Socialism’s Poster Child?

David Deming writes,

You don’t have to be a student of ancient history to know socialism doesn’t work. The collapse of the Soviet Union in 1989 was an unequivocal demonstration of the moral and economic superiority of capitalism. The misery caused by socialism is unfolding today in Venezuela. Since Venezuela embraced socialism in 1999, poverty, crime and corruption have all increased. Grocery shelves are empty and the annual inflation rate is estimated to be as high as 200 percent.

For the left, the poster children for socialism would not be the Soviet Union or Venezuela. Instead, think of Sweden or Denmark. But one can argue that those are welfare states, not socialist states in the sense of government ownership of the means of production. But consider Singapore:

A majority of the top dividend-paying stocks on the Straits Times Index are government-linked

That is according to Andy Mukherjee. Pointer from Tyler Cowen.

I would suggest focusing on the relationship between knowledge and power. In small states, like Singapore, Sweden, and Denmark, there is relatively little discrepancy between knowledge and power. It is possible for government officials to know more of what they need to know to carry out policy effectively.

Large states are harder for a central government to manage. Decentralized institutions, including markets, do a better job of aligning knowledge with decision-making power.

See my essay on the recipe for good government.

What Books to Read?

Diane Coyle asks,

What ten books would you absolutely want a young person to read – whatever their subject – to be well-rounded? The idea is a kind of summer reading list for someone about to go to university – what kind of broad mental hinterland should they have before arriving to start a social science degree?

Pointer from Tyler Cowen.

Of the ten she lists, I have read Hume, Kahneman, Camus, and Jacobs. I have strong impressions (possibly too shallow) of what is in Darwin, de Beauvoir, and Scott. I have no strong impression of the other three.

a. I have compiled these sorts of lists before. I think that perhaps more important than which books you put on the list is your thought process in assembling them.

b. There is nothing magic about the number 10.

c. Some of the books that would be in my list have yet to be written.

My first category might be called war and society.

1. Violence and Social Orders, by North, Weingast and Wallis. A very powerful political economy framework that I think works.

2. The Best and the Brightest, David Halberstam, about the Vietnam War. It is an epic tale of government failure.

3. Alone, William Manchester’s second volume of his biography of Winston Churchill. If Vietnam was the costliest intervention mistake made by a western democracy in the 20th century, then the failure to heed Churchill’s warnings about Adolf Hitler was the costliest non-intervention mistake.

My second category might be called late 20th-century perspectives on 21st century technology and society.

4. The Diamond Age, a work of science fiction by Neal Stephenson, is longer and more confusing than I would like, but it offers a vision of the impact of technology on society that raises many of the important issues, particularly the class divergences that people are talking about today.

5. The Transparent Society, by David Brin. That also was a very farsighted book, about the issues of privacy and security that are being much discussed today. See my review.

6. The Age of Spiritual Machines, by Ray Kurzweil. He later updated and expanded his thinking in The Singularity is Near, but I think that the older version may be more interesting, because of the long list of predictions made in 1999 for 2009 and 2019 that we can now evaluate.

My third category might be called fictional insights into human nature and power over others.

7. One Flew Over the Cuckoo’s Nest, by Ken Kesey. Don’t bother with the movie, even though it was voted Best Picture. For me, the book offers insights into the dynamics among people who feel entitled to power and people who are nervous about freedom.

8. Animal Farm, by George Orwell. Another book on the determination to exercise power.

9. Lord of the Flies, by William Fielding Golding. I see it as a story of reversion to barbarism.

I do not know how to categorize my next pick.

10. The Blank Slate, by Steven Pinker. The book gives you a lot of modern European philosophy and a lot of evolutionary psychology.

My next category might be “dueling asymmetric insights.”

11. Moral Politics, by George Lakoff. Lakoff, a progressive, offers an interesting theory of the appeal of conservatism. Recommended for conservatives so that you can understand how progressives think of you.

12. The Vision of the Anointed, by Thomas Sowell. Sowell, a conservative, offers an interesting theory of the appeal of progressivism. Recommended for progressives so that you can understand how conservatives think of you.

Finally, I have my category of works yet to be written.

13. Readings on The Industrial Revolution. This would include timelines for growth rates, innovations, and trading patterns. It would include excerpts from various theories (Clark, North, McCloskey, etc.) of why the Industrial Revolution emerged at the time and place that it did.

14. Readings on the Great Depression. This would include a chronology of events, and it would include excerpts from various theories of why it started and why it persisted. It would include analyses of the political legacy of the Great Depression

15. A project that I am currently toying with (probability of attempting of about .2), on the challenge of trying to extricate yourself from political tribalism. A bit of Robin Hanson, a bit of the three-axes model, a bit of Martin Gurri. Possibly embedded in a work of fiction.

Kling on Matt Ridley

My review of The Evolution of Everything is here. I end my review with a series of questions.

If ideas emerge from the “adjacent possible,” how is it that some rare individuals thousands of years ago were able to anticipate ideas that only began to penetrate our culture in the late 18th century, when Adam Smith published his most important works? And why does the idea of evolution continue to face so much resistance today? As Ridley points out, on the one hand there are many religious conservatives and others who insist that biology comes from design, not from evolution. And there are many on the left who insist that economic well-being comes from government planning, not from markets. Are those of us who see decentralized evolution as superior to central planning forever doomed to be in the minority? Or is it possible to envision evolutionary progress on that front as well?

Jeffrey Miron on Fiscal Imbalance

He concludes,

The fundamental economic reality implied by fiscal imbalances is that the “rich” economies are not as rich as they would like to believe; they are planning far more expenditure than they can afford. Recognizing this fact sooner rather than later does not eliminate the problem, but it allows for more balanced, rational, and ultimately less costly adjustments. And if attention to fiscal imbalance helps cut ill-advised expenditure, economies can have their cake and eat it too.

I think that this way of putting it is vulnerable to the comeback that we can always cancel our debt, since we owe it to ourselves. I prefer to characterize the problem as one of creating political friction because of the need to disappoint people’s expectations. See my classic (in my opinion) Lenders and Spenders essay.

Adam Martin on Democracy

His talk is here.

He says that voice tends to be less democratic than exit. Even though everyone has a right to vote, political influence tends to be highly concentrated.

I tried to make the same point, probably less well, in the widely-unread Unchecked and Unbalanced. For a more concise version of the arguments there, see my essay on competitive government. That essay and Martin’s talk go well together.

Two Thoughts on Douglass North

1. Deirdre McCloskey treated him as an adversary.

2. I cannot think of any other Nobel Laureate who produced anything as significant after winning the Nobel Prize as Violence and Social Orders (My most recent essay about that book is here, and more links to my use of his framework can be Googled), or even come close.

Tyler Cowen has more.

Garett Jones is Endorsed

‘Pseudoerasums’ writes,

Your “moral circle” is wider with intelligence and patience than without.

…To paraphrase Garett Jones…smart, patient people are more Coasian; they find a way to cooperate and build good institutions.

It is a very long essay, and all throughout I was thinking of Garett Jones, so it was nice to see him turn up at the end. Pointer from Tyler Cowen.

The substantive point is that you can expect good institutions when you have a population that is high in intelligence and patience. Although the author of the essay does not go this far, I would suggest a causal pyramid with population intelligence and patience at the bottom, institutions the layer on top of that, and economic outcomes and other indicators of human development on top of that.

See also the appendix to my recipe for good government piece.


I review the latest book by George Akerlof and Robert Shiller. I generally admire both authors. Ordinarily, if I do not like a book, then I do not write a long review. However, because both authors are Nobel Laureates, and because the book has received some positive press, I made an exception and let go with both barrels.

The authors do not deny that markets often work. However, if phishing equilibrium is limited to specific types of products, then the authors do not say so, nor do they give any criteria or characteristics to look for in order to predict in which markets phishing equilibria will be most prevalent.

But you have to read to the whole review to get the flavor.

Recall that Alex Tabarrok did not much are for the book, either.

The Basic Social Rule

My latest essay:

I claim here that humans have a fundamental rule of social morality, which is: Reward cooperators; punish defectors. The use of this rule is what enables humans to work effectively with strangers, making possible sophisticated economies and civilizations. However, this rule can cause problems when people mis-classify the social actions of others.

Please read the whole thing and comment. These are ideas that I also plan to include in the Book of Arnold.