making an argument that I find very similar, if in less nationalistic tones, to the kind of argument I've been criticizing Beck for making. The essential parallel is that both see the US declining and wish to attribute this to what are essentially individual level shifts in ideas and values.

There are a few problems with this.  The first is that we are in relative not absolute decline.  This means that either others were doing something wrong and stopped, or they started doing something we're not.  Neither case requires that anything that we're doing is behind our relative decline.  Something we're not doing may be, but not anything that is changing within our own nation.

The second problem with this is that Brooks doesn't have any evidence that the US is failing to start new businesses or that people have stopped getting their hands dirty.  A few brief internet searches for evidence showed that new business start ups are continuing to rise (with noisy data, there remains an upward trend).  If we had become too genteel for business it seems unlikely that this would be the case.  Of course, I couldn't find any per capita data, which is what would be really relevant, but I think there is a lot of reason to doubt that a shift in values have led Americans to work less or to have less desire to get involved in the messy business of commerce.  I do believe more could be done to encourage these values and to make it easier for people to attempt risky new ventures but this would need a change from old thinking to achieve, not a return to it.

The third problem with this is that it is the most tired, and unproven, explanation for decline in history.  Every society gets a group of people who are saying that the reason their society is declining is because they are falling away from the ideals of a proud past.  The Chinese did it, the Romans did it, I doubt you can find any society that didn't fall because of a disaster that didn't use this excuse.

The problem with it is that the societies that end up replacing these cultures don't look like what these cultures did in their supposed golden age.  Instead, these cultures always had learned everything they could from the supposedly declining societies and then introduced innovations (the exception being nomadic cultures that overthrow earlier ones based on superior military technology, these cultures tend to get absorbed into the sedentary culture however so are an interesting exception rather than something immediately relevant).  So the key factor is not that the declining society has changed but that someone else has become something new.

This hints at how we should respond to decline.  The question is how to adapt ourselves to a changing world with new innovations and how are society must change to meet these challenges.  The problem is that old ways of managing the world break down in the face of social change, you get mass social disruption.  Trying to restore the old order is futile, the mass production society of the 50s required different social traits than the modern information and high tech economy of today.  We need to adapt ourselves to social institutions and ideas that will provide ideas, norms, and values for this world, not the old ideas that were so successful in the 50s.  Otherwise, our decline relative to other societies is inevitable because we will be hopelessly out of sync with the emerging world.  Facing the problem from a position of what would social and institutional structures look like that produce what we need to continue to be successful holds promise to answer the problems Brooks notes about social breakdown and skills mismatch, though not too many bankers*.

* Basically what do the successful entrepreneurs of today look like?  Well, successful people today generally marry late, are highly mobile, are well educated (not necessarily in school), have social support of some kind to fall back on, have an ability to work with people from very different backgrounds, etc.  So, what would the social institutions look like that promote this kind of lifestyle?  Those of the family from 1950, or something different?  Then we can get into institutional structures, such as how corporations are constituted, litigation, etc.  Might we have to change substantially, yes.  Might this be a bad thing from a human happiness perspective, yes.  But if we're worried about decline, it comes down to power.  If you're worried about human happiness or some sort of objectively defensible social order, worry about this and stop fretting about losing relative power.  Leave power to those that desire to make the changes to get it because from this perspective, the costs are too high.

[Brooks does have something with the role of finance.  While cases are too few to generalize from, the Dutch and British both had strong financial sectors after decline was inevitable.  However, they also had strong financial sectors while they grew.  This is a complicated topic beyond the scope of this post.  There is a problem however, if the financial sector is relied upon as a strength while other sectors decline.  It can become a parasite in the right conditions, I have no idea if that is descriptive of today.  If it gets, and stays, too influential in the political process however, than there might be a problem.]

Brooks on the Genteel Nation Part 1

David Brooks had a peculiar column today where he argued that America is declining in part because of a shift in values.  He starts by mentioning Mokyr's new book, "The Enlightened Economy," which is arguing that a crucial cultural shift was behind British development (I mention this solely because Mokyr is on my short list of next books to buy, if anyone has read both this book and The Lever of Riches, perhaps Gifts of Athena as well, could you let me know if they're all worth buying or is there enough repetition that only buying one is a better choice?).  He then goes on to argue that we need to look not just at material factors but also shifts in ideas and values.  I agree with this as far as it goes.

What I disagree with is that the shift in a nation's fortunes happens internally.  None of the histories, whether economic or on other topics, I've read has tried to argue that Britain decline was due to a shift in its internal values (Brooks mentions Barnett, who I haven't read).  This goes against most everything that I have read.  Historical, social, and economic change are explained by the intersection of ideas and values and material factors (though any theory will deal with one piece at a time, any decent writer, with the exception of Marxists anyway, will admit that they are examining only a piece in detail and that others are necessary to explain the whole).

The important thing is that you have the right ideas and values, with the right material factors, at the right point in time.  America took over from Britain not because the British changed who they were, everything I've read about Britain makes me think they were essentially the same, but because America had both superior material factors as well as ideas and values that allowed them to take the next step Britain couldn't.  We broke into mass production partially through having a different way of organizing the corporation and firm, we early on developed corporate structures that could handle tasks like building an transcontinental railroad and were able to apply these lessons to large scale manufacturing such as ship building and autos.  British firms, with the exception of trading companies, remained rather smaller.  They didn't make the same change in ideas and values and social structures that we did.

So the essential piece isn't that there is some inherently "right" mix of ideas and values that is under threat.  It's that you can change the ideas and values that animate your society to match the conditions you are currently living in.  If you have the ideas and values of the wrong time period, you decline.  If you have the right ones, and the other contributing factors, you rise.

[To plug for my favorite magazine, the Economist Free Exchange blog has a good post up on the decline of manufacturing as a percent of GDP in the US, which is what Brooks is lamenting the loss of, and why we shouldn't be worried about it.]

American Exceptionalism: What it is and Can it Survive?

I often take issue with the use of American exceptionalism to explain our peculiarities.  This isn't so much because I don't think there is anything to the concept; I just have a problem with how the concept is being used.  Most of the cases where I see it used involve using some aspect of American culture to explain either why we are dysfunctional, why we can't adopt a particular policy, or to explain why we shouldn't change something or why we should try to make ourselves more like some imagined past.

As exceptionalism, this is a bunch of bull manure.  This is being special in the everyone gets a trophy kind of special.  If you're a nation, you're exceptional in this fashion.  Everyone's got a culture they think made them great, there's nothing in American culture that doesn't have an analog elsewhere.  While these cultural traits can help define why we're not exactly like any other individual nation they don't explain any more for us than why France is different from Germany is different from China is different from South Africa.  This sort of cultural explanation explains why we get a UN membership card and aren't simply an administrative district; it tells us nothing about why we're great among nations.  It also doesn't tell us why we can or can't adopt a specific policy.  Tie any outcome back to American culture and you'll have an analogous situation elsewhere, there's nothing exceptional about particular policies.

Which isn't to say that American exceptionalism doesn't help explain why we're great among nations.  It's just an American exceptionalism that is hard to swallow for those wishing for a cultural explanation or nativism.

In my reading a few months ago I came across a good section on American exceptionalism, a way of defining it that I think does represent our actual history and explain our greatness, which the normal use of the term exceptionalism does not, on either count.  The section below is from John Gerard Ruggie's Constructing the World Polity, "Interests, Identity, and American Foreign Policy." 1998. p. 218.

America's form of nationalism differs from that of most other nations however.  Most nations claim an "organic" basis in either land or people, and these are the usual referents of a nation's foundational myths.  The American form of nationalism, in contrast, has no such organic basis.

...America traditionally has viewed itself as a willful community, or an elective community.  ... In principle, anyone can become an American.  But that fact is made possible, in turn, only because the American concept of political community rests on, not the exclusive organic specificities of traditional nations, but, in the words of political theorist Tracy Strong (1980: 50), "a universal or general foundation open in principle to everyone."

American nationalism, then, is a civic nationalism embodying a set of inclusive core values: intrinsic individual as opposed to group rights, equality of opportunity for all, anti-statism, the rule of law, and a revolutionary legacy which holds that human betterment can be achieved by means of deliberate human actions, especially when they are pursued in accordance with these foundational values.  Being an American is defined as believing and doing these things.

This definition of American nationalism I believe accurately represents America's history and culture.  I also think it clearly shows how our exceptionalism contributed to making us exceptional among all nations (though Ruggie is careful to state in a note that he sees this as distinctiveness, not exceptionalism; I'm more of a nationalist than he is).  This form of exceptionalism really does bring out how America is unique not in the sense that every national culture is unique but how we truly are unique among nations.

This is why some of the cultural forces waxing strong worry me.  The wish to precisely define who an American is and what being American means and to tie American identity more specifically to a codified set of myths and beliefs threatens the very heart of what makes us different from every other nation by making it clearer why individual Americans are distinct from individuals from any other nation.

Defining being American in cultural terms replaces American exceptionalism with the kind of organic myth of nation that every other nation has.  The exceptional thing about America is that we are a community based upon a set of enlightenment ideas rather than pre-modern traditions and myths, open to any individual that believes in them and will act upon them, rather than a people defined by shared myths, background, and territory.  We are defined by our inclusivity, not our exclusivity.  By who we are and the beliefs we share rather than by who we aren't and the beliefs we disagree on.  We are bound together by our shared beliefs in the founding ideals of our Republic, not in a national myth about our background or in strict adherence to a set of legal strictures.  Another exceptional aspect is that these ideas are so firmly grounded in the ideas behind the enlightenment, we don't represent ancient traditions such as religion or heredity but instead are a nation firmly grounded in the ideas that gave rise to modernity and that are open to all, whatever their traditions.  We may not see eye to eye in how to interpret and act upon these ideas in our modern world, or even how these ideas acted in our own history, but our shared identity is rooted in our mutual recognition that we are seeking to put these ideas into practice in the world as we find it.

None of this is to say that this modern trend to redefine being American in cultural terms is unique.  It isn't, the desire to redefine America in terms that draw from the same roots that other nations' nationalism draw from is a tendency that is visible throughout American history.  People throughout our history are made uncomfortable by our exceptionalism and desire to sacrifice our differences to be more like other nations and to enjoy the same kind of exclusionary certainties that are the privileges of those with more typical national myths.  I have faith in the resilience of our beliefs and do not think this will occur but I do think there is a significant enough threat that it is necessary for us to speak out against the possibility of us adopting a typical national identity, like that which the Tea Party is seeking to promote.  Go down this road and American exceptionalism is gone forever.

Why We Need to Teach Financial Literacy

My entire Labor Day weekend was consumed helping my girlfriend lease a new car, it even ate our planned canoe trip.  Anyway, early on in the haggling I received some firm evidence of my belief that too many Americans are financially illiterate.  During negotiations, the salesman gave us an initial quote of $286 and change a month, when we refused this he then came back with another quote of $260 a month with a thousand down, which is virtually the exact same price but front loaded.*  This left me rather offended, surely few people are stupid enough to fall for this; the math is just arithmetic and he had already seen me doing the math on the three year cost of the car before this.  I can only assume based on this tactic that many wouldn't have known to do this simple math.

Being able to solve these problems is what basic numeracy is.  Without it, shopping for a car would have led to us being badly ripped off.  How do people get by without it and why aren't schools teaching kids enough that salespeople wouldn't even consider this stupid trick?

* It's actually a little more, this would work out to $287.78 a month, the fact that he wrote Labor Day Blowout by the number just left me that much angrier that he seemed to take me for a fool.  Figure in that if I dropped that thousand in a 3 year CD I could still get a little over 2% a year even in this economy and the deal gets that much worse.  It's hard to believe we don't teach all kids these basic practical issues by the time they're out of high school.  If you can't do this on graduation, the school failed in its job of preparing you with the skills needed for modern life.

Am I Feeling American Today?

There's been quite a bit written about Glen Beck's restoring honor rally.  Not having attended it myself I can't comment on the specifics of it.  But I do have some thoughts about what has been expressed about the rally.  It was covered heavily just about everywhere.  The Economist blogs had three posts on it, Ross Douthat at the NY Times has been running with it, and there are countless others.  What is most remarkable to me isn't so much what the pundits have to say as what is said in the comments.

This makes it much clearer what the appeal of Glenn Beck is and what he was doing with his rally.  It's been expressed elsewhere but Beck's appeal is that he affirms what it is to live like an American.  This is an America that is explicitly emotionally felt rather than an America known through careful interpretation of our history and modern actions.  Mr. Beck's rally seemed to have a message that America is a great and successful country because of what Americans believe, how we live, and knowing that America will continue to be great as long as we adhere to our values, especially religious ones.  By affirming these values and continuing to act upon them America will continue to be great and grow ever more successful.  The solution to our problems is to stay true to what we feel America to be.  The American myth must become the American reality.  It's pretty much typical American populism.

While this is certainly a narrative with a long tradition in America, not only politically, the rally reminded me a bit of the Great Awakenings though I don't believe it will have nearly that impact, so culturally as well, this is a view that is irreconcilable with another view of America.  This view is that America is great because of our choices, because we were willing to make the tough decisions and change ourselves at a very basic level when we had to and we didn't fall into the trap of thinking we could work through our problems by affirming who we are as a nation instead of accepting the need to change.  In this view, America is so successful because it was able to continue to reinvent itself, we are a country that prides itself in being something different when we're grandparents from what it was when we are children.  This America is essentially a system, it's a set of institutions that a political community of unparalleled flexibility and strength was built upon.  It doesn't matter what the culture, beliefs, or values of the members of that community are, as long as they have faith in our institutions a way forward that includes everyone can be found.

These two views of America are based on two radically different views of how the world works.  One sees America's success as the result of the beliefs and values of the people making up the nation.  If their beliefs and values are good, the country will be strong and successful.  If they break away from what has been successful in the past, America will decline as we deviate from the very values that our country was built on.  This has been a very common and appealing view, it empowers people to impact the world and their nation through their own actions.  Our success or failure is independent of broader social forces.

The other view sees America as being successful because of how we responded to the environment we found ourselves in.  Our success isn't dependent on measuring ourselves against some constant set of values, it's dependent on how we respond to the changes in the world around us.  If we correctly identify what is happening in the broader world, and make the right changes, we will be successful and grow and our citizens will be happy and successful.  If we misdiagnose, or fail to respond, to the changes occurring and the systemic pressures we face, we will decline, and possibly eventually collapse.  While this doesn't have the message of individual affirmation the other view holds, it still sees us as in control of our own destiny. This view holds out hope for continued evolution and that there is no end to our improvement; if only we have the courage to continue to change.

The first view is one of the most common views held by societies throughout history.  They have all failed.  What makes America so successful is that with time we choose to act on the second view.  Despite the beliefs and efforts of men like Mr. Beck, the US knows deep down that change is inevitable and should be embraced so I have faith we will make the right choice in the end.

A Modern Tragedy of the Commons: Gold Dredging on the Rogue River

In a post a couple of days ago I was discussing how cultural attitudes towards homeownership shape the supposedly universal principles of the free market.  Here's another instance.

In this case, it's about the area of land ownership that has historically been the most difficult to assign property rights to, use of rivers.  After several dams on the Rogue River were taken down, it seems largely for environmental reasons, a rush (if 1000 permits warrants the term) of dredgers flocked to the river to search the accumulated silt and gravel for gold.  This has proven to be a disturbance to local property owners that use the river and to people wishing to use the river for forms of recreation beside dredging (while I don't know for sure, this doesn't sound like an extraordinarily lucrative opportunity to me).

As river issues go, this one isn't very complex.  It's a simple tragedy of the commons ameliorated through government intervention limiting dredging and subject to further legislation by the state.  However, unlike many other uses for public land, this particular use has comparatively large externalities that are being imposed on others.  I don't know enough about the subject to come down on one side or the other of this particular dispute but I did think it was a great example of how very basic conceptions of property right, in this case that rivers are effectively non-excludable due to downstream impacts so must be publicly managed rather than privatized, lead to unpredictable impacts in other areas. 

If we did have a conception of property right that gave sole control over rivers to those owning adjacent land (or alternately allowed rivers to be bought and sold independently of the land on either side, though I'm not aware of any society that has done this) the property owners would have control over whether or not someone dredged.  Of course, since dredging effluent would then still flow downstream and have effects on the wildlife that removing the dams was supposed to help this wouldn't make the problem any more solvable. 

In any case, you still have a free market no matter how your conception of property rights applies to rivers but the free market will behave very differently in its impacts on individual decision making depending on which specific institutional form of property rights applies to your society.  Which is an example of why it is a fundamentally flawed approach to seek to explain economics or society through a focus on individual action, individual action is only comprehensible against a background of socially constitutive norms and these norms are derived not from individual but from social action.  This is why libertarianism makes absolutely no sense to me, social norms and forces must be understood prior to understanding individual action and from everything I've read, libertarianism, and authors such as Hayek, seek to reverse this direction of understanding society.

I'd Be Afraid to See Their Take on Survivor

This is just an amusing (?) aside.  I came across a blog post on an Iraqi television program which gets its laughs by planting fake bombs in celebrities cars and then taping their reactions when Iraqi soldiers in on the gag tell them they found a bomb and caught them red handed.  Whenever someone accuses Americans of being desensitized think of this show and remember that we have nothing on this part of the world.

Great Post On Why Housing Should Be Thought of as Consumption, Not Investment

The Free Exchange blog has a great post today on why it is better and more accurate to think of housing as a consumption good and not an investment good.  I can't add anything to that specific argument, for those of you that don't regularly read the Economist I strongly urge you to take the time to read the article.

I do think that this specific instance points to the the more general idea that culture can influence market structure in unpredictable ways.  This is a major reason why I disagree with those that like to think of free markets as some sort of exogenous force.  It's not, it's what is technically called a regime (or perhaps an institutions, depends on exactly what set of ideas you want to describe as the free market) and is a set of constitutive norms.  How we regard different sorts of property, such as housing, have real systemic level effects on the functioning of the rest of the market. 

This also leads into how different conceptions of property impact the broader market and create differences in what the free market is across different societies.  In the US, we think of housing as an investment and something we have some sort of vague natural right to, we don't really think of our use and occupation of it as a form of consumption as readily.  This is different in societies that have tax regimes that include implied rent to owner occupied housing, there the conception of property is different and the link to consumption, and the potential ability to use that property as a money making investment, is more explicit because the relation of housing to investment and consumption is conceived differently, so a tax regime is possible that would be impossible in the US.  This has real impacts on the broader market.  In both cases there is a "free" market but how that market functions is controlled by attitudes in the society to what property is and the role of real estate in that market, these differences in ideas lead to a different set of institutions that together form the regime of the free market.  The market is a socially determined institution, not an exogenous force wholly formed by the free efforts of individuals.

Reason, Emotion, and Faith

This post is mostly meant as a preface to a post I'll be doing later on Glenn Beck's little shindig and I thought that explaining my more general views in advance would be helpful.  It's also meant to better explain a discussion I had earlier on the DiA blog about trying to reframe the debate between faith and reason, which I don't think is a good opposition because many people arrive at faith through reason.

What I do think is in opposition is reason and emotion as starting points.  Reason leads to questioning everything, through this questioning things worth believing in and having faith in are found.    This faith and belief is always being refined and is never a static set of beliefs, there is an understanding that further questioning will lead to the further evolution of these beliefs as more about the world is discovered.  Reason leads to faith in systems or processes, it is the approach and the honest questioning that is necessary to make sense of the world around us.  Of course this process can lead to emotional attachments but this is an end and not a beginning.  This form of faith is both robust and flexible, since it was found through exploration of the world this faith changes and grows as the world is experienced so change is often seen as an affirmation of faith rather than a threat to it.

Emotion is different.  Starting from emotional attachments leads to a different way of engaging with the world.  Truths are felt, not reached through questioning.  Questioning and reason become a means of discovering how to get the world to evolve towards these emotionally held beliefs, not a way of discovering these beliefs.  Emotion becomes tied up with identity, identity is not something that is built but something intrinsic to be protected and valued.  There remains evolution through this approach but it is an evolution of how the world is engaged with through this emotional principles rather than an evolution of the principles themselves.  This approach leads to a faith not in the system of questioning but instead a faith in the principles that are a starting point for questioning and understanding the world around us.

These approaches lead to very different kinds of faith.  It is the second type that is generally being referred to as faith in the faith vs. reason debates.  However, this is inaccurate because faith can be as easily found through reason as it is through emotion but the starting point leads to some very different ways of expressing both.  This can also be applied to political ideology.  My next post, likely tomorrow will take up that topic.