Paul Romer, Intellectual Heir to Henry The Lion?
The July-August issue of the Atlantic features a warm profile of Paul Romer by Sebastian Mallaby, who says the first Charter City was medieval Lübeck:
HALFWAY THROUGH THE 12TH CENTURY, and a long time before economists began pondering how to turn poor places into rich ones, the Germanic prince Henry the Lion set out to create a merchant’s mecca on the lawless Baltic coast. It was an ambitious project, a bit like trying to build a new Chicago in modern Congo or Iraq. Northern Germany was plagued by what today’s development gurus might delicately call a “bad-governance equilibrium,” its townships frequently sacked by Slavic marauders such as the formidable pirate Niclot the Obotrite. But Henry was not a mouse. He seized control of a fledgling town called Lübeck, had Niclot beheaded on the battlefield, and arranged for Lübeck to become the seat of a diocese. A grand rectangular market was laid out at the center of the town; all that was missing was the merchants.
To attract that missing ingredient to his city, Henry hit on an idea that has enjoyed a sort of comeback lately. He devised a charter for Lübeck, a set of “most honorable civic rights,” calculating that a city with light regulation and fair laws would attract investment easily. The stultifying feudal hierarchy was cast aside; an autonomous council of local burgesses would govern Lübeck. Onerous taxes and trade restrictions were ruled out; merchants who settled in Lübeck would be exempt from duties and customs throughout Henry the Lion’s lands, which stretched south as far as Bavaria. The residents of Lübeck were promised fair treatment before the law and an independent mint that would shelter them from confiscatory inflation. With this bill of rights in place, Henry dispatched messengers to Russia, Denmark, Norway, and Sweden. Merchants who liked the sound of his charter were invited to migrate to Lübeck.
The plan worked. Immigrants soon began arriving in force, and Lübeck became the leading entrepôt for the budding Baltic Sea trade route, which eventually extended as far west as London and Bruges and as far east as Novgorod, in Russia.
Read the whole thing. A few things about it are heavy-handed: the headline says the whole idea is politically incorrect; Mallaby suggests Romer rejected the “libertarianism of his Silicon Valley home” by claiming rules matter more than hard technology—what??–and he also frames charter cities as neo-colonialism lite. That makes it sound more confrontational than it is, but Romer added some thoughts on his blog:
In the discussion of the modern proposal for charter cities, the article picks up the language of “neo-colonialism” that some charter city critics use in an appeal to emotion. Yet, the article uses the term dispassionately and gets the logic exactly right: If it’s neo-colonial for a family to move from a poor country to a charter city, it’s also neo-colonial for the same family to move to Vancouver. In the end, the important ethical question is whether people from poor countries should have more choices about where to live.
If the critics who appeal to emotion want to frame the debate in terms of colonialism, we should distinguish the coercive brand of colonialism that the British used to invade India from the opt-in brand of colonialism that Indians employ when they migrate to London.
Space-steading
From the NYTimes, a nice profile of Bigelow Aerospace, a company building the first private space station:
“Every astronaut we have come in here just says, ‘Wow,’ ” said Robert T. Bigelow, the company founder. “They can’t believe the size of this thing.”
Four years from now, the company plans for real modules to be launched and assembled into the solar system’s first private space station. Paying customers — primarily nations that do not have the money or expertise to build a space program from scratch — would arrive a year later.
In 2016, a second, larger station would follow. The two Bigelow stations would then be home to 36 people at a time — six times as many as currently live on the International Space Station.
Help Add Some Cogs to The Machinery of Freedom
David Friedman is close to putting together a 3.0 version of his classic tome. And if you have any ideas as to what he should include or subtract, he’d like to hear them:
The following is my tentative list of chapters for the new Part V; I am interested in suggestions both with regard to what is there that shouldn’t be and what is not there that should.
- A positive account of Property Rights
- A World of Strong Privacy
- Problems with Ayn Rand
- National Defense: Further Thoughts on a Hard Problem
- Market Failure, Considered as an Argument For and Against Government
- Lessons from Other Legal Systems
- Capitalist Trucks
- The Economics of Virtue and Vice
- The Weak Case for Public Schooling
- Welfare and Immigration
- Anarchy and Efficient Law
Yogi said predictions about the future are hard, but I’d like to see Friedman play with a crystal ball, offering thoughts about what technologies might help us get from here to there. Or, horror, the reverse and worse. (His Future Imperfect touches on these issues.) In fact, I’d love to see an update for the section, “How to Get There From Here,” because in the old editions he said the way was education, education, education. In other words, folk activism. Now that we know the grain in the crooked timber of humanity a little better, its biases and irrationalities, I wonder if he might change his tune? Education helps of course–something paved the way for the neo-liberal revolution and the original edition was published when there was still a draft. In retrospect, it’s easy to take that for granted. But still.
Link Archipelago
Reuters
- Is Falcon 9 a turning point in space markets? “Though the industry’s coming of age is still some way in the future, this launch marks, if you like, its transition from childhood to adolescence.“
- Violent contest for sovereignty in Jamaica: “If Coke is somehow able to hold out and formally establish his community as a state within a state, then Jamaica’s future is bleak”
- Competitive government, Swiss canton style: “Schaffhausen, the size of the New York City borough of Queens, is one of 26 Swiss cantons offering tax deals to attract hedge funds, biotechnology firms and Internet entrepreneurs, and companies fleeing tax havens such as the Cayman Islands that are encountering international pressure.”
- Chinese researchers create an artificial mini black hole.
- Who is Ayn Rand?
- Understanding Society–institutional reform blog from a social democratic perspective. Here are two thought provoking posts on deliberative democracy and utopian thinking. (HT Will May)
- Who is the best film maker working today? Poet Frederick Turner says Hayao Miyazaki.
- Ephemerisle is approaching! Bleg: if any of our kind, gentle readers is Ahabbing a boat, Jonathan Wilde and I are looking for a place to stay. E-mail me if you have any space for two wild cards. 🙂
Hear Ye, Hear Ye: Bastiat Prize for Journalism
For the ninth year, International Policy Network (IPN) is accepting submissions for its annual Bastiat Prize for Journalism. The Prize is open to writers anywhere in the world whose published articles eloquently and wittily explain, promote and defend the principles and institutions of the free society.
Submissions must be received on or before 30 June 2010.
In addition to the Bastiat Prize for Journalism (First – $10,000; Second – $4,000; Third – $1,000), we are again awarding the Bastiat Prize for Online Journalism (first prize only, $3,000). Entrants are allowed to compete in just one (not both) of the competitions.
The Invention of Invention
Over a transcontinental weekend, mostly at a cruising altitude of 36,000 feet, I was able to finish Matt Ridley’s The Rational Optimist. (It’s illustrating just this kind of miracle of progress that this reassuring book excels at.) I can’t heap any more well deserved praise on it than it has already received. Here’s Robin Hanson’s review. Overall, I see it as a companion volume to Arnold Kling and Nick Schulz’s From Poverty to Prosperity, only with a broader narrative sweep and a more directed argument against the nay-sayers of progress and wealth creation. Its key argument is that trade and specialization are the drivers of prosperity. For someone like myself who accepts these tenets as articles of faith, it’s a nice positive dose of confirmation bias. My post on the Levers of Wealth and Freedom shares many similar themes to Ridley’s book, in case you haven’t seen it.
On the other hand, what’s interesting to me is that it led me to question my own hip pessimism. Not the platitudes of smelly little orthodoxies, like those preached by the limits to growth crowd or the dry heat sink prophesied in environmental apocalypse. No, Ridley led me to believe that perhaps I’m too pessimistic about the growth of government and the centralization of power, the coming cascade of sovereign debt defaults and/or hyperinflation, the pervasive economic stagnation induced by accumulating parasitic elites, and so on. True–in the short run, these may kill the bees that produce today’s honey. There were a number of centuries between the fall of Rome and the Renaissance. But over geological time scales, perhaps I should be more sanguine about the brush fire of innovation. If invention in the U.S. declines, so what? Ridley convinces me the torch will be picked up elsewhere. Tho I should add that Ridley doesn’t address these concerns at length. I’m only thinking reasonable anarcho-libertarians may have their own pessimistic biases as well.
Anyhow, the book’s narrative doesn’t touch on innovation in governance and national rule-sets, but some parallels come to mind. Like improvements in other technologies, progress in governance will come from exchange and invention–and not from the top down efforts of academics and vested interests. For instance, many have argued that advances in basic science propelled the industrial revolution, but Ridley says this gets cause and effect backwards. First comes trade, adaptation, and improvisation–then comes understanding. I would argue the same holds for political philosophy and governance. This passage particularly struck me as relevant (p. 257):
The twentieth century, too, is replete with technologies that owe just as little to philosophy and to universities as the cotton industry did: flight, solid-state electronics, software. To which scientist would you give credit for the mobile telephone or the search engine or the blog? In a lecture on serendipity in 2007, the Cambridge physicist Sir Richard Friend, citing the example of high-temperature superconductivity–which was stumbled upon in the 1980s and explained afterwards–admitted that even today scientists’ job is really to come along and explain the empirical findings of technological tinkerers after they have discovered something.
The inescapable fact is that most technological change comes from attempts to improve existing technology. It happens on the shop floor among apprentices and mechanicals, or in the workplace among the users of computer programs, and only rarely as a result of the application and transfer of knowledge from the ivory towers of the intelligentsia.
Or as Patri is fond of saying, Hong Kong is more eloquent than a thousand dissertations.
Mensa Quiz for the Day: Which is More Powerful, the Mohair Industry or the Financial Industry?
As further evidence of the futility of “folk activism,” consider the fate of mohair subsidies:
Federal price support for mohair was first enacted in 1947. The National Wool Act of 1954 established direct payments for wool and mohair producers. The purpose of the program was to encourage production of wool because it was considered an essential and strategic commodity. According to the Congressional Research Service, no similar purpose was stated for the mohair program. While this program was phased out in 1995, ad hoc payments were provided in 1999 and 2000 and the program was reinstituted in 2002. Eliminating this program once again would save taxpayers approximately $1 million a year.
Source: Eric Cantor, Republican Whip, YouCut, in which the Republican leadership bravely proposes cuts, according to Cato, of .017% of the federal budget.
For as long as I can remember, mohair subsidies have been ridiculed as an example of government waste. I know of no economist, left, right, or Marxist, orthodox or heterodox, who supports them. Indeed, as far as I know neither the Democratic nor the Republican Party supports them. Nor does The New York Times, National Public Radio, Rush Limbaugh, or Fox News.
On the positive front, one of the few real accomplishments of Newt Gingrich’s “Contract for America” was to eliminate the much-maligned mohair subsidies following the Republican victories in 1994. And yet we see ad hoc payments returning in 1999 and 2000 and a full blown re-institution of the program in 2002.
If we can’t kill, and keep dead, one of the least supported and most easily ridiculed of all federal subsidies, how can we hope to eliminate subsidies supported by both Republicans and Democrats, supported by mainstream media, and supported by numerous respected academics? Moreover, unlike mohair subsidies, the financial industry has thousands of esoteric ways to ensure that their interests are cared for, including technical rule changes that only a highly specialized expert can understand. They don’t need to have their interests furthered by the crassness of mere subsidies.
Until and unless we change something fundamental about our electoral system (Hayek? Buchanan? Durant? Other suggestions?), we are destined to continue with government favors for the financial industry, most likely to include government guarantees, visible and invisible, explicit and implicit. Therefore until we change something fundamental about our electoral system, we will continue to destroy the financial well-being of our nation every twenty years or so by means of making a few of the richest people in the history of the human race a whole lot richer.
Who Will Bail Out The Bail Out Men?
Some links:
- David Einhorn, of I’ll publicly short Lehman fame, writes in the NYTimes: “At what level of government debt and future commitments does government default go from being unthinkable to inevitable, and how does our government think about that risk?”
- Hedge Fund manager Hugh Hendry breaks lances with Jeff Sachs on the Beeb: “I would recommend you panic. The European banking system is in a crisis.”
- The Lending Merry Go Round, via Greg Mankiw.
In case you missed it, Michael Strong recently wrote about democratically encouraged bankruptcy for profit here.
The Law Versus Legislation
Strategic Fertility Is A Public Good
Bryan Caplan writes about ways to get Liberty in the Long Run:
6. Strategic fertility. Standard twin methods find that political philosophy and issue views (though not party labels) are at least moderately heritable. But wait, there’s more: Since there’s strong assortative mating for political agreement, standard methods seriously understate the heritability of politics. The upshot is that if libertarians can get and keep their birth rates well above average, liberty will actually be popular in a century or two. And even if this plan to free the world fails, it will still create a bunch of awesome people.
Strategic fertility might seem like a big burden, but as I keep arguing, being a great parent is a lot easier than it looks because nurture is so overrated. And even if I’m wrong about the power of nurture, having one extra child is probably easier than moving to New Hampshire, and certainly easier than moving to a seastead. Admittedly, if you want radical libertarian change in your lifetime, strategic fertility isn’t much help. But what is?
As an avowed natalist, I am certainly not going to object to advocating for libertarians to have more kids. I would love libertarians to have more kids. But as a strategy to promote political change, it is problematic for the same reason as education and policy activism: they are all public goods.
Having kids for your own personal happiness is, of course, a private good. But that’s not what Bryan is arguing here – he’s got a whole book coming out to do that. Strategic fertility is suggesting that parents have extra kids in order to achieve long-run political change. But just like educating, proselytizing, or advocating for good policies, the costs of these extra kids are born by their parents, while the benefits accrue to everyone. Thus they are a public good, and will be underproduced.
Moving to a seastead may be hard, but at least the individual immediately and individually gets the increased freedom. Making the costs (in money, isolation, etc.) less than that increased freedom are a major challenge. But at least we know that if we meet that challenge, we can get liberty and grow a free society through individual benefit, without having to convince large numbers of people to engage in self-sacrifice for a distant vision.
As I often express in my talks and posts, I have a general frustration with the failure of libertarian economists to turn the mirror of economics and public choice on the process of political reform. The importance of privatizing profits and losses, internalizing externalities in order to achieve progress is a very basic part of economics. Why then is it so widely ignored in the area of political reform? How can Russ Roberts write about how the lack of internalized incentives caused the financial crises, while advocating that we fix politics through educating people – an activity whose costs are individual and whose benefits are external? How can Bryan Caplan, as a libertarian and economist, advocate that victory is most likely to be achieved through the virtue of…unselfishness?
H.L. Hunt said it too weakly. Here’s my version: This country can only be saved if it can be saved at a profit. Profit for individuals, and for the entrepreneurs who provide the opportunity. A little too strong, perhaps, but it’s a message that could use some overstating these days. Seasteading, Charter Cities, and the Free State Project face major obstacles, yes, but unlike most other solutions, at least they don’t run foul of basic economics.
Fortunately, while Bryan may be advocating for the wrong strategy in this post, the main focus of his work – his current book project – is doing exactly the right thing. After all, who is most likely to read, understand, and accept his book on Selfish Reasons To Have More Kids and have more kids because of it? Well, those in his wide social circle, those who see him as high status, and those who sympathize with his values and are persuaded by his style of thinking and writing. In other words, those who are to some degree libertarians and economists! Thus his book is brilliantly promoting his strategy of strategic fertility by appealing to selfishness among prospective libertarian parents. Is this brilliance intentional or accidental? Only Bryan knows…
(credit for the idea of public vs. private activism to Jonathan Wilde, who first explained it to me)
Let A Thousand Nations Bloom 