Link Archipelago
- Suicide Tourism in Switzerland: “Dignitas only helps foreigners. The number of foreigners Dignitas helps each year—132 in 2007, compared to 91 in 2003—has increasingly left the Swiss uncomfortable with the country’s growing reputation for ‘suicide tourism.’ As of the end of last year, Dignitas had helped a total of 1,046 people to commit suicide.”
- Political Competition and the Median Voter: “Political competition, though no less vigorous [than market competition], is conducted on very different terms — and often ends up stifling innovation instead of encouraging it.”
- Technology Can Remake Society: Thoughts on Roissy, Geoffrey Miller, Devlin and Tucker Max: “Welcome to the New Paleolithic, where tens of thousands of years of human mating practices have swirled into oblivion like shampoo down the shower drain and Cro-Magnons once again drag women by the hair into their caves—and the women love every minute of it.”
- The US has 300+ million people. The other countries in the top 10 of the Index of Economic Freedom average 12 million. Outlier or marvel? Arnold Kling: “there are serious diseconomies of scale in governance. The larger the polity, the worse the ability to govern. Yes, some small countries are very un-free, but the most-free countries are all small…democracy is a very unreliable friend of economic freedom. The ability to vote with your feet is more valuable than the ability to cast a ballot. The trend in the U.S. is toward giving people less power to vote with their feet, as power becomes more centralized.”
Dictatorship vs. Democracy In Poor Countries
You know what’s irritating about dictators and autocrats? They’re not all bad. Sure, some have successfully turned their nations into a collection of paranoid, starving and stunted dwarves. But there are outliers, such as Lee Kuan Yew in Singapore. In a new paper, economists Ling Shen and Marc Schiffbauer compare the evolution of economic growth under dictatorships and democracies. From the abstract:
A democratic society is often regarded as a prerequisite for economic growth and development. Yet, most empirical studies are not capable of identifying a positive link between GDP growth and democracy indexes. In addition, it is a stylized empirical fact that: (i) most developing countries are dictatorships; and (ii) many poor dictatorships have experienced high growth performances and emerged from poverty such as South Korea, China and Egypt. Against this background, it is of interest to analyse in which ways the growth performance between autocratic and democratic economies may differ, in particular among low-income countries…
We demonstrate that poor but large and stable dictatorships exhibit a higher equilibrium growth rate than comparable (equally poor) democracies. Moreover, there exists a particular threshold value in income such that the growth-reducing impact of dictatorial consumption (corruption) outweighs the higher (initial) public investments. Above this, the growth rate under democracy dominates the one in dictatorship.
Good Charter Cities Overview
Paul Romer, in Prospect Magazine:
The right rules can harness self-interest and use it to reduce poverty. The wrong rules stifle this force or channel it in ways that harm society. The deeper problem, widely recognised but seldom addressed, is how to free people from bad rules. I floated a provocative idea. Instead of focusing on poor nations and how to change their rules, we should focus on poor people and how they can move somewhere with better rules. One way to do this is with dozens, perhaps hundreds, of new “charter cities,” where developed countries frame the rules and hundreds of millions of poor families could become residents.
One of the highlights of the article is Romer’s discussion of commitment problems. If businesses invest in a region, how can they be sure their success won’t be subject to arbitrary interference from the current government? It seems regime uncertainty has undermined many half-way attempts.
There’s also another point in the article worth emphasizing:
Because Hong Kong helped make reform in the rest of China possible, the British intervention there arguably did more to reduce world poverty than all the official aid programmes of the 20th century, and at a fraction of the cost. And, if many such cities are built, fewer people will be trapped in the failed states that are the root cause of most humanitarian crises and security concerns.
The game of political philosophy is not won by trying to convince people with reasons. Instead, you have to instantiate and convey desirable elements. The first rule of our political philosophy is to never, ever try to convince someone of anything. Build something better than they currently have, welcome them, and their choice will make plain the core elements of their true values. It’s too bad there isn’t somewhere twice as wealthy as the U.S. “I want what he’s having” is far more potent than this offering from the 1967 Harvard course catalogue:
Philosophy 171. Political and Social Philosophy: Half course (fall term). Tu., Th., (S.), at 10. Professor John Rawls. An examination of some of the philosophical concepts and moral principles expressed in a rational appraisal of social institutions. Special attention will be given to such concepts as justice, equality, liberty and tolerance, the common good and social utility. Readings from classic and contemporary writers representing specific interpretations of these ideas.
Prerequisite: One half course in philosophy.
Can you believe they met on a Saturday?
Thinking Structurally About Government
Do your progressive friends think seasteading is nothing more than rich white people trying to get away from social programs? Well, our own Will Chamberlain will disabuse any squawking prog-frogs of this flapdoodle. His talk from the Seasteading Conference is up. If viewing isn’t your thing, you can read a précis of his talk at the TSI blog here.
Time Magazine Covers Secessionists in Vermont
On Jan. 15, in the state capital of Montpelier, nine candidates for statewide office gathered in a tiny room at the Capitol Plaza Hotel, to announce they wanted a divorce from the United States of America. “For the first time in over 150 years, secession and political independence from the U.S. will be front and center in a statewide New England political campaign,” said Thomas Naylor, 73, one of the leaders of the campaign.
A former Duke University economics professor, Naylor heads up the Second Vermont Republic, which he describes as “left-libertarian, anti-big government, anti-empire, antiwar, with small is beautiful as our guiding philosophy.” The group not only advocates the peaceful secession of Vermont but has minted its own silver “token” — valued at $25 — and, as part of a publishing venture with another secessionist group, runs a monthly newspaper called Vermont Commons, with a circulation of 10,000. According to a 2007 poll, they have support from at least 13% of state voters.
That poll was taken three years ago during the Bush presidency, so who knows how much support there is now. Still, you have to admire the push, especially by greeny-lefties in a New England state with good ski slopes. You can read the Vermont Commons here. And we’ve previously written on secession during our annual “Secession Week” blogging extravaganza.
An Anthropic Principle for Economics
Another guest post for A Thousand Nations from Max Borders. You can see his previous posts here.–Editor
Full disclosure: I’m an Darwinian. I thinks the twin theories of evolution and self-organization suffice to explain life–specifically the transition from the primordial soup to people. But proponents of intelligent design make an interesting point when they invoke the Anthropic Principle.
The idea goes something like this: human beings and the complex ecosystems in which we find ourselves are enormously complex and diverse. The laws of nature seem to have been ‘set up’ in such a way that such complexity and diversity was possible at all. Even minor tweaks in cosmological constants and basic physical laws would have meant human beings – much less other complex forms of life – would not have arisen. The universe seems to be “tuned” to life, which proponents of intelligent design say require a tuner. Perhaps. We won’t get into that debate today. Instead, I think we can learn something important from this way of thinking and apply it to economics.
Today’s economics is a world of sophisticated maths, models and macro-economic wizardry. Sadly, these wizards are advising our leaders. “Sadly” because most economists are missing the important bits: the rules. The analogy is roughly: a given universe’s laws (rules) are either more or less hospitable to diversity and complexity (life); likewise, a given economy’s laws (rules) are more or less hospitable to economic diversity and complexity (entrepreneurship and growth). In economics, we don’t have to worry too much about the question of intelligent design — unless, of course, we’re talking about those wizards with their models who actually believe they can not only predict, but plan, a complex system. (Macro-economic modelers usually aren’t designing the rules, but rather scrambling them.) In any case, when it comes to the institutions of economics – those rules that give rise to the phenomena – we know they’re going to be an artifact of intelligence for better or worse. Even as some institutions and rules themselves evolve a la the common law, these rules co-evolve with the designs and decisions of intelligent agents in their environments, somewhere in time.
So what does all this mean for economics? I think it means most of the economics discipline is, like Waylon Jennings, “lookin’ for love in all the wrong places.” New institutional economics and Austrian Economics, though minority sub-disciplines, are moving things in the right direction. Even simple heuristics like Economic Freedom Indices are informed by data and track with some of our intuitions about institutions in something like “reflective equilibrium“. Otherwise, we might think about rules in terms of increasing the likelihood of throwing a stone into a population and hitting someone for whom transaction costs are low. In other words, what rules create dynamic, entrepreneurial environments for the maximum latitude in coordination and cooperation?
in his Nobel Prize lecture, Douglass North says:
“Institutions form the incentive structure of a society and the political and economic institutions, in consequence, are the underlying determinant of economic performance.”
And he’s right.
For some reason, I’m reminded of Adrian Bejan’s constructal law:
“For a finite-size system to persist in time (to live), it must evolve in such a way that it provides easier access to the imposed currents that flow through it.”
Bejan thinks that we see the constructal law operating everywhere in evolved ecosystems and that we can even mimic those properties in our mechanical designs. Still, I suspect Bejan would agree that large-scale economic ecosystems can’t be designed at all and that, left alone by would-be interventionists, they will evolve constructal propererties. Would a constructal law of economics be committed to localization and autonomy as a means of “providing easier access to the imposed currents that flow” through the economy? Mises, Hayek and the gang gave us that idea of flow a long time ago. I’ve offered some rules myself, elsewhere.
But back to something like an Anthropic Principle for Economics.
Let’s just put it out there: There is an optimum range for economic dynamism, diversity and complexity determined by rules. If our economic rule-sets are too complicated and cumbersome, we won’t get flourishing. There will be distortions and perversions at best. If our economic rulesets are underdeveloped or ambiguous, economic actors will not be able to regularize their behavior so as to lower transaction costs and focus on innovation. As with the laws of nature, there is a sweet spot in the set of all possible rulesets, which gives rise to maximum complexity and diversity. If we can agree that a complex, diverse economy is likely to result in concomitant opportunity and prosperity, then maybe we should turn our attention to those rules in the sweet spot that yield complexity and diversity.
Of course, most of the big struggles are between those who want complex and diverse economies and those who do not. One person’s economic rainforest is another’s “jungle.” Still, with something like an Anthropic Principle of Economics, my less ambitious objective would be to give greater attention to the rules of the game than to the epiphenomena at any give moment. In so doing, we’ll at least remove the distractions caused by all this modeling and aggregates thinking, and get back to underlying causes of prosperity.
How To Create Television News
While I’m on a video kick, I thought I’d point out this brilliant analysis on how vapid television news is. Enjoy.
Arachno-Capitalism for Dummies
HT Mises
We Need More Gordon Gekkos
A while back, writing on the origins and causes of the banking crisis, Michael Lewis said the principal-agent problem was to blame:
John Gutfreund did violence to the Wall Street social order—and got himself dubbed the King of Wall Street—when he turned Salomon Brothers from a private partnership into Wall Street’s first public corporation…He lifted a giant middle finger at the moral disapproval of his fellow Wall Street C.E.O.’s. And he seized the day. He and the other partners not only made a quick killing; they transferred the ultimate financial risk from themselves to their shareholders. It didn’t, in the end, make a great deal of sense for the shareholders…But it made fantastic sense for the investment bankers.
And before he waxed poetic on greed, you’ll remember in the movie Wall Street, Gordon Gekko had this to say to the shareholders of Teldar Paper:
The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! All together, these men sitting up here own less than three percent of the company…you own the company. That’s right, you, the stockholder. And you are all being royally screwed over by these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets and golden parachutes.
Gekko was the villain. He shouldn’t be. Robin Hanson has a thought-provoking post up on why we need a freer market for Gordon Gekkos to roam in. The source article he cites on a market for corporate control is here. Excerpt:
Firms whose share prices are lower than they could be if managed by more talented or highly motivated managers are attractive takeover targets. By buying up enough shares to vote in a new board of directors, a bidder can then replace an inefficient or ineffectual management team. The bidder profits when the new management team gets results, which come in the form of improved corporate performance, higher profits, and, ultimately, higher share prices…
Numerous studies show that shareholders in firms that are the subject of takeovers enjoy significant profits. Gains to target shareholders average 40–50 percent above the prices at which target firms’ shares traded immediately prior to the takeover.
There’s a subtle point that both Gekko and Michael Lewis miss in their analysis. Yes, they suggest, one way to avoid the negative consequences of a principal-agent problem is to collapse the distance between the agent and the principal, as would be the case in a private company. In this way we could have avoided the banking crisis Lewis says. If the bankers had had to face the full consequences of their risk-taking–instead of passing it onto the shareholders–then these financiers would have been more prudent. Likewise Gekko says Teldar is run poorly because the management has no stake in the company.
But that begs the question about the shareholders–why are they so lazy or incompetent with their own money?
In truth, it’s not so much having a direct stake in the company that matters. Gekko’s analysis is off, but he’s a player in a very important game. Shareholders need a free market in corporate control. If you artificially diminish the supply of able managers (with stifling, anti-corporate raider regulation), then the quality of management will decline, too. Even if no one raids a corporation, a threat can be as good as the execution.
The differences between a market in corporate control and one in government control deserves exploration. Perhaps in a later post. I offer one passing thought: if you think the collective action problems shareholders face are insurmountable and lead to excessive risk-taking, then you can’t possibly believe voting is any better.
Tax-Free Rebel City Flourishes in Northern Ivory Coast
De facto free economic zone in Bouake
From the BBC:
The north of Ivory Coast – an area covering 60% of the country and a zone bigger than England and Wales – remains under the authority of an ex-rebel group, the New Forces, who split the country in two after a rebellion in 2002. Bouake is the ex-rebel capital of “Soroland”, as the zone is sometimes nicknamed, after the New Forces leader, Guillaume Soro…
Soroland may not be a breakaway zone, but for seven years the inhabitants of this zone have got used to living without government taxes, customs charges and even water and electricity bills…
Members of the government’s armed forces formerly aiming to recapture Bouake now profit from the duty-free shopping.
Nothing like low prices to beat the competition, as I say. There are other instances of de facto free economic zones cropping up like flowers in unlikely places. For instance, the Arizona Market in Brcko, a city in war-torn northern Bosnia and Herzegovinia. So these kinds of rare flowers bloom once in a while, but their life-cycles have yet to be determined. As the wealth of the region increases, the temptation to plunder will as well. Cross your fingers that doesn’t happen here.
Let A Thousand Nations Bloom 