I have gotten a library card and checked out my first book: "Basic Economics" by Thomas Sowell. I anticipate that I will be very critical of it. Someone who expresses opinions I disagree with, but in a manner that shows he has put thought into those opinions thinks highly of this book. From what I understand of the author, and the book, it will not be a book whose main priority is a well-rounded introduction to economics, but a book about economics with a libertarian agenda.
I'm keeping that bias in mind as I head into the book. It will paint my opinion of the book, and unfairly so, unless I keep the bias in check and properly balance it out. It can be an exercise in managing first impressions, as "Hire with Your Head" recommends.
This book is due back at the library on November 2nd. This gives me 22 days (counting today) to 634 pages. So I gots about 30 pages to read per day. I just read 13 pages in about 15 minutes, so I have a little over a half-hour of reading to do on average per day.
Though, I must say, I'm already noticing the libertarian slant the book has. Consider this rather mundane quote: "In a market economy coordinated by prices, there is no one at the top to issue orders to control or coordinate activities throughout the economy."
I think, already, I'm noticing a lack of consideration of who controls the wealth, and the role that leverage plays in economies. Though right on the cover there is a note about this edition of the book: "See Especially the Newly Added Chapter on International Wealth Disparities".
So, perhaps I will be happily proven wrong here.
In any case, I'd like to keep a running commentary on this book whilst I read it. I think it'd prove valuable as a means of keeping track of my reactions to the book, and whether or not those reactions are fair, or more-importantly if those reactions are true.
So far, the book started off strong, but has already started implying libertarianism to be the one true economic strategy. I've liked the definition of economics, and the statement that: "regardless of our policies, practices, or institutions [...] there is simply not enough to go around to satisfy all our desires to the fullest. [...] These various kinds of economies [socialist, capitalist, feudal, etc.] are just different institutional ways of making trade-offs that are inescapable in any economy."
I'm thinking that I will gain some good vocabulary, concepts, and valid economic lenses even if this book ends up painting pure capitalism as the best economic strategy in every case.
It will be like learning a game from a particularly good player, but that player only believes in one methodology of playing. As long as I learn good fundamentals and keep potential flaws in mind, I should still be better off than starting from scratch, and maybe even better off than reading the opinions of an expert whose conclusions I agree with or trying to navigate the labyrinth of blatant and nuanced disagreement amongst experts at once.
In any case, for the two of you who might follow me on this journey, if I manage to keep posting my thoughts, know that they are a work-in-progress whilst I read this book, and hopefully I'll come back to these notes after I finish the book and then consolidate everything into a well-constructed opinion.
Having already written a lot today, I'll stop reading for the day. I should still finish the book if I manage to do a proper 30 pages per day starting tomorrow. I'm thinking I'll attempt to stop by the library on my way home everyday for a solid hour of a reading per day. We'll see, though, as I also want to try running home from work, and carrying a rather large book while running makes me think that these are mutually exclusive ideas.
I have some thoughts about fixing this exclusivity, but they have pros and cons themselves. We'll see what I decide to do.
Moar "Basic Economics" reading!
I have just finished "Chapter 2: The Role of Prices", and it's a well-written justification of the magic of the free-market. It is well-written in that it is fun to read and gives valid examples of the impossibility of top-down control, and how fluctuating prices redistribute resources effectively. It also is clearly avoiding any of the harder examples that show what happense when the free market fails.
Monopolies? Conflicts of interest? Really, it seems so far that the concept of "leverage" is completely ignored. Who has ownership or control and how does that affect the economic game? It's a really important part of economics, and a significant reason why a pure free-market simply can not exist. The people who end up controlling the scarce resources, whatever their means in acquiring such power, now have arbitrary control over those resources, thus destroying the free market. They effectively become a government, and there's nothing stopping them from being a particularly poor government.
His arguments against top-down control are valid, but they are not complete. The system we have currently arrived at is still imperfect. There are flaws, and how we go about addressing the flaws may indeed require retrying strategies that didn't work universally, but may work in specific situations.
There are 27 chapters in the book. So either I'll need to be comfortable stopping in the middle of a chapter, or some days I need to read more than others.
We'll see what I do.
The next chapter is "Price Controls". I'm sure I'll enjoy that.
Reading a bit of "Basic Economics" at the Seattle Indies Meetup.
I already have a bunch of problems with the "Price Controls" chapter. The problem isn't that what he saying isn't true, the problem is him leaving out a bunch of details that make the whole situation a lot more complicated than it is.
For example, price controls are not just a government thing. People who own the supply can very well work towards price controls. This is the reason monopolies are bad. But I wonder if monopolies will ever be mentioned in this book at all.
I keep coming back to the lack of consideration of "leverage". I mean, I haven't read much of the book, but if leverage isn't ever brought up, I won't be surprised, and the book will be missing an important part of economics because of it.
And leverage is an important concept, because it's a part of how governments influence economies, and noting that leverage isn't only a tool of governments is an important means of considering why economies are fragile and need purposeful direction at times.
Finished chapter 3 "Price Controls". It's really weird to me that he doesn't mention price controls via monopolies. He even mentions governments that make prices artificially high, but doesn't mention monopolies.
Otherwise, it is indeed a very convincing chapter. But his focus on government inefficiencies and not other inefficiencies makes me pretty confident that he's leaving out key information that doesn't maintain his argument that pure capitalism is best economic system, period.
It's something I'll need to come back to after doing research outside this book.
Though, a lot of reading this book makes me think that maybe basic income really is a more effective solution than government subsidies.
That's a thought to also revisit later.
More "Basic Economics".
Falling behind the planned pages-per-day. Hopefully I'll catch up on some flights starting this Sunday.
In any cases, "Basic Enconomics" has brought up a common argument against socialized medicine in this chapter (Chapter 4: An Overview of Prices). Well, two common arguments:
- Socialized medicine ends up more expensive
- Socialized medicine has longer wait times
For 1, to be fair, he says "more expensive than anticipated", instead of "overall more expensive for society". That's just a nature of doing things, it's almost always more expensive than anticipated. Things are complicated.
But, as it stands, the United States spends more on healthcare than any other nation. I'llneed to refind my sources, and also make sure those sources aren't playing with numbers to get to this conclusion, I also will need to see how the US fared pre-ACA, but considering the fact that the ACA was super pushed for, I wouldn't be surprised that healthcare spending was spiraling out-of-control before its inception.
As for 2, I will also need to refind my sources, but as far as I can tell it simply isn't true. Wait times vary for the large variety of different kinds of medicine appointments from country-to-country with generally little correlation with that country's method of paying for healthcare.
Further, many of the studies that measure "wait times" measure from the setting of the appointment to its proper execution. These studies simple do not count people who need medical care but can not set an appointment due to cost. Those people's wait times are essentially inifite.
But, again, this is something I'll need to refind sources on, properly vet those sources, and maybe even make a more formal bit of writing for my argument there.
In any case, still this book only ever mentions the government mucking up the economy. I wonder if it'll ever mention other forces breaking the economy. My understanding of this book as libertarian propaganda makes me think it will not.
Note: I still find a lot of the arguments and concepts within these books well written and valid. It's just clearly missing additional details necessary for rounded economic thinking, I think. My lack of rounded economic education may make that assertion unfounded, however.
There are lots of solid things to quote that I agree with in this chapter, is what I'm trying to say. I'm just not going to because I went on a tangent and am out of time for today. If future me does more with this book's writing, and uses my notes here as future reference, make sure to point out that the writing on "systemic" vs "individual" causes are really greate (and the logic therein could be applied to a great many things).
Basic Economics reading.
I've hit a spot where the book mentions John D. Rockerfeller and his role in lowering the price of kerosene. It seems he has stopped talking about him without mentioning his role as an oil tycoon and the monopoly that was forced into being broken up.
I'll read until the end of the chapter before I comment more on this.
No mention whatsoever....
I'm legit surprised. I mean, the chapter is titled "The Rise and Fall of Businesses". Mentioning Rockerfeller and not his ensuing monopoly and its legally, not business, enforced breakup into smaller institutions is a significant socialist talking point, as far as I know (and this book goes out of its way to criticize solialism).
Rockerfeller's story is a perfect example of non-government price controls in action. It is a significant thing to bring up. His monopoly lasted decades and when his businesses were forced to be broken up, he ended up making more money than before because the economy improved as a whole.
It is both proof of the importance of competition and proof of possible value from government intervention.
Chapter 6, "The Role of Profits--and Losses", has a bit of splash text mentioning Rockerfeller. I may have spoken too soon, he may be brought up regularly. Perhaps he'll give his interpretation of Rockerfeller's monopoly in this chapter, or at some point in the book.
I don't think Rockerfeller is going to be mentioned again.
I must stress again that I agree with a lot of what this book talks about, and that it provides insights and examples that I have not come across before, but it's stuff like that that really makes me think it's philosophy has significant blind spots.
Perhaps next time I'll focus on some of the stuff I like. It may be prudent to do so. "Hire with Your Head" taught me to fight against my first-impression and early biases, and to be honest I'm clearly not doing that in my written thoughts.
Getting some more reading of Basic Economics in.
It makes a really neat point about bridges and tolls. The logic goes: bridges are built with peak hours in mind, and in many other proper businesses, peak hours are when costs are highest. But because of the nature of government-controlled things, all users of the bridge are charged the same amount. (I must note that private roads with tolls also have this problem.)
This is a solid point. If tolls were less during less busy times, people would be incentivized to travel during less busy times, and this would help alleviate rush-hour problems.
I've had a similar thought recently, but with non-toll highways. Carpool lanes are only usable by vehicles with more than one passenger during peak hours. I think that instead of there being a carpool lane, there should only be one non-carpool lane during peak hours. The worst lane, the right-most one that is always the slowest.
I say this because the carpool lane, while cool, isn't even that convenient to use when I'm elligible, as it's a single lane that limits me to the speed of the cars behind and in front of me (I do not like tail-gaters nor do I like the car in front to fell slow). It's also hard to get to, especially during rush-hour when traffic slows to a drizzle.
But I think the car-pool lane is an excellent idea. When I moved to Seattle, I paid attention to all the single-occupant vehicles, and they were a good 90% of vehicles. And rush-hour was crazy packed depending on the direction. I think harder carpool rules could really put a dent in that and save a lot of people time, gas, and car maintenance.
Back to reading.
Basic Economics reading.
Here we go, "Monopolies and Cartels" in Chapter 7, "The Economics of Big Business". Will I eat my earlier words? I hope so.
Before that though, because I'm already writing, some random thoughts. I am really enjoying the book's example-based approach to things, in all honesty. It's pretty solid.
Though, there's a lot of assumption that people whose money are on the line are more likely to know the value of things. He mentions CEO compensation and golden parachutes, and says that these things are likely necessary mechanisms, but (again, I'll have to find and vet my sources here) to my knowledge, empirical studies show no good evidence that higher CEO pay leads to better results.
In fact, it often leads to worse results. Perhaps a weakness in the system that could be overcome with newcomers and the better data.
Anyways, back to reading.
He's blaming governments for monopolies. I guess that's technically accurate, but he's blaming not a lack of laws but the creation of laws that help monopolies exist. The latter is possible, mind you, but the former is also very possible. A free market is a vacuum, and businesses can create their own pseudo-governments quite easily. It's just asking for the creation of a plutocracy.
No mention of Rockerfeller in the section. The closest the book comes to admitting that privately created monopolies could require political intervention is: "In the absence of government prohibition against entry into particular industries, various clever schemes can be used privately to try to erect barriers to keep out competitors and protect monopoly profits. But other businesses have incentives to be just as clever at circumventing these barriers. Accordingly, the effectiveness of barriers to entry has varied from industry to industry and from one era to another in the same industry."
The book goes on to note computers as an example. When they were big and costly, not that much competition, but as innovations made them cheaper, competition seeped in.
Perhaps foundational costs are a weakness in a purely free-market economy, and alternative methods of initial ground-breaking research is warrented? That's my take, anyways.
That's the end of chapter 7, and the end of my reading for today. Tune in tomorrow for "Chapter 8: Regulation and Anti-Trust Laws". The title seems promising.
Friend running late, getting some extra reading in before heading over to his place.
There's a really good bit in this chapter already:
"The economic complexities involved when regulatory agencies set prices are compounded by political complexities. Regulatory agencies are often set up after some political crusaders have successfully launched investigations or publicity campaigns that convince the authorities to establish a permanent commission to oversee and control a monopoly or some group of firms few enough in number to be a threat to behave in collusion as if they were one monopoly. However, after a commission has been set up and its powers established, crusaders and the media tend to lose interest over the years an turn their attention to other things. Meanwhile, the firms being regulated continue to take a keen interest in activities of the commission and to lobby the government for favorable regulations and favorable appointments of individuals to these commisions.
"The net result of these asymmetrical outside interests on these agencies is that commissions set up to keep a given firm or industry within bounds, for the benefit of the consumers, often metamorphose into agencies seeking to protect the existing regulated firms from threats arising from new firms with new technology or new organizational methods. [...]"
The book goes on to give an example in the Interstate Commerce Commission. My mind, however, went to the FCC and the recent appointment of a leader completely uninterested in maintaining Net Neutrality.
Chapter 8: Regulations and Anti-Trust Laws.
This book is very convincing, I must say. It is only once it breaches subjects that I am more familiar with that I am reminded that this philosophy isn't perfect nor does its understanding of reality always properly reflect reality.
The book lists anti-trust actions against Microsoft as an example of bad anti-trust laws. I simply do not agree. Microsoft had a true monopoly. If this writing becomes a proper review of the book in the future, again I'll have to "find my sources" (probably how I'll search for writing that needs citations when I review these writings later), but off the top of my head Microsoft forced hardware manufacturers to exclusively bundle its operating system with their computers (no other OS bundling allowed), would annonce the development of software that it had no intention of devloping to deter competitors from developing that same software (aka annouce vaporware).
It was so bad that Microsoft was forced to invest in Apple (for a variety of reasons) such that they had a proper competitor. And until Apple grew in popularity, Apple basically stayed the only competitor. If not for that requirement, Microsoft could well have had a stranglehold on the market for quite some time.
And the example given in the book was about an anti-trust law that required Microsoft to allow competitors to develop software applications for its OS. Definitely a major win that allowed true competition in the variety of possible software a user has access to on their computer. Something that very likely improved Microsoft's quality to users, and set a standard for potential competing OSes to follow.
Businesses do things against their own interest for greedy reasons all the time. When forced to do a thing that fosters competition, it often improves the anti-competition businesses bottom-lines. It happened with Rockerfeller, and it probably happened with Microsoft.
Basic Economics reading.
I have a slowly building bit of one-off notes in my tiny notebook of things to mention in Basic Economics. I didn't mention them while reading before, because I was reading on a plane and found it quite awkward to handle my back pack in any way.
I continued the habit today, and I think instead I should just write when I get the feeling to say something, else what I want to say will be lost in the moment. Or, rather, my motivation to want to say it will be lost in the moment.
In Chapter 10, "Productivity and Pay", there's a section called "Pay Differences" and a subsection called "Income 'Distribution'". In it, the book states that the shifting statistics on income are misleading. The bottom 20% own less of the wealth than the bottom 20% of 40 years ago, yes, and wages are flat (or negative considering inflation) for the same job.
The 20% poorest now are not the same people as the 20% poorest 20 years ago. "Three quarters of those initially in the bottom 20 percent in income were in the top 40 percent atsome point over the next 16 years." Wealth is a non-zero sum game, and the majority of people don't work the same job their whole lives (though, notably, a significant percentage does, as far as I know). Are wages up overall if not measuring "apples-to-apples"? According to the book, the incomes of people followed throughout the decade are up, on average.
"The University of Michigan study found that, among working Americans who were in the bottom 20 percent in income in 1975, approximately 95 percent had risen out of that bracket by 1991--including 29 percent who had reached the top quintile by 1991, compared to only 5 percent who still remained in the bottom quintile in 1975."
I should check its sources.
This is important and valuable information, and I'm glad to have been given it. My understanding before was in fact that the poor get pooer and the rich get richer. I understood that wealth is not zero-sum, but took flat wages as evidence that the rich are literally taking all the gains.
Further, the book makes an important distinction between wealth and income. You aren't wealthy if you spend all your income. This is advice I've already taken to heart, Stephan. Though, this makes me wonder if his same point properly applies to the weatlhy. Something to find sources on.
The book mentions businessmen working many hours more per week as evidence of their working more for their money. This conflicts with my understanding that past a certain point, more work has diminishing returns (and in the long run hurts productivity). Their obession or compulsion may have them work more, but they may in fact be doing far less (and perhaps it's related to how so many businesses fail).
There's a good point in the chapter about how "household income" is a misleading term. A single person living alone has their income counted towards "household income". There are smaller families and a greater percentage of single workers today than in decades past. "Houshold income" now vs decades ago may not be showing flat growth so much as more income per person and less people per household. Another thing to find sources on (this one should be provided by the books sources listed online somewhere).
The book makes mention of female infants in China being murdered because they were net-negative for the most-common work at the time (farmwork). Having studied some Chinese history, and having knowledge of the abilities of women to do menial labor (they do a lot of it in India), this is blatantly false. Female infants were killed in China because families were allowed only one child per law for a while, and because women were less valuable politically and regliously than males. I'll find my sources.
The book then goes on a tangent for how women's pay is not in fact less for equal work. Lots of common (and debunked) refrains follow including but not limited to:
"If for example, women were paid only 75 percent of what men of the same level of experience and performance were paid, then any employer could hire four womeen instead of three men for the same money and gain a decisive advantage in production costs over competing firms."
One, this has happened. It has happened on such scales to permanently reduce the pay in a field even to men in that field. Two, hostile work environments exist. There's a lot of things wrong with this statement, I should refind some of the stuff I read on this and link it if/when I consolidate this into more solid writing.
"It is worth noting agin the distinction made in Chapter 4 between intentional and systemic causation. Even if not a single employer consciously or intentionally thought about the economic implications of discriminating against women, the systemi effects of competition would tend to weed out over time those employers who paid a sex differential not corresponding to a difference in productivity."
I actually agree.
Except "weed out over time" requires some evolving mechanism within the system to gain power. Could it be all the women speaking out in their experience of this lopsided system, and all the work going into correcting it (both politically and throughout the corporate world) may in fact be a visible manifestation of such weeding out? Maybe such weeding out could take decades of incremental, inconsistent progress?
Maybe instead of women getting paid less because they do less they do less because they get paid less? Maybe it's a self-fulfilling prophecy? Consider this paper on the effect gender stereotypes have on the game of chess. Source found, because I wanted to remember where to look for it before I forgot (namely, I found it in this video wherein an incredibly smart anti-capitalist tears into a sexist youtuber saying women are inferior to men).
In any case, that paper found that when women played men without either players knowing the gender differential, they played relatively evenly. When women were informed they were playing against men, and reminded of the gender stereotype, they played worse. This happened even when their opponent was the same person (the information given to the woman was just different).
So, this is a problem that is not simply solved by hiring more women for any given role (though that's certainly a start). It's a cultural problem that must be overcome on purpose to unlock the full potential of oppressed groups. It's so obviously a problem that corporations like Microsoft and Google are now spending significant money towards fixing this problem without government intervention telling them to do so.
The same problems most-certainly apply to minorities as well, though how to solve that problem may well be different. And the book goes on to say a lot of things about discrimination as well. Some of it which may be true and something to consider. Specifically, "minimum wage hurts miniorities" because "less people are hired", and "when less people are hired, and there are more people to choose from, racism holds stronger sway".
Though, now we're in a new chapter. Chapter 11: "Minimum Wage Laws".
I'm not convinced by this argument, though, as minimum wage vs. jobs is a complicated thing that really isn't so simple as the book pretends it is.... As far as I know. And unfortunately the lenght of my knowledge is one FiveThirtyEight article I read a while back about the subject specifically applied to Washington state. So, I'll need to find my sources.
Further, I feel a false dichotomy is being presented: have a job and gain experience towards higher income later vs have no job and have no means of gaining higher income later. Missing are two other possibilities: have a job with too little pay that has no ladder upward, and have no job but get training or education towards a job with enough income. I've just started my reading on "Investment", which actually talks about education, so I think I'll come back to this. But the latter two are entirely possible, and make the minimum wage argument a lot more complicated, I think.
Which leads me to a chapter I have a lot of problems with. Chapter 12: "Special Problems in Labor Markets". This is the "unions are bad" chapter. It starts with some discussion about unemployment and how unemployment statistics are flawed that I mostly agree with. It also talks a bit about the nuances of worker safety and how first-world demands in greater safety for third-world business practices may force people into even less safe situations. Which, at least, paints the situation as complicated, and solutions as less-than-straightforward but worth strivig for.
But this chapter sort've implies that "collective bargaining" on the whole is bad, and I have to stop and talk about it, because it's just amazing to me. It comes across to me that the author thinks that prices just magically find their correct value, and to the extent that there's a human element to it, that human element is invisible.
What's particularly amazing is that the book has an example of unions having improved the accuracy of the price of their wages, but thinks that the example is anti-union:
"In private industryy, many companies have remained non-union by a policy of paying their workers at least as much as unionized workers received. Such a policy implies that the cost to an employer of having a union exceeds the wages and benefits paid to workers. [...]"
There's even more juicey goodness in the paragraph, but the point is that unions proved their validity and did their job: workers were being paid less than they should've been and the threat of workers organizing forced businesses by-and-large to improve working pay (amongst other things like working conditions).
I think this uncovers a very important point, if some group of people are being oppressed under a system and that system doesn't correct that error quick enough, those people will turn to some other system willing to try to help them. Even if the adopted system is less efficient, and hurts everyone overall over the long run.
Capitalism is not an exception to this point. Unions are the tax being paid for business consistently underpaying their workers. Businesses that exist without them do so by avoiding the circumstances that caused them. Some of their means to avoid unions may prove problematic and cause a similar anti-capitalism solution if the problems go uncorrected.
The chapter also makes implications of teachers being greedy and once again conflates working more hours with doing more work (but this time when comparing countries), but I'm not intersted in diving very deep into either of those things.
I mentioned in an earlier entry that a monopoly presented problems not just for consumers, but for employees. The book explicitly mentions this possibility, but mentions it being possible mostly only for highly specialized labor. I think it applies to menial labor as well, but that's something to find sources for.
The book mentions "the exit of businesses from California", and I'm curious about that. I should look at the books sources or find some of my own.
Basic Economics reading.
The book makes an important point that I thought of earlier. Maybe I even mentioned it. "Although economists often proceed by first explaining how a free competitive market operates and then move on to show how various infringements on that kind of market affect economic outcomes, what happened in history is that controlled markets preceded free markets by centuries".
Exactly. Free-markets, in the grand scheme of things, are a relatively-new beast. How to best raise a healthy market and what illnesses to look out for and what cures to administer are young, and being explored. It is far from a solved problem. This also goes back to what I wrote a couple days ago, "if some group of people are being oppressed under a system and that system doesn't correct that error quick enough, those people will turn to some other system willing to try to help them. Even if the adopted system is less efficient, and hurts everyone overall over the long run."
I should add, also, that often when a new thing is being implemented, even if that new thing is about equal with the old thing, or even slightly better, people using the thing will be more critical and will back-slip to the old thing at the slightest provacation. It's similar to something that a mentor described to me as the "10x better rule", Stephan. For people to properly adopt a new thing, it has to be 10x better, because the person selling it thinks its 3x better than it is, and the people forced to adopt it will think the old thing is 3x better than it is. Hence, needing the new thing to be 10x better before adoption occurs.
But I've gone off on a tangent. My main point is that capitalism is new, is still heavily flawed, and fighting to improve it can and should happen at any possible angle, including but not limited to political action.
Anyways, the book uses this point as a transition to talk about the over-regulation of industries via requiring licenses when they aren't really necessary. The book's prime example is taxis. Driving does not require a highly specialized skill, the book argues, and so artificially limiting taxis with limited licenses is bad.
This sounds like a good argument. But I, like many people, have watched the Simpsons. Specifically, I have watched the episode where the family goes to Brazil, mention the danger of taking unlicensed taxis, and then Homer gets kidnapped and ransomed (hilarity apparently ensues).
Could a license be for something beyond proof of capability of a skill? Could it be for safetly purposes relating to the nature of the work? Could it be that a flooded marketplace could attract bad actors whom could do criminal activity under the guise of legitimate business?
Now, I'm not properly versed in this arena (my go-to annecdote above was a fictional plotline in the Simpsons). Perhaps the litigation was explicitly bad for taxi licensing, but I think it's important to consider how different technology was when those rules were created. Nowadays, I would agree that licensing makes less sense for taxis, because there's an automatic digital tracking system keeping proper track of which car is registered with which company, and the company is telling you what car/person to expect, and there's plenty of means by which to add safety measures to the system without considerably hindering its growth.
Anyways, this is a small thing that I had a lot to say about. It wouldn't hurt to do some due diligence here, but I already have a lot of sources to find, this is just an aside.
So, there's a quote about Thomas Edison that... well, actually, the whole paragraph, read it: "The industrial revolution was not created by highly educated people but by people with practical industrial experience. The airplane was invented by a couple of bicycle mechanics who had neer gone to college. Electricity and many inventions run by electricity became central parts of the modern world because of a man with only three months of formal schooling, Thomas Edison. Yet all these people had enormously valuable knowledge and insights--human capital--acquired from experience rather than in classrooms."
So, this whole paragraph is extremely misleading, and stinks of painting history as the story of singular great men moving society forward as most just sat by and watched. Thomas Edison is an example I'm somewhat familiar with, he worked with, had rivalries with, and debatably stole from highly educated people in pursuit of control over the industry he "created". In reality, industries are created by a lot of people with a lot of different know-how (some of it from higher academia), and probably would fail to spring forth without most of them.
This is a dissonance I've noticed in the book before. Sometimes, it'll note the many moving parts and complexities behind progress, and other times it'll imply progress is this magical thing that'll just instantly happen if you let markets run amuck without political interference.
Anyways, Thomas Edison and the rise of the industrial revolution would probably be a good thing to find my sources on.
"Many unthinking people in many countries and many periods of history have regard financial activities as not 'really' contributing anything to the economy, and have regarded the people who engage in such financial activities as mere parasites." This is a fair point. Though, at the same time, these people often find themselves in positions of significant power, and the only famous powerful fiancial people are the corrupt ones. So, perhaps the people with the power should do a better job of self-policing and take proper responsibility for when they hurt the economy for their own gain.
Events like the 2008 finacial crisis largely caused by fiancial people who knowingly conned the entire world doesn't really help the banking reputation. Especially considering that no banker got any real punishment out of it. Trust is hard to build and easily broken.
And I am caught up on my notes. This book is due back in the library in 8 days (counting today), and I have about 350 pages to read. So, I need to read about 50 pages a day. I got a lot of travel time ahead of me, let's try to read 200 pages today.
Basic Economics. (Notes while reading.)
The book is trying to justify the high interest rates of payday loans. The explicit goals of these places is to trap already-poor people in an inescapable cycle of debt. Also, using higher processing costs as an excuse doesn't work when the industry itself is making much more money than traditional lending establishments.
Just ugh. I'm going to let John Oliver take it from here:
Basic Economics reading.
All right, I'm super behind on Basic Economics. So, I'm going to note page numbers and short descriptive comments and try to read 235 pages before the library closes tomorrow.
First, let's clean out my notebook:
Page 296: An argument against peak oil.
Page 298: This is a good section to note the author's climate-change denialism.
Page 310: An argument against the gold standard.
Page 323: Insurance: good arguments, but ignored bad practices.
Page 326: Insurance speed-of-service flatly false.
Page 330: Property rights.
Page 332: Those evil environmental agencies (also: a good place to link to Lindsay Ellis' video essay about the Hunchbakc of Notre Dame).
Page 334: author implies ageism isn't real.
Page 337: "immediately"
Page 339: Detroit example
Page 340: Annectdotal evidence is good when the author uses it
Page 346: Fallacy of composition
Page 348: Great depression abundance logic
Page 354: Real income.
Page 357: Purchasing power.
Page 361: What's being counted?
Page 362: Statistics and survival.
Page 367: Inflation is bad
Page 368: Just talked about the misleading nature of statistics!
Page 371: The author accidentally makes an argument for bitcoin. I mostly agree.
Page 373: Deflation.
Page 375: Federal reserve depression
Page 378: Author argues against gold standard without explicitly saying so.
Page 381: Fractional reserve banking (this would be a good place to link Extra History series on subject).
Page 386: Author argues that federal reserve is bad.
Page 388: Author implies that private banks are the best.
Page 391: Author states that government pressure to make bad loans were main cause of banks collapsing in 2008. Nothing was stopping the banks from rating the loans as bad, but this goes against the author's general argument that cartels tend to fall apart on their own in the free market.
Page 395: Author makes good point about the effectiveness of governments that keep a good rule of law, even in spite of various bad laws that are overall bad. This is something I think about from time to time. Unevenly applied laws lead to all sorts of problems, whereas if all laws were properly enforced evenly, then bad laws would cause proper unrest in citizenry, hopefully leading to their reform.
Caught up on notes.
Page 398: Author implies Britain colonialism was good.
Page 399: "While impartiality is a desirable quality in laws, even laws which are discriminatory can still promote economic development, if the nature of the discrimination is spelled out in advance[...]" The author implies a defense of giving different ethicities different rights. For anything the author is against, he will never give any nuanced opinion on its effectiveness. His interpretation of all historic government regulation has consistenly been negative, even of the positive historic examples (he insists that short-term positives are out-weighed by long-term negatives). But racist laws? At least the laws were spelled out in advance.
I think I should mention that the author was (and still is?) against the desegregation of schools.
Page 400: Mentions riots ruining neighborhood economic viability, but does not mention that economically viable neighborhoods have historically been ruined by racist mob jealousy. This happened to weathly black communities, and happened on a governmental level in Nazi Germany.
Page 400: Property Rights. I will assume a lack of pointing out where existing property rights can be bad. An easy go-to example is slavery. Let's hope I'm wrong.
Page 401: An accidental argument that all workers should gain some property ownership in their work.
Page 401: "The only animals threatened with extinction are animals not owned by anybody." Tragedy of the commons argument follows suit. It is a real phenomenon, but there is also the problem of ancient ecosystems that will be destroyed by reckless human interference. Either by the commons or the private. There are some ancient resources that will take decades before destruction destorys their business value. If the person who owns them does not care for long-term sustainability, they need not care about ethically haversting from those resources. The borneo forest is such an example. Its survivability may already be impossible, but harvesting continues.
There are examples of privatization that do no better, or do even worse, than commons. To ignore these examples is to avoid nuance that is necessary in future innovations in economic capability over both the short and long term.
Page 402: Enough poor peope together have more wealth than a rich person. The author tries to make this about property rights, but it's also a matter of social technology needing to further improve. We already have things like kickstarter helping the many fund projects that the few rich would rather not, further innovations may help the many outbid the rich in various other avenues.
The law is also in a state that makes this hard. There are minimum wealth laws for certain investment opportunites, for example. So, there is some truth in the author's point here.
Page 403: "the economic incentives are for landlords[...] to try to keep their apartments as fully rented and as continuously occupied as possible, so long as the tenants pay their rent and create no problems". Considering that the author just had a section about the problems that inflation causes, rent inflation is in fact a serious thing to consider (and perhaps rent controls and tenant rights are not good solutions to this problem, but letting things sort themselves out also definitely has serious consequences to weigh against).
Page 405: Section on social order and honesty is pretty good. Also good to consider the incentives that lead to honesty versus dishonesty. People who are stuck in a system may sabotage it, but those who can opt-out may simply abandon the system.
Page 406: "What economics professor William Easterly of New York University has aptly called 'the radius of trust'[...]" Cool name and a good phrase to understand. Gives me ideas that I can't quite articulate now. Make a good name for a game, too.
Page 407: The author is now talking about incentives and disincentives to be honest.
Page 408: Giving rent-control examples, citing arson incentives. Notably, non-rent-controlled slum in Britain recently went up in flames, and killed/injured many tenants. Gots to find my sources for that, though.
Page 410: Proper free markets punish cheaters. Anomlies are noted, but brushed aside as anomolies. I think anomalies need be studied to improve our capabilities moving forward. This book is convincing me of the value of free-market economies (well, after I fact-check and verify various things in the future), but to me it's clearly an argument on what improves the environment for proper free enterprise and what worsens it. It's more complicated than letting the market sort it out, I think. The environment needs to be tended to and we need to learn to direct it where and when necessary. Finding the flaws that occur naturally and working towards mending those flaws both during and before they happen is a necessary step forward.
Page 411: The author actually says the government is a good solution to something! External costs! Like polluting of the environment. I'm feeling there's a "but" coming, but I'll take what I can get. Also external benefits, like mud flaps!
Page 412: External, indivisible benefits. Aka: prisoner's dilemna. Military spending is the go-to example. Not sure how I feel about that. Military spending in the US is out of control. And yet, when talking about reducing government spending, military spending only increases. I have to find my sources, but I believe that any spending cuts that happen basically ultimately lead to increases in military spending.
It also comes across as a double-standard. Surely, similar arguments exist for general healthcare, and yet the author is defacto against socialized healthcare. But socialized military is necessary.
Page 413: Collective action as part of spontaneous organization. I like this concept. I find it relatable to the "radius of trust".
The example, however, is interesting. "[...]owners of cattle organizaed themselves into cattlemen's associations that created rules for themselves and in one way or another kept newcomers out, in effect turning the plains into collectively owned land with collectively determined rules, sometimes enforced by collectively hired gunmen."
The author just had a section talking about California/Virginia laws created by the weathly that restricted property rights such that a poorer collective couldn't buy land and turn it into a clustered housing unit (page 403).
I'm getting way to caught up in this stuff and my reading rate is a paltry 15 pages in an hour and a half, so I'm going to have to stop going into detail about this. I do not have the time.
Page 413: Author makes a point of trade associations and their benefit, but I can't help but compare their purpose to unions, but author went out of his way to talk about unions being bad.
Page 414: "Both the incentives of the market and the incentives of politics must be weighed when choosing between them on any particular issue." .... I agree. I wish this nuance was present more evenly throughout the book.
Page 415: "As an example of what virtually everyon now agrees was a counterproductive policy, the Nixon adminsistration in 1971 created the first peacetime nationwide wage controls and price controls in the history of the United States." Sounds like an interesting thing to read about. Find my sources!
Page 416: Interesting how the author goes out of his way to explain Nixon's price controls but just gave Carter's research a short sentence during the discussion on peak oil earlier in the book. I guess his lack of belief in climate change made discussing the nuances less valuable in that section.
Page 416: "There is no 'present value' factor to force political decision-makers to take into account the long-0run consequences of their current decisions." This isn't exactly a true statement, as far as I can tell. During the the healthcare reform attempt by the Republicans, the CBO score of any published plan that they had gave an estimated look into the future, and the CBO was a huge talking point and means of criticism of each Republican plan. This is a problem that is slowly being addressed politically. I hope.
Page 416: "With fundamental educational reform being both difficult and requiring years to show end results in a better education population entering adulthood, it is politically uch more expedient for elected officials to demonstrate imeediate 'concern' for education by voting to spend increasing amounts of the taxpayers' money on it, even if that leads only to more expensive incompetence in more showy buildings."
This is a fair but unbalanced example. An equally valuable example would be the politicians saying we're overspending on education and gutting education, worsening the competence of our educational system. Another equally valuabe example would be our ever-rising military costs, which have a similar problem in showing efficiency or effectiveness in spending as compared to output.
Page 417: The author gives another example, but with clean water or air. An example I agree with. But again the example could be military spending, and yet it isn't. Also, speaking of water impurities as going too far is kind of a badly aged example considering the recent Flint water crisis, and how Flint-levels of lead contamination are actually terrifyingly common and how government is doing nothing about it.
I need to verify my sources sources, but I found this out in the video below:
Page 418: I mostly agree with the talk on too much being done to fix impurities, I must say. Or rather, all that effort being made to further purify things that are already pure enough is plausibly taking away effort that could be made to all those Flint-level crises happening that are being ignored.
I think it may be politically wise to learn how to shift the conversation away from unnecessary improvements to necessary ones. How to actually do that, however, I do not know.
Page 419: The author makes a note about the dangers of airbags. I agree with this note, but wanted to expaned. A lot of car safety has been done with the adult male form in mind. This presents unmeasured risks with non-adult and/or non-male forms. I read something about this, and should find my source here. I found it quite interesting.
Page 419: "In the United States, government regulations are estimated to cost about $7,800 per employee in large businesses and about $10,600 per employee in small businesses. Among other things, this suggests that the existence of numerous government regulations tend to give competitive advantages to big business, since there are apparently economies of scale in complying with these regulations." Is this a net cost? I would assume there are instances of regulations saving money over some amount of time. Going to need to check the author's sources and find my own.
Page 421: A good point about the problems of laws and powers living past their purpose. It is, indeed, a problem that needs solving.
Page 421: "When thinking of government functions, we often assume that particular activities are best undertaken by government, rather than by non-governmental institutions, simply because that is the way those activities have been carried out in the past." This is true in reverse, as well, to be fair. It may, due to various social/technological innovations, work better for government to take control of some activities now, but we keep it privatized simply because it has always been so.
Personally, I think it's valuable to have government create a base-service, and also to allow for competition to that service. I can elborate further on that whenever I get around to using this writing as reference for future, polished writing.
Page 423: The beginning of Chapter 19, Government Finance. Woo.
Page 424: "If [the national debt] really meant what it said, the national debt would include all the debts in the nation, including those of consumers and businesses." Is there such a debt-measurement? That would be a good one.
Tangentially, this reminds me of when I fantasized (defined here as: thought about without the intention to do, and assumed for granted outcomes that would required serious work and luck) about becoming a politician, I considered a stock slogan to be: "I believe a debt-free America starts with debt-free Amercians".
Page 426: The book is explaining the concept of higher prices vs. fewer buyers. The book avoids charts at all costs, which is fair limitation, but a common means of showing this phenomenon is the "hat chart" (if I remember its name correctly). Showing revenue or profit vs cost-of-item and showing that there's a point in the middle where the most is gained.
This hat-chart is often not invoked, now that I think about it. Though perhaps that is because it implies a possibility that taxes could be too low, something that various people who argue for lower taxes to increase tax revenue don't really like to admit to.
Page 426: Actual examples of people leaving states when income taxes were raised! Now I'd like to see the same thing, but for federal examples.
Page 427: Close, I guess. Lowering capital gains tax on the federal level led to increased tax revenues.
Of note, lowering taxes doesn't always work. Kentucky is now feeling the negative effects of lowering taxes too much and not having enough money to pay for the things that the government is expected to pay for (and whom private industries aren't racing to replace the government in). I'll have to find my sources for that.
So, really, I agree with the author on the incentives being important, I just think there should be research done to see where the best tax-level is.
Page 437: Foreigners holding US debt is bad, foreigners running banks in various developing countries was fine earlier.
Page 440: "It is one thing to have a national debt as large as the Gross Domestic Product, or larger, at the end of a major war, for the rturn of peace means drastic reductions in military spending[...]" I think drastic reductions in military spending is definitely still the answer here.
Page 443: "The only way to determine whether the benefits [of the ferry ride] are really worth the cost of $108 per round trip is to charge $108 per round trip." This is the author talking about subsidized ferry rides around the San Francisco area.
This is a false statement. If all these people getting ferry rides are now not driving, then we have lessened the strain of rush hour on the roads in these areas. This could potentially be helping traffic overall and reducing commute times via pricing incentives. This could very well be a great allocation of the ferry resource, and alternative uses that are not subsidized may well lead to more cogested traffic and thus less productive work being done overall.
Though, I don't know how likely that is to be the case, I'd have to find my sources.
Page 444: "[...]subsidizing everyone who uses those goods and services in order to help a fraction of the population [the poor] seems less efficient than directly helping "the poor" with money or vouchers and letting the others pay their own way." I mostly agree. However, bureacracy has a tendency to screw over the poor. It's also just asking for corruption and an injection of incompetence. Having witnessed the process of getting diability pricing on various things... it's a good idea on paper, but can be equally as messy as subsidizing it for everyone.
It's one of the reasons I am pro-basic-income.
Page 447: "In the United States, it has been estimated that the cost of keeping a career criminal behind bars is at least $10,000 a year less than the cost of having him at large." Sounds like the cost of keeping a prisoner a criminal is the highest cost of them all. Recidivism is a thing we should work to avoid. The US having the largest prison population in the world is not something to celebrate.
Page 448: The author is criticizing "smart growth" land-use restrictions. Seems strange, considering the author's earlier criticism of government insurance for homes that are at high risk for weather-based damage. "Smart growth" restrictions often exist to help prevent such damage, if I understand correctly (though I need to find my sources there). One of the reasons the recent hurricane hit Texas so hard is the lack of regulations in buildings vastly reducing flood runoff. Again, find my sources.
Page 454: Beginning chapter 20, "Special Problems in the National Economy".
Page 458: Author blaming government intervention on high unemployment rate of the Great Depression. Even if the author is correct that the government is better in not intervening, the problem is that people think that a political solution is viable, and if the government doesn't give one, they may well revolt. There needs to be a plan and there needs to be some means of having the people trust that plan.
The author goes on to compare the Great Depression to "do-nothing" recession earlier. Considering that these would be pre-industrial revolution, it seems quite likely that this is an apples-to-oranges comparison. It's a lying with statistics sort of thing that the author warned against earlier in the book.
The author than gives two more examples, admittedly more modern, and perhaps this is something I should think about. He mentions the 1921 ecomonic downturn preceding the 1929 stock-market crash. Also, the stock-market crash of 1987. Though, I've read some economist writing on that second example, and still feel that it's not a fair example. Perhaps not all stock-market crashes are created equal, and there are ones where it makes sense to do nothing, and ones where something must be done.
Similar, in essence, to how sometimes tax cuts increase tax revenue, and sometimes tax increases increase revenue. Applying either solution at the wrong time could prove disasterous.
Page 460: The author talks about how what works and what doesn't is trial-and-error, and that the error has a huge human element that is quite costly. I agree. There's this danger imposed by finding the right system that best helps the people within find success. But we have to do the exploration. And sometimes we have to repeat past mistakes, because we need that data. How to do this whilst reducing the suffering it will cause is a serious problem we need to solve.
Page 463: The author talks about social security. The fact that all that money is immediately used for government spending elsewhere, and is not proper invested, does in fact irk me. Hopefully I get some social security money back, but if not... at least I'm doing my own savings.
Page 466: The author quotes disability statistics, acting as though a lot of people are mooching off the system now than before. Perhaps we're better at assessing disabilities and actually a lot of people need disability assistance?
Page 468: "Whatever the merits or demerits of particular government economic policies, the market alternative is very new as history is measured, and the combination of democracy and a free market still newer and rarer." I agree. No further comment here.
Page 473: I have now finished part 5, "The National Economy". Next is part 6, "The International Economy". I'm seriously enjoying this book and agreeing with a lot of what the author has to say. But oftentimes he mentions something I'm more intimately familiar with and then I think that maybe the book is charasmatic and good at explaining its point of view, but not really being fair to contrary points of view.
Perhaps I should make sure to track more of the stuff I find myself agreeing with, to check my sources and expand my economics understanding when I start reading more content on it later.
Page 475: Chapter 21, "International Trade" begins.
"[I]nternational trade is not a zero-sum contest. Both sides must gain or it would make no sense to continue trading." The book once again ignores concepts of leverage, and really short-term vs. long-term viability. China is still rightfully angry about enforced trading in early British/Chinese trading history.
There's a good Extra History series about it:
Though, I must note that I agree that things should be considered in non-zero-sum terms most of the time. Stronger together and all that great jazz.
Page 478: Three categories of gain from international trade: absolute advantage, comparative advantage, and economies of scale.
Page 480: The book actually is using a table to help explain comparative advantage. What is this?
Page 481: Comparative advantage is actually pretty cool. Best quote: "Comparative advantage means there is a place under the free-trade sun for every nation, no matter how poor, because people of eery nation can produce some products relatively more efficiently than they produce other products."
Page 489: Sub-section "[The ]Saving Jobs[ Fallacy]". I haven't read this section yet, but I'm going to assume the book will state how job totals will grow overall, it'll just be different work. The author may concede that people will be displaced, but will not really concede that this is a significant problem to be solved. More and more jobs are disappearing, and yes jobs are being created, but the people with the old jobs often don't have the skills for the new job. There needs to be a strategy to rectify this more efficiently than exists now.
Page 491: "The fallacy of composition, the belief that what is true of a part is true of the whole." The author mentioned this fallacy before, but I didn't note it, and I really like it, so I wanted to note it here. In this case he's talking about how "saving jobs" in one industry often costs more jobs in another. The given example being steel production and the various industries that use steel. Reducing imports saved $240 million and 5,000 jobs in the steel industry, and cost $600 million and 26,000 jobs elsewhere.
Which, looking at revenue vs jobs, looks like it hurt a larger number of lower-income jobs. The exact nature of these statistics is unknown to me at this time, though. For example, it may include jobs that didn't come into being because of these laws. I'll need to find the book's sources on this statement.
Page 492: Subsection "Infant Industries". Surprisingly, the book does not also mention how this fallacy doesn't take comparative advantages into account.
Page 497: The author zips right by a significant comment he quotes: "Asian manufacturers make 'razor-thin profit margins due to the hefty licensing fees charged by the global brand firms.'" A specific example of leverage in action and the author just ignores it.
Page 498: "As of 2006, 63 percent of the Japanese brand automobiles sold in the United States were manufactured in the United States." Heh, a fact I heard recently because the US president is an idiot.
Page 499: "It has been estimated that all the protectionism in the European Union countries put together saves no more than a grand total of 200,00 jobs-- at a cost of $43 billion. That works out to about $215,000 a year for each job saved." I should find the author's sources, but I already am against protectionism, so this is cool. Also, another argument for basic income (though I'm still digesting criticisms against it).
Page 500: Chapter 21 done.
Tomorrow, Chapter 22: International Transfers of Wealth.