Contentious Quote of the Day

"Thus, once they lost the currency exchange mechanism, which had institutionalized their political strength, multinational corporations found that they could not operate in the particular type of political arena that developed in West Africa after independence. These companies then coped as best they could with the overvalued exchange rate and looked to invest their money elsewhere, where there were more favorable economic circumstances and politics. Pace dependence theory and the literature on globalization, the problem of developing countries, at least in the area of exchange rates, is not that multinational enterprises have been too politically powerful but that they have not been strong enough to influence policy."

From Jeffry Herbst, States and Power in Africa: Lessons in Authority and Control, pp, 219.


This is definitely my favorite book on post-colonial state building.

This is not to deny the historical causes of underdevelopment in Africa, the main one which is the abject weakness of many African states (in terms of basic state functions: protection/contract enforcement). But it is to say that, in the context of state weakness, some pretty terrible policy choices were made by new leaders. It was not the presence of commerce and trade, but rather the barriers to economic activity, which largely explain why Africa remains so poor.

Libya: State builders or Gangsters

From the NYtimes: Libyan loyalists reject rebel ultimatum.

Moussa Ibrahim said in a phone call to the headquarters of The Associated Press in New York that “no dignified honorable nation would accept an ultimatum from armed gangs,” the news agency reported.

In 1985, the late great political sociologist Charles Tilly wrote that state making was sort of like organized crime. Based on a substantive body of empirical work, Tilly and his colleagues had found that states in Europe formed out of a process of nearly 500 years of war. Basically, a bunch of guys with access to weapons (wielders of coercion) went to war and had to find some way of financing this, so they built tax bureaucracies, police agencies (and eventually the architecture of the modern state). Those that were good at war making and tax collection won, and the organization that this called forth was a state. A state is just a super good way of deploying violence, extracting revenue, and exercising territorial control. This is, of course, what the mafia does also, and the modern state does this on much larger, more sophisticated scale.

In other words, state formation is the process through which armed gangs, warlords, or other people that hold coercive power come to control a piece of territory, gain some legitimacy as the "government", and become recognized as sovereign by the international community. As Saint Augustine said: "what is sovereignty but organized robbery?"

So sure, the Libyan rebels are a ragtag militia of gangsters. But with a little time, they could be the government of a new Libyan state.

Demonizing Muslims

Gerald Caplan writes:

Among the remarkable inventions of the counterjihadists is the non-existent threat that Muslim sharia law poses to the United States. It appears that American Muslims, less than 1 per cent of the population, are conspiring to impose sharia law across America. The campaign to stop this menace from happening, even though it’s already not happening, has achieved remarkable support from everyone from Republican presidential candidates to local political hacks promoting anti-sharia legislation.

AM: In Canada, Muslims make up about 2.5 percent of the population. By comparison, about 3.5 percent of Europe's population is Muslim. The United Kingdom has a Muslim population of about 2.7 percent; France, 6 percent, and Holland, 5 percent. Ultra-right wing politicians seem quick to blame this small minority for all sorts of social and economic dislocation. Even if we accept the worst doomsday predictions of the clash of civilization types, the numbers just don't add up.

Of course, it's not just a numbers game. Clash of civilization-types like to point out the authoritarian and radical elements of some Islamic societies and political systems. But this is a baseless generalization that lumps a few radicals in with a far more moderate general population. Caplan puts it well.

The goal of the Muslim-haters is surely clear enough. By lumping all Muslims together as terrorists, by equating a violence-prone Muslim lunatic fringe with all Muslims, by insulting the hundreds of millions of moderate Muslims everywhere, they alienate all Muslims and create among non-Muslims an irrational fear of and hostility to all Muslims.

Quote of the Day

Nobody planned the global capitalist system, nobody runs it, and nobody really comprehends it. This particularly offends intellectuals, for capitalism renders them redundant. it gets on perfectly well without them.

Peter Saunders (quoted in Matt Ridley's The Rational Optimist).


AM: Against this argument, is the idea (popular with Keynesians) that the economy, like an engine or a car, can be fixed or steered. The benign planner presumably has the knowledge to carry this sort of thing out effectively. Hayek would call this the "pretense of knowledge." In reality, the economy is far too complex, and our knowledge of it far too limited, for any top town planner to carry out effective interventions.

Is the economy like a car?

More on the economy-engine metaphor

Paul Rosenberg writes:

Progressives were "really really good on critiquing the free market", and "pretty decent" on articulating their desired goals, she told me. "But where we really really fall down is in the middle," by which she meant "the explaining, really of how the economy works".

AM: Ok, this seems right so far. Lefists have a lot to say about the free market, but very little understanding of how it works. Yes, yes yes… I know this was not what the author meant. What she meant was that leftists don’t have a good metaphor of how the economy works.
AM: Luckily:

"What's incredible about this is that suddenly we have kind of what the right has - a metaphor for what the economy is - it's a vehicle

AM: Sounds familiar (I wrote about it here). How does this work?

"The most fundamental thing we know about vehicles is that they have drivers. The idea of a whole bunch of unmanned vehicles on the road ... That's how you have crashes," she said. In short, this metaphor "suggests at the most basic level the economy requires control". It also quite naturally implies "going where you want to".

AM: So the economy is a car that we drive around? I don’t really think this gets progressives much closer to an understanding of how the economy actually works. It seems tailored to fit their ideology. A car, of course, demands a central planner/driver. I guess they could say the same about the right.

“The organic metaphor tells people to accept the economy as it is, to be passive, not to disturb it, to take a laissez faire attitude - leave it alone.”

AM: So how does this new metaphor measure up? 1. It’s not new – the left has always had the engine metaphor. But an engine is different than a car. A car is a single vehicle that travels around, whereas an engine is a system of interlocking parts. In the Keynsian story, the central planner is not a “driver”, but a mechanic. There are problems with this, but at least it sort of makes sense. This “vehicle” metaphor seems completely wrong.
2. The Engine metaphor is plausible – but it depends a lot on expert knowledge about the economic system, and the certainty that interventions can make things better. Engines don’t just start working on their own, they must be designed, tweaked etc…
3. The body is still a better metaphor. I think the article slightly misunderstands it. The idea with a body is that it is a “non-designed” super complex system. There is quite a lot that goes on inside a body that is self-regulating, and when we make interventions into the body, either through surgery or medication, we have to be very careful or else things will get worse.

Saving Rhinos by hunting them?

From the Property and Environment Research Centre:

In 1900, the southern white rhinoceros was the most endangered of the five rhinoceros species. Less than 20 rhinos remained in a single reserve in South Africa. By 2010, white rhino numbers had climbed to more than 20,000, making it the most common rhino species on the planet.
Saving the white rhino from extinction can be attributed to a change in policy that allowed private ownership of wildlife. While protecting the rhinos encouraging breeding, the ranchers were able to profit by limited trophy hunting.
Poaching for rhino horn, which is in high demand for medicinal and ornamental purposes, had also devastated the rhino population. CITES banned the commercial sale of rhino horn, which caused black market sales to sky rocket and encouraged poaching. If the ban were lifted, ranchers are ready to supply the market by harvesting the horns humanely, which then regrow just like fingernails.
Strong property rights and market incentives have provided a successful model for rhino conservation, despite the negative impact of command-and-control approaches that rely on regulations and bans that restrict wildlife use.

AM: I’m torn on this one. My free-market libertarian side applauds this approach. Attaching property rights to “common property” is a good way to preserve it, especially when government efforts fail. On the other hand, my “animal rights” side doesn’t like this at all. Animals are not “common property” in the first place. They should be able to live their lives without being murdered by greedy humans. Do we have to enslave them, and to make rhinos into human property to ensure that the species survives? I guess there is a “utilitarian” argument here. Kill a few rhinos for the sake of all rhinos. But in principle, it seems wrong to enslave things, and shoot them, no matter what the “end.”

On the other hand, in countries with weak political institutions, this may be the only viable option. The best option would be a law that protects rhinos from slavery and murder. But this is simply not possible in places with weak justice systems.
Thoughts?

Hmmm....

Christie Blatchford’s article on the media coverage of Jack Layton’s death is getting a lot of attention. The reaction seem to be mixed. Some, like my friend over at the Real Johnson, are disgusted. Others who I have talked to (like a friend who referred to the “collective media circlejerk”) will likely approve.




Blatchford writes:

How fitting that his death should have been turned into such a thoroughly public spectacle, where from early morn Monday, television anchors donned their most funereal faces, producers dug out the heavy organ music, reporters who would never dream of addressing any other politician by first name only were proudly calling him “Jack” and even serious journalists like Evan Solomon of the CBC repeatedly spoke of the difficulty “as we all try to cope” with the news of Mr. Layton’s death.

On the death bed letter:

The letter was first presented as Mr. Layton’s last message to Canadians, as something written by him on his deathbed; only later was it more fully described as having been “crafted” with party president Brian Topp, Mr. Layton’s chief of staff Anne McGrath and his wife and fellow NDP MP Olivia Chow.

Language and the Economy

On language on economic discourse, Max Borders at the Library of Economics and Liberty writes:

“Metaphors can't change reality; they can only shed light on it. And when people use metaphors to take liberties with reality, their words can be misleading at best and mendacious at worst. We see this often in the socio-economic arena.
One of the most pervasive false metaphors in economics is the economy as machine. It can be subtle or overt. But "economy as machine" is arguably the most powerful metaphor at work in contemporary economic discourse.”

A couple of things come to mind:

(a) Maybe one of the reasons that people so readily accept Keyensian economic theory/policy these days is that it overtly relies on this appealing, yet simplistic idea that the economy is kind of like an engine; implicit in this idea is that policy makers can act like mechanics, tweaking and fixing parts that are broken. It also follows (again implicitly) that the economy, like an engine, is the product of human design or planning. Refer to the ridiculously awesome video by Russ Roberts and John Papola (Fight of the Century) Keynes compares an economy in recession to an engine that just needs a “quick spark”.

(b) It also strikes me that the prevalence of this type of simplistic economic language may be one reason that democracies often get economic policy so wrong. I’m thinking of Bryan Caplan’s book, the Myth of the Rational Voter, which argues that certain biases pervade the general public against a proper understanding of basic economic concepts. Might this type of misleading imagery also be a factor?