Push / Pull

[nyuanshin]

If I had to pick one maxim by which to evaluate legislation, it would be "don't get in the way". But if I had to pick a second one, it would be "maintain price flexibility at all costs". The reason I bring this up is that Patri pointed me toward a good summary of the late great Mancur Olson's opus on how to keep your country from being rich. The

Comments

[ihuitl]

Regarding Olson's work, I might be making a leap here so bear with me.

The idea that countries who have been too stable become stagnant economically reminds me of Jared Diamond's hypothesis as to why Europe had a scientific revolution while China did not. Namely, the stability of China under one ruler (facilitated by less internal natural barriers) reduced the need for such leaps in technology. In Europe, with numerous countries separated by geographical features constantly vying for territory, the drive for increased scientific knowledge for a better political/military/economic position was higher. The higher population of China also made labor saving advances less necessary than in a Europe decimated by plague.

[nyuanshin]

In general I find Diamond guilty of trying to do way too much with way too little. Controlling for intelligence, scientific and technological innovation is driven primarily by two things: the fraction of people you have that are crazy enough to devote their lives to tinkering, and their ability to network and build on eachother's work. IIRC, China was actually way out in front of Europe when Europe was *less* politically stable, then the positions switched from the Middle Ages onward. Chinese culture, and Asian culture more broadly, is a lot more conformist and closed-off than Euro culture (which I take as reflecting cognitive differences, but you don't have to for the purposes of this point). Independent thinking is punished even worse there than it is here.

FWIW, Joel Mokyr spins out what I find to be a more compelling instution-centric framework. Still biology-blind, but beats the pants off Diamond's "everything begins and ends with geography" schtick.

[ihuitl]

I'd credit Confucianism with the drive to a conservative/conformist mindset, but I wonder if you reverse the chicken with the egg and say that the former is symptomatic of the latter. Either way, Taoism seemed to form a counterbalance, be it from a philosophical or cognitive root.

[nyuanshin]

You're not wrong in wondering. I think it would be hard to deny that the kind of philosophy that you get is a reflection of the underlying cognitive architecture; I've found it instructive here to engage in some comparative study of the old Greek, Indian, and Chinese traditions, which end up approaching a lot of the same problems with different methods. And certainly the kinds of ideas that become prominent depend on the cognitive ecology they're vying for. I don't think you can blame Confucius for Japanese conformism

[airstrip]

In general I agree and I'm glad that you are, at least tacitly, signing on to the revolutionary ethos. Obama has another couple of weeks before I declare him fit for the wall.

[nyuanshin]

Yeah, I won't join officially but I'll be a spy and saboteur. *rubs hands*

[airstrip]

Also, I disagree with you macro/micro characterization. I think it's roughly backward. When the macroeconomy is stable, pain should be short and concentrated because it is also much more compartmentalized. More pieces move more freely of any single wheel and hence that wheel's failure is less correlated to that of others. When the economy is much less free, pain should be diffused because the systems in place will keep this dysfunctional pieces where they are by burdening other elements. Hence why you have zombie banks and the like

[nyuanshin]

You're right -- uncorrelated failures are what make for a stable macroeconomy. What I was thinking was that unsticking rigid prices would smear out the burden of adjustments among more agents, but since a lot of the same restrictions that create the rigidity also concentrate supply into fewer, more connected hands, their removal would also tend to make the capital allocation network more modular.

[airstrip]

I'm not sure because there's always the issue that, unless you have perfectly rational actor and efficient markets, the dulling effect is overridden by the "holy shit, there goes my job" effect. However quickly the market will reabsorb those people, it still concentrates the losses in a serious way. Guaranteed fuck you money however.....