Tuesday, December 09, 2014

Don't Throw Out the Baby along with the Dirty Diaper!

Yeah, I know, the actual expression is "Don't throw out the baby with the bathwater!" It means don't jettison the good stuff (the baby) when you get rid of the bad stuff (bathwater). I changed it because bathwater is pretty homogenous and I want to differentiate between two different bad things when I chastise certain critics of "capitalism." To be clear, I think "capitalism" is not a particularly helpful term for a number of reasons but it is au courant with the history crowd at present, as in the growing "History of Capitalism" subfield. Most of its practitioners are critics of "capitalism" (which is good) but critics who go to far and throw out the baby along with the dirty diaper. The good part of capitalism (the baby) is of course competition (price competition holding quality constant). The bad parts are asymmetric information (the pooh pooh, the natural product of the baby/markets) and rent seeking (the diaper, which like political favors is unnatural and will burden future generations).

For more on concepts like price competition, asymmetric information, and rent seeking, feel free to peruse my oeuvre.

Thursday, October 02, 2014

Daschle Dialogues Tweets

Last night (10/2/14), I attended the first annual "Daschle Dialogue" at South Dakota State University. I post my tweets of the event below, with editorial comments in [square] brackets.

[Tom = Daschle (we call our Reps and Senators by their first names here in So. Dak. Keep 'em in their place!)
Lott = Trent Lott]

@ Daschle Dialogues at So. Dak. SU in Brookings 2nite. "How Much Partisanship Is Too Much?" Tom. D-SD + Trent Lott R-Miss.

Pretty packed house here at . Will the speakers deliver?

It begins. After the hoopla & jokes, Tom says he owes it all to education, esp his SDSU degree. Whatifaugie? I wonder [what Tom's career would have been like if he went to Augustana College instead of State.]

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Waving the "bloody flag," not of the Civil War, the Great War, or the "Big One" (WWII), but of 9/11. Lott says song spontaneous and historic[.]

Lott is pandering so hard that he must be running for president! [Sarcasm, of course]

Frightening how unready Congress was for the attacks and how easily these "leaders" conflated desire for revenge with real bipartisanship.

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Tom says they did the best they could given the "intelligence" they had. I thought he meant from God or DNA at first! [More sarcasm]

Tom says transparency has a high cost so Senate used to meet behind closed doors and Senators "poured their hearts out" during those mtgs.!

Tom and Lott are friends. Maybe there is hope for Reynold [Nesiba] and myself???? Naaaaaaaaaahhhhh! [Inside joke]

Hypothesis: Tom and Lott are pulling an Adams-Jefferson, i.e. rewriting history to further their own image in Clio's oft dull eyes. [Key insight of the evening.]

Tom laments Senate in session only 109 days per year. Isn't that a good thing???? Does suggest per diems would be appropriate payscale.

Lott says we need "leaders that [sic] will lead." If he means NON-partisan statespeople, amen!

Tom says major problems are the "money chase" and partisan news outlets. BUT he likes Obamacare and has no problem w/ partisan vote for it.

Lott says Clinton and Bush talked regularly to senior Congressmen but Obama apparently doesn't. Wants candidates to say what they are FOR.

Lott says he supports MODIFYING Obamacare. Guess he is not running for President after all. [Yes, more sarcasm.]

Student q[uestion]s! = what da f 2 do about student debt? Tom's answer evasive. Lott's response rambling, personal: low i[nterest rate] loans, workstudy.

what about service to country for students? Tom in favor for $ [for college] & citizenship reasons.

 OMG! Tom says medical salaries will INCREASE with universal healthcare. Lott says his many docs are worried about $ decreases in future.

Lott says McCain Feingold created the SuperPAC campaign finance problem we have today. I did not know that McCain was on SCOTUS! [Yes, more sarcasm.]

Lott's favorite presidents = Washington, Jefferson, Lincoln, and Reagan. He liked Clinton, who he called "Slick." Bill called him "redneck."

Lott says he & Tom were both from poor, rural backgrounds and so valued courtesy: knew 2 smile at somebody before you shoot him. [That was a joke, on Lott's part.]

Lott says fed gvt should defend the shores, deliver the mail, and stay the hell out of the way. Q: does he really think we need USPS? [Honestly.]

I left about 3 minutes early to beat the rush out of the parking lot as it was late and I had a 1 hour drive ahead of me. For more coverage, see the Sioux Falls Argus Leader.

Friday, September 26, 2014

Modern Abolitionists Beware the Half-Truths of Baptist; Or, the Critique The Economist Should Have Made

Edward Baptist’s The Half Has Never Been Told: Slavery and the Making of American Capitalism contains a dangerous message for 21st century abolitionists: slavery undoubtedly causes economic growth. Baptist is so certain of this claim, in fact, that he asserts that “it is the truth” (p. xii) and that his “true narrative” establishes it (p. xxii).

There is much to admire about the book, especially if one is sympathetic to the reparations movement or wants to empower African Americans by labelling them the makers of the modern economy and backing it with hundreds of pages of text and thousands of scholarly references.

For those of us fighting the sundry new forms of slavery today, however, Baptist’s message is potentially pernicious as it could be used to justify enslavement, from trafficked children to debt peons to convict laborers. The Western world owes its wealth to slavery, the argument would go, so it should stand aside and allow the rest of the world to do likewise. A similar argument has already been made to justify child wage labor and pollution in less developed countries.

Thankfully, Baptist’s thesis is not just wrong-headed, it is wrong, or at least wrong enough to render its use as a pro-slavery argument ineffective. For starters, Baptist confuses sufficient and necessary causes. That is unsurprising as he does not engage, and quite frankly appears utterly oblivious to, recent scholarship in financial and economic history outside of the narrow slavery literature. Sustained economic growth (consistent increases in real per capita income over decades and even centuries) could not have been monocausal, this literature shows, but rather resulted from complex interactions between governments, financial systems, legal precedents, entrepreneurs (including enslavers) and laborers (including the enslaved). None alone were sufficient causes of growth but some were necessary causes. For example, if one removed republican government from the early U.S. scene, growth would not have happened there (e.g., Latin America). Other causes, like slavery, were present but incidental. Had they been removed from the economy, growth would still have occurred after the necessary causes appeared (e.g., Canada).

Second, Baptist confuses profitability with economic efficiency. Baptist correctly notes that some scholars have argued that slavery was unprofitable but those views have long since been swept aside by both evidence and common sense. But the profitability of producers does not necessarily lead to economic efficiency, the proximate cause of economic growth, if one or more market failures intercede. Consider, as the most salient example, the recent financial crisis, which proved highly profitable for a few while hurting the overall economy.

Monopolies are probably the most widely known market failure but they were not much of a factor in the antebellum South. The ill effects of pollution are also widely understood and, unlike monopoly, germane to the slavery question. Pollution is just one example of a broader class of market failure called negative externalities, which occur when some of the costs of production are borne by the economy at large rather than by buyers and sellers. Slavery produced numerous, significant negative externalities (e.g,. slave patrols, public whipping stations, fugitive slave acts, etc.) worth far more than slavery’s marginal productivity (its productivity minus the productivity of the next most productive alternative labor system, which was not debt peonage!).

At the root of many of the negative externalities produced by chattel slavery was the resistance of the enslaved: running away, feigning sickness, breaking tools, behaving in an “uppity” manner, and so forth. The enslaved and formerly enslaved, with help from abolitionists, eventually managed to impress upon many Northerners the costs/negative externalities that slavery imposed upon the overall economy and thus prepared the way for emancipation.

Not only could this counter narrative be used to uplift African Americans today, it is closer to “truth” than what Baptist has mustered, at least by half. The counter narrative also reserves a place for abolitionists and leaves no room for claims that slavery, then or now, is good for the economy. Then as now, enslaving people is a sin that enriches the enslaver but does not drive growth.

Thursday, July 24, 2014

Rediscovering the Road Less Traveled

It is no secret that most Americans want to spend part of their short time on this planet doing fun things in interesting places. That means they want to travel, and to do so safely, quickly, and, ultimately, efficiently. Unfortunately, getting around this great nation is becoming ever more dangerous, time consuming, expensive, and even unfair.

Transportation woes already accost Americans almost daily and more troubles loom on the horizon. The vast bulk of America’s transportation infrastructure -- the airports, bridges, canals, ports, roads, railroads, and tunnels that speed Americans to their vacation destinations and, more importantly, also allow them to trade with other Americans and the rest of the world -- is aging faster than the government can fix it. The federal highway trust fund is essentially bankrupt, kept temporarily afloat with legislative bandages while commute times and accident rates remain sky high and bridges collapse due to disrepair and poor management.

The best solution to the crisis is to privatize the nation’s transportation infrastructure, i.e., to sell (or lease) it to private companies. Done properly, privatization would make traveling the country safer, faster, more efficient, and fairer, much as it was, adjusting for changes in technology, in the nineteenth century.

For the last century or so, governments, especially the one in Washington, have financed and controlled the bulk of the country’s transportation infrastructure. So it seems natural to look to the federal government to control and finance our bridges, roads, railroads, and so forth. But there are economic and moral reasons why national ownership of transportation infrastructure is in crisis and why Congress cannot find a fix.

One government-based solution is to increase fuel taxes at the pump but that is unfair because such taxes are regressive – they fall hardest on the poor – and inefficient because the number of gallons spent on fuel is a poor proxy for how much wear a vehicle places on roads and bridges, which is mostly a function of speed, weight, and number of axles.

Government could also pay for infrastructure out of general tax revenues but that is unfair to those who do not use the infrastructure. Why should South Dakotans subsidize Amtrak, which has a total of zero stations in their state? Likewise, why should someone who does not own an automobile pay to fill potholes in I-90? Why can’t Americans pay for the infrastructure they use, just as they do with most other things in life?

A private transportation system would be “pay as you go.” That means tolls but lower ones than you might expect. Most tolls collected today go not to private companies but to government agencies that waste them (Google “corruption” and “Pennsylvania Turnpike” for an inkling) or use them to subsidize other parts of the transportation system (for example, Golden Gate Bridge users subsidize Bay area ferry and bus service).

New technology makes toll collection cheap and easy, eliminating one of the major rationalizations of transportation infrastructure nationalization in the early twentieth century. (Tolls can even be adjusted in real time to alleviate congestion.) The differences between competitive and monopolistic markets are better understood today, as well, reducing the risk of “highway robbery” at the tolls. Even local bridges, roads, and tunnels could be privatized, as many were in the nineteenth century.

Amtrak could also be privatized. Passenger rail died in this country after World War II because of government over-regulation and its subsidization of the interstate highway system. Railroads will probably never regain their cultural status or economic importance but they can provide efficient service in some congested corridors. Florida, in fact, recently permitted a private company to build and operate a new rail system between Miami and Orlando that looks promising. Even if it fails, however, the burden will fall on its investors, not taxpayers.

Investors want to generate profits, of course, but that does not necessarily, or even often, mean high prices or shoddy products so long as markets remain competitive. Think of all of the wonderful products you consume, from chewing gum to vodka, that stem from the efforts of entrepreneurs backed by private investors or large, publicly-traded corporations. Imagine what those same products would be like if only the government provided them. (If you can’t, look up what consumer products were like in the Soviet Union or other communist countries, if they could be had at all.) 

Why is transportation infrastructure any different from beds, haircuts, or televisions? Private transportation companies will work hard to get you to use their road or mode of transportation by offering better value and that means safer, faster, fairer, and cheaper travel options.

For additional reading, see two publications due out in the next month or so:
Robert E. Wright, “The Pivotal Role of Private Enterprise in America’s Transportation Age, 1790-1860.” Journal of Private Enterprise 29, 2 (Spring 2014), 1-20.
Robert E. Wright, “Specially Incorporated Transportation Companies in the United States to 1860: A Comprehensive Tabulation and Its Implications,” Journal of Business and Economics 5, 7 (July 2014), 249-66.

Thursday, April 17, 2014

Learning from History

Seems like just about every wit to ever put pen to paper, or finger to keyboard, has said something pithy about learning from history yet we, meaning human beings, continue to suck at it. Recently a new scholarly neo-abolitionist journal listed just about every discipline in academe, except history, as under its purview. Not only can history help to reduce the number of people forced to labor on behalf of others, it can help to prevent shipwrecks, like that heart wrenching tragedy in South Korea. How? In Institutional Revolution (2011), economic historian Douglas Allen explains why captains are supposed to go down with their ships -- it incentivizes them to be the best captain they can be, the type of captain who stays sober, pays attention to weather conditions and nautical charts, makes sure that life boats work, people know how to evacuate the ship, etc. Why do you think that commercial airplanes crash so much less frequently than ships sink these days? Airliner pilots are highly unlikely to be able to escape but ship captains, no longer bound by the old rule of being the last on board, escape with regularity.*

Similarly, my Corporation Nation (UPenn 2014) explains why the Left was right to squelch Social Security privatization during the Bush administration. Yep, corporations these days are governed almost as poorly as governments are! The book explains why, while showing how the U.S. came to have so many corporations. It also offers some suggestions on how corporations could clean up their acts. Alas, perhaps due to the high price (which signals scholarly tome in flashing lights), neither the right nor the left has picked up on the book's core message yet, making it almost as disappointing as Fubarnomics, which offered a completely balanced ("hybrid") view of major policy failures such as Social Security, healthcare, higher education, slavery, and the financial crisis. This tells me that most folks are more interested in scoring (largely worthless) ideological "points" than actually fixing these uber-costly messes.

*The latest news reports say that the captain will be arrested. That is a good start but he should not have been rescued until all the passengers were evacuated in the first place.

Monday, February 24, 2014

Kristi Noem's Justice Against Slavery Summit

Attended Kristi's* anti-slavery summit in Sioux Falls So. Dak. this morning. She made sure to meet everyone in the room but it was not a partisan event. No mention of "he who shall not be mentioned" or his administration or any partisan issues. I continue to be impressed by the genuine-ness of the people in the neo-abolition movement!

*We call our Reps, Senators, and other politicians by their first names in South Dakota, as a sign of respect and an acknowledgement of their humanity.

I hated to do it, but I was "that guy" in the back of the room tweeting away. Here are my tweets, in reverse order, and with my editorial comments in brackets. I'm @robertewright if you want to follow:

  1. Hypothesis: and other forms of directly correlated to income or wealth inequality. Econometricians get on it asap!
    Survivor Carrie: all age both gender @ risk. Vulnerability is individual & manifest. 2 see potential vic look in mirror.
  2. FBI guy says SD has too many small counties for effective enforcement.
  3. Crazy guy from [me!] just said in q&a that more attention needs to be paid to history, economics. [Kristi agreed so I put her onto Stan Engerman]
  4. Brittany says "vacating conviction" 4 trafficking victims better than expungement as they should never have been prosecuted in 1st place.
  5. Brittany says So Dak behind on legal front. Absolutely true but laws don't fix things, action does. Pushes uniform law.
  6. Brittany wants stronger laws. Kids trafficked via child welfare system! Doubt she means gibbeting w/o benefit of clergy.
  7. Brittany [Vanderhoof, Polaris Project] on 1st trip to So Dak happy w size of crowd. Turnout in some bigger states only 10. 50ish here.
  8. Carrie 2 explains "guerilla pimping" perpetrated by native american female gangs. Initiation includes gang rape!
  9. Another Carrie [Kerry Stephenson] helps trafficked Amerindians: sex tourism in Sturgis & huntingcamps. Women on IRs particularly vulnerable.
  10. Survivor "Carrie" says her enslavers have not been apprehended but she must speak out, help others, despite risk. Vics are brainwashed.
  11. FBI guy [I may have this wrong. May be Captain Paul Niedringhaus, Minnehaha County Sheriff’s Department? IDK] says they are working both supply and demand sides of the problem. Great! But how many economists are involved?
  12. FBI guy says we all have to work together ... wonder if 5-O [police] could do more if they weren't chasing drug stats?
  13. Speaker #1: "This is an issue we've never faced before." A USD prof [Elizabeth Talbot, PhD, MSW, MS, CSW-PIP, who approached me later to say she does recognize the problem has a past], obviously not an historian. HAS has work to do!
  14. How often do you see politicians, 5 oh [uniformed police], ACLU, nuns, recent college grads, etc. in the same room agreeing with each other?
  15. Attending Rep Noem's antislavery conference in Sioux Falls today.