The horizon is not so far as we can see, but as far as we can imagine

Category: Book Reviews Page 3 of 4

Review: Cities and the Wealth of Nations by Jane Jacobs

Jane Jacobs came to prominence with the publication of The Death and Life of Great American Cities, which examined what made cities succeed and fail in extremely minute detail–such as how pedestrians walk on sidewalks and what makes parks safe. It’s a brilliant book, and reshaped urban planning, but I’ve always found her economic duology, The Economy of Cities and this book more useful to my interests.

Cities and the Wealth of Nations was published in 1984, and starts with the observation, and case, that the economy of much of the world seemed to have gone off track in a semi-permanent fashion: Something had changed from the post-WWII economy, something which downshifted the economy.

When I first read this book, around 1990, I didn’t think much of that position, but I now know it’s true: Between 1968 and 1980 a vast variety of economic and social metrics all shifted to new tracks; bad tracks. From inequality to wage growth to productivity to growth in the third world, it all went bad.

Jacobs thinks that the way we analyze economies is wrong from the bottom up. Nations, to Jacobs, make no sense as economic units. Canada and Singapore and Britain have almost nothing in common except the fact that they are sovereign units.

To Jacobs, as one would expect, cities are the fundamental economic unit. It is in cities that new work, new industries, are created. It is cities which generate economic forces, forces which affect non-city regions unevenly.

When you lump cities together with non city regions, economics gets ugly. Part of this is feedback: Because cities are the fundamental economic units, when they grow, they should receive the feedback of imported items growing cheaper; and when they are stagnant or shrinking, imported items should become more expensive.

Put simply, cities should have their own currencies, but don’t. They are lumped together with other cities and with non-city regions, and the import/export effects of those regions swamp what each city needs.

In sovereign areas, with multiple economically active cities, this tends to crush all cities but one: You can see this most clearly in England, which used to have many economically active cities and which, as of Jacobs’ writing, was down to two: Birmingham and London.

London, basically, drove the value of the pound. This was inappropriate to the needs of other cities and strangled them, turning them economically inert: They were cities only in the sense of their populations, they were not economically viable cities where large amounts of new work was still generated.

Large hinterland regions do the same thing: If you have a lot of agriculture or a lot of mineral resources or anything else from your hinterlands, the exchange rate will tend to be propped higher than the city(s) need, again strangling growth.

Workarounds for this are always inefficient. You can do what the US did in the 19th century and have tariffs, but that hurts agricultural and resource regions–they simply aren’t receiving what they should from their labour, and is doesn’t eliminate the multiple cities problem.

So, ideally, cities should have their own currencies, and so should non-city regions, so that everyone is getting the feedback they require (steps must also be taken to ensure that currency rates are driven almost entirely by export/import, and not by speculation or by central bank/government manipulation).

This is hard to do in the real world, for obvious reasons, but I agree with Jacobs we should find a way to do it.

Jacobs also spends a lot of time detailing how cities influence non-city regions; almost always in ways that deform the non-city regions and often harmfully.

The first of these influences are supply regions, which produce something cities want. In the modern era, the foremost of these might be Saudi Arabia: It’s rich, because it has oil, but with almost nothing else it is doomed to poverty once oil is no longer important. Economically productive cities want the oil and want nothing else Saudi Arabia produces. When those cities stop wanting that oil (or enough of it), doom will fall. (Jacob uses the example of Uruguay, which was once very prosperous, but never had economically active cities.)

The second influence is regions workers abandon–a place where everyone leaves to go to cities, because there is no work in the region. Examples are distressingly common, and all the screams in the US about immigrants are essentially about such regions in Mexico and further south–places where people can’t make a living, and have to leave.

A variation on this is clearances. New technology displaces workers out of regions. The classic case was peasants forced off their land in Britain, so landowners could enclose the land and grow crops or tend sheep for more money. But this happens all the time in the third world, where subsistence workers are forced off the land for plantations, and is a regular occurance today in China, where people are cleared out of a place so that suburbs or mines or whatnot can be built.

The next type is capital for regions without cities. Jacobs uses the example of the Volta dam in Ghana. It has a huge hydroelectric power supply, but there’s no real value to it, because there is no industry to take advantage of it. All the while, the dam itself destroys local agriculture, hunting, and fishing. Large amounts of money also often go into picturesque regions used for vacations, driving out most of the people who were there before the money arrived, distorting their economy.

Then there are places that were once cities; economically productive, which lose their productivity. Jacobs gives ancient Egypt as an example: the heart of a technologically sophisticated civilization, eventually reduced to mostly subsistence agriculture and no longer one of the beating hearts of the ancient world. A better example, I think, is Europe in the Dark Ages. When the Arabs cut off trade, Europe swiftly became a backwater hole, losing almost all of its advanced cities and spending centuries sinking into poverty before it started growing and advancing again the Middle Ages.

Economically active cities, in short, are powerful, and they often do nasty things to regions that are not cities. Even when what they do seems good, as with demand for oil, or Uruguay’s produce and minerals, it is a boon that can disappear at any time.

Jacobs points out one other thing of note: Backwards cities are best off trading with each other, rather than with the more advanced cities. This was, by the way, a more prevalent pattern in the post-war period before neoliberalism, and in that period growth was faster. The argument is simple enough: Advanced cities often don’t need the goods produced by backwards cities, but other backwards cities do.

Overall, this is an important book. One of the most important I’ve ever read. The point about broken feedback and economic units not making sense is absolutely fundamental and explains a simple fact: City states which can manage to survive the political-military environment, almost always do very well. The ideal economic circumstance is a world of city states, but we don’t have that due to military political reasons (they can’t defend themselves).

That doesn’t mean we shouldn’t figure out a way to get the results of city states while allowing for defense.

To me, then, it’s a must-read book, and perhaps Jacobs’ most important.


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Book Review: The Spirit Level

Given all the controversy around inequality, this is a must read book.

About three-quarters of it is what I call “proving the obvious”–that inequality is, in fact, bad in every way imaginable.

Inequality correlates to almost every bad social metric you can imagine. Health, lifespan, performance, violence, happiness, and so on. The more unequal a society, holding other stuff even, the worse the society is to live in.

It really is that simple, and The Spirit Level goes to ludicrous lengths to provide the evidence, because in our society the ludicrously obvious is disputed by people with a lot of money.

But The Spirit Level also has some non-intuitive information to share, of which the most interesting to me was that high inequality is bad for the people at the top. People in, say, the top one percent in a more equal society are better off than those in the top one percent in a more unequal society–even though those in the latter would have more money.

You’d think having more money would mean that you “win,” but, in fact, your life span is shorter, you are more unhealthy, and you are more unhappy than those in the same relative position in a more equal society.

Another interesting fact is the performance effect of being unequal: Simply being told they are lesser destroys people’s performance. This is quite robust. You can test them, then tell them they’re unequal, test them again, and see it happen.

The causes of inequality’s other effects are hard to tease out, but the most likely reason is stress: Being unequal is stressful. It’s more stressful for people on the bottom, constantly worried and being ordered around, but it’s stressful even for those on top. The more unequal the society, the more people below you are stressed and angry and the more you have to do to defend your situation.

And, of course, unhappy people just aren’t nice to be around, and if your society systematically makes people less happy, that’s going to feed back into you, because you live in the society.

I really do think everyone should read this book. It’s not that it’s earth-shattering, it’s that it makes you one hundred percent confident that, yes, inequality is just bad, whether or not the people at the bottom have a TV.


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Book Review: Bad Samaritans, by Ha-Joon Chang

So, if you’re going to read only one book about free trade and neoliberalism in relation to developing nations, this is the one to read.

The bottom line is this: The standard advice given by Western economists and experts about how to modernize or industrialize is wrong, actively harmful, and hurts countries.

Countries that do industrialize through mercantile policies (there are maybe four, including Russia), almost without exception, do not engage in free trade; they engage in managed trade behind protective barriers.

This was true of Japan, Korea, and China, among others. (China used iron-like control over currency as its barrier: Trump is wrong now, but not wrong for the key industrialization period.)

Moreover, growth in developing countries was better, generally speaking, under Bretton Woods, which allowed developing countries tariffs and so on. Once neoliberals took over and took it as their mission, in the IMF, World Bank, and elsewhere, to bust tariffs and subsidies and create “free markets,” growth slowed in countries trying to develop using a non-mercantile policy.

In other words, again, if you did what Western experts wanted done, you got hurt bad.

The advice was truly horrendous, based on what should be an essentially niche matter — “comparative advantage.”

Comparative advantage is garbage. Japan’s original comparative advantage was silk production, not cars or advanced electronics. If they had chosen to emphasize their existing comparative advantage, rather than change their comparative advantages, they would be a third world country still.

Those countries which did follow this advice, were usually told that their comparative advantage was in cash crops or commodities. True enough.

Unfortunately, most developing countries have an advantage in cash crops or other commodities. When they all started taking that advice at the same time, it led to increases in supply, which collapsed prices.

To make most cash crops, you have to shove subsistence farmers off their land and set up plantations. The money from exports which was supposed to feed those people didn’t show up, and governments were required to stay the course, going further into debt, rather than being able to pay off their debts with all the money they had been told they would earn.

(Aside: The removal of people from subsistence farming is one reason I doubt the extreme poverty stats, which are based on money. When Mexicans were shoved off their farms due to NAFTA, into slums, they wound up eating less nutritious food for which they had to pay. They had more money, but it’s not clear to me they were better off.)

Chang goes into all of this in far more detail than I can, and the book is well worth reading as a sort of “bullshit inoculation” for common economic nostrums. Most of what we are told causes development simply does not; what does work is known, and as much as possible the world system is set up today to not allow it.

If you want to develop, you either need to be big enough to do mercantalism whether the US likes it or not, be able to bribe US elites (China is both big and bribes US elites) or you need to be a nation the US considers a key ally (like Japan or South Korea), which it is willing to allow to industrialize behind various protections. (Japan’s first industrialization was done as a British ally.)

That’s it, that’s all.

Worth reading.


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Book Review: Confucius and the Chinese Way, by H. G. Creel

Statue of Confucius from Rizal Park in ManilaAmong ideologies and religions, one of the longest lasting and most influential was Confucianism. Confucianism was the most important ideology of the Chinese for about two thousand years, and China was either the first or second most advanced region of the world for most of that time (India being the other contender.)

The review is of an older book, published in 1949, before Confucian influence was so heavily hit by the rise of Communism.

Confucianism, by that time, was seen as an essentially reactionary philosophy: Everyone should know their place and stay in it, worship their ancestors, obey their parents, and so on, but Creel argues, convincingly, I believe, that Confucianism was a radical project at the start.

Confucius lived in a period of warring states. Huge armies were raised, battles were frequent, taxation and levies were harsh, and maiming and torture were common. Ordinary people were much afflicted, as noble families fought it out to see who would unify China.

Confucius believed that the welfare of the common people should be the goal of ruling, and he set out to do something about it. That something was to create a philosophy, and a teaching, which produced officers for the lords, officers who had been trained to believe the common weal was the goal of rulership.

Confucius astutely noticed that there was no formalized training for officials and created it. He wasn’t the only one to so notice: The legalists and the Mohists did as well, but in the end, it was his system that worked.

Confucius decided to build off human nature as he observed it: He noted that parents tend to love their children and care for them, and that children love their parents. He tried to take that love and transfer it to officials and rulers. Rulers were to treat those below them as beloved children, and those below were to obey their rulers as parents.

Confucius wasn’t a fool, of course. He understand that this could be abused, so he noted that if a ruler didn’t act like a loving parent, with beneficience to those he ruled, then he wasn’t actually a ruler, but a tyrant, and duty was to oppose him.

A ruler should pick the best officials, and leave the governing to them, with an eye to flourishing of all.

Confucians should act out of benevolence no matter the circumstances, or even the results. Confucius recognized that one could try to do good, and though “Heaven” could frustrate one, the merit lay in trying. Thus, a man who tried could feel secure that he had done his duty, whether he succeeded, or even was ever appointed at all. Willingness and ability to serve was enough.

Interestingly, Confucianism was most successful in two periods: before the unification of China and for something over a hundred years afterwards. The Confucians were quite popular with the people, and princes wanted their support. When the first Emperor of China won, he did it primarily through Legalist doctrines (individuals exist only to serve the state, and the Emperor is the absolute ruler), but his dynasty was soon overthrown with the aid of Confucians, and the first few Emperors were good Confucians, until an ambitious and smart one came along who decided to gain control over the Confucians.

How he did so is a lesson which should resonate though history: He formalized teaching of Confucianism with appointed masters and teachers with stipends and so on. He chose them, he controlled their finances. Confucianism seemed to benefit from this, but, of course, it put Confucians and Confucianism largely under Imperial control. From that point on, Confucianism (very generally speaking, we’re talking about two millenia of history) was never again so beneficial for the people, and much more of a prop for the ruling class.

The Confucian sages and scholars had been, to use the modern word, co-opted.

A few summers ago, I read a large number of books on Confucianism, and for my purposes this was the best, because what interested me most was the life cycle of the ideology: How it rose, how it gained power, and how it fell.

Confucius, famously, died thinking he was a failure (as Jesus may have, and many other reformers). Only after his death did his teachings become influential, and the day they truly took power, it seems to me, is when the days of their full benefit became numbered.

This is normal for ideologies, and Confucianism got a far, far longer run, than most at being beneficial.

Seeing this cycle play out millennia ago is a nice antidote to studying more recent rises and falls; such as the relating to the end of New Deal liberalism with Reagan/Thatcher, or the end of the world system put in place after Napoleon.

It is also, in some ways, a master class in the details of ideology creation: Confucius created a system which had innate rewards for those individuals who followed it, which was beneficial to the governments which adopted it, and which was able to create a large group of people who wanted it to continue, while ensuring a wide support base in the population.

All of this makes for fascinating reading, and I recommend this book highly, though it’s old and may be hard to find a copy.


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Book Review of “Dark Age Ahead,” by Jane Jacobs

This isn’t the best book by Jacobs, the famous theorist of city planning, economies, and morals, but on re-reading it for the first time since it was published, I thought it made points worth sharing.

Jacobs defines a “Dark Age” primarily as a great forgetting: Society loses the skills and culture known to one’s forbears in a widespread way.

She follows Henri Pirenne in naming the key point where Europe’s decline turns into a Dark Age as being when Mediterranean trade ended with the Muslim conquests–but the forgetting had been going on for years. Roman craftsmen in the 3rd century could not make items that their forebears could make in 0 AD, and by the fifth century, cities and culture were in noticeable decline under an autocratic state which allowed very little economic freedom. This state, with its remains of a much higher Roman and Greek culture, impressed the barbarians on its borders greatly, but it was a shell of what it had once been.

Once the Dark Ages descended in full, well, things got ugly. There was the loss of the three-field system, the loss of a skill as simple as bread-making (so much so that the staple food around Paris in 1000 AD was gruel), and the loss of most iron-making abilities, so that people were plowing with wooden plows. Archaeologists say the bones of French peasants show that they ate grass–which even showed up in their teeth, so they must have eaten rather a lot.

That’s a Dark Age.

Jacobs had recently read Jared Diamond’s Guns, Germs and Steel, which is about why some areas do well, and others don’t. The answer basically comes down to: “Those that start with the most just keep winning.” Jacobs noted that Diamond didn’t explain why such regions sometimes stop winning, such as the Fertile Crescent (the core of civilization for almost 8,000 years) and sets out to provide her own answer.  (Diamond later wrote his answer, which came down to (and I agree, in part, nor is he the first to make the point): “Advanced regions stop winning when elites are insulated from the effects of their actions.”)

I think that Jacobs’ answer, which she is not the first to give, is somewhat more interesting, however, if perhaps less fundamental.

Jacobs, as the book title suggests, saw signs that we in the West were moving towards a Dark Age. This was due to forgetting–not being able to do what we had done in the past. In this case, it is not about losing technical skills (yet), but in losing certain scientific skills and in not understanding how it is that our economies actually produced the civilization in which we live and thus being unable to do what our predecessors had done.

Jacobs hits five points as examples, starting with families. She notes that the median family can no longer afford the median house in most of North America; that the decline of community and extended family means that child-rearing has fallen far more on fathers and mothers than in the past; while median wage stagnation combined with fixed costs rising has meant people need to work more. These are all conditions that push the family towards failure, and indeed, that can be seen in the very high divorce rates.

As anyone who has read her knows, Jacobs thinks suburbs are very unhealthy: They don’t create community (no walking, no street life), and they don’t foster real economic growth due to zoning regulations. The large is often the child of the small, and we have deliberately pushed people into neighbourhoods which, by design, cannot be communities. There are other causes of the decline of community and family, and many are deliberate policy choices, like making housing prices rise faster than wages (this is policy, and has been since, at the latest, 1983).

Because society is made up of families, and families are the most responsible for the important work of raising the next generation, the failure of families indicates a deep malaise in society. Note that at the same time as families are under stress, alternatives like schools and community groups and libraries are also in decline; as parents need more help, less help is available.

Jacobs second point is that education at the post-secondary level is no longer education, it is credentialing. I shan’t go into that at great length, but it’s worth reading, because Jacobs was alive during the Great Depression, and personally remembered the GI boom, and so on. She was there when universities became credentialing institutions and not educational facilities, that is, places where you get a piece of paper that lets you apply for a job rather than an actual education. On a personal note, I have never found that in any social science, except perhaps political science (which I do not find useful), that I do not know more than almost any person with a B.A. in the subject. They’ve had four years of specialized instruction, and they know less than an autodidact.

Jacobs’ third point is about science. She starts with a review of the basic theory of science (testing hypotheses), and the work of Thomas Kuhn on how paradigms guide science and are overthrown. She then eviscerates traffic engineers (this is an old Jeremiad of hers, starting with The Death and Life of Great American Cities in 1961). Their fluid dynamics model of how traffic should operate (constrict it one place, it goes somewhere else) is not supported by the data, which shows that if you constrict traffic in one place, it often just disappears. She goes on into much technical detail about proper street use, but her point is simple: What traffic engineers say works, doesn’t work if you actually look at the data. That they don’t recognize this indicates bad science.

She then looks at the Chicago heat wave of 1995. 739 people more died that week than during an ordinary week, mostly old people. The Center for Disease Control sent in a team of 80 researchers, and they did a huge study which came to the conclusion that they had died because they ran out of water, didn’t have air conditioning, didn’t go somewhere that did, and weren’t checked in on.

As Jacobs points out, that’s what everyone already knew. Not useful.

Meanwhile, a single sociology student noticed something interesting. Death rates in certain parts of the city were much higher than others. Turns out that people who lived in low-density, low-income neighbourhoods were less likely to have air conditioning, more likely to lose water pressure because of kids opening hydrants, had fewer stores with air conditioning nearby, and fewer friends–especially local friends. They didn’t answer the door when checked on, and didn’t want to leave their homes, because they were scared of crime.

The CDC had not looked for what tied the people together as a group. Instead of looking individual characteristics, the CDC should have been noting where they lived, and to a large extent, their socioeconomic status.

Since the goal of the study was to figure out what to do next time, the second set of data was far more useful than the first.

The last part of this chapter is taken up with noting that economists don’t really understand what causes growth (creation of new work in cities and import replacement splurges in cities) and, as such, were mystified by periods of large growth in Canada which did not accomodate their models (in Vancouver in the early 90s, and Toronto in the 2000s), but I’ll leave that be. (See my review of The Economy of Cities to learn more.) The fact that economists don’t understand economies will surprise no one who remembers that most economists said there was no housing bubble.

Jacobs’ fourth point is about taxation, in particular, that the parts of government which have the ability to tax the most are the farthest removed from the people they serve and the least responsive to people. Our taxation system lacks subsidiarity and fiscal accountability.

Subsidiarity is the principle that government works best–most responsibly and responsively–when it is closest to the people it serves and needs it addresses. Fiscal accountability is the principle that institutions collecting taxes and disbursing taxes work most responsibly when they are transparent to those providing the money.

In other words, the more local the authority, the better it spends its taxes. This is one (only one) of the reasons why city states tend to be successful. People who spew over Singapore make me laugh: Of all the forms of government in the world, running a city state is the easiest as long as one can solve the violence problem (i.e., not getting taken over by someone larger).

Jacobs believes that these issues have been getting worse: More and more spending decisions are made further and further away from local government and those decisions are more and more opaque. She targets property taxes as the basis of city government in particular.

I am in broad agreement with her, actually, and would put primary responsibility for taxes on the local level, with mandated transfers up and out to rural areas, rather than our current system of federal governments doing most of the taxing and then deciding how much money they want to give local areas.

It’s not clear to me how much of this is new, but Jacobs is probably right that it’s getting worse and worse as populations increase. Cities can’t keep up with the taxes they have; federal and state/provincial governments would rather spend the money on items that don’t help the cities, and the next thing you know BART is 40 years old and dying, or Toronto’s subway and transit system can’t keep up with the population either.

Jacobs’ final example is about professional self-policing. She uses the decline of the accounting profession (right after their failure to notice Enron’s problems before it collapsed) as her case example, but arguments could be made for many professions, certainly including the clergy, medicine, and American psychologists. It’s very hard for government to regulate professionals properly, because they don’t understand the profession, so it is ideal for professionals to do it themselves. If they can’t, then the government must, and something important is lost. (Alert readers will notice the relationship to subsidiarity.)

Having tackled these five areas in much more depth than I can cover, Jacobs turns to the question of how to fix these self-reinforcing downward spirals, using as her example housing, which was her first point when dealing with how families are being set up to fail. She runs through the history of how we got into this mess and suggests that with appropriate changes to zoning laws, suburbs can be turned into high-density, productive neighborhoods with solid communities, reducing both the cost of housing and bringing back community.

Jacobs concludes the books with thoughts on the patterns of Dark Ages; how agrarian societies were gutted and lost their culture due to industrialization, how successful societies are in the most danger, because they cling to the ways of their success, and how some societies, like Japan, managed the transition from agrarianism to industrialization, under armed threat, and still maintained their culture and did not fall into a memory hole dark age. I’m not sure she has much in the way of prescription, other than, “Add to what you had,” but perhaps that’s appropriate: Jacobs’ prescription was given in her section on how to turn suburbs into communities and reduce housing prices at the same time, thus aiding the family.

To Jacobs, the small details matter as much as the big, and while every problem is related, each problem needs its own solution. If you want to fix X, you need to really understand the problem. Having spent her life studying cities, housing, and urban economics, Jacobs tackled the problem she knows how to handle and hopes that we can see, in her solution (take the old and turn it into something new, build off what is there) a pattern to use to fix problems in the areas of our own expertise.

As I said at the start, I don’t think this is Jacobs strongest book, and if you’ve read her other works, perhaps a third of it will have you thinking, “Oh, that topic again, my she loves to grind this axe,” but it may be her most timely book, given the times which lay ahead of us. The rest of her work covers principles which should still be useful a thousand years from now, assuming we haven’t become post-human or scavengers in a glowing post-apocalyptic wasteland.

And thinking of a “Dark Ages” as a loss of culture, a loss of learning, technology, and science, focuses our eyes on what we are losing as we move forward and what we might not be able to regain (for example, through offshoring manufacturing, we lose culture and know-how that will be extremely difficult to restore).

Worth your time if the topic interests you.

(I will review one more of Jacobs books, Cities and the Wealth of Nations.)

Note on the book review series. During last year’s fundraiser, I promised 20 book reviews. Clearly, not all will be done this year, but all will be done. The “Construction of Reality” e-book is two-thirds complete (of the text that will not be substantially revised) and that will be released as well.


The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

 

 

Review of Justice, by Michael Sandel

This is the best single book I’ve ever read on morality: About how we should treat each other, especially at the social level. It’s not a good book because Sandel, himself, has much that’s worth saying (though he tries at the end), it is a great book because Sandel is a great teacher of other people’s ideas, able to break them down cleanly, show the logic, and make clear both their problems and their virtues.

Sandel breaks the world’s ethical traditions down into welfare maximization, freedom, and virtue maximization, with a section trailing afterwards dealing with questions of loyalty and particularity. As with all the books I review, I can’t do this full justice, and I urge you to read it yourself, but I’ll sketch out the basics.

Sandel starts with Utilitarianism: This is the principle of the most good for the most people. Utilitarianism is a pared down system: Pleasure is good, pain is bad. We should maximize pleasure, and minimize pain, and nobody’s pain or pleasure is worth more than anyone else’s.

The obvious problem with Utilitarianism is that, in its pure form, it suggests that if a minority needs to suffer so that a majority may know pleasure, that’s acceptable. The most good for the most people even demands it. If I have to kill Fred, even if Fred is innocent, to save two other people’s lives, I do it. If I have to sacrifice an old man’s life to save a young man’s life, I do so. I do so even if they don’t consent.

Utilitarianism shares a problem with the freedom traditions, as well, in that maximization of pleasure doesn’t necessarily discriminate between pleasures. We want to be able to say that taking pleasure from the pain of others is bad: Sandel uses the example of a football player who kept dogs and made them fight himself. The football player took pleasure in this, as a society we certainly allow animals to be mistreated (no, no, don’t pretend), so what, exactly is the problem?

We simply don’t all agree on what is good: We don’t even agree that all pleasure is good. Most people would say sadism is bad; others would say it’s ok if the victim consents; and others would say that self-harm is bad and should be discouraged or forbidden. Even if that includes drinking a lot of pop (definitely self-harm, if not as immediate as suicide).

This leads to Libertarianism, which Sandel uses as his overaching term for the idea that individual freedom is what matters most. So long as what someone is doing harms only them, it is no one else’s business AND society has no business choosing between people. If making ten people better off requires hurting one person, we have no right to do that if that person isn’t actively harming them.

This isn’t an abstract question, it goes to the heart of things like taxation. It asks the question: If a bunch of people are starving, do we have the right to take extra food away from people who aren’t starving–if they don’t consent? It is at the heart of all the libertarians who scream “Taxation is theft!”

There’s a deep vein of truth to liberty, “Mind your own business!” that cannot be denied. The idea that no matter how much someone else thinks they know best, damn it, they should bugger off and leave us alone.  Liberty is the wellspring of individual rights, of minority rights, of “just because the majority or the stronger wants it and thinks it is good, doesn’t mean it’s right.”

But, humans do not live alone, they live in societies, and what they do affects each other. In fact, the reason you happen to have extra food may be the precise reason why those starving people do not have enough (in every famine, there has been enough food if there had been no hoarding). That the law benefits the rich far more than it does the poor may well be why the rich tend to stay rich and the poor tend to stay poor. The rules of the game, which let you keep your stuff stuff, may not be fair. If they are not fair, what right do you have to say “Fuck you Jack, this is mine?”

Even more, your health and your happiness effects everyone else. If you get sick, unless society is willing to let you suffer, everyone pays for it. (This is at the heart of Libertarian objections to universal health care: You can do whatever you want, but no one else should be forced to fix your problems.) If you have a disease, you may spread it. If you are unhappy, you will make those around you unhappy. And while society could just let people suffer, not only is their misery often not their fault, it feels wrong to most humans.

Which brings us to Kant, who rested his defense of human rights not in the idea that we own ourselves, and no one has a right to do anything to us, but in the idea that humans are rational beings worthy of being treated with dignity.

Kant doesn’t like the idea that everything is worthy. A libertarian, similar to a utiltarian, will say that what one person likes is their business. Kant doesn’t see it that way. If you are not acting in a way that everyone could act without negative consequences, and if you are not acting in a way that is rational, then you are not acting morally.

Your personal preferences are a mess: They are contingent on your specific body, your specific culture, your specific time. They cannot be universal, and they cannot be rational except in ends-means terms (if you want A, do B to get it). They can only be worthy of respect if they are universal, that is, usable by everyone in all times and places without negative effects.

Furthermore, to act on your contingent wants and desires is to be a slave to them, not to be free. You love America because you were born in America: That’s not rational. You follow a religion because your parents did, that’s not rational. You love sugar because your body craves it, even though it’s bad for you. That’s not rational. It’s also not freedom.

For Kant, to be free and to be just, one must act in a way that if everyone acting in accordance with your morals, the world would work well. If your actions cannot scale to everyone without bad consequences, they are not moral.

This is a hard, hard philosophy to follow, demanding a great deal of the practitioner. Even less helpfully, Kant never drills down to describe what the rules of his morality would be, giving nothing beyond a couple of suggestions like, “Don’t lie.”

Which leads us to John Rawls. Rawls’ famous thought experiment was as follows: Imagine you are creating the rules of a society without knowing your place in it.

This is reason shorn of interest. You don’t know if you’ll be male or female, black or white, born in Africa or America, in a strong body or weak, smart or stupid, and so on.

Rawls believes that not knowing where you’ll be in society, or even what body you’ll have, and with how well you’ll do being determined, in essence, entirely by genetics and position (a.k.a. who your parents are and the genetic roulette of their DNA), most people will choose a society where those who don’t do well are well taken care of, one with some inequality, but not a great deal. Inequality will be justified only as it makes everyone better off: that is, if it is necessary to pay people more or treat them better to have enough doctors, do so, but otherwise, don’t.

Better treatment for Rawls, is only justified if it makes everyone better off. This is similar to the justification for inequality in libertarianism, but not identical. Libertarians believe that “value creators” deserve all of the value they create. Rawls thinks they should only get enough to be willing to do what they do.

Rawls expects that his contract will include rights, as well, because you don’t know if you might wind up as a minority. For sure, women will be treated equally, because hey, that’s 50 percent of the population and your odds of being one are high. So again, we’d include equality, or at least a guarantee of rights, because you don’t want to take a chance on grabbing the shitty end of the stick.

Rawls’ contract thus comes out to “utility maximazation, with inequality allowed only to the extent that it increases overall utility, and with everyone taken care of to a minimum acceptable standard with basic rights for everyone, including minorities.”

Rawls concludes that his contract comes out to be a basically social liberal democratic state of the post-WWII era (or the current Norwegian kind), or perhaps to some sort of benevolent autocracy which can be challenged. Critics find this “convenient,” I leave it up to you to decide if, behind the veil of ignorance, it’s the society you would choose.

Having discussed Rawls, Sandel then turns to the specific issue of affirmative action. (Hey, he’s an academic at Harvard.) To summarize, the issue comes down to, “What is the mission of the university?” If the mission is social (“to create a better society”), which is, in fact, what the charters of many universities say, then affirmative action makes sense. If it is to create better people through education, then exposure to people who aren’t like you is probably valuable and that argument can be made to justify affirmative action. If the mission is, on the other hand, to further educate the brightest, if it is a competition for limited spaces, then affirmative action is not justified. (Again, more subtleties in the book, read it if this gets you hot and bothered).

And semi-finally, we come to virtue ethics, which Sandel identifies with Aristotle.

People should get what they deserve and society should be run to create virtuous people.

This is most visible in competitions and in war: A medal for bravery should go only to those who have shown bravery. The gold medal should go the person who ran the fastest. The job should go to the person who can do it best.

People should get what they deserve, and by making sure that this is so, we encourage people to do what is required to deserve the rewards of virtue.

This isn’t the same as libertarianism’s “kill what you eat” ethos. Virtues include charity and kindness and so on. Virtue ethics came out of the polis: the city state. Citizens were expected to act in the interests of the city as a whole, as well as their own interests. People wanted to live with other good people: kind, just, charitable, brave, and so on. Virtue ethics says that it is not good to take pleasure in bad things.  If you like lying, treachery, cowardice, the pain of others, and so on, you’re a bad person, and we don’t want a society made up of bad people.

Thus, a well-run society is one that encourages virtue–not just by rewarding it, but by fostering it through laws and education. Good people make good societies, and contra Kant, there are few rules that cover all circumstances. People will have to make judgments throughout their lives regarding the “right thing to do,” and our best chance that they will make the right choices is if they decide as virtuous people.

This, of course, means that we should choose virtuous people as our leaders. (Note that virtue, in this case, includes qualities we would say make one capable, such as being energetic and brave.) But virtuous leaders, alone, are not enough; the mass of the citizenry must be virtuous as well, or the leaders cannot succeed (and won’t be chosen in the first place).

This line of thinking has echoes in Machiavelli, who believed that Republics could only be created and maintained with a virtuous public, and in America’s founders, who believed that eventually Americans would become so lacking in virtue that only an autocrat could rule them.

(I myself would say that virtuous men and women should work for the maximum good, while encouraging virtue and safeguarding individual liberty.)

Having run through these ethical systems, Sandel now comes to his own ideas, which, to my mind the weakest part of the book. He notes our very human desire for particularity–for putting ourselves, our friends, our communities, and our countries first, and he believes that many of these systems do not deal adequately with these needs. Parents do have a duty to put their children first, yes?

I am reminded of a book I read a long time ago, in which an admiral, on finding out his son was in a city he felt he should bomb, bombed it anyway. “I should be a monster indeed if I were willing to kill the loved ones of others, but not my own.”

I think, perhaps, Sandel would have done well to read more Confucian ethics, which deals with the question of family vs. society in some detail. Almost all of us want particularity, we certainly act on it, but our propensity for particularity, in caring for ourselves first, our families second, our friends third, our countries fourth, and everyone else last (and hey, forget animals), is at the heart of many of our problems.

Judge an ethical system by its fruits, insomuch as it is actually followed. We are very aware of the evils of totalizing ideologies, but particularity, with the indifference and tribal warfare it creates, almost certainly has the award for a higher toll of death and suffering.

And yet, you do have to care for your children first.

But, perhaps, not at any cost.

I strongly recommend this book. It will make you think, hard. And that’s the highest recommendation there is.


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Review of “The Economy of Cities” by Jane Jacobs

jane-jacobsI read this book in the early nineties, along with its companion, Cities and the Wealth of Nations. It struck me then as profoundly important and still does today–perhaps more important than The Death and Life of Great American Cities, the book for which Jacobs is better known and which has become seminal for much of modern urban planning.

Jacobs was an autodidact, and quite willing to challenge the status quo thinking based on her own investigation and research, and The Economy of Cities is perhaps the most striking example of this, with Jacobs starting the book by saying that agriculture was created in cities, not in the country.

Jacobs definition of a “city” is as follows:

A settlement where much new work is added to older work and this new work multiplies and diversifies a city’s division of labor OR a settlement where this process has happened in the past.

If a lot of new work is being created, a settlement is a city. If work is not being added, it is not a city–though there are cities which had this process in the past, in which it has largely stopped. Appropriately, Jacobs, publishing in 1969, spends a lot of time discussing how this process had stopped in Detroit, the results of which are now clear to see.

Jacobs observes that the countries with the most advanced cities have the most advanced agriculture, and that the productivity of agriculture, in modern times and those times about which we know, lags behind the productivity of cities. She uses Denmark as an example, which had backwards agriculture until Copenhagen began developing due to trade with London, and replacing imports by making those imports in London.

Likewise, refrigeration was developed in cities, factories started in cities and moved to the countryside, electricity started in cities, and on and on. Industries: Work, is created by cities and when it is codified enough to be vertically integrated within a single organization, it is then moved to the countryside.

Given this is the case for new work today, and in recorded history, Jacobs asks: Why do we assume it was not true for the invention of agriculture?

Archeologists in Jacobs time didn’t agree, and they don’t agree today, but I’m not sure they were right. A lot hinges on that definition: Settlements where a lot of new work is being added.

Still, there is some archeological evidence: As my friend Stirling Newberry once pointed out, the vast walls of stone age settlements, for example, make no sense as defensive measures. They cover too wide an area for stone age settlements to actually man them. But if you’re breeding crops, they make perfect sense: You need your new species to be protected from windblown seeds.

Still, whether Jacobs is right about agriculture in specific is less important than that she is right about what cities are today and on the historical record: Places in which new work is created.

But not all cities, not forever. Like Detroit. A city starts by exporting something and importing what it needs. It then replaces those imports by making them itself. Jacobs gives many examples, from medieval Europe to Los Angeles after the war.  As it replaces imports, it creates new work along with a vast ecosystem of suppliers of services and products. It also frees up money to buy new imports, which, in turn, it can then replace.

Because new work generates out of old work, the more work you have in a settlement, the more likely it is for new work to arise. New work doesn’t arise on the entirety of an old business, though, it arises on part of it. So the bra was the invention of a dressmaker who shut down her dress making business to concentrate on bras, which she had previously made one at a time and given to customers who bought dresses.

A startup business needs suppliers: It needs sources for everything it doesn’t make itself. When Ford, famous for the assembly line, made cars successfully, he did it by buying all the parts from other Detroit businesses and just putting them together. Only later did Ford start making everything internally. (One of Ford’s suppliers were the Dodge Brothers.)

A new business can’t do everything that business requires: accountancy, sales, making every machine for manufacturing. So a city with a wide variety of work makes it possible to add new work. Cities which produce the most new work (but not the most efficient) are cities like Detroit before the success of the auto industry–full of small businesses, none of which dominate the city.

If one industry or company becomes too successful, they make a city efficient and the small suppliers die off. As examples, Jacob gives Manchester (the heart of early British textile manufacturing), Detroit, and Rochester, NY. In all three cases, a successful mono-business strangled the prerequisites for new businesses to arise. In the case of Rochester, Kodak was extraordinarily vindictive in stopping anyone from leaving the company and starting a new one.

As an aside for the modern reader, this leads to one of the reasons for Silicon Valley. Famous for its startups, often created by people who just left another company, Silicon Valley exists because California law makes non-competes illegal. If you want to be “the next Silicon Valley” and you allow non-competes, it isn’t going to happen.

Which comes to the more basic point that people have to be able to start new businesses. Where they can’t, for whatever reasons (water carrying slaves in Rome are one example Jacobs uses), new work can’t be created. This strikes at the heart of questions of credit, of centrally planned economies vs. decentralized ones, at the massive loss of regional banks in the United States (large banks are worthless for starting new local businesses, as a rule), and so on. Jacobs has a long section on credit for new businesses, using as one of her examples, the tech boom in Boston after WWII, which was in large part the result of a single bank starting up which wound up specializing in funding such businesses.

This summary can’t really do justice to the book, and it’s worth your time to read. Jacobs, in this book, says she felt that the US was just beginning to slow down, which proved prescient; and in her next book, Cities and the Wealth of Natons, she declared it had happened. The archeologists may disagree with Jacobs about agriculture, but the economic macro-data is clear: The earliest you can see the US slowdown is about 1968, when she would have been writing the book, and by 1980, when her next book came out, it was clear.

Although Jacobs was writing before the internet, and before just-in-time shipping and near global supply networks, her book is interesting to read in light of these developments. Her conditions for new work creation and why cities are required, make it possible to ask: “Can those conditions now be met without living in a city?”

The answer would seem to be, “If I can order all the parts and services I need from anywhere in the world, why not?”

But…but, the fact is that the center of world manufacturing is now in a few cities in China. For example, the foremost electronics manufacturing center is Shenzen, and if you want anything made it can be made there, because, well, all the suppliers are there.

So, while the internet and global (fast) supply chains seem to suggest that perhaps cities are not as necessary as they once were, a few cities still seem to be the places where most of the new work is happening for particular industries.

This book really does need to be read along with Cities and the Wealth of Natons, it’s really part one of a longer book, which sets up the macro-circumstances under which cities can keep the necessary conditions for growth. They also deal, in detail, with the effect cities have on non-city areas. That book I will review at a later date.


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Book Review: Zero to One, by Peter Thiel

peter_thiel_2014A few weeks ago, for work related reasons, I had to bone up on Venture Capital. One of the books I read was Thiel’s “Zero to One.”

Recently, Thiel has become even more famous for bankrolling the lawsuit that put Gawker out of business and for his support of Trump. He’s a libertarian gay man.

Before this, Thiel was most famous for being one of the founders of Paypal, of Palantir (the “information” company), and for being one of the early investors in Facebook, which made him about a billion dollars.

He’s also a very smart man, and his book, which is about startups, is worth reading, even if you don’t agree with all of his politics or ideas.

Zero to One is based on the idea that there is doing more of the same (normal business), and there is creating something new. When you create a new way of doing things, that’s going from zero to one. Doing more of the same is additive, new stuff is what really grows the economy.

(This is, interestingly, exactly the same beat that Jane Jacobs tackled in “The Economy of Cities”, which I’ll be reviewing soon. Her answer was more fundamental than Thiel’s, and more important, but Thiel says things worth reading.)

Thiel thinks the key to creating something new is knowing something is true that most people think is not true.

Having a secret. You can use that secret, whether it is a scientific fact or a social one, to do something other people aren’t doing. Elon Musk’s secret at Tesla was to start with luxury cars, and use the demand of wealthy people to drive down market.

But Thiel’s big secret is one that is known to a lot of successful business people, but denied piously by most.

If you want to get stinking rich, if you want to create an important company, it helps to be a monopolist (or oligopolist). In a lot of markets, there’s one or a few big winners, and they take all the money. Google in search (and thus online ads), Microsoft in OS’s back in the 90s, Paypal in sending money online, Steam in online game distribution.

Opolies (a new word I just made up) make money hand over fist.

Thiel goes on a bit of a run here, trying to justify monopolies and oligopolies as good for society, noting that only rich companies can treat their employees and customers well; everyone else cuts wages and costs into the ground.

According to Thiel, opolies are good if they can be superseded, and if they exist because their product is genuinely better.

He then uses the example of Microsoft, which undermines his entire argument. Microsoft’s first operating system that really did well, MS DOS, was not better than other operating systems at the time. It rode to success of the back of a previous monopoly, that of IBM. There used to be a saying in the IT business: “No matter how big and standardized a computer market is, IBM can change it.”

IBM could have written an OS as good and almost certainly better than MS DOS, and when they did a little later on it was better. But they were under a lot of consent orders due to anti-trust laws, so they bought the rights to use MS-DOS (which Gates bought from someone else).

This was a big mistake. Gates outplayed IBM. But MS-DOS didn’t win because it was better, and Windows and Windows 95 were inferior to Apple OS’s at the time as well.

Gates won because he understood positive externalities and did everything he could to get the OS on as many systems as possible and reaped the positive externalities of doing so (and because of Microsoft Office, which is another discussion).

Monopolists and oligopolists, in fact, treat suppliers and customers and employees no better than they feel they must. Amazon is a notably nasty place to work. Silicon Valley colluded for years to not compete for engineers on pay, and so on. Monopolies and oligopolies look good when you have a regulatory environment where everyone is allowed to treat workers and customers terrible (a.k.a. neo-liberalism) and some of them can look good in comparison to the blood washing in the Agean Stables outside.

But enough of sweeping the bad side of monopolies under the rug. Thiel is right: If you want to get filthy rich, you want to create a company which seizes a huge chunk of a market, and you don’t want to compete on commodities. This has been known for a long time, it is the ugly step-child of market theory. Fair and competitive markets drive profits into the ground; companies that want to be profitable, especially for long, need an unfair competitive advantage.

This leads to another of Thiel’s secrets: The power law. A very few companies make almost all of the actual profits. A venture capitalist makes money not because of how most of his investments perform, but because a few perform very well. So, Y-Combinator, which helps startups and takes a small share, has made almost all of its money off two out of hundreds: Dropbox and AirBnB. Everything else, in terms of returns, is a wash, even if it made ten times returns.

Startups are lottery tickets to investors. Most of them won’t pay back enough to matter, but a few will, and it is almost impossible to tell which ones in advance (if you think it’s easy, get moving, and when you make your first billion, I expect you to give me nothing).

Still, Thiel thinks they have the best chance when they are based on some principles:

  • A strong view of the future
  • A small group of founders (no more than three) who really get along
  • An understanding that you are aiming to be an oligopoly or monopoly and plan to get one
  • Knowledge of something (a secret) that most other people don’t have
  • Knowledge of how you’re going to distribute and sell (basic, but his advice is sound)

Thiel is especially strong on having a plan, a view. He divides world-views into four types: Definite and indefinite optimists and definite and indefinite pessimists.

Definite means “having strong views of the future and a plan.” Thiel puts China into definite pessimists: They have a plan, they’re working on it, and they expect the future to suck.

Why? Because they are copying the West, mostly, and they know that every Chinese can’t live the American dream: There aren’t enough resources in the world, or enough sink for greenhouse gasses. But they aren’t sitting around, they’re doing what they can.

Americans in the post-war liberal period were definite optimists. The future was going to be great, and they had a plan to build it!

Thiel puts modern Americans into the indefinite optimist category (I think Millenials aren’t, however). They think the future will be swell, and have no idea how to get there. (The results are that are mostly bad, in Thiel’s view. I agree.)

And the Europeans are indefinite pessimists. The best is behind, their plan kinda sucks, and they expect the future to be worse. I’m not sure I agree–Eurocrats have a pretty definite plan, but it may well be true of Europeans more generally, and the business community in particular.

Thiel is strong in encouraging people to have a plan, to not treat themselves as lottery tickets, even if that’s how VC’s view founders.  Know what you’re doing and why.

Thiel ends with a macro look at the future. The ancients saw the world as up and down. Civilization rises and falls. We tend to look at the future and see a plateau. He thinks these two are now unlikely, that we’re either going to get to real sustained exponential growth (the abundance society), breaking the bonds of limited resources through technology, or we’re going to pretty much wipe ourselves out.

I can recommend Thiel’s book. It’s pretty good on startups and venture capital, his philosophy is basic but generally not stupid, and it’s an easy read. Perhaps more importantly, Thiel’s thinking appears to be pretty widespread in Silicon Valley and amongst tech elites in general. That doesn’t mean they all agree with the politics which have recently bought him infamy on the Left, but that his general philosophy resonates with them, and how he does business makes sense to them.

Given that these people do drive some of the most important parts of the world economy, understanding how they think is important.


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