Seth’s blog

I was pleased that Matt Ridley quoted me in his blog about the Emperor’s New Clothes Trilogy and out of curiosity I read his previous post (”Chiefs, priests and thieves“). Strangely enough it’s closely related to the post of mine that followed The Emperor’s New Clothes Trilogy: about Jane Jacobs’s view of two moral systems, guardian and commercial.

In “Chiefs, priests and thieves”, Ridley wrote about what he’d learned from what sounds like a truly fascinating book: Empires of the Sea by Roger Crowley.

As always, ordinary people wanted to carry on with commerce, but chiefs, priests and thieves — sultans, emperors, popes, pashas, holy knights and corsairs — just kept plundering the fruits of that commerce for their own enrichment and their own glory. Little wonder that, as the historian Meir Kohn concludes, preindustrial government was predominantly predatory in nature. Not that it is entirely free of that suspicion today.

This is exactly what Jacobs was talking about — the close connection between government and predation, in contrast to trading (commerce). And it’s what Russ Roberts is talking about in his terrific essay about the cause of the financial crisis. When large financial firms become close to government (”In the week before the AIG bailout that put $14.9 billion into the coffers of Goldman Sachs, Treasury Secretary and former Goldman Sachs CEO Henry Paulson called Goldman Sachs CEO Lloyd Blankfein at least 24 times“), they become predatory rather than commercial. Was Goldman Sachs providing useful innovation when it provided and sold the bonds that the SEC is now complaining about? No, it was basically predatory, under the guise of being commercial.

I think the rest of us let this sort of predation happen because of apocalyptic stories spun (always in future tense) by leaders: The infidels will . . . The terrorists will . . . The financial system will . . . Under cover of these stories, leaders do stuff that strengthens them and weakens the rest of us. But recently a countervailing story has gathered strength:  Guardians as idiots. These stories are past tense: Harry Markopolos went to the SEC five times with incredibly persuasive evidence of Madoff’s Ponzi scheme, and the SEC did nothing. I think the hearings about this were incredibly embarrassing to SEC officials and a big reason they’re now doing something about Goldman. Another example of the genre is …First Do No Harm, wherein doctors nearly prevented an epileptic child from getting life-saving therapy. And, of course, Al Gore is looking more and more foolish as it becomes clear he trusted research (that hockey-stick graph) he had no clue about.

More More future tense: “To the Indios they said, “If you don’t work, this God will kill you.”

What do the following have in common?

1. Doctors who view patients as “profit centers”.
2. Chinese universities that open art departments because art students pay much higher tuition than other students. The classes in these departments have high student/teacher ratios and are taught by inexperienced teachers.
3. Corrupt government officials.
4. Katherine Weymouth, publisher of the Washington Post, organizing salons where, for a hefty price, important people would meet Post reporters.

All can be seen as cases where guardians abuse the trust they’ve been given by trying to profit from it. Jane Jacobs wrote about guardian/commercial ethical differences in Systems of Survival. Jacobs’s answer to why two ethical systems? why not twenty? was that there are two different ways to make a living: taking and trading.

Jacobs wasn’t trying to tell people how to act. She was trying to describe and explain differences in behavior she’d seen. As a one-pass view of how people make a living, taking and trading is a good division. Looked at more closely, teaching (education) and learning (science) are also central. They underlie both taking and trading. Following Jacobs’s logic, maybe they need different ethical codes to function well. Yesterday I spoke to a Tsinghua professor who complained that other Tsinghua professors simply taught what they wanted to teach, as opposed to what would help their students. I said, yeah, I’d blogged about it (”For whom do colleges exist?“, “For whom do law schools exist?“).

“City air makes free” is a medieval saying quoted by Jane Jacobs. I thought of it a few months ago when I visited an experimental private school near Shanghai. The founder of the school wanted to encourage creativity among students, in contrast to the main Chinese educational system with its overwhelming emphasis on memorization. His school was itself an example of city air makes free. There are many factories around Shanghai, filled with migrants from rural areas. These workers moved without official permission, which made their children ineligible for public school. This created a market for private schools, such as the one I visited. The school’s founder was previously a school teacher. The rural-urban migration had made him free to start his own school.

By growing up in a city instead of a village, regardless of what school she attends, regardless of overall economic growth, a Chinese student will have more access to the Internet, much bigger libraries, better teachers, far more students of different backgrounds, far more occupations in action, and a much wider range of culture. Her parents’ increased income may allow her to have a computer. Her family will suffer less from corrupt government officials. The increase in freedom — in opportunity — is profound. Her creativity and productivity will increase because she will better match her talents and her job. This is why Chinese creativity will increase enormously in the coming years whether the education system changes or not.

That such thinkers as Bill McKibben (who doesn’t understand the importance of cities for saving energy) and Jeffrey Sachs (who doesn’t understand the importance of cities for economic development) fail to understand this point shows how non-obvious it is. One more reason Jane Jacobs was a great economist.

“She and other Chinese I met on my trip had a much broader sense of what was possible, or what they were missing out on, than previous generations.”

This is from China Daily:

Every day before sunrise, Zhang Zhengxiang leaves home to walk along Dianchi Lake, one of the major attractions in Yunnan province.

The 62-year-old retired farmer carries a camera, tripod and telescope to record the pollution encroaching on the country’s sixth-largest freshwater lake.

During weekends, Zhang collates his observations and sends letters to the local government, informing them of the growing pollution.

He has been doing this for 30 years.

Sounds good to me. Like my self-experimentation, he is (a) trying to change something he cares a lot about and knows a lot about and (b) slowly collecting data. In contrast to a great deal of American good works, such as Jeffrey Sachs’s.

In this case, unlike a lot of philanthropy, we know how the story ends:

His efforts slowly began to pay off.

In 1998, the local government shut down six mines near Dianchi because of his warnings.

In 2003, 56 large and medium-sized mines, chemical factories, and fertilizer and lime plants were closed.

Since 2008, the local government has invested about 12 billion yuan ($1.7 billion) to clean up the lake. . . .

[In 2005], Zhang was selected as one of 10 outstanding grassroots environmental activists. In 2007, he became a member of the Chinese Society for Environmental Sciences.

Last year, he was selected as one of the 20 people who have warmed Chinese hearts.

This supports what Jane Jacobs told an interviewer: “It’s a funny thing. You can only change something if you love it.”

When I started college, I started reading harder books. I noticed something no one had told me about: Only some of them made sense. In some cases (e.g., Theory of the Leisure Class), there was a general statement I could understand and examples that clearly supported it. In other cases (e.g., Freud), I had difficulty understanding what was being said. I stopped reading the puzzling stuff.

I thought of this experience when, thanks to Marginal Revolution, I read Michael Clemens’s comments on how the Millennium Village project should be evaluated. This makes sense, I thought. His points are clear and he has evidence for them. (I wish he hadn’t used the words scientific and scientifically, which confuse me, but that’s minor.)  In contrast, when Jeffrey Sachs explains the absence of comparison villages like this:

he [Sachs] does not like the idea of going into a village, subjecting poor people to a battery of questions and then leaving them empty-handed.

I’m confused. In grad school I learned that a good way to test for causality in an experiment is to test different dosages of the treatment; if the treatment has an effect, different dosages should have different effects. (And the two groups will be more alike than a treated group and an untreated group.) Other villages could have been given small amounts of aid in return for cooperation.

The whole Millennium Village Project reminds me of a 7th-grade science-class demonstration I mentioned earlier. Our teacher, Mr. Tanguay, put a bunch of ingredients (water, sodium, calcium, etc.) mimicking the composition of the human body into a big graduated cylinder. This is what the human body is made of, he said. When we put them all together let’s see if we get life. The final ingredient he added caused the whole thing to swirl around for a little while but needless to say there was no life.

The easy way to create life is to connect new ingredients with existing life. (As I do when I make kombucha and kefir.) Likewise, the easy way to create new economic life is to connect dead economies with existing economic life. It can be as simple as people in poor villages moving to cities, as is happening in China. No one is paying them to move. To pump money into this or that poor Chinese village could easily delay the migration — which is why the long-term effects of the Millennium Village Project could easily be negative.