27 июля, 07:06

Friedman, Galbraith, and Wright on American Capitalism, by David Henderson

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"Capitalism" has become a fighting word in the battle between East and West and for men's minds everywhere; and, like all slogans, it means many things to many men. To some "capitalism" is a term of opprobrium, signifying the oppression of little men by ruthless monopolies; to others "capitalism" is a term of hope, signifying the freedom of men to shape their own economic destinies, the unleashing of human ingenuity and energy to raise the standard of living of the masses. To all, American capitalism is a symbol of economic strength and power, of unprecedented wealth and productivity, the strength which is the hope of our friends and the despair of our enemies. So begins Milton Friedman in a June 28, 1953 discussion on NBC radio titled "What Is American Capitalism?" At the time, Friedman was a professor of economics at the University of Chicago. The other two participants were John Kenneth Galbraith, a professor of economics at Harvard University and David McCord Wright, a professor of economics at the University of Virginia Law School. It was either the late Gordon Tullock, in a conversation in 1971, or the late Ben Rogge, in a conversation in 1969, who told me that Wright was a rare bird: a conservative Keynesian. That is, he believed in countercyclical fiscal policy but not in a large government. I've posted twice now (here and here) about these late 1940s and early 1950s NBC shows. What's striking here, as already noted, is how civil the conversation is and how formal: each person calls each other by his last name. Here are some highlights. In response to Milton's question, based on Galbraith's just-released book, American Capitalism, about what is special about American capitalism, Galbraith answers: I am afraid that you give me credit for sophistication which I did not have. I do not recall that I had anything particular in mind in adding the word "American" to the title, and I would not attempt to make too sophisticated a definition of capitalism. It would seem to me that the essential point is who makes the decisions in an economy. Under capitalism the decisions are made by the people who own or manage the basic productive resources, and that is in contrast with decisions which are conformed to in a larger plan made by the state under noncapitalist forms of enterprise. In response to Milton's question about now competitive American capitalism is, Wright answers: In order to answer that, one first has to have some idea of what competition is or what monopoly is. A lot of people think that monopoly is simply big business and that competition is small business. This is quite wrong. Competition to me means the presence of several centers with alternative policies competing against one another. You can have big units, but if there are many other big units and if they are all deciding independently and being reconciled in the market, then that is not monopoly; and in the same way under the fair-trade laws you can get a lot of small units which are so bound down that there is no real competition among them at all. [Note that this discussion occurred before Lester Telser's path-breaking work that gave economists a new insight into resale price maintenance, which is what Wright was referring to when he discussed "fair trade."] Then an interesting interaction between Friedman and Galbraith: Friedman: In the actual American economy it seems to me that there unquestionably are these areas of monopoly, these areas of competition. My own feeling is that most discussion tends grossly to overstate both the magnitude and the importance of the monopolistic elements, largely because monopolies where there is only one firm in the field are more visible, partly because monopoly is so concentrated in manufacturing. [DRH note: This was a theme in much of Milton's writing over decades.] Galbraith: I am not terribly impressed by the importance of the question partly because I am less disturbed than many people about the problem of monopoly. The question, to be sensibly framed, has to be put in these terms: Is the American economy over at the concentrated, big-business pole; or do we find most of the production coming from agriculture, coal-mining, the industries where characteristically a large number of small producers produce a similar product? It seems to me perfectly evident that most of our production does come from large firms that are relatively few in number. Friedman: This seems to me not only not obvious but false. The large firms few in number are likely concentrated in manufacturing and transportation, and these together account for less than a third of our total output. Recent studies which have been made suggest that what would generally be regarded as monopolistic firms and industries account for perhaps less than a quarter, as little as a fifth, of our total output. [DRH note: In transportation, of course, much of the monopoly in trucking and in airline travel was due to heavy government restrictions on entry. Milton surprisingly didn't mention it. I wonder if he knew it. The main literature on monopoly in trucking didn't start until a few years later.] Later Friedman and Galbraith agree. Friedman: Yet, while recognizing this gradient [between monopoly on the one extreme and atomistic competition on the other extreme], it is important to emphasize that bigness is not by any means the same thing as monopoly. The Atlantic and Pacific chain of grocery stores is an exceedingly big enterprise, but it seems to me to have essentially no monopolistic elements worth speaking of. There are many much smaller enterprises which have a large amount of monopoly. This is particularly important, because one of the common feelings has been that monopoly has been growing in this country. I regard this myself as an erroneous conclusion drawn from the fact that firms have been getting bigger. Galbraith: I completely agree with you, and the case of A&P is a very persuasive one. A & P only has about 8 per cent of the retail business and is in a business where entry is fundamentally very easy. Great interaction between Galbraith and Wright. Wright has just expressed upset at labor union monopoly and Galbraith says it is no big deal. Galbraith pursues it. Galbraith: I agree, of course, that the notion of monopoly is not peculiarly a business concept. On the other hand, I would not agree that the center of the monopoly problem here is in the labor field. I am curious as to why that excites you more than, say, in the area of industry. Wright: It is harder to deal with a wolf in sheep's clothing than it is to deal with a wolf. The essential drive toward the routine society comes from both the left and the right, but in the case of the union movement it is given all sorts of altruistic labels which make it much more difficult to pin down. Finally, Galbraith and Friedman on how wages are determined. Galbraith: The ancient position on the labor market, for example, was that competition between employers for labor would insure that everybody got a fair wage. That is the position that most economists believed and held in the nineteenth century and which, I gather, Friedman, that you hold. Friedman: I cheerfully agree with that characterization. (2 COMMENTS)

22 июля, 02:51

Frank Knight on John B. Watson, by David Henderson

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I dug out of my library a famous unpublished (until 1991) 1932 mimeograph (those under age 45 should look up that term) article by Frank H. Knight. The article is titled "The Case for Communism: From the Standpoint of an Ex-Liberal." It's for a blog post I'm thinking of writing. A friend gave me my copy in about 1970. It's a speech he gave to the University of Chicago's Communist Club and National Student League. Here's a fun passage: The dictatorship of the [Communist] Party once established, and given a monopoly of propaganda, the problem of controlling the proliferation of romantic myths, of unifying and stabilizing and concentrating on one system at a time should be simple in the extreme. One of the greatest of modern scientific developments is waiting to serve the regime in this regard and save the world from turmoil. I refer, of course, to psychology in its applied aspect. In this connection we may thrill with patriotism as well as hope. No other country has approached our own in the succession of peerless psychologists we have given to the world. To name but a few: P.T. Barnum; Jay Gould; Mrs. Mary B.G. Eddy; Mrs. Aimee S. McPherson (notice the due representation of both sexes); Billy Sunday; Goat-gland Doc Brinkley; and coming to our own home town, our own dear Big Bill Thompson, Balaban, and Katz, and WGN. As a climax to this glorious series I would name Dr. John B. Watson. It is not necessary to prove that he is the world's greatest psychologist; he admits it. And besides, doesn't he draw $40,000 a year [DRH note: this is over $700,000 in 2017 dollars] for his psychologizing? Speaking for myself, I must express chagrin that it is so little. A man who can stand before the cream of the intelligentsia and exhort them to believe that they do not believe, but only react, to think that there is no such thing as thinking, but only muscle-twitching, that the whole idea of struggle and error is an error against which we must struggle until we see that seeing is an illusion, and illusion likewise an illusion--in short, one who repeats that "I am not saying anything, and you are not hearing anything, the gears are in mesh, nothing more," and makes them like it and pay to hear it--I say such a man should be worth at least $1,000,000 in any properly ordered civilization. One of the first acts of justice of the Communist dictatorship will undoubtedly be to give such a man a task which is not an insult to his powers. . . . (8 COMMENTS)

21 июля, 02:11

Sudan Sanctions and My Neighbor's Cat, by David Henderson

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Diplomats here expect Washington to drop sanctions in the fall, as planned during the final days of the Obama administration, not least because they failed to achieve some key goals. "When the sanctions were implemented, the hope was that there would be a popular uprising against Bashir," one Western diplomat said. "Twenty years on, I think we can safely say that didn't work." This is from "Sudan Gets Down to Business in the Face of Sanctions and Strife," by Matina Stevis, Wall Street Journal, July 18, 2017. I posted about it earlier today. But the quote above is about another aspect that I've written about with respect to other sanctions. Here's what I wrote in "Why Economic Sanctions Don't Work," Hoover Digest, October 30, 1998: When I was a kid, the boy next door once played a nasty trick on my brother Paul: our neighbor held his cat in his arms, brought it within a few inches of Paul's face, and pulled its tail. The suddenly angry cat bit Paul's face. My brother and I were upset; the cat, we thought, should have bitten the perpetrator's face. I think of that incident whenever I hear people call for economic sanctions against a whole country. When governments impose sanctions, the officials implementing the policy want to harm the dictator or bad guy heading the other country's government. That's the goal. What they do to achieve it is intentionally harm many innocent people in those countries by cutting them off--if the sanctions are effective--from food, medicine, and other goods that they need or value. The sanctions almost always work in a limited sense: they impose some harm on innocent people in the target country. But that's not the goal. Nor is the goal to cut off the dictator from food, medicine, et cetera. You can be sure that Saddam Hussein and Fidel Castro are not hurting for antibiotics or high-quality food. No. The harm that the advocates of sanctions want to inflict on the bad guys is indirect. They are yanking innocent people's tails so that those people, like our neighbor's cat, will lash out at whoever's face is right in front of them. They want those people to see their own government as the enemy and to try to overthrow it. But people are smarter than cats. When people suddenly find food, clothing, medicine, and other goods in short supply, when they find themselves a lot poorer and focusing desperately on day-to-day survival, they will take the time to find out who is responsible. And guess what? They do find out. Although governments in embargoed countries like Iran, Iraq, and Cuba strictly control what newspapers, radio, and television report, one piece of information that is sure not to be censored is the role of outside governments in the country's economic distress. I went on to say: What do people in embargoed countries do when they find out that foreign governments threaten their survival? They want to do what the cat wouldn't do: bite the hand or face of the perpetrator. In fact, I can think of no case in history where as a result of sanctions imposed by government A on people in country B, country B's people overthrew their own government. It's the stuff of novels, and not very good novels. To understand how people in embargoed countries feel, you will have to use your imagination. Picture yourself back in 1974. President Nixon's popularity has hit bottom. Many Americans want him out, but he holds on. Now imagine that the head of a freer country--say, Switzerland--thinks Nixon is a vicious leader and imposes sanctions on us. Because of these sanctions, we can't get medicine and we can't feed our families adequately. We spend our days scraping for the basics we need to survive. (Of course this is implausible in the United States, which is why I said you would have to use your imagination.) Now ask yourself: Is your first thought that you should organize and try to overthrow the president? I bet it's not. For one thing, you don't have much of a shot at succeeding. The Nixon administration is probably in charge of allocating the scarce medicine and food. But more important, you're furious with the Swiss government. "Who are they to interfere in our country's affairs?" you ask. So if Nixon offers you a war against the Swiss infidels, you're likely to say, "Hell, yes," and postpone thoughts of getting rid of your president until you've gotten those foreign bums off your back. And that's probably how Iraqis are feeling right now about the United States and other governments that are participating in the embargo. (6 COMMENTS)

20 июля, 21:02

How Conscious Is Your Robot?, by Bryan Caplan

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Now that I've studied the article that inspired Robin's recent bet, I'm completely flabbergasted by his reaction.  Here's the key figure in the original paper, showing how respondents ranked the mentality of thirteen characters.The Experience factor explains 88% of the variance; Agency comes in a remote second, with 8% of the variance.  And on the Experience factor, the robot is virtually at 0.  Apparently most people (correctly, in my view) don't think he's conscious at all.Yet here's how Robin reads the results.  He's in blockquotes; my commentary isn't.I'm also pretty sure that while the "robot" in the study was rated low on experience, that was because it was rated low on capacities like for pain, pleasure, rage, desire, and personality. He wasn't just rated "low."  He was rated near-zero.Ems, being more articulate and expressive than most humans, could quickly convince most biological humans that they act very much like creatures with such capacities. How badly would the robot's mentality scores have to be to make Robin say the opposite?You might claim that humans will all insist on rating anything not made of biochemicals as all very low on all such capacities, but that is not what we see in the above survey...Actually, every living character made out of biochemicals scored at the mid-point or higher on Experience.  Respondents rated a dead body higher in Experience than a functioning robot.  A dead body!  The only creature in the robot's league was God himself, who is also generally not supposed to be made out of biochemicals.P.S. At this point, I would be willing to bet that if the same study were re-done with an "em" character added, the em would score less than .6 on the Experience factor on a 0-1 scale.  Note: .5 is roughly the score of a fetus or someone in a permanent vegetative state.  Per my original reservations, however, I would not bet more than $500 at even odds.  Robin doesn't care for this bet, but so far we haven't been able to work out anything mutually acceptable. (2 COMMENTS)

20 июля, 09:43

Getting Around Economic Sanctions in Sudan, by David Henderson

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When I started the Ph.D. economics program at UCLA in September 1972, one of the first things we graduate students heard that we should be doing different in our daily lives was to subscribe to the Wall Street Journal. If I recall correctly, Ben Klein recommended it in a class he taught (that I wasn't taking at the time) and the recommendation filtered back to me. Gulp. I was from a small town, population under 2,000, in rural Manitoba, and the largest city I had lived in was Winnipeg. The term "Wall Street" was intimidating. Would I be able to understand it? Harry Watson, my roommate who had come down from Canada with me to go to graduate school, and I split the cost of the subscription and found ourselves reading and enjoying it daily. I laughed at my earlier fear that I wouldn't understand it. My favorite kind of Wall Street Journal article was not on the op/ed page but in the economic news section. It was typically a well-researched story by a careful journalist who managed, without hitting you over the head, to lay out the economics--the incentives, the unintended consequences, the ways of adjusting to various laws and regulations, etc. I don't see many of those kinds of articles in the news section of the Journal any more. But today I saw one. It's by Matina Stevis and it's titled "Sudan Gets Down to Business in the Face of Sanctions and Strife." Stevis does a great job of laying out how people get around various restrictions on trade that the U.S. government has been instrumental in imposing. One of the opening paragraphs: The financial isolation--along with the strategically important country's designation as a terror sponsor and the International Criminal Court's pursuit of longtime President Omar al-Bashir for war crimes--has fostered a special kind of business acumen in executive suites and sand-caked streets: forcing businesses in this former colonial outpost to snare alternative sources of finance, sidestep trade barriers and find creative ways to import consumer goods. Here's why it's hard to finance trade: A $8.9 billion fine against French lender BNP Paribas in 2015 after it admitted violating sanctions, sent a chilling message to major financial institutions. Correspondent banks, financial institutions that were intermediaries between Sudan and the rest of the world, pulled out soon after, rendering trade finance virtually impossible, according to the IMF. This leads to the problem and the incentive to find a way around: There are no international automated-teller machines and debit-card payments are impossible, but that hasn't deterred would-be entrepreneurs. What's one workaround? Ahmed Abdalla, a cybersecurity expert by day at African mobile giant MTN, is working on a mobile-payments platform, SIM Pay, which uses prepaid mobile-phone airtime to allow people to transact across the country. (4 COMMENTS)

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19 июля, 18:14

De-Identifying Race and Ethnicity Reduces Bias, by David Henderson

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But not in the way you might expect. What we found is that de-identifying applications at the shortlisting stage of recruitment does not appear to assist in promoting diversity in hiring. In fact, in the trial we found that overall, APS [Australian Public Service] officers generally discriminated in favour of female and minority candidates. This suggests that the APS has been successful to some degree in efforts to promote awareness and support for diversity among senior staff. It also means that introducing de-identification of applications in such a context may have the unintended consequence of decreasing the number of female and minority candidates shortlisted for senior APS positions, setting back efforts to promote more diversity at the senior management levels in the public service. This is from "Going blind to see more clearly: unconscious bias in Australian Public Service shortlisting processes," June, 2017. The study was written by Behavioural Economics Team of the Australian Government (BETA). HT2 Scott Alexander. (7 COMMENTS)

19 июля, 15:00

Germany is not the problem, by Scott Sumner

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The Economist is probably the best magazine in the world, but a recent cover story on "The German problem" is just appalling: For a large economy at full employment to run a current-account surplus in excess of 8% of GDP puts unreasonable strain on the global trading system. To offset such surpluses and sustain enough aggregate demand to keep people in work, the rest of the world must borrow and spend with equal abandon. In some countries, notably Italy, Greece and Spain, persistent deficits eventually led to crises. Their subsequent shift towards surplus came at a heavy cost. The enduring savings glut in northern Europe has made the adjustment needlessly painful. In the high-inflation 1970s and 1980s Germany's penchant for high saving was a stabilising force. Now it is a drag on global growth and a target for protectionists such as Mr Trump. There are so many misleading statements here that one hardly knows where to begin: 1. The Economist confuses trade and aggregate demand, which are entirely unrelated issues. People do not need to "borrow and spend with . . . abandon" to insure an adequate level of aggregate demand, rather they need a sensible monetary policy. 2. We know that Italy, Greece, and Spain were not "forced" to run large deficits by Germany, because Italy and Spain have sizable surpluses, and Greece's current account is roughly balanced. That would not be possible if the German surplus forced these three countries to run deficits. It's true that these countries currently have a shortfall of AD and high unemployment, but that's due to a combination of the ECB's tight money policy and very rigid labor market regulations, not Germany's trade policy. 3. It's true that at a global level a German CA surplus must be offset by an equal deficit elsewhere. But the German economy is only a very small percentage of the global economy, so a Germany CA surplus of 8% of GDP implies a "rest of world" deficit of far less than 1% of GDP. 4. As a practical matter, one can see the German surplus as being offset by the even larger US CA deficit. But obviously this US deficit does not create an AD problem in the US, as the Fed is currently involved in raising interest rates to prevent AD from rising too rapidly! The rest of the world (not the US and not Germany) is currently running a large CA surplus. So Germany certainly does not force the rest of world (excluding the US) to run a deficit. 5. Some argue that current account deficits are problems even if they don't depress AD. Perhaps the US current account deficit has led to de-industrialization. If so, that must have happened before 1987, as the US deficit has not increased at all over the past three decades, so it can't have contributed to recent de-industrialization. It's a bit over 2% of GDP, even less than in 1987. 6. Some argue that trade causes job loss through "re-allocation of labor". This is a channel that might apply to the US, even if our CA deficit is not getting "worse". But this argument would equally apply to Germany, indeed even more so, as it's CA has changed more rapidly than in America. So Germany has presumably been doing a lot of re-allocation from its declining industries to its advancing industries. Re-allocation is a genuine challenge (from both trade and automation) but it has absolutely nothing to do with current account balances. 7. The Economist makes the common error of confusing CA deficits with net borrowing. The German CA surplus in no way "forces" other countries to borrow more. It's up to each individual, business and government to decide how much they want to borrow. Even in a world with zero debt, there would be large and persistent CA imbalances as assets are bought and sold across borders. The Economist is simply wrong, CA balances and net borrowing are completely separate issues. Their entire cover story seems based on the worst elements of Keynes's General Theory, where he speculates that the mercantilists might have a point. These ideas were wrong in the 1930s, and they are still wrong. Unfortunately this sort of article gives aid and comfort to protectionists like Donald Trump, Steve Bannon and Peter Navarro, and that's the last thing the world needs right now. Germany is not the problem; it's the solution. More countries should emulate Germany's labor market reforms and its high savings rate. If we all did so, the world would be much better off. PS. Tomorrow I say goodbye to Boston and leave for Southern California by car. While I'm getting my kicks on Rte. 66, blogging will be spotty. (16 COMMENTS)

18 июля, 23:41

Murder: A Socratic Dialogue, by Bryan Caplan

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Glaucon: Have you heard the news, Socrates?  A scimitar-wielding Persian maniac just cut down three Corinthians in cold blood.Socrates: A ghastly crime.  But why are you telling me? Glaucon: Because it just happened! Socrates: So I gathered. Glaucon: In Corinth!  That's only fifty miles away. Socrates: Should we get inside and bar the door? Glaucon: [squinting] No.  The Persian was killed moments after the attack. Socrates: Then I repeat: Why are you telling me? Glaucon: [upset] Because I assumed you would care about the victims! Socrates: Well, I care a little bit.  But I didn't personally know them.  Glaucon: [outraged] You're barely human, Socrates.  Everyone else is outraged by this Persian crime.  You should be too! Socrates: Perhaps you're right.  But one thing puzzles me. Glaucon: [calming down] Namely? Socrates: My friend Pythagoras has calculated the number of innocent people murdered on an average day.  Do you know how many that is? Glaucon: No. Socrates: Fifty. And the minimum number of recorded daily victims is five.Glaucon: What a hellish world we live in! Socrates: Perhaps.  Now that you know this, I have to ask: Do you plan to be outraged every day for the rest of your life?Glaucon: [taken aback] Well, those numbers are pretty bad, but... Socrates: But what? Glaucon: Well, life is for the living.  I'm not going to be angry and miserable every day just because vile crimes are happening somewhere on Earth.  It's a big place, you know. Socrates: Very wise.  But then why did you say I was "barely human" for having the same reaction when you told me about the tragedy in Corinth? Glaucon: [renewed outrage] That's completely different.   Socrates: Really?  Please help me understand how. Glaucon: Well, we're talking about innocent... [fumbling]  What I mean is, it just hap... [dumb-founded] Socrates: You were going to remind me that the crime is fresh, and the victims were innocent.  But you stopped short, because you realized that this is true every day.Glaucon: [irritated] Yes. Socrates: Did you think I should be upset simply because our community is temporarily fixated on this specific crime?Glaucon: No, that would be pretty stupid. Socrates: And shallow and disingenuous.  So I ask you again: Why am I supposed to be distraught about the tragedy in Corinth? Glaucon: [long pause]  Because they victims were fellow Greeks! Socrates: According to Pythagoras, three Greeks are murdered on an average day.  The tragedy of Corinth therefore brings us to our daily average.  Do you plan to be angry and miserable every day the number of Greeks murdered equals or exceeds the long-run average?Glaucon: You're missing the point.  The Corinthians were murdered by a treacherous Persian! Socrates: Ah, I overlooked that critical distinction.  So what should outrage us is not murder in general, or murder of Greeks by fellow Greeks, but only murder of Greeks by Persians? Glaucon: [touchy] Do you think it's funny when a Persian maniac butchers a child with his scimitar? Socrates: Not in the slightest.  But how is that worse than when a Greek maniac murders a child? Glaucon: Well, maybe it's not worse.  But we can do something about the Persian maniacs. Socrates: We can "do something" about murderers of any nationality, can we not?Glaucon: [exasperated] Sure.  But we can do a lot more about the Persians. Socrates: Are would-be Persian murderers more easily deterred by punishment?  Glaucon: Probably less, actually. Socrates: Then what do you mean when you say we can "do a lot more about them"? Glaucon: Well, if there weren't any Persians here, they wouldn't be able to murder any of us. Socrates: True enough.  So to end Persian murder, we should murder every Persian in Greece? Glaucon: That's barbarous!  No, we should just keep Persians out of Greece. Socrates: We should exile a vast group for the crimes of a few? Glaucon: I don't know why you call it "exile."  The Persians can stay in Persia.Socrates: What about Spartans?  They're only 10% of the population of Greece, but they commit half the murders. Glaucon: So?Socrates: If the Persians should stay in Persia, should the Spartans stay in Sparta? Glaucon: What a horrible thing to say!  Spartans are fellow Greeks! Socrates: So we shouldn't exile all Spartans for the crimes of a few Spartans? Glaucon: Absolutely not. Socrates: But are not the Persians fellow human beings? Glaucon: I suppose. Socrates: Why then isn't it just as horrible to advocate collective punishment against Persians as against Spartans?Glaucon: What part of "Spartans are fellow Greeks" don't you understand? Socrates: These Spartans seem rather troublesome.  Could we just declare they're not Greek anymore, then exile them? Glaucon: That would be a monstrous injustice.Socrates: Indeed it would be.  But the reason is not that they're fellow Greeks.  Who counts as "Greek" is a matter of convention, not justice.Glaucon: Then why would it be a monstrous injustice? Socrates: Because Spartans, like Persians, are fellow human beings deserving of just treatment.  And that, my dear Glaucon, is no convention. (22 COMMENTS)

18 июля, 19:58

Enough to Buy Back the Product, by David Henderson

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I was on an email discussion this morning with some free-market economists and some economically literate fans of free markets. One of them surprised me with this statement: I always tell my students the Henry Ford $5 a day story in 1914, a great example of management looking out for labor and a "win win" formula for success. It stopped Marxism's two big arguments: that capitalists exploit workers and that capitalism alienates workers, forcing them to produce products they can't afford themselves. But when Ford overnight raised workers pay to $5 a day, it was the first big example of sharing the profits -- and Ford workers could buy Model T's for the first time, thus destroying the Marxist argument of alienation. There's nothing necessarily incorrect in his actual statement above. But there is something misleading. It may well be the case that Ford workers could buy Model Ts for the first time because of the increased wages, but he makes it sound as if that was Henry Ford's motive. That's unlikely to have been Ford's motive because the number of Ford workers was probably well under 1% of the number of potential buyers. Would it really make sense to pay more than necessary to get workers so that your number of potential buyers can increase slightly, especially when the downside is that with the higher wages come higher costs and your larger potential market is likely to shrink? I think it was a fortunate accident that Ford's workers were able to buy Fords. The reason I've read for Ford's success is that Ford was plagued with high turnover and high absenteeism and paying above market reduced turnover and absenteeism substantially. One can imagine this being particularly important in a relatively new industry and certainly an industry with a relatively new production method--the assembly line--because there was probably a bigger gain than normal from keeping people on the job who gradually got very good at it. If you still think the "pay them more so they can buy the product" argument makes sense, then consider what Henry Hazlitt wrote on this issue in his 1946 classic, Economics in One Lesson: Some sponsors of the theory seem to imply that the workers in each industry should receive enough to buy back the particular product they make. But they surely cannot mean that the makers of cheap dresses should get enough to buy back cheap dresses and the makers of mink coats enough to buy back mink coats; or that the men in the Ford plant should receive enough to buy Fords and the men in the Cadillac plant enough to buy Cadillacs. So a question for the person I quoted above, based on Hazlitt's quote, is this: Were Cadillac workers more alienated than Ford workers? A few years ago, I used Hazlitt as a supplement to my main text and we covered this chapter. Remember that my students are largely military officers and disproportionately Naval officers. One U.S. Navy student had a great example to make Hazlitt's point. He pointed out it's not a good idea to pay workers making aircraft carriers high enough wages that each of them could buy an aircraft carrier. Here's an earlier discussion of the issue. (16 COMMENTS)

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17 июля, 23:25

Is Russia's Government Hostile?, by David Henderson

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One of the things that I think affects people's view about the Trump administration vis a vis Russia is their view of Russia. In a recent article, my friend Steve Chapman, columnist at the Chicago Tribune, writes: If this was not collusion between the Trump campaign and the Russian government, it was a conscious attempt at collusion with a hostile government on the part of the candidate's son. No wonder Donald Jr. lied about it until his emails were exposed. So Steve sees the Russian government as hostile. Hostile to whom? He doesn't say, but it seems from context that he means that it's hostile to Americans. Interestingly, he didn't provide even a lick of evidence for that claim. Usually the term is used to refer to a government that is at war with, or has threatened war with, the United States. The Russian government has done no such thing and, in fact, President Trump and Vladimir Putin have discussed working together to settle things in Syria. That's not what we would normally think of governments doing when they're hostile to each other. (I don't defend their actions. I would have Trump--and Putin--stay the heck out of the Middle East altogether.) What about spying? Certainly, the Russian government has many spies here. Does one government spying on another mean the spying government is hostile? If so, then one would have to refer to Israel's government as one that is hostile to the United States. I think that misuses language. Of course the Russian government is hostile to its own citizens in many ways, and the U.S. government is hostile to its own citizens in many ways. Have you been in a TSA line lately? No, this is not "equivalence." It's a simple statement of fact. Would I rather face the U.S. government's hostility to me as a U.S. citizen than the Russian government's hostility to me if I were a Russian citizen? Of course. Which has nothing to do with my point. Two people I admired greatly, George Orwell and Thomas Szasz, emphasized that words matter. We should use our words carefully. Calling Russia hostile without providing strong evidence does not advance any rational discussion. (58 COMMENTS)

17 июля, 22:42

Varys, Tyrion and limited government, by Alberto Mingardi

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Game of Thrones is back. The HBO series (not to mention the novels by George R.R. Martin) is an exciting part of our popular culture, but it is also obviously about power plays and, er, politics. So, for once, searching for its political message is not perhaps reading too much into it, but somehow consistent with the very nature of this spectacular entertainment product. A couple of years ago I linked to a good post by Mike Rappaport on Games of Thrones and styles of leadership. Now I've run into this article by Robert Coville at CapX. It is very good indeed and gives a non-cynical interpretation of Martin's stories. For Coville, the gist of the series resides in a couple of dialogues between Tyrion and Varys, one and the other the most politically savvy - but, at times, the most Machiavellian - of Martin's characters. He argues that Martin's real preference, I would argue, is revealed in another on-the-nose conversation between Varys and Tyrion (taken from the TV series, admittedly, rather than the books). "What is it you want, exactly?" Varys asks. Tyrion responds: "Peace. Prosperity. A land where the powerful do not prey on the powerless." "Where castles are made of gingerbread and moats are filled with blackberry wine," scoffs Varys. Both Tyrion and Varys are political realists, who have been close enough to sovereign and powerful men to see how human and, indeed, selfish they are. But they both join the cause of young Daeneris Targaryen not only because she has, er, dragons, nor because her dynasty has a claim to legitimacy much stronger than others, but because they see her as a champion of good government, understood as moderate government, moderate in the sense of self-limiting when it comes to what the powerful can actually do to anybody else. If the series evolves like Coville argues, it could turn out to be about capable political operators turning to the service of leaders they consider the best not for their career, but for the land and the people. This may sound naive, but anybody who either read or watched Game of Thrones knows that Martin is not naive indeed. He doesn't spare any of the cruelty and pettiness of politics. I think somehow this apparent inconsistency is familiar to many of us who follow political matters closely. We know that self-interest and political incentives are the almost infallible umpires of the great trends in politics. But any of us can also name quite a few people who, though being fully aware of the problems and shortcomings of playing politics, are nonetheless trying to go against the grain and to what they sincerely believe it is the good thing. Martin, an arch-realist, suggests that the very same people who played safe and cynical can, under different circumstances, become forward-looking and generous. Let's put it in different terms: perhaps the more you see how arbitrary and capricious government can be, the more you long for limited government. I don't know if, whenever Game of Thrones ends, this will emerge as one of its messages. But it will be interesting if it does. (4 COMMENTS)

17 июля, 18:04

Em Bet?, by Bryan Caplan

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After discussing a ten-year-old paper on empirical philosophy of mind, Robin proposes a remarkable bet:I'm also pretty sure that while the "robot" in the study was rated low on experience, that was because it was rated low on capacities like for pain, pleasure, rage, desire, and personality. Ems, being more articulate and expressive than most humans, could quickly convince most biological humans that they act very much like creatures with such capacities. You might claim that humans will all insist on rating anything not made of biochemicals as all very low on all such capacities, but that is not what we see in the above survey, nor what we see in how people react to fictional robot characters, such as from Westworld or Battlestar Galactica. When such characters act very much like creatures with these key capacities, they are seen as creatures that we should avoid hurting. I offer to bet $10,000 at even odds that this is what we will see in an extended survey like the one above that includes such characters. (emphasis mine)Since Robin repeatedly mentioned my criticism of his work in this post, I sense this bet is aimed at me.  While I commend him on his willingness to bet such a large sum, I decline.  Why?1. First and foremost, I don't put much stock in any one academic paper, especially on a weird topic.  Indeed, if the topic is weird enough, I expect the self-selection of the researchers will be severe, so I'd put little stock in the totality of their results.2. Robin's interpretation of the paper he discusses is unconvincing to me, so I don't see much connection between the bet he proposes and his views on how humans would treat ems.  How so?  Unfortunately, we have so little common ground here I'd have to go through the post line-by-line just to get started.3. Even if you could get people to say that "Ems are as human as you or me" on a survey, that's probably a "far" answer that wouldn't predict much about concrete behavior.  Most people who verbally endorse vegetarianism don't actually practice it.  The same would hold for ems to an even stronger degree.What would I bet on?  I bet that no country on Earth with a current population over 10M grants will grant any AI the right to unilaterally quit its job.  I also bet that the United States will not extend the 13th Amendment to AIs.  (I'd make similar bets for other countries with analogous legal rules).  Over what time frame?  In principle, I'd be happy betting over a century, but as a practical matter, there's no convenient way to implement that.  So I suggest a bet where Robin pays me now, and I owe him if any of this comes to pass while we're both still alive.  I'm happy to raise the odds to compensate for the relatively short time frame. (6 COMMENTS)