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Friday, July 24, 2009

The jobs fairy

When thinking about practical understandings of economic matters the matter of jobs is pretty meaningful to most people. Shannon Love provides illumination over at Chicago Boyz:

We talk about jobs as if they are physical objects. We find jobs. We lose them. We trade them. We save them. We export them by shipping them overseas. Occasionally, we believe they are stolen. Metaphors are common in language and usually harmless, but sometimes we seem to forget that they are metaphors. This in turn causes us to misunderstand the phenomenon under discussion.

In the case of jobs, the metaphor stops us from asking what physical event actually occurs when jobs “go away” and “don’t come back.” Examining this metaphor tells us something that is very important and ignored in most political discussions.

First, what is a job? A job is a task you perform for someone else’s benefit in return for compensation of some kind. If you mow your own yard it’s not a job. If you mow your neighbor’s for $10 it is. If you grow food for your own consumption, that’s not a job. If you grow food and sell it for money, then it is. A job requires that an economic exchange for the results of labor occur between two or more people.

Here we see the limits of metaphor. In the metaphor jobs are treated as objects, but in reality a job is an event or an action. It is the act of exchanging labor for money. The word job should be a verb instead of a noun.

When we talk about jobs leaving, moving, shifting etc., or being exported, we’re really talking about a particular subset of people leaving, moving, shifting etc. Who are these people? They are the job makers.

For example, a job in a factory does not exist before someone invents the technological item to be manufactured, designs the assembly line, buys the land, builds the factory and does all of the other thousands of tasks necessary to make, distribute and sell a product in the modern world. Until a job maker does all of that creative work, no job exists.

The ugly truth is that although we work hard, most us don’t create jobs for ourselves or others. Instead we rely on a small minority of job makers to create tasks that we can perform in exchange for a living. Only about 20% of us make any jobs at all. Of those 20%, about half, 10% of the total, are self-employed and make a job only for themselves. The remaining 10% make all the jobs for the rest of us. We rely on this small minority to identify solutions to problems and to create organizations that can implement those solutions. They then hire us to carry out the tasks associated with that solution. Without them, the rest of us would still be subsistence farmers.

When jobs “go away” it’s really the job makers, as living and breathing humans, who go away.

It’s easy to see why leftists would eagerly adopt the metaphor of jobs as objects. It lets them ignore the fact that a small minority of economically creative people create jobs for the rest of us. In turn, this lets them advocate policies that drive away job makers, without being held responsible for the loss of the jobs the job makers create.

The leftmost 25% of the American political spectrum do not for the most part consider themselves Marxist but they clearly work from a model strongly influenced by Marxist thought. Marx asserted that the economy and technology were the results of impersonal natural forces. No human created a job or any other economic good. Instead, the jobs and goods just happened, and a minority of evil people unjustly claimed the lion’s share of the benefit of these natural resources for themselves by shear brute force. The entire intellectual and moral argument for Marxism stands upon the idea that business people don’t actually create anything. This is why contemporary leftists honestly don’t understand why taxing and over-regulating the economically creative destroys the jobs of the economically uncreative. They think jobs just happen like the rain, and that the only real decision to be made is how we distribute the benefits of those jobs.

When the job makers leave, and the non-economically creative no longer have work, leftists do not wonder what they did to drive the job makers away. Instead, they treat the loss of jobs-as-objects like some act of God or natural disaster.

The rest of us should have that conversation. We should stop talking about impersonal and abstract “businesses” as creating jobs, and instead make explicit that a small and valuable minority of individual human beings creates the jobs and and wealth that the rest of us depend on. We should make it clear that the proper role of government economic policy is to support the creativity of such individuals, and it should do so mostly by getting out of their way.

The world has become “flat” in the sense that the geographical advantages no longer exist that once made one region inevitably wealthy and another inevitably poor. Today, one can build a factory or almost any job-creating system almost anywhere in the world. Today, prosperity simply requires that you have a sufficient mass of economically-creative job-makers. The great tragedy of Michigan, the other rust belt states and California is that nothing physical or material whatsoever prevents them from becoming economic powerhouses again. All they need do is change their political culture and laws such that instead of vilifying, hounding and looting job makers, they encourage them to create. If the states do that, then nothing can stop their rise to prosperity.

If they do not, then nothing can save them.

In my discussions over the years, most people seem unaware of the importance of the economically creative people who provide them with opportunities. The jobs fairy is my fun little rhetorical device for labeling the vital few but it also captures the common mistaken notion that jobs mysteriously appear out of thin air.

Additional info.: America Runs on Small Business

71 comments:

Bret said...

I mostly agree with this post, but we're channeling "Atlas Shrugged", aren't we?

One quick nit:

"It [a job] is the act of exchanging labor for money."

Not exactly. In a socialist economy, many people are paid a wage yet do absolutely nothing. It is still said that they're employed because they are supposedly doing something.

The more substantive point is that anyone can create that sort of job. The government can pay every single person to dig holes and fill them in again. Everybody would be employed by the above definition, yet we'd all starve to death.

Secondly, the government can also create jobs to accomplish tasks. There's the military, there's NASA, there's the national labs, etc. The Soviet government owned the land and gave the people jobs to work it. It's said that the government then pretended to pay them and the workers pretended to work. But they all had jobs!!!

So the government can be a job fairy. Or a job imp. Or a job tyrant.

The question then, is how important is that 10% to which Love refers? That's really where the argument between the Left and the Right (in an economic sense) exists. The Left says that if only we remove the evil people who currently run the companies for money, then others, who aren't interested so much in money will take their place and do a better job for society because they are more caring sorts of people. And besides, we'll regulate and tax them so heavily that only people who aren't interested in money will bother to do it.

Being one of the current 10%, my plan is to get the current venture as quickly as possible to a point where it pays the investors (or it may fail) and then I'm more than willing to get the hell out of the way so the more caring sorts of people can create the jobs going forward into the future.

Let's see how they do.

Harry Eagar said...

Odd, isn't it, that as a capitalist, free market society, Sweden was the poorest country in Europe, and after it went socialist, it has been richest or second-richest?

erp said...

What's really odd is that Sweden, realizing that being the first or second richest country in socialist Europe doesn't mean much is throwing off the gray mantle of socialism and coming back into the sunshine of capitalism.

Susan's Husband said...

erp;

Not really. If you look at the actual history of Sweden, you see that they went free market, got rich, went socialist, stopped getting rich, and are now reverting back to freer markets.

The same thing with Germany -- the last 20th Century welfare state was built on wealth accumulated during a much freer market period after WWII.

Heck, even the USSR had to loosen things up a bit in the mid 1920s to survive (netsearch Lenin, New Economic Policy).

erp said...

You are right.

My comment was poorly written.

I didn't mean they got rich while socialist. I meant that even while they were socialist, they were rich relative to the rest of socialist Europe.

It's hardly arguable that prosperity and socialism don't go together.

Harry Eagar said...

If you look at the history of Sweden, you will see that you are wrong.

In my opinion, the reason that Sweden went from poor to rich had little to do with economic systems and much to do with education, which in turn had everything to do with religion.

But nothing changes that fact that as a capitalist, free market nation it was poorer than every other nation in Europe, even including Portugal and Greece. Poorer even than Albania.

Sweden also contradicts that bogus argument about where you can experience famines.

erp said...

Harry, in this Redstate article, my "landsman" Skanderbeg has a couple of thoughts on Sweden.

I'd bet he'd differ with your position on the relative poverty of Sweden and Albania.

Hey Skipper said...

If you look at the history of Sweden, you will see that you are wrong.

A year or so ago, The Economist ran a fairly lengthy article on Sweden. The point of the article was to determine how it can be that socialism actually works in Sweden.

Turns out it doesn't. Rather, Swedish socialism is coasting on the economic freedom that preceded it.

Just like SH said.

Harry Eagar said...

You guys think history started in 1917. It didn't.

In the 1840s, Swedish peasants ate the bark off trees every spring because they were -- gasp! -- victims of famine. That's why they thought North Dakota was an attractive place to emigrate to.

Peter Burnet said...

If we are going to honour and bow down to those "economically creative" people who create jobs, does that mean we get to shoot the "economically destructive" ones who downsize unnecessarily, invest recklessly or otherwise make stupid decisions?

No pain, no gain.

Bret said...

Where was honouring and bowing mentioned?

I think we're talking more about not looting.

Hey Skipper said...

You guys think history started in 1917. It didn't.

With regard to modern economies and socialism, the various recipes for tree bark in the middle 1800s are interesting, but irrelevant.

What is relevant, though, is to what degree socialism tramples economic vitality.

On that score, Sweden's history from 1900 is dispositive.

Harry Eagar said...

I just looked it up. Sweden's per capita income, measured several different ways, is around 14% higher than the US.

Bret said...

Harry,

You got a link for that?

Here's a couple of links that show totally the opposite, with Sweden at GDP per capita (PPP) at $38,500 and the US at $47,000 GDP per capita (PPP).

https://www.cia.gov/library/publications/the-world-factbook/geos/sw.html

https://www.cia.gov/library/publications/the-world-factbook/geos/us.html

Are you sure you didn't get your numbers upside down?

Harry Eagar said...

I'm sure. It was wiki, which can be gamed, but it cites the cia as well and has Sweden in the top 10 by all three measures and the US in the top 20.

Norway, which was part of Sweden until 1905, is even higher, probably because of oil.

Harry Eagar said...

Well, now that's odd. I tried a slightly different search query and get numbers more like yours.

Not that they tend to prove your point, as they are very like Canada's.

Harry Eagar said...

Ah, I see. One nominal, one tweaked.

Susan's Husband said...

So Mr. Eagar is counter-cited and his reponse is not to, say, go to the original sources for which Bret provided links, but to refer back to his memory of some unknown website which he claims references those same sources. I see how modern journalism operates, and why many of us don't take Eagar's claims very seriously.

Since I am not a journalist, I used Bret's links and verified his claims. Somehow that makes me more confident of the validity of his claims.

Harry Eagar said...

I found what Bret found and, what he didn't find, the untweaked version. A slight change in the queries bring up the two, which I then compared.

We could then go into whether it is possible to tweak the numbers. I think not, because, with respect to the US and Sweden, people buy different things (which, as somebody said at Thought Mesh, is how people behave), so the market baskets are not the same.

Once you remove oddities like Qatar, both countries are at the top. Your point about socialism is then, what?

Bret said...

Harry Eagar asks: "Your point about socialism is then, what?"

That it works poorly in aggregate, especially in regards to create wealth and prosperity.

The fact that one tiny (population less than 10 million people), nearly completely homogeneous country has coasted under socialism to a point where they're only 18% behind in GDP per capita is pretty weak evidence for the benefits of socialism.

Susan's Husband said...

The New York Times disagrees with Eagar's view on the relative wealth of Sweden vs. the USA.

Harry Eagar said...

Depends what you like. If the leading complaint about wealth in Norway -- per your link -- is that school supplies are not free gratis from the government, then they aren't here either. Furthermore, I got a call yesterday soliciting a news story about a woman performing a deed of charity: collecting pencils for American children so they will have something to write with in school.

At that, it's an improvement over what my aunt, a school principal, had to do. She used to extort clothing from merchants so naked children could leave the house.

erp said...

Why can't parents in Norway supply school supplies for their kids? Ditto the students here.

Harry Eagar said...

Because their employers made stupid decisions and now they're out of work?

You know, that old risk-reward system that made America great: I take the risk and if there's a reward I get it, but if there isn't, you lose your livelihood?

You should sit at my desk and answer the telephone for a few days. It would be instructive.

Susan's Husband said...

How, then, did America become great, since it's been that way since the founding?

Again, your objection seems to be that free markets are not instaneously perfect. Oddly, such a criticism doesn't move me.

Bret said...

Harry,

Your last comment's a little unclear to me, but I'll answer what I think you're trying to say.

As someone who runs a business, I take risks every day. The only other choice is to shut it down, that's the only riskless thing I can do. To continue the business means to continue to take risks.

My employees have taken a risk working for me.

Their reward for taking that risk is that I pay them.

You should run a business for a few days. It would be instructive.

Harry Eagar said...

That's a funny definition of 'risk,' but no surprise since my opinion is that market fanatics do not understand risk.

I think that's been objectively demonstrated beyond cavil. You don't, obviously.

Guy, America became rich, it wasn't always great. It isn't uniformly great yet either.

The richness derived in large part from mere theft, and in even larger part from advancing technique. Europe, about which you guys are so contemptuous, is as innovative, per capita, as America.

Think of physics. How economically free was the center of physical advance? Not free at all.

Bret said...

Harry Eagar wrote...

"That's a funny definition of 'risk,' but no surprise since my opinion is that market fanatics do not understand risk."

What's your definition of risk?

"America became rich, it wasn't always great."

It didn't become rich by being a entitlement society.

"The richness derived in large part from mere theft..."

Theft from whom?

"...and in even larger part from advancing technique."

Free market commercial necessity is the mother of invention.

"Europe, about which you guys are so contemptuous, is as innovative, per capita, as America."

I've not seen any economic paper claim this. Do you have a reference?

Susan's Husband said...

Mr. Eagar;

"Guy, America became rich, it wasn't always great. It isn't uniformly great yet either."

Exactly my point, that your real objection is the lack of instaneous perfection in free markets. My objection is not that you are critical of free markets, but that you don't apply the same criteria to whatever alternatives you support. I will admit that you're extremely vague about those and so to some extent avoid the issue. I do think it's a bit cheap to attack us for our specific economic visions while declining to provide the equivalent.

Bret;

I would also ask "theft of what?". We stand accused of not understanding risk, but such a statement demonstrates a complete lack of understanding of wealth.

Put me down for harboring doubts about Europe (especially post social democracy) being anywhere nearly as inovative per capita as the USA. One wonders how that ties in with so many innovators moving from Europe to the USA but not the other way. Perhaps Europe is as innovative, they just have to move to the USA to actually do it?

erp said...

Harry, most of the time I look upon your point of view as that of a lovable eccentric and rarely take umbrage, but I do in the instance of your stating categorically that American wealth came from theft.

I'll add my voice to Bret and SH and ask, theft from whom?

As for American ingenuity, not all of us were lucky enough to be born here and had to rectify the error with their feet.

Harry Eagar said...

'Theft from whom?'

Land from the Indians, labor from the Africans.

'Free market commercial necessity is the mother of invention.'

It helps, sometimes, but invention has many mothers.

Free market conditions also pay, sometimes, to suppress invention.

There are many, many examples of America's giving up a lead in commercial/technical advantage despite the obvious commercial advantage of not. It can happen fast, too.

In 1865, the US led the world in gunfounding experience and technique. Five years later, it wasn't even a player.

The very rough guide to innovation is to count patents. Considering that many, many patents are not really innovative, that many are nuts and that many are never exploited, this is a very, very rough estimate.

Allowing for that, the rate of patents is roughly the same between the developed parts of Europe and the US.

It has been suggested that the UK system of guiding smart kids into particular kinds of activity produced a measurable difference of outlook compared with the US.

This certainly appears to be the case with medical research. Theoretical breakthroughs in England, engineering applications in the US.

There's no doubt that government can really direct economic outcomes: Recall the arrival of the U-boat in New York harbor in 1916. That event had deep historical roots in government economic policies in 3 countries.

Bret said...

Harry Eagar wrote (across 2 comments):

"The richness derived in large part from mere theft..."

"Land from the Indians, labor from the Africans."

A large part, eh?

Funny how the Indians had that land for eons and were still in the stone age.

Funny how the North won the civil war even though the South had all that free labor.

A small part, maybe.

erp said...

Funny too how the poorest part of the country is the part that had all that "free" labor from Africa.

Harry, you don't believe the myth of indigenous peoples and their spiritual bond with the earth, the animals and each other do you? The people we call Indians took the land from those here before them, but instead of creating a great civilization with the vast resources at their disposal, were content to live little better than the animals poaching on each others settlements, killing brutally and taking slaves,

Once the Americans were discovered. there was no way to stop the adventurous and the desperate from looking west. Good thing they did because, unlike the Indians, we did build a great civilization, the only one in the history of the earth that guaranteed life, liberty and the pursuit of happiness as well as equality under the law for all. (Yes I know about slaves and women given a lesser status, but we did eventually through much travail rectify those errors).

Harry Eagar said...

The Indians weren't any more savage than the people who displaced them. If you think the US Constitution guaranteed life, liberty and the pursuit of happiness, I recommend you read John Finger's 'Tennessee Frontiers.'

Susan's Husband said...

"The Indians weren't any more savage than the people who displaced them."

Are we today, in the USA, more, less, or just as savage as those groups?

Bret said...

Note that I didn't say anything about "savage". I said they were still in the stone age. Weren't they?

erp said...

Harry, I didn't use the word savage either. My comment wasn't judgmental, it merely described the life style of our indigenous peoples because popular culture has so mythologized it that it no longer bears any resemblance to the reality.

Go to the source. Read the Declaration of Independence. It's quite inspiring ... and to answer your question, it goes without saying that our society is the antithesis of savage.

Harry Eagar said...

Metals do not equal morality.

Since you guys refuse to read economic history, I will summarize Professor Finger's description of the settling of Tennessee by the whites:

In the late fall, the militia would move up the valleys, burning down the Indian towns and their stored food, so that by spring all the Indians would be dead.

If this sounds familiar to you, it should. It is exactly what the Bolsheviks did in Ukraine in 1930-32.

(In the 1790s, the Indians were superior farmers to the Scots who had settled the Piedmont, who were notoriously incompetent farmers and who lived just about as poorly as the Indians despite having metal and draught animals.)

Bret, you are mistaken. The Southern Indians were not stone age. They worked copper and gold, though they did not know smelting.

SH, just about the same, I'd say.

Hey Skipper said...

The Southern Indians were not stone age.

Correct, although none had advanced so far as the Bronze Age.

No American Indians developed writing, or the wheel.

In fact, Indian life at the time of the European invasion was indistinguishable from that thousands of years ago.

Harry Eagar said...

What do you mean no American Indians developed writing?

The Maya did, and a sophisticated astronomy.

The Mexican Indians knew about the wheel, they didn't exploit it economically, perhaps because they didn't have draught animals, perhaps for other reasons.

One of the curious byways of economic history is the abandonment of roads and wheeled vehicles in the area of their invention for pack camels.

Humans settled the entire world, but most of the innovation occurred in just 2 places. Why is that?

Nobody knows.

Susan's Husband said...

It's not that we refuse to read economic history, we simply fail to see how your cites are relevant to the point at hand. We are all aware of how the natives were treated during the European settlement of North America. We fail, however, to grasp your point because as always you seem curiously reluctant to state it explicitly.

The point of asking what was stolen was to compare what was stolen with the overall wealth of the nation, and then ask "where did all that extra wealth come from?". And, as Bret pointed out, to note what a small fraction it isin contrast to your claim of "in large part".

Now, please point out how the details you are quoting from that book have anything to do with this point. It's not really very persuasive to point at tangentially related but essentially irrelvant facts. When that doesn't work, rather than tossing out insults, perhaps your could deign to actually provide the context you think makes them relevant.

Harry Eagar said...

If you don't think all the real estate is a 'large part' of America's wealth; or if you don't think that the most lucrative export of the United States during the first century or so of its existence amounted to a 'large part' of America's wealth, I cannot help you.

I do not believe you do know how the natives were treated. I am willing to bet you did not know how the South Carolina militia evicted the Cherokee from eastern Tennessee, other than some sort of vague 'displacement.'

I certainly have read often enough around here about the great crime of the Bolsheviks in the Ukraine, and always in a context that ascribes it as something special that only happens in socialist or totalitarian regimes; never, ever as something that we did right here.

Hey Skipper said...

The Maya [had writing], and a sophisticated astronomy.

You are right; I thought they had only pictographs.

However, I think the larger point remains. No New World civilization had advanced past what ancient Egypt had obtained. There was no use of the wheel, and there are plenty of uses beyond draught animals.

It is probably unknowable why the New World remained essentially neolithic, but it did.

I do not believe you do know how the natives were treated. I am willing to bet you did not know how the South Carolina militia evicted the Cherokee from eastern Tennessee ...

Hmmm. Trail of Tears. I think I have heard of it.

It is very difficult to imagine how the meeting of stone age tribes and steel age Europeans could possibly have turned out anything other than badly for the natives.

Of course, that is an entirely different milieu than what the Bolsheviks did in the Ukraine. That you make them analogous is puzzling.

... if you don't think that the most lucrative export of the United States during the first century or so of its existence amounted to a 'large part' of America's wealth ...

A large part? What percentage of the wealth of the US on Jan 1, 1901 (never mind 50 years later) had to do with chattel slavery?

You really do need to watch The Commanding Heights. You are old enough to have lived through socialism was; this will refresh your memory.

Susan's Husband said...

"If you don't think all the real estate is a 'large part' of America's wealth; or if you don't think that the most lucrative export of the United States during the first century or so of its existence amounted to a 'large part' of America's wealth"

America spent its first century exporting real estate?

You also might want to look in to instrinsic vs. extrinsic value if you think the land itself, rather than what can be done with it, is the large part of the value. Or is your claim that the net total wealth of North America changed very little during from 1780 to 1880? Certainly there wasn't much more real estate created.

Harry Eagar said...

Cotton.

See, I don't think you guys even yet understand what happened to the Indians. The Trail of Tears came much later, in Jackson's era, and was comparatively humane compared to how the Indians were exterminated in the 18th and early 19th c.

It is exactly the same as what happened in Ukraine, although the motive -- land hunger -- was not exactly the same.

Certainly the people who did it considered land, as land, wealth, since the move to evict (murder) the Indians was not a result of population pressure. There was no ability to use most of the land when the Indians were cleared out. Not for generations.

Susan's Husband said...

No, what we don't understand is your point or the relevance of this to the topic of discussion, i.e. where the overall wealth of the USA came from.

Perhaps, rather than just repeating yourself, you could try explaining how understanding what "truly happened" to the natives would affect our understanding of economic history. How, for instance, would it change our view of the relative values of land and the economic value of the produce of that land?

Hey Skipper said...

See, I don't think you guys even yet understand what happened to the Indians. The Trail of Tears came much later, in Jackson's era ...

Actually, I do understand. The Trail of Tears is just one example of many that come to mind.

But so what?

What does the collision of stone-age tribes with a near industrial-age civilization have to do with economics?

To put it differently, assume the US became communist in the 20th century. Would that have changed the characteristics of the dispossession of Indians from their land?

If not, and I'm going with not, then pointing out that dispossession, in all its brutality, is cause for sad reflection, but irrelevant to the point at hand.

Harry Eagar said...

Ah, the Eastman Kodak school of wealth creation.

As I've said, markets know only 2 things: the offered price and the asked price. Nothing else is known or can be known. If the deal creates wealth, then wealth is created and that's all you need to know.

Thus, if you build a huge fortune on stolen patents, nobody is supposed to mention how you did it.

Bret said...

Harry,

A market includes a set of institutions base of rule of law that support contractual agreement which include not only price but terms.

So, yes, bad things happen outside of every system.

But, no, theft of patents is not considered part of free-market systems.

Susan's Husband said...

"As I've said, markets know only 2 things: the offered price and the asked price"

Ah, so that's the root of your complete misunderstanding of markets. Markets actually know extremely large amounts of information, since a market consists of people and their interactions in the market are based on the sum of the information held by the participants.

You have a very cargo cult view of markets, in that you look only at the final result and not at all at how that result was created, just like people who think blinking lights make a computer.

Harry Eagar said...

Kodak operated outside the market system for over a hundred years? How did it do that?

I have explained, at Restating the Obvious, in the context of new entrants in sectors with stable or declining labor forces, how markets create imaginary 'efficiencies.'

I can see how the mythical efficiencies are made, but buyers cannot. They go for the low price. They don't understand that the new entrant may not be really efficient. Or if they do, they don't care.

It amounts to the same thing.

If you are going to argue for efficient market theory, then, as Skipper would say, you got some 'splainin' to do. Where do bubbles come from?

I agree, though. It is like a cargo cult.

Susan's Husband said...

I am not arguing for efficient market theory. You're arguing with straw men of your own creation again.

Beyond that, I will trump your Kodak with the Burea of Indian Affairs. Which leaves the interesting point that free market types can easily point out how (according to your claims) Kodak violated market principles. Can you tell me how the BIA violated non-free market principles? Or is that simply the sort of thing one should expect from a non-free market?

P.S. Just take your example and change "buyers" to "voters".

P.P.S. Can we get back to the question you brought all of this up to avoid, i.e. how understanding the travails of Native Americans affects understanding of economic history? And how well the natives were served by non-free markets via the BIA?

Harry Eagar said...

BIA and Kodak are pretty much of a muchness, both thoroughly corrupt, so I don't see where you are going with that.

Are you proposing that swapping skins for firewater in a totally free market worked to the benefit of Indians?

Bret said...

Harry Eagar asks: "Are you proposing that swapping skins for firewater in a totally free market worked to the benefit of Indians?"

Yes.

Because once they were introduced to "firewater", they would've made it themselves if they had not traded for it which would've left them even poorer.

Susan's Husband said...

"BIA and Kodak are pretty much of a muchness, both thoroughly corrupt, so I don't see where you are going with that."

You used Kodak to indict free markets. In the same way, I used the BIA to indict non-free markets. So your point, as far as I can tell, is that we shouldn't have any economic activity because it's corrupt. If you were leading toward a different point, please enlighten us.

Harry Eagar said...

Not knowing anything in particular about the BIA functioned, I went out and bought Robert Utley's 'The Indian frontier of the American West, 1846-1890.'

It turns out it did not work the way you seem to imagine it did. Another free market disaster.

Bret, you're wrong about that, too. Check out Brody's 'Maps and Dreams,' which offers an eyewitness account of firewater among the Blueberry band in recent years.

Susan's Husband said...

The BIA did not shut down in 1890. And given that you have labeled Tsarist Russia as "free market" I have strong doubts that any one except you would see government action on that scale as any sort of "market failure". You asked elsewhere why I think you hate markets. This is why — any bad outcome is labeled by you as a "market failure" and it's rare indeed for someone to use a term in that way for something they don't hate.

Harry Eagar said...

What about tsarist Russia do you think was not 'free market'?

Property was allowed to do whatever it wanted.

Susan's Husband said...

"Property was allowed to do whatever it wanted."

Since property is non-sentient, it doesn't ever want to do anything, so this is true for every possible economic system.

How's this: You finally explain what you mean by "free market" and I will answer your question. Otherwise I am just typing lorem ipsum and I can do that in my code more profitably.

Harry Eagar said...

In a free market, owners of property are allowed to do whatever they wish with it, without reference to what knock-on effects it may have on others, whether the others own property or have nothing.

Another way of saying it is that a free market is antisocial.

Except for being obliged to stop owning slaves after 1861, what restraints do you think property owners -- and in this case, owners of farms -- labored under in tsarist Russia?

Isaac Asimov, whose father was a grain dealer in Russia in tsarist times, has an interesting section in his autobiography on how grain dealing operated.

Susan's Husband said...

In a free market, property owners are not allowed to ignore "knock on" effects, what are commonly called "externalities". The study of the interaction between externalities and property rights is a matter of long intense study in libertarian circles. Here is a PDF format article from CATO, a hard libertarian think tank, discussing the very subject.

Another aspect of a free market is that everyone can own property and that the rules for property ownership are uniform. Tsarist Russia violates both of these because serfs, for instance, had much more restricted property rights than the aristocracy. This is also why slavery is not a free market phenomenon.

Tsarist Russia also restricted how land could be bought and sold, which violates even your definition of property owners being allowed to do whatever they want with their property. This comes up with the various trade patents, guilds, and restrictions on trade in Tsarist Russia and also violates even the Eagar Definition.

Let's try this, with regard to your claim of the outlawing of slavery (serfdom) late in history of Tsarist Russia:

"The Emancipation Act of 1861, while nominally freeing the peasantry from bondage, sought to limit change by shoring up the village communes. In most places the commune continued to control the amount of land allotted to each household. Land allotments were divided into scattered strips and subject to periodic redistribution based on the number of workers in each household; and it was very difficult for individual peasants to leave the commune entirely and move into another area of the economy, although increasing numbers worked as seasonal labor outside their villages (otkhodniki)."

That's not a free market as the peasants by law are not allowed to own land. It violates the Eagar Definition as well, since the communes can not do anything they want with the land they "own", such as sell it to peasants. I would need to research but I would be willing to bet they could not industrialize it either, in violation of the Eagar Definition.

So, no, Tsarist Russia was not free market under either definition.

Harry Eagar said...

Well, under your definition there has never been a free market anytime anywhere, so what are we fussing about?

As for your idea that markets, free or otherwise, have to take account of externalities, I have never seen that happen. RtO has visited that subject several times, in the context of allowing China to set US environmental policy. for example.

Susan's Husband said...

We could argue about how the USA doesn't satisfy my definition of free market. I answered your about Tsarist Russia. But my actual purpose is to provide you with more accurate information.

You're also setting up a false dichotomy, i.e. "free market" or "not free market". Real economic systems are some where between those two states, although as a short hand there is a tendency to refer to systems closer to free markets than others as "free market".

Harry Eagar said...

You seem to misunderstand markets.

My point was that the grain, once produced, was marketed freely; in particular, it was sold out of country even while the people who produced it were starving, because the owners were completely free to maximize their returns, and hang the social consequences.

You really should read Asimov, you would be surprised.

Susan's Husband said...

No, I don't think I am the one who misunderstands markets. But even if true, I note that you prefer vague insinuations such as your reference to Asmov's father's grain dealing to any actual specifics. I have decided to not respond to Kafkaesque accusations like that one.

I do think this demonstrates why we think you hate markets, as best you understand them.

You take Tsarist Russia, a thoroughly unfree society, and when a famine hits you find the one little bit that's market oriented and place the entire blame on that. I realize that the Soviets put an end to those socially irresponsible markets and no Russian ever went hungry again, but I still think it's scapegoating based on personal dislike.

As far as I can tell you want markets which have good outcomes and not markets with bad outcomes, without realizing these are the same markets. Or you think there is some magic switch that lets someone turn markets on and off with perfect foresight, beneficence, no "knock on effects", and without corruption (unlike those grain sellers) despite the much greater scope for personal enrichment. I am not sure, though, because as usual you fail to come out and state the actual problem and your preferred solution.

Finally, it wasn't markets that bought and sold the grain, but people. If people want to prevent famine, they can do so even in the face of markets. So can a government, which could buy the grain itself or purchase it from external sources. The existence of markets makes this easier, and their abscence makes it harder without making the risk any less.

Harry Eagar said...

I don't hate markets. Like I said, they can be useful servants. They just make bad masters.

You worship markets. Whatever is, is right, as Browning put it.

If people depend on a market (rather than their own plot of land) for grain, and the market sucks grain out of their district so that their children starve, then I don't think what is, is right. It's time to interfere in that market, as much as and as long as it takes to set things right.

I am not absolutist. I am not demanding central direction. I am saying that markets sometimes -- very often -- produce unconscionable outcomes.

Less central to my objection but also important, markets also are remarkably stupid and generate false profits. I am writing a story about one such developing train wreck this morning.

This one happens to concern medicines, and everybody who knows the issue (and even an amateur like me) can see what is going to happen, but the market is dictating train wreck.

Finally, there is nothing the least bit vague about my allegation. It is recorded history that in '92 record amounts of grain were exported from Odessa while the people who had grown the grain starved to death.

Asimov's grandfather is just a homely example, of the kind anyone can understand, of how that market worked.

Susan's Husband said...

Yet I never see you say a specific positive thing about a specific market. In every specific case, you come out against markets. In the example you are using, what conclusion should I draw other than the best way for Tsarist Russia to have prevented starvation is to outlaw grain markets? Given all of the other oppression, slavery, and autocracy of Tsarist Russia, to pick out grain markets as the source of misery doesn't seem to have an explanation other than hate.

"You worship markets. Whatever is, is right"

No I don't. I have never made the claim in the second sentence, in fact I have frequently pointed out that it's not true. My claim has been that markets produce fewer bad outcomes than any known alternative. I think if there's worship here, it is by you of central direction as you have never, to my knowledge, acknowledged even the possiblity that it can be wrong or create a bad outcome. E.g., people didn't starve in Tsarist Russia because of too much central direction, but because of too many markets.

"I am not absolutist. I am not demanding central direction."

I think you are. If you object to markets in every specific instance, then the only situation that avoids your objects is absolute central direction. I have yet to see, in what you have revealed of your view of a proper economic system, a place for markets.

"I am saying that markets sometimes -- very often -- produce unconscionable outcomes."

This just reinforces the above, if you honestly believe that "very often". What kind of useful servant "very often" produces "unconscionable outcomes"? Fire wouldn't be a useful servant if it "very often" burned people to death. It would be outlawed.

"Finally, there is nothing the least bit vague about my allegation."

It was extremely vague. You have now, at least, provided a year (if not a century) and a place, which is somewhat less vague. That these are revelations indicate just how vague it was. The problem is that in most (if not all) previous cases where a vague reference of your like this was chased down, it turned out to be bogus (e.g., Carter and gas prices). The Wiki page for Odessa makes no mention of the '92 famine, although it discusses the 1921-1922 famine caused by the Soviets.

I find it quite plausible that there was a famine in Odessa in 1692? 1792? 1892? and that grain that could have fed people was sold instead. That leaves

1) Was there an actual food shortage? If so, why?
2) Who sold the grain, who bought it?
3) How did the sellers get the grain, if they were not the growers?

If, for instance, the grain was siezed during one of the many anti-Jewish pogroms by force and then sold, I would tend to not blame the grain markets, but rather localize the problem in the pillaging. I have no idea if that's the case, because your accusation is so vague. Apparently all one needs to know is that there was a market. But that's not anti-market bias!

Harry Eagar said...

That would be a good reason not to get 'information' from wiki.

I got mine from the first volume in Bruce Lincoln's history of the Russian Revolution.

Susan's Husband said...

So, your accusation wasn't vague because I used a Wiki to get some information? Besides, I thought you got it from Isaac Asimov's autobiography, as you claimed earlier in this thread.

But let me ask - what is the gist of your accusation, if it's not "There wouldn't have been starvation in Odessa under the Tsarist regime if they had only had less free markets"?

Harry Eagar said...

The '92 famine from Lincoln, the way the markets worked in the countryside from Asimov.

Am I permitted to consult more than 2 books? The effect of the gold standard on world grain trade during the long deflation from Mike Davis.

The tsarist government could have and should have intervened, but this was a government so beholden to market values that it sold the bones of its soldiers to be ground into fertilizer (do I need to give a cite? Ripley's Believe It or Not).

The tsarist government was more interested in gaining gold than in keeping millions of its producers alive. Hence the grain drain.

The market obliged. No one thought to say, perhaps we should not be buying grain from a famine zone. You will say, of course not; and I will say, such a concept is so far beyond the capacity of a marketeer that it is impossible even to conceive.

In famine questions, one of the great failures of markets always arises: If you have liquid assets, you can aspire to quick and easy profits by sequestering grain and creating more hunger.

There is, of course, nothing in market behavior to forestall this, so it always happens.

The power of markets -- which of course I do not discount -- is that even when antimarket forces (like government) attempt to forestall this murderous behavior, they have always had great difficulty in doing so.

If the market values you alive, it will work to keep you alive. If the market values you dead, it will see to it that you die.

That's how it worked in Russia.

Susan's Husband said...

"Am I permitted to consult more than 2 books?"

Your accusation isn't vague because you don't know what it is, it is vague because no one else knows. I don't see how your reading more books is going to change that.

"The tsarist government was more interested in gaining gold than in keeping millions of its producers alive. Hence the grain drain."

Exactly. The Tsarist government. The government sells the grain, the government sells the bones of its dead soldiers, and that's the fault of the market? The Tsarist government wasn't beholden to any market values, it was beholden to getting money in to its treasury. The Tsarist government, by your own claim, wasn't trying to forestall the famine at all, it was encouraging it. The government deciding it wanted money more than citizens, that is how it worked in Tsarist Russia. Just read your own quote for verification.