Catallaxy Files

polymathic pontification, bleeding heart economic rationalism and liberal secularist contrarianism

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    Saturday, May 10, 2003
    Tax credits and a new welfare state?
    Prospect has a good overview of the increased use of low-income earners' tax credits in the UK. Of course a debate has also re-emerged about greater use of this instrument in Australia following the recent Garnaut report on immigration. The article concludes:

    So, is there something emerging in social policy which deserves the title progressive universalism? The stress on work and families with children is well known. So too is the tax credit as the new version of targeting-"civilised selectivity" as Roy Jenkins once put it. We are a long way yet from complete integration of the tax and benefit system. But a start has been made. And overall social policy has certainly been progressive.

    But there is also something odd going on. The New Labour rhetoric of "rights and responsibilities" and "the end to the something for nothing state" slots in rather neatly with the idea of insurance-type contributory welfare. But in policy there has been no sign of this linkage. It seems that when Frank Field went, the contributory principle and opposition to the means test went with him.

    Perhaps a distinctive conception of a conditional welfare state is emerging. No longer a method for allocating resources tied to unconditional entitlement, but instead a corrective against capitalism, a huge leviathan for the mitigation, indeed eradication, of poverty. No longer grants as of citizenship right, but conditional: today on income, tomorrow, perhaps increasingly, on behaviour too.
    Blogging with comments - a new form of collective thinking?
    I can only speak for myself, not my co-bloggers but I've noticed a subtle change in style in my blogging, though perhaps it was dormant all this time and slowly emerging. When I first started this blog it was genuinely more of an 'advocacy' blog - I used to write lots of fiskings (and IMHO pretty good ones too). Of course it was around after S11 then, there were lots of things being said which it was not humanly possible for me not to react to, there was more than enough fuel to stoke the flames. However there is only so much time before fiskings start to get boring even to the people who write them, and even explicit advocacy of your ideology gets boring if you do it everyday.

    Thus though I still do the odd reactive post and explicit advocacy post and can't resist firing cheap shots from time to time (I also have to refrain from my bad habit of posting intentionally provocative facetious debating points when I'm pissed off at something) I now find these are not the posts which I get most satisfaction out of writing. I no longer care about changing the world or anyone's mind - though I'm not sure that I ever really did.

    Speculation is more important to me than advocacy which is not to say that there aren't implicit biases in my writing but nowadays they tend to be fairly generic propositions - rule of law is good, governance structure which promote decentralised trial and error like in well-functioning markets is good, standard Hayekian stuff, but less so the concrete policy stuff. That's the other thing - I think my blog will continue to have a policy slant in some way but there's only so many studies of privatisation or low tax to report on but fundamental questions like the thesis advocated by Amy Chua (see below) are also issues worthy of more exploration than they tend to be given whether by the mainstream media or other groups - more so the tricky issues with conclusions that don't automatically support one 'side' in a debate over another.

    Another different aspect of blogging I've come to perceive is in the greater value of the process over the outcome (readers familiar with the Jungian inspired Keirsey Temperament Sorter for categorising personality types might choose to attribute this to my high P score in my overall INTP make-up) . With the long rambling posts which occasionally go off tangent, the highly speculative posts like say the one I provocatively called 'Can Asian societies think?' or the one below called 'The unstable template?', I literally did not know what my conclusion was going to be until after writing it. I also tend to write my posts online and publish them straight away so it suits this tangential tentative style which revolves more around throwing up speculations (and in some cases hoping readers will react and do the hard yards and bring to my attention empirical data either supporting or refuting various points - a process which would now be speeded by the comments facility I've installed) than having a firmly developed rhetoric to change the other person's mind. I'm starting to find lots of blogs which are closer to this style than the traditional advocacy style and find these among the most stimulating in the blogosphere, irrespective of ideology.
    The unstable template?
    The Mises Institute reviews a new book out by Amy Chua which proposes a rather troublesome thesis:

    Her highly original proposition (with credit duly given to Robert Kaplan) is that the simultaneous encouragement of laissez-faire free markets and democratic government based on universal suffrage in third-world countries is almost bound to lead to the destruction of either or both in short order. While she mentions that doing exactly this is the policy both of the United States government and of various multinational entities such as the World Bank and the International Monetary Fund, she delves not at all into the question of why this is, by far the most serious omission from her analysis.

    But Chua's marshalling of facts and historical perspectives from dozens of places and times around the globe more than offset any diagnostic omissions. And this lawyer writes with clarity and focus that would credit any historian, or even novelist. Thoroughly accessible to any thinking layperson, her text studies the presence and growth of what she calls "market-dominant minorities" in developing countries, and contrasts them with their comparative absence from societies that have attained and held a high level of development, both economic and social (that is, of their markets and their democratic forms of government).

    She holds—and forcefully demonstrates in case after case—that when impoverished ethnic majorities are empowered by the sudden introduction of full-blown democracy, they fall prey with discouraging regularity to demagogues who incite them against the often-conspicuous disparity of welfare and privilege between them and the small, exclusive ethnic minorities that just as regularly seize power over huge proportions of the wealth generated by free markets.

    Of course what people from the West have in mind when they talk about democracy is liberal democracy which is supposed to be a self-constraining democracy with various articles such as constitutions to prevent majorities from oppressing minorities so formally speaking there is no trade-off. However she does have a point that substantively there is because some societies may not have the internal resources to prevent some form of majority rule from degenerating into majoritarian oppression or stuffing up the development of markets through cronyism and widespread etatism because they lack cultural prerequisites for a liberal democratic mentality. Most notably these countries are those without a significant bourgeois and whose previous stage was feudalism with no past participation in a sophisticated capitalist trading order. Thus witness the differential success of various East European bloc countries since the fall of Communism. Or witness the difference between Taiwan and any African country. But leaving aside even the extreme cases, there are problems with the intermediates as I'm sure Chua is referring here to the pogroms and more formalised discriminations that flare up against market-dominant middleman minorities in, for instance Indonesia.

    On the other hand it's not clear that introducing one without the other necessarily entails a less difficult balancing act. The main virtue of democracy is not that it encompasses a means of reflecting the view of the majority. The main virtue of democracy is that in the long run it is the most stable means of ensuring that governance can change hands peacfully. This of course presumes that it's good for governance to change hands but I think the history of dictatorships or even business empires for that matter suggest that this presumption is justified - that is, it's good to keep present governance on its toes by making clear it is always of limited life (For a totally contrarian view on this see Hans Hermann Hoppe.)

    Regardless, it is so clear that doing one without the other (capitalism without democracy) can give one a better assurance of success in achieving the objectives of both in the long run?

    Thus if the idea is that, for instance, something like the China strategy is better than the Russia strategy for transition to a capitalist economy the questions that arise are as follows-
    i) is the present dictatorship really going to be stable enough to last long enough to do the market transplanting job well before it gets overtturned in a frenzy of blood?
    ii) even assuming it can last long enough for optimal implementation will its performance sufficiently deteriorate the longer the time it is around because of the 'who watches the watchers effect' alluded to above
    iii) will one ever reach the end point of a liberal democracy given the temptations of staying in power? If not then eventually deterioration will start to kick in via mechanism (ii) and it may all end in tears as per (i)?

    Notice too that while you hear experts talking about the China vs Russia approach to developing market economies, India is arguably an even greater success - its democracy muddled along in Gandhian socialism for decades but even it has come around now and boasts its own authentically developed Silicon Valleys.

    Friday, May 09, 2003
    The irrelevance of sexual 'morality'
    Another display of high intellect in National Review (notice too the ad they're running on the left of the article for a book on 'Intelligent Design')

    The Left wants a world where there are no rules, no morality, and no personal responsibility. In a relativistic world, those people who do have beliefs or morals must be held as the enemy. Liberal elites thus must seek to undermine traditional values and the status quo

    Charming. This comment won Andrew Sullivan's Derbyshire Award, though I wish he'd rename that award to something else since Derbyshire is a far more subtle thinker than his NRO mates, and indeed a far more subtle thinker than Sullivan himself. I wonder what the NRO types would think of NSW's recent moves to promote equal rights for gays by lowering the age of consent to 16 - which is the current age of consent for heterosexuals? Also another thing I've always wondered - why is it that countries with far more liberal sexual morality like Australia, Canada, Japan, Scandinavians and Dutch seem to produce proportionately far less screwed up sickos (Tim McVeigh, the Unabomber, serial killers, sexual predators, domestic terrorists) and have far less crime than relatively starched collar America? Why is this so if children and teenagers are supposed to turn into warped monsters by watching a bit of whoopie on TV or knowing that homosexuals exist?

    Update As per the comments below, mixed in with my rather admittedly facetious debating points about serial killers is a serious point which has been made before by researchers who fail to find any link between pornography and violence in various countries or find relationships quite the opposite of those expected. That is,framing the issue the other way there is no compelling evidence that countries with 'looser' morals are more violent/have proportionately more cases of sexual abuse or coercion, etc. More so marked when you consider the easy access to varieties of depicted depravity in some countries with low rates of actual offences. Of course other things may be responsible for this which are difficult to disentangle ...
    Michael in a Muddle
    In the preface to his new book, The Experience of Middle Australia: The Dark Side of Economic Reform, Michael Pusey admits to ‘despair’ over early drafts. Given how bad the final version is, how full of errors of fact, logic, and omission, that despair must count as one of Pusey’s few moments of genuine insight. At a guess, his publisher, Cambridge University Press, was also suffering despair, which might explain why a book that was originally scheduled for release in October 2001 did not hit the bookshops until April 2003.

    The generally positive reaction to Pusey’s book supports one of my theories about non-fiction books, which is that articulating the intuitions people already have (in this case, that economic reform is bad) is more important than the book being interesting, accurate, logical or well-written. Noam Chomsky (see my post of yesterday), who gives Pusey ‘advance praise’, is popular partly for the same reason.
    New Hayekian blog
    Greg Ransom, who set up the now iconic Hayek Scholar's Page and Hayek Mailing List now has his own blog (unfortunately with the rather un-Hayekian name of 'Prestopundit'). Go visit.
    Margaret Drabble loathes America
    Why is it that good writers and artists can always be counted on to have stupid political opinions? (think of TS Eliot, Ezra Pound, Dostoevsky, Picasso, Hemingway, I'm sure there are countless others which don't immediately spring to mind - George Orwell is not an exception to this rule. Orwell was a great journalist and pamphleteer and satirist but was 1984 or Animal Farm really a work of great literature?) Why is there such a strong tradeoff between the capacity for rational thought and creative ability in the arts?

    Thursday, May 08, 2003
    Can Asian societies think?
    This article takes a researcher to task for speculating that East Asian writing systems may hinder abstraction and that this can therefore explain the lack of scientific creativity of Asian societies:

    The latest scholar to venture into such politically sensitive territory is William C. Hannas, a linguist who speaks 12 languages and works as a senior officer at the Foreign Broadcast Information Service, a federal agency in Washington. In a polemical new book, "The Writing on the Wall: How Asian Orthography Curbs Creativity" (University of Pennsylvania Press), Mr. Hannas blames the writing systems of China, Japan and Korea for what he says is East Asia's failure to make significant scientific and technological breakthroughs compared to Western nations.

    Mr. Hannas's logic goes like this: because East Asian writing systems lack the abstract features of alphabets, they hamper the kind of analytical and abstract thought necessary for scientific creativity.

    The solution he proposes, switching to an alphabet, is hardly novel. It is an idea that has long been debated in countries like China, where using a computer keyboard can be a daunting task and people increasingly fall back on Pinyin, the Romanized Chinese script, for data entry. And few doubt Mr. Hannas's linguistic qualifications. "I don't think there's a single other person on the globe who knows all the relevant languages as well as Bill Hannas," said Victor H. Mair, a professor of Chinese language and literature at the University of Pennsylvania who taught Mr. Hannas in graduate school and is the general editor for the Pennsylvania Press series in which his book appears.

    Mr. Hannas insists that he is not criticizing Asians. "I worry that people will misunderstand my claim that Asians are less creative in basic science to mean that Asians are lacking in intellect," he said. "Nothing could be further from the truth."

    I think the researcher's argument is wrong for manyt reasons but I don't think he should be taken to task for raising the issue and for presuming there is a problem with intellectual creativity in general in Asian societies.

    Firstly if I recollect correctly there was one theory doing the rounds not too long ago that the reason that students from Asian countries did so much better at math tests and math olympiads was because the pictogram system of Asian writing stimulated the right hemisphere of the brain more and therefore honed spatial thinking that aided math. If Asian writing can be given credit in one context for one alleged strength, then by the same token there should be no problem with looking at whether it can take the blame for deficiencies.

    Secondly it's not at all implausible that the form of writing and education you are brought up with might give effect to subtle changes in your neurological connections.The thesis shouldn't be dismissed out of hand.

    Thirdly it shouldn't be inappropriate to suggest there is a relative paucity of scientific creativity in Asian societies and has been since, say, the 15th century? Asians are a lot harder on themselves than the PC brigade. A book doing the rounds in Singapore at the moment is called Can Asians think?

    Now, for my reasons on why I think this researcher is wrong.

    The obvious reason is that China did go through a period of great scientific creativity as documented by Joseph Needham during which it navigated a large chunk of the world, invented the compass, gunpowder, various mining and drilling techniques, developed highly sophisticated maritime technology, was the first to use paper money and meritocratic exams to select civil servants. etc - and at that time it was using the same writing system it is using now. Are Chinese who are totally illiterate in Chinese writing like me on average more scientifically creative than those in Asian countries? Well, lots of Asian Americans who are presumably also English-users have now won the Nobel prize but that's most likely a function of educational opportunities, contact with peers and so on.

    It seems as if most of the Asian world became frozen in time from about the 15th century or so when that idiot Emperor ordered a stop to contacts with the outside world. There's a lesson for you protectionists and isolationist and anti-globalisers. However if there's one word that can explain the intellectual sterility of Asian societies I'd say it would be 'Confucius'. And given China's cultural imperialism over other Asian societies, when it got into its frozen habits of thought owing to the excessive veneration for that boring Tory old fart it exported this to other Asian societies.

    Who knows how things might have turned out if instead China had grown to venerate the slighly mad but far more interesting contemporary of Confucius, that libertarian anarchist Lao Tzu? But seriously I think this is where the rot started. I'd like to write about all this in more detail later but here are some germs of thought:

    1)It was precisely the superiority of China's political technology and its earlier achievements which allowed it to build a vast centralised empire. The problem with centralisation as opposed to decentralisation that if you make one mistake in a system it spreads everywhere. Thus, for example excessive veneration of Confucius was instituted into the meritocratic civil service exams. The best brains from all over China, were being channeled into memorising Confucian texts rather than proving theorems or playing with metalwork or setting up businesses. What do you get when society is ruled by a bunch of humanist literary intellectuals widely steeped in the classics, every Straussian's wet dream? You get China long past its days of scientific glories. It's a good thing that the industrialists and scientists are in the ascendant in the West.

    2) In the West you had feudalism. You had roaming nomadic barbarian tribes intersecting with an ancient highly structured Mediterranean civilisation. You had the best of both worlds. Too little centralisation and organisation and you end up with the hunter-gatherer societies of the New World (you had the same thing too in China with the Mongolians and Manchus but rather than adapt the political and cultural technology to their ways they got swallowed up by it themselves). Too much centralisation and you get a society continuing to venerate ideas that have outlived their useufulness, basking in the pride for old achievements, reinforcing its insularity. The optimal level of organisation is in between. The Germanic tribes who donned the garments of the old societies donned them with an appreciation for the more decentralised way of life they led before - thus was sowed the seeds of liberal democracy and the nation state and federalism and creation of new structures which were crucibles for numerous collective trial and error attempts, which is more essential to progress than the individual mind.

    There's a lot of levels to this argument. There's the systemic level I've tried to sketch here but there's also the personal - what's so bad on an individual level about Confucianism? More later.

    Note to readers You might notice some changes in this version from what you read before. The reason is that I published a preliminary, rougher version of this posting last night and then decided I wanted to make some edits but Blogger has refused to update the changes until now.
    Keith Windschuttle's next victim?
    Fresh from his attacks on historians Lyndall Ryan and Henry Reynolds, Keith Windschuttle has turned his attention to American leftist Noam Chomsky, whose many books can be found in inner suburban bookstores. It paints a rather familiar picture of a leftist holding liberal democracies to high standards while endlessly making excuses for anti-Western tyrannies. See also the excellent profile of Chomsky by Larissa MacFarquhar in the 31 March issue of The New Yorker (article not on line).

    Wednesday, May 07, 2003
    Quiggin drought
    Prolific blogger John Quiggin's new blog site is stll inaccessible. John, get that mentalspace fixed or come back to blogspot.
    Rudd for Labor leader?
    My God, a Phillip Adams column I agree with -Adams thinks that Kevin Rudd should head the ALP. If only - he'd have to first of all lose the tone of superiority he sometimes projects which I can tolerate but I'm not sure the punter in the street can.
    Libertarian paternalism?
    The AEI Brookings Joint Center has up on its website a new interesting paper by Cass Sunstein and Richard Thaler titled Libertarian paternalism is not an oxymoron (PDF). Here's the abstract:

    Cass R. Sunstein and Richard H. Thaler assert that while the idea of libertarian paternalism might seem to be an oxymoron, it is both possible and legitimate for private and public institutions to affect behavior while also respecting freedom of choice. Often people’s preferences are ill-formed, and their choices will inevitably be influenced by default rules, framing effects, and starting points. In these circumstances, a form of paternalism cannot be avoided. Equipped with an understanding of behavioral findings of bounded rationality and bounded self-control, libertarian paternalists should attempt to steer people’s choices in welfare-promoting directions without eliminating freedom of choice. Sunstein and Thaler argue that it is also possible to show how a libertarian paternalist might select among the possible options and to assess how much choice to offer. This paper gives examples from many areas, including savings behavior, labor law, and consumer protection.

    Monday, May 05, 2003
    Prime numbers
    Prime numbers are apparrently the new rage among popular books on number theory. Here's a review in the Washington Post. One of these new prime number books is written by the most interesting and least predictable of the National Review writers/bloggers, John Derbyshire. Having just read Simon Singh's book on Fermat's Last Theorem I'm starting to be infected with a new found enthusiasm for number theory. If I could be reborn I'd like to be reborn as either a jazz/blues musician or a number theorist. I've got my blues harmonica to work on the first dream. Any reading recommendations to start me off learning number theory are welcome.
    What I'm currently reading
    Black spark, white fire which is written by fellow blogger Richard Poe (alas, no relation to Edgar Allen Poe though he looks like there might be). This fascinating book argues that the ancient Egyptians were of at least part African descent and certainly part of African culture, may have been originally established by the Ethiopians and were extremely influential in shaping Greek culture. The implication of all these argument is, as the subtitle of the book suggests, Ancient Europe may have been civilised by African explorers and the seeds of Western civilisation planted by an African culture. I am not particularly learned in this area so I don't know what to make of this controversial thesis but the book strikes me as being well-researched and Richard of all people (a Jewish-Hispanic conservative who writes for FrontPage magazine) would seem to have no particular ideological axe to grind in writing this book.

    The book has certain convinced me if I wasn't already convinced that the ancient Egyptians were at least partly African and the later influx of 'Caucasians' from elsewhere into Egypt did not add any particular advance to their civilisation so that it was already sophisticated from the start. It also makes a number of good points - for instance black Afrocentrists in the US are attacked for wanting to take pride in Egypt's achievements even if it is partly black because 'Africa is a big place' and US blacks are mostly from West Africa - but why shouldn't they if the descendants of Germanic barbarians of the far north of Europe can take pride in the achievements of older Mediterranean civilisations as being 'Western' and 'European'?
    The immigration-social democracy tradeoff
    Professor Ross Garnaut has delivered his commissioned report to the Immigration department. His findings?

    Poorly educated city dwellers should be given a helping hand to cope with Australia's expanded immigration program with an overhaul of the tax system to spur them into jobs, a Federal Government report says.

    While immigration "makes Australians richer on average", the report says, adverse side-effects can be headed off.

    Without help, the poorly educated could suffer as they competed for jobs in parts of Sydney and Melbourne where low-skilled migrants were concentrated.

    Australia's egalitarian ethos made it "politically impossible" to pursue a formula that had succeeded in the United States - paying low-skilled workers less.

    Instead, the author of the 60-page report, economist Ross Garnaut, suggests bold measures including changing federal-state funding to help the areas hardest hit by immigration, such as western Sydney, and putting more resources into transport and other urban services

    The fact that the lowest-skilled native born population can be hurt by immigration in the absence of redistributive measures should not be too controversial - after all, it is probably one of the main reasons why the trade union movement and Labor Party in the days of federation were among the strongest supporters of the White Australia policy - competition for jobs from new arrivals can drive down wages and conditions. Against all this, there may be countervailing demand effects depending on the composition of migration (for instance some of them might decide to support themselves by setting up businesses, rather than becoming employees) but it still follows that the higher the proportion of migrant intake which are likely to compete in the same labour markets as the native born population, the more likely that wages and conditons go down - unless they are regulated not to go down, in which case you will see more unemployment because some employers are not willing to employ the labour at the regulated minimum. Determining what the magnitudes of each effect are is a big ask which is why immigration policy will never be an exact science. In the US which has a higher proportion of low skilled immigration, the costs of immigration in terms of reduced economic opportunities in particular for low wage blacks (whose closest competition is of course low skilled Hispanic immigrants) , has been well-documented by the research of Harvard Professor George Borjas. As the article rightly notes, the US has nonetheless been able to absorb large amounts of unskilled immigration precisely because of their flexible wages and conditions and low minimum wages - immigrants then end up being working poor but the alternative is they end up being unemployed and potential recruits for Al Qaeda like they are in Europe.

    As a caveat to all these arguments, there is of course the now famous Card and Krueger study which found that the effects of higher minimum wages on job creation may have been overstated. In essence, Card and Krueger found that increases in New Jersey's minimum wage did not lead to job losses. However it is debatable to what extent the Card and Krueger study is relevant to the regulated wages and conditions found in Australia or putting it another way, minimum wages in the US are pretty low to begin with so it may well be that below some minimum there is little additional effect in terms of job losses in raising the wage because the demand expanding effect of such rises outweighs the depressing impact on labour demand (because some employers don't feel the labour is worth employing at that wage). This is not say, however, that the conventional economic story that the higher the price the lower the demand won't still kick in, at the regulated levels of Australia's industrial relations system. All these considerations are of particular relevance to the refugee debate. Refugees are by definition that part of the immigration intake that is not selected for skills. A higher proportion of refugees are likely to be low skilled than those who come in through conventional channels. Low skilled migration will have more adverse impacts on the economic opportunities of low income groups already here. Anyone proposing a much higher intake will likely have to adopt some of the measures recommended in the Garnaut Report to ameliorate the effects, and perhaps go further down the path of neo-liberal reform of the industrial relations system if you don't want to end up with a large pool of workers priced out of the market. You can't have everything.
    Comments facility now activated
    With many thanks to c8to aka Tom Vogelsang who is now among my 'Centrist' links on the left and whose blog is the epitome of Zen minimalism, I have caved in to audience demand and added a comments facility. Unlike John Quiggin I am not so genteel and am occasionally fond of colourful language myself so it would be hypocritical of me to impose an explicit prohibition against swearing and bad language on my comments facility - this will be left to the judgement of the individual user. However any comments which I judge to be likely to land me, as host, into trouble, under the defamation and racial vilification laws will be swiftly removed, as will any comments which are personally defamatory (as a guide - saying that my arguments are stupid does not count as being personally defamatory) . Subject to these rules, spontaneous order reigns supreme.




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