Wednesday, May 31, 2006

Hegemony and its Discontents

The Pax Americana appears to be taking it on the chin. Not only is the U.S. facing unexpected military difficulties in Iraq, but a mere four-plus years after 9/11 anti-Americanism is on the rise in Europe, in Latin America and elsewhere. Why?

In asking the question, I am not here referring to fundamentalist, essentialist anti-Americanism – the belief that the U.S. itself is intrinsically malevolent, and must be opposed to its core. That idea has been around for awhile, and has been analyzed many places, including here. Rather, I mean a softer form of opportunistic anti-Americanism the opposing of U.S. national interests by other nations in pursuit of their own. This is a natural and predictable reaction to the era of U.S. hegemony – our inordinate role relative to our percentage of the global population (about 5 percent) and even global output (about 25 percent) in maintaining world order, a power we use (as any nation would use) in pursuit of our own interests.

It is U.S. military power that keeps the sea lanes largely unobstructed, allowing the gigantic stocks of global commerce to move. U.S. diplomatic leadership, sometimes using carrots and sometimes sticks and always with the cooperation of other like-minded nations, has presided over the creation of the World Trade Organization, the establishment of the International Criminal Court and various ad hoc war-crimes tribunals in places like the Balkans and Sierra Leone, and, most controversially, the reining in of destabilizing states.

But as hegemon, the U.S. is the one nation that cannot be subject to such courts, which will be used to weaken its hegemony; this is obviously an argument that can never play well elsewhere. But the reason is that global order is a public good – it benefits those who contribute and those who don’t alike. And so each nation has an incentive to free-ride, just as those who benefit from flood-control projects have inadequate incentives to contribute in proportion to the social value of their contribution. In this case nations have an incentive to pick at the edges of U.S. hegemony so as to further their own private interests. And so Germany, France and Russia dealt commercially with and forestalled military action against Iraq and Russia does the same now with respect to Iran not because they are corrupt and the Americans are pure, but because it is not in their interest to proportionally contribute to maintenance of global order, and it is in the interest of the U.S. to facilitate its own national interest (e.g., by installing pro-American governments or directing business to American firms) at their expense while it polices the world. The U.S., with its poaching of territories from Mexico and Spain during its rise to great-power status during the Pax Britannica, was also willing to behave as the realists would predict, and now other nations are doing the same. The U.S. will, for the same free-riding reasons, continue to spend a lot on national defense, and Europe will continue to spend little. Robert Kagan has written a famous essay about these divergent interests with respect to the U.S. and Europe, although from the point of view of different mental models of the world –- a Hobbesian jungle for the U.S., a postbellum Utopia governed by international law rather than the threat and actuality of military power for the U.S. While the argument here is grounded in realpolitik, the prediction is the same.

And so we can expect that over time other powers will be reluctant contributors to American hegemony, but will never seek to go far enough to threaten it. China or Russia will oppose an aggressive U.S. posture in Iran, but is not interested in seeing the U.S. defeated (or Islamists armed) to the extent that the U.S. withdraws from the world. One of the things that left other nations most fearful in the days after 9/11 was that the U.S. really had been brought low – fatally wounded, unable to maintain its role as the global policeman. It is worth remembering that in those days it was unknown whether worse attacks were coming, and whether the U.S. would even succeed in ousting the Taliban. Now that the imminent threat from the jihad has declined nations feel more comfortable free-riding, and so we can expect to see more of it. This is less true in places where threats still feel real, and so the Japanese are considerably more enthusiastic about aggressive American leadership than the Europeans are. But in general being the global sheriff is a thankless job.

And for Americans an ambiguous one at best. World War I saw the Red Scare and anti-sedition legislation that would never have passed muster in a time of peace, and World War II saw the creation of an immense national-security apparatus (Eisenhower’s “military-industrial complex”) that has only grown since then. The rise of American power, in other words, has coincided with the rise of the surveillance state. Do not kid yourself. It would have been utterly inconceivable to a Jefferson or even a Madison that the government under the guise of national security could collect the path – the number from which the call came, and the number receiving the call – of every phone call in the U.S., as the National Security Agency is said recently to have done. Even if those in the national-security state believe that they are only acting in response to an imminent and great danger, it is in the nature of things that national-security personnel always believe that. It is in their DNA to see threats everywhere, and hence to feel forced to move the goalposts with respect to the security/liberty tradeoff. It is, ultimately, what they are paid to do. The immense opportunity cost of the national security state – the diverted scientific and engineering talent and the tax burden that it necessitates – is also a substantial consideration, albeit ultimately a secondary one.

But what is the alternative? If the U.S. is not the global power, one of two other things must happen. Either, absent a hegemon, the world descends into chaos (which can still be observed on the global periphery in places like Somalia) or someone else becomes the hegemon. And whether that someone else is China or the caliphate or some as-yet unimagined global power, the alternatives offered do not seem very appealing. As a believer in limited government but a realist about man and the world he has built, I see no good choices for the U.S. In an address to Congress in July 2003, when Baghdad had just fallen and the introduction of “democracy” to Iraq seemed like a trivial task for political engineers, Tony Blair gave a speech to the U.S. Congress in which he said that “[a]s Britain knows, all predominant power seems for a time invincible, but in fact, it is transient. The question is, what do you leave behind?". If we don’t leave a global legacy, someone will, and that is what makes the choices for Americans so unappealing.

Friday, May 26, 2006

"I Wouldn't Cover the EU if You Paid Me"

Don't read much about the European Parliament? They have a plan to fix that. The International Herald Tribune reports that to persuade Brussels-based journalists to make the trip to write about the Parliament when it goes to Strasbourg once a month, European taxpayers are ponying up travel and per diem money for journalists. This is in addition to the already generous facilities they get to use free of charge in Brussels. (Hat tip: No Pasaran!.) Here is the most revealing excerpt, although the whole thing is worth a read:

Although it is generally viewed as unethical for journalists to accept funding from institutions they cover, analysts said that in countries that rely on public broadcasters, the notion of using available public money to fund journalists may be viewed as acceptable.

Jaime Duch, spokesman for the Parliament, said the funding was intended to encourage EU journalists who would not otherwise cover the Parliament to make the monthly pilgrimage to Strasbourg. He said the Parliament under no circumstances interfered with what was reported. "If we didn't help them, they wouldn't come because they have other priorities," Duch said. "And if we stopped the funding, the journalists would protest."

One television journalist who regularly travels to Strasbourg using funding from the program said the daily stipend was sufficient to pay for a quality hotel and lunch at an upmarket brasserie, including a glass of Bordeaux wine and a dish of Strasbourg's celebrated sausages. The neo-classical Hotel Hannong in Strasbourg - popular with journalists - costs about €60 a night if booked on the Internet.

Another broadcaster, who like others interviewed for this article requested anonymity, said perks such as these had prompted journalists to refuse requests by editors to write stories on members' privileges and travel expenses at the Parliament, a topic of growing interest in Europe. "How can I expose such perks when I myself am benefiting from them?" the journalist asked.

Substitute “U.S. military” or “big drug companies” for “Parliament” and the, um, ethical conflicts become obvious. There are two lessons to take away from this episode: that the Parliament is paying the money, and that the journalists are taking it.

Ken Lay's Revenge

Ken Lay and Jeffrey Skilling are likely to have a lot of time on their hands to contemplate their legacy. The press will undoubtedly depict their convictions yesterday as the hallmark of an era of rampant corruption and speculative excess, but ultimately they will have the last laugh.

Enron, the company that a jury of their peers has now found was driven into bankruptcy by the fraud of Mssrs. Lay and Skilling, is generally credited with at least inventing and certainly mainstreaming and refining the idea of trading electricity futures and derivatives of those futures instruments. There is nothing intrinsically different in this than in the trading of commodities futures that farmers and others have engaged in for centuries. It helps everyone – electricity producers and consumers alike – who already bears or for a fee is willing to bear exposure to risk to benefit from a more efficient allocation of that risk. A farmer has a huge amount of risk tied up in whether that year's crop succeeds or fails, and because of the vagaries of weather not just where he is but elsewhere this is to some extent beyond his control. Professional “speculators” will make it their business (literally) to try to amass information about the global outlook for corn, which will determine its market price, and if the risk-averse farmer is willing to pay the less risk-averse farmer to accept delivery at a guaranteed (if potentially lower) price on a guaranteed date, the farmer benefits from eliminating the risk and the speculator benefits from expected profits, which may or may not pan out. The speculator performs the further service of more efficiently matching up those who make corn to those various parties who may need it in the future – what economics textbooks call “widening the market.” And so too with electricity futures. (Just as with corn futures, fraudulent trading in electricity futures does not promote efficiency, and hence is obviously to be discouraged, by criminal sanction if necessary.)

And while Enron is now essentially dead, a tiny shell of its former self in the process of liquidating its remaining operations, the innovation it pioneered lived on. Numerous other companies trade electricity actively, and the practice has even spread to many countries in Europe. These exchanges sprout because they mutually benefit the participants. And whether they know it or not, they benefit others, e.g. electricyt buyers, who never get near them.

I was always surprised by the amount of attention the Enron collapse got. The story broke less than two weeks after the U.S. launched its attack on Afghanistan, when the fate of that venture was still uncertain and the wounds of Sept. 11 were still raw. And yet Enron managed to push that story below the fold of the major newspapers; yesterday’s conviction drew four columns of all-caps headlines in The New York Times.

And that is undoubtedly mostly because of the power of Enron as archetype for an era. It symbolized the speculative excesses of the high-tech 1990s, and the too-clever marketization of everything by unregulated Masters of the Universe. In combination with the 2000-1 California electricity fiasco (itself caused mostly by the inability of its electricity generators to ration electricity by passing on higher costs to consumers), it served to delegitimize market forces at a time when in the view of many they were due for a comeuppance. Despite the fact that Enron and Tyco and Worldcom were a tiny fraction of the thousands of companies traded on the U.S. stock exchanges, the meme of “corporate corruption” took hold, as deceit and fraud were increasingly assumed to be the norm in corporate America. For an eminently representative post-verdict specimen of this crabbed view see here. Howard Fineman of Newsweek blames the episode on some amorphous villain called the Texas business culture. And the shame attached to Enron in particular endures above all; every fall for the last few years the University of Missouri (where Mr. Lay went to school) has solicited applications for the Kenneth H. Lay endowed chair of economics, and every year they have to run the ad again, presumably because it goes unfilled.

Ultimately Enron was symbolic of almost nothing except a few venal individuals. The innovations that spurred it will live on, no matter what the anti-corporate crusaders say, because they make it easier for people to pursue the goals they wish to pursue. That is what all markets do, and ultimately whatever its sins and the pain it has inflicted on those who bought into it Enron has ultimately given more to humanity than it has taken.

Wednesday, May 24, 2006

Reds, Whites, and the Globalization Blues

The Yanks win again. A Napa cabernet-based wine, Ridge Montebello, finished first in the combined rankings of judges in California and London. These were wines used in the 1976 tasting, because an argument had been made then that while the Cali wines were better then they wouldn't age as well. As five New Worlders took the top five of ten positions (another finished tenth, with French grand wines finishing 6-9), and as Ridge itself moved up from fifth in 1976 to first now, that argument seems to have been put to rest.
Thirty years ago today a remarkable event occurred which in many ways foreshadowed much of the anger that consumes some (but far from all) people when the conversation turns to globalization. A Paris wine merchant named Steven Spurrier wanted to use the U.S. bicentennial to promote his store. He arranged for nine French wine experts to conduct blind taste tests of U.S. and French reds and whites on May 24, 1976. Mr. Spurrier was confident that the location of Paris combined with the all-French panel would guarantee victory for the French product.

The tasting of whites was conducted first. Stunningly, the judges awarded the top marks to an American wine, and in fact the Yanks took three of the first four positions. Breaking wine-tasting protocol, the judges were informed that they had selected U.S. wines in the white stage. Despite what might have been an extra effort to pick French wines in the red stage, an American wine won there as well. Although French wines took second through fourth places, many of them were from the elite vineyards, and the U.S. winner was the fairly run-of-the-mill Stag’s Leap. (The full results are here).

In some ways the full results of that event are still with us, and it is certainly a striking illustration of globalization’s discontents. This BBC video actually claims that the results marked the rise of modern French “economic patriotism.” Whether that is true or not, they do provide a fascinating contrast between two ways of thinking about wine. The European and particularly French view emphasizes the local characteristics of each region and the knowledge accumulated over generations by its artisans. Each wine is a unique product of unique geography, unique climate and unique local knowledge. (The French call this view of wine terroir.) The recent documentary Mondovino provides a view of this conflict that is sympathetic to traditional winemaking.)

In at least the stereotypical view of U.S. winemaking (which has been equally adopted by other new entrants to the global wine scene such as Australians and Chileans), winemaking is like the manufacture of any other product – it is a process amenable to technology, market research, cost-saving innovations and the other standard tools of modern business. And so American barrels are different from French ones, giant American corporations (the Mondavi empire, e.g.) purchases asset all over the world from local driven out by the brutal forces of global competition (i.e., by their inability to make wines that people want to buy at the price they ask), and on and on.

And so the forlorn local artisan crushed by the ruthless multinational is one of the tropes we are left with after “The Judgment of Paris,” as the 1976 event came to be known. The French wine industry has been in the cellar for many years, as tastes have shifted to the global wines. (It is unclear whether residual American anger over the French government’s actions in the runup to the war in Iraq plays any role in this.) And this slump has occurred despite the tremendous power that the French label still carries in the wine-mad country of Japan. But those global wines are global precisely because they are wines that people enjoy, even if some wine aficionados think they shouldn’t. Such emphasis on expertise acquired at great cost as the wisest course of success as opposed to the outcome of decentralized competitionis one of the most common determinants of hostility to globalization.

Another notion that those opposed to the globalization of wine reject is the role of the expert in determining tastes, particularly the inordinately influential American Robert Parker. Parker has no particular background in winemaking – he was an attorney by training for whom wine was a hobby. And yet he saw fit to assert that the traditional wine-classification system of France was obsolete, and that something more consumer-friendly was needed. Hence, the ultimate barbarism – the ranking of wines not by reputation but by tasting and grading on a 1-100 scale. Mr. Parker has built an immensely profitable empire by ranking wines throughout the world, without (he would certainly claim) fear or favor arising from any of the commercial ties to the wine world that crippled the reliability of earlier wine critics.

It is clear that there is no going back. As an admirer of Friedrich Hayek’s notion of the implicit wisdom of social tradition, I might ordinarily be expected to have some sympathy for the small European family winemaker who is unwilling to adapt with the times. But traditions should be overthrown as long as the process occurs in an evolutionary, competitive decentralized way rather than being imposed through politics. The globalization of wine is the former, and it has had the same effect as the globalization of everything else – it has dramatically improved, quality, accessibility and especially variety of the product. The number of wine drinkers is greater than it has ever been, and this will continue – driven not just by growth in the U.S. but by the penetration of wine into the massive Chinese and Indian markets. (China already has vintners, some of them not bad.) The number of types of wine and the ability to acquire it at reasonable sacrifice is simply far greater now than when wine was more or less an old-boy network controlled by rent-seeking insiders. And as for Mr. Parker, he succeeds because consumers value what he does. The elitist would attribute that to the sheeplike behavior of his average subscriber, but a more sophisticated view would note that Parker is a market-maker, able to make wine comprehensible to those without the time to invest mastering the old arcane classification systems. His rise has coincided perfectly with the rise of global wine consumption, and that is no coincidence. Wine drinkers present and future are the better for his presence, and for the globalization of the wine industry.

Tuesday, May 23, 2006

To Trade or to Grab

”Competition makes discrimination costly, and independently forces people who are truly racist to re-evaluate those beliefs when they must, because the corporation wants to make money rather than accommodate tribal grievances, work together with people of different groups. Athletic teams, military units and multinational corporations are the places where racism runs into the most difficulty. In each case people are working have an obvious common goal, and there is no time to waste worrying about such extraneous considerations as racial hostility. Thus, the more freely market forces play out, the more quickly racism recedes.”

Or so I claimed in my last post on American racism. That commerce erodes hate, discrimination and segregation is now supported by this report from the BBC. It notes how the most downtrodden castes in India now have opportunities their parents could not have imagined, due to, basically, globalization, economic reform and multtinational corporations:

"The economy has created the need for jobs," he [Bindeshwar Pathak, social entrepreneur] says, showing us the various activities in his centre. "More people are needed to work for these multinational companies who need women to sew their garments, make handicrafts, work in their factories."

"Before this centre, these women would have never even thought of a life like this, or a way out. Now, even their children feel they can be proud of their mothers."

Economic growth has changed the lives of the lower caste in Indian cities as well.
Arun Chowdhury, a lower caste businessman, runs a thriving outdoors advertising firm in Delhi.

A dozen men work for him, many of them from the upper caste.

In the pursuit of wealth and employment, ancient social barriers have become irrelevant.

"I've never felt that because of my caste, my advertising business has suffered," says Arun.

"No one ever asks me. It is not important in the cities like Delhi. It is commerce and trade that is important now. Everyone wants to make money."

Prosperity, or more accurately the potential for prosperity, has surprisingly salutary effects on the choices people make. When one reads, just to take a few examples from today's news, of rioting over wages in Bangladesh or sporadic civil warfare in Mali, one wonders why the modern West has mostly escaped the kind of violent instability that is routine in much of the world. As I say this, note that the West gave the world two of the most brutal outbreaks of interstate violence in the form of the two World Wars. And certainly the brutalities of the U.S. Civil War provide additional evidence that we have no innate cultural predilection to avoid violence. So I am reluctant to attribute the chaos and looting that still grips so much of the world to something as amorphous as "culture." Postwar Western Europe and North America (and even the word “postwar” is striking in its optimism) have been remarkably tranquil, even able to absorb with relative equanimitythe social upheavals associated with the baby boomers moving into young adulthood. (While the late 1960s were turbulent in the U.S. and Western Europe, it is useful to contrast our experience then with those of other societies with excesses of angry young men now - the Middle East with its jihadism and China with its rapidly ballooning violent protests over property seizures.)

Why? A key ingredient in this outcome is the opportunity for gains through cooperation. There are two ways in this world to get what you want from someone – to persuade him to give it to you (by giving him something he wants), or by taking it from him, with the corresponding risk that he will fight back. The former is trade, and as people at least since Adam Smith have known, trade tends to promote cooperation. And the greater the potential gains from trade, the more incentive societies have to restrain predatory behavior, whether in the form of civil war, aggressive rent-seeking via the state or ordinary street crime. And so richer, more open countries tend to be less plagued by these problems, whose roots lie in the intrinsic makeup of the human species. This is the great promise of globalization – as more societies merge into the immense global commercial traffic, the incentive to get along rises, and the incentive to emphasize the arbitrary differences of tribe – religion, language, ethnicity, caste – correspondingly fade. Globalization raises the return to funneling activity into positive-sum cooperative trade rather than zero-sum politics.

But let us be cautious; let us not be over-deterministic in thinking about the nature of man. Commercial forces will restrain him from his worst impulses, but they can never guarantee anything. Here are another's remarks that are broadly consistent with the above analysis:

The elaborate financial interdependence of the modern world has grown up in spite of ourselves. Men are fundamentally just as disposed as they were at any time to take wealth that does not belong to them. But their relative interest in the matter has changed.

In very primitive conditions robbery is a moderately profitable enterprise. Where the rewards of labor are small and uncertain, and where all wealth is portable, the size of a man’s wealth depends a good deal on the size of his club and the agility with which he wields it. But to the man whose wealth so largely depends upon his credit, dishonesty has become as precarious and profitless as honest toil was in more primitive times. The instincts of the City man may at bottom be just as predatory as those of the robber baron, but taking property by force has been rendered impossible by the force of commercial events.

The writer was Norman Angell, the work was The Great Illusion, and the year was 1910.

Friday, May 19, 2006

The Last Refuge of the (21st-Century) Scoundrel

What patriotism was to Dr. Samuel Johnson in his famous saying, public opposition to someone else's "racism" is all too frequently to the early 21st century. In opposing an amendment to the Senate immigration bill that would declare English to be the official language of the U.S., Senate minority leader Harry Reid declared it “racist.” In particular, he said that “"This amendment is racist. I think it's directed basically to people who speak Spanish.”

Now this is a statement that cries out for deconstruction. It is frankly probably true that the amendment in some trivial sense is targeted at Spanish speakers, in that Spanish is by far the most widely spoken language in the country other than English. But must one be “racist” to expect those who can speak Spanish (and any other language, since the amendment does not mention any other) to deal with the government in English? All of this is independent of whether the amendment is wise, as it may well not be. But "racist"? This comment is part of the devaluation of the notion of “racism,” and its entanglement with the refusal to support both the general agenda of the multicultural left and government subsidy of particular cultural capital - such as a minority language or cultural heritage - in particular.

Once upon a time “racism” was a meaningful word, one which meant belief in important intrinsic differences among “races,” and often a corresponding dislike of the races thus judged to be inferior. But now it is wielded opportunistically as a sword to combat any dissent against the multicultural pieties. And this is a shame. Actual racism (and religious prejudice) is undeniably a powerful force in the world.

But is it so in the U.S.? As Casey Stengel said, you could look it up. The General Social Survey of the National Opinion Research Center at the University of Chicago has been keeping track of Americans’ views on social matters since 1972. One of the things they have been tracking is attitudes toward racial matters. Since 1977 they have been asking respondents whether they think racial “differences are due to inborn disability.” In that year 26.1 percent of Americans said yes and 73.9 percent said no. That divide has changed over time to 21.1%/78.9 percent in 1985, 13.4%/86.6 percent in 1994, and 8.5%/91.5% in 1994. Fewer than one American in ten, in other words, now believes that there are important intrinsic differences in the races, a fraction that is astonishingly low for such a survey. (This may overstate the problem of hostile racism in that includes on-balance "positive" stereotypes, e.g. the belief that Asians are genetically good at math.)

Several papers have been published on the game show "The Weakest Link," which was briefly popular a few years back. In the show, contestants had clear monetary incentives to vote against weak contestants in the early rounds and stronger ones in the later rounds. In a working paper at the National Bureau of Economic Research, Steven Levitt (of Freaknomics fame) found no evidence of discrimination by men and non-blacks against women and blacks respectively, although there was some evidence of information discrimination (based on statistical inferences about the whole group rather than dislike) against Hispanics, and some taste-based discrimination against older players. In a recent paper in the Feb., 2005 issue of the Journal of Human Resources, Kate Antonovics, Peter Arcidiacono and Randall Walsh also found that men did not discriminate on taste grounds against women and non-blacks did not discriminate against blacks, although women did discriminate against men. The cleverness of such tests is that they involve a clear tradeoff of money on the one hand versus indulgence of discrminatory tastes, if they exist, on the other. If such tastes existed, money trumped them.

That the U.S. now gives out citizenship with almost complete indifference to race, a distinction it shares only with Canada and perhaps Britain and France, also suggests how inconsequential race is in this country. So too does the surge in interracial marriage in the last twenty years. Many Americans could now tell of instances in which they placed their lives or careers in the hands of a doctor or supervisor of a different race. And the sort of nationalist/racist politics on the rise in France, Austria and elsewhere in Europe has, like so many European fanaticisms, not played nearly as well here. (Most of the time; a Holocaust denier, David Duke, was nearly elected governor of Louisiana a few years back. But, broadly speaking, there is no candidacy for European-style quasi-racist politics, as the repeated failures of Pat Buchanan’s campaigns bear out.)

So why does the word still get trotted out so much? First, because we are all subject to self-serving bias: when we don’t get a job offer or a promotion, we tend to believe that we deserved it but that there was a flaw in the selection process. But why, in the case of a member of a minority group, would he attribute the obvious error to racism rather than, say class bias or simple-mindedness on the part of the person making the decision? Here the larger culture matters. There is a significant industry that earns more revenues the more the U.S. is seen as a country riven by racism, and so they have an incentive to emphasize this as a key feature of American society. Class-based stories, on the other hand, have never gotten as much traction here as they have in Europe.

And perceptions of unfairness on grounds of “race” can then feed into more political activism on the basis of tribal identity, which further reinforces the subsidy of separate tribal identities, which in turn reinforces the belief that life’s unpleasantness is more often than not due to racism. And this in turn raises the return to the politically active of mobilizing the population on racial as opposed to other grounds, even though history provides ample precedent that this kind of political mobilization is most dangerous.

How then to break this vicious cycle? As I have argued before, there is ample reason to think that one of the most compelling ways to breaks down tribal hostility is free competition. Competition makes discrimination costly, and independently forces people who are truly racist to re-evaluate those beliefs when they must, because the corporation wants to make money rather than accommodate tribal grievances, work together with people of different groups. Athletic teams, military units and multinational corporations are the places where racism runs into the most difficulty. In each case people are working have an obvious common goal, and there is no time to waste worrying about such extraneous considerations as racial hostility. Thus, the more freely market forces play out, the more quickly racism recedes.

Perhaps even quickly enough, an optimist might suppose, to make the U.S. a country where almost no one believes in intrinsic racial differences. A country that, in fact, it already is.

Wednesday, May 17, 2006

Christianity Behind the Grassy Knoll

The Da Vinci Code premiered today at Cannes. Those worried about how it might rattle the faithful are probably in much better shape today than yesterday, with the BBC reporting that critics actually laughed at the film (which is not a comedy) at several key junctures, with some whistling at the end. What to make of the book's success, and the strenous efforts made to turn it into a summer blockbuster (even at the apparent expense of artistic quality)?

First note that the author of the book, Dan Brown, appears to be something of a crank conspiracist. He gives mixed signals in interviews, but often appears to believe that the Christian church, particularly the Catholic Church hierarchy, has been able to knowingly peddle a lie (as opposed to naively or uncritically believing something that is not true) for two millennia. One is reminded of the diagrams that conspiracists draw up, with lines going this way and that to show how the many perceived players in some perceived plot are really connected. The historical facts with which he leavens his book are probably true more often than not, but connecting the dots in this peculiar fashion is another thing altogether.

That such a theory (but remember, it’s just a work of fiction) could become a best-seller says a few things about the culture. (That it is made into a movie after the giant success of the book says only that Sony Pictures is trying to maximize profits.) First, there is a certain tone-deafness to the sensibilities of global Christianity, which is one of if not the fastest-growing religion on earth. (The ways Asian and African Christianity might ultimately change the Chritsian faith is a fascinating topic in its own right.) One is hard-pressed to imagine a major motion picture and novel positing that the foundations of Islam or Hinduism are purely mythical. That a novel and film that do precisely that about Christianity suggests two things: that those who brought them to market are untroubled by offending believing Christians, and that they see Christianity as in need of being taken down a peg. There is also the question of ignorance about how American Christians see the world: CNN has an earlier piece with an entertainment reporter, Sibila Vargas, in which she contends that, absurdly, Sony planned to pitch Da Vinci as it would The Chronicles of Narnia, i.e. to the same audience that turned out in unexpectedly huge numbers for The Passion of the Christ. If true, it is a pretty grim marker of how removed at least some at Sony Pictures are from this broad current of the American culture.

But this is unsurprising. For at least 150 years, sections of the intellectual community in Western society have had contempt for mainstream bourgeois culture, which rewards only the value of what you bring to the table as your trading partners see it rather than any intrinsic merit you have because you possess a particular number of years of schooling, a particular family history, etc. The rise of evangelical Christianity in the U.S. in recent decades, its resultant scary flexing of its political muscles, and perhaps even the growth of Christianity overseas make it part of the hated middle-class enemy, along with Wal-Mart and McDonald's. The popularity of Da Vinci (to the extent it was not motivated by the quality of the writing as readers saw it and the suspense of the story), particularly for Mr. Brown and those in the culture and ideas industry who facilitated it, may have something to do with this longstanding struggle. A quick Google search indicates over 28,000 results for the book title and “syllabus.” Although the majority of these are extraneous, some university courses as workaday as Italian Studies and freshman English have incorporated the text, however uncomfortable the fit.

And so is this a major threat to Christianity? Almost certainly not. Religion has been fair game in the Western public square at least since the French Enlightenment. While the decline of religion to almost nothing in Western Europe is often noted, this probably has more to do with state church monopolies and the collapse in faith brought about by Europe's 1914-1945 suicide attempt than with anything coming from the surrounding culture. Christianity is vigorous in the U.S. and growing explosively in Africa, Korea and China (although, curiously, it has never taken much in Japan). While The Daily Telegraph reports that two-thirds of those who read the book believe that Jesus fathered a child, and 17 percent of them believe the somewhat secretive and ritual-laden Catholic service group Opus Dei is involved in murders, this might just as easily be a selection effect – those who were predisposed to believe such things are those who buy the book. I am not aware of any evidence that Christians have been leaving the faith in large numbers because of the book.

And yet for all that some religious leaders believe that it is a threat; there have been calls to ban or slap a disclaimer on it in India and in some East Asian countries. (Ironically, in the Indian case it was a Muslim leader was quoted on the BBC calling for a ban; Muslims view Jesus as a prophet, although neither the ultimate prophet nor divine Himself.) The Archbishop of Westminster was interviewed on the BBC today and clearly had memorized his talking points; he twice went out of his way to refer to the movie as “Pythonesque.” My advice to the archbishop and to others similarly fearful is to relax: the movie will have its 15 minutes in the sun and then fade away, to be seen ultimately as another example of the sorts of strange ahistorical, conspiracist thinking that periodically seize public opinion in the U.S. and elsewhere. In the grand scheme of things, it’s just a movie.

Monday, May 15, 2006

Crimes Against Humanity, Then and Now

One of the most interesting features of Saddam Hussein’s ongoing trial, which concerns an orchestrated massacre of Shiites after an attempted assassination against him, is the brazenness of his and his co-defendants’ conduct. Hardly a day seems to pass in court without angry outbursts questioning the legitimacy of the judge, the trial, and the very state underpinning the process as American stooges or some such. Occasionally defendants have stormed out of the courtroom.

The Nuremberg trials after World War II (and the lesser-known Tokyo trials) were said to be an attempt to make the Axis powers answerable to law. Making national leaders answerable to the law for disrupting global peace, presumably, was to be another (perhaps the most important) rampart in civilization’s defenses against barbarism. The chief prosecutor, in fact, was the sitting U.S. Supreme Court Justice Robert Jackson, and it was said to be the Americans who pressed for a formal trial, while the other three Allied Powers were in favor of quick executions. And it is striking how legalistic (in the sense of resembling normal legal processes, not in the sense of involving legal technicalities) it all was. The transcript of Justice Jackson's cross-examination of Herman Goering would not have looked out of place in any American courtroom. In an interview with the late tribunal prosecutor Dexter Sprechel, he describes a perfectly civil exchange with Goering – a key member of one of the most monstrous regimes of humanity's bloodiest century – after Sprechel replaced the defendant's broken pencil.

What is the difference? Most obviously, the nature of the way in which the two sets of defendants came to trial. The Nuremberg trials occurred only after the Nazi military had first stormed across Europe. They were only turned back at the cost of millions of lives, and ultimately after an extraordinary saturation bombing campaign by the Allies in Germany and a sweep of mechanized armies across Europe. This campaign was duplicated in the Far East – there was at least one night of conventional bombing of Tokyo in which more people died than did in the atomic bombing of Hiroshima, and this went on night after night for months before the decision to go nuclear was taken. In the Eastern front, too, the barbarism of the Soviet advance, at some points undoubtedly matching war crime for war crime the march of the Nazis in the other direction several years before, left the Nazis with the feeling of having been utterly crushed. After having been astride the world after the conquest of France and the deep advance into Soviet territory, the Germans were in other words truly beaten; almost every city in Germany was a disaster area, threatened by cholera and famine and with the fear of brutality by huge numbers of occupation soldiers. The idea of resistance must at that time have seemed ludicrous. Several Japanese defendants, who had been part of a cruel, ruthless war machine until very recently, had nervous breakdowns during the trial.

The allied military campaign in Iraq was much different, with the U.S. military taking significant measures using its high-technology weaponry to minimize infrastructure damage and civilian casualties. Combined with the quick rise of Iraqi resistance and the fairly slim size of the occupation forces, Saddam Hussein may well stride into court every day feeling like he has yet to be actually vanquished. Since totalitarian dictators are not known for being in close touch with reality, this resistance may allow him the indulgence of the idea that his people will yet rise up and overthrow the occupiers.

And this suggests a second difference, the presence of live television broadcasts. The Nuremberg trials were recorded, but not broadcast live. The Hussein trial is telecast in Iraq, and this gives Hussein a chance to grandstand. In becoming the Iraqi equivalent of Judge Ito, the Iraqi jurists presiding over the trial have allowed the law to be corroded as a repository of society’s highest values. The more the trial becomes theater, the less it becomes either useful as a precedent for deterring other potential mass murderers or something that inspires confidence in Iraqis.

But the final factor concerns the whole notion of such trials. They clearly perform a valuable role in establishing an international record, and the notion that no one, not even the biggest of Big Men, is above the law. But the legitimacy of such trials has always been vulnerable to the charge that they are simply victors’ justice. As far back as the Tokyo trials the sole dissenting opinion, filed by Radhabinod Pal of India (then of course a British colony), argued that the whole trial was illegitimate. Foreshadowing our relativist age, he contended that Euro-American powers had no business judging non-European peoples while still in possession of vast colonial powers. When I was last there in the mid-1990s that opinion was still prominently displayed at the Yasukuni shrine in Tokyo, where numerous war criminals were buried. The implication – that the Greater East Asia Co-Prosperity Sphere was in fact a moral enterprise – was obvious.

So too the ease with which Slobodan Milosevic was able to turn his trial in The Hague into a years-long circus by on the one hand refusing to accept its legitimacy and on the other insisting on his right to defend himself made a mockery of the whole process. No doubt Saddam Hussein and his fleet of lawyers watched and learned from the Milosevic trial. Ultimately, the notion that an entity such as the new International Criminal Court, created to sit in judgment of national and military leaders and out of bargaining between nations living in a world where they have no friends, only interests, could have the same legitimacy as, say, a state district court sitting in judgment of accused burglars is a fantasy. Despite their learning curve, on painfully obvious display in the Baghdad court where the trial goes on, it is probably for the best that Saddam Hussein’s trial is a purely Iraqi venture. Only Iraqis appreciate the monstrosity of what was done, and only they in all their legal imperfections can hope to render anything like justice.

Friday, May 12, 2006

Who Searches for What?

Do the Chinese want democracy and freedom? There is an argument that says that while they were fired up for democracy during the Tiananmen Square protests in 1989, after they were violently crushed they turned their attention to making money. Some research also supports the idea that people don't agitate for democracy until they have achieved reasonable prosperity, perhaps $6000 in per capita GDP. Anecdotally, one can think of Taiwan, S. Korea and Chile as examples of countries where the creation of a large middle class came before public protests that dictators step down. (The Philippines, on the other hand, was much poorer when Ferdinand Marcos was forced out.)

Google has a new site that allows exploration of this question, and many others, at It allows you to type in a search term, and find out which countries, or U.S. cities, or languages generate the most searches. The measures are relative, in that they measure the percentage of all searches that use that term. If I understand the methodology in the FAQ correctly, if the absolute number of searches from the region or in the language is small it won’t show up. With those caveats in mind, here are some interesting examples for some of the things that interest me:


1. South Africa
2. Philippines
3. U.S.
4. Australia
5. Canada
6. India
7. New Zealand
8. U.K.
9. Sweden
10. Netherlands

Discouraging, except that by languages it's a little different:

1. English
2. Chinese
3. Dutch
4. Italian
5. German
6. Spanish
7. Portuguese
8. French

Since these are relative, this means that Chinese-language searches use “democracy” at the second-highest rate among all. (However, when one tries “Saudi Arabia” under “Region,” one gets “Your terms - democracy - do not have enough search volume to show graphs.” Distressingly, the same is true for Iraq.)

Here is “economic freedom”:

1. U.S.
2. Canada
3. India
4. Australia
5. Poland
6. Germany
7. U.K.
8. France


1. Philippines
2. South Africa
3. Morocco
4. Malaysia
5. India
6. Indonesia
7. Singapore
8. Hong Kong
9. Australia
10. Ireland

Where are people most eager to leave? Here are the results for “emigration":

1. Algeria
2. Morocco
3. United Arab Emirates
4. South Africa
5. Bulgaria
6. Romania
7. Ireland
8. U.K.
9. India
10. New Zealand

The U.S. employment visa is the H1B. Here are the results for that:

1. India
2. Singapore
3. Philippines
4. U.S.
5. Canada
6. U.K.
7. Australia
8. France
9. Germany
10. China

I find it interesting that China is so low. Who is most interested per capita in “globalization"?

1. Jamaica
2. Philippines
3. Pakistan
4. Malaysia
5. India
6. South Africa
7. Hong Kong
8. United Arab Emirates
9. Singapore
10. Egypt

Not all results are flattering for the top-ranking countries. Here, for example, are the results for“kinky sex”:

1. Korea
2. Norway
3. U.S.
4. Canada
5. Belgium
6. New Zealand
7. Australia
8. Sweden
9. Denmark
10. Netherlands

I leave other searches for the interested reader.

Tuesday, May 09, 2006

Domesticating the Global Left

One of the most interesting things about the Bolivian government’s (re-)nationalization of its oil and gas production facilities is the reaction of other governments. The Spanish and Brazilian governments have both protested vigorously, despite the fact that they are both governed by left-wing parties. The largest investor in Bolivian fields, in fact, is a state company, Petrobras of Brazil. In a reaction that any robber baron could admire, its officials have hinted at the possibility of suing for breach of contract, perhaps even in international court. The Spanish government, abandoning its usual sympathy for the developing world, is considering reduced foreign aid.

What we are witnessing is the surrender of the socialist left, a final accommodation in many of these countries with the basic premise of property rights. The Spanish and Brazilian governments now have a lot invested in the existing global system that has brought so much prosperity to so many, and are mainly interested in defending it.

Bolivia needless to say, is not so enraptured with the existing order. And there is a reason for that. Consider two kinds of resources: extractable capital and human capital. Extractable capital is resources in the ground – oil and gas, minerals, etc. Unlike most kinds of capital, which can be bolstered by investment, its supply is obviously fixed. (Although greater investment can lead to greater recoverable quantities.) It is also immobile, and cannot really be translated into innovation per se. Only human capital brought to bear on the extractable resources can do that. And human capital is also mobile, and hence less tolerant of being abused.

And so we might develop a simply theory of nationalization and other expressions of economic populism. I would expect it to flourish in societies with little human capital and heavily dependent on extractable resources. Those are the societies where foreign knowledge is most essential to making the resource base profitable. Such capital will also demand compensation for its services. In combination with the lack of domestic human capital (and hence income derived from it) and the corruption and instability that such resources generate, appeals to nationalism might resonate most strongly there. (Bolivia has fought numerous wars over resources over the years – with Paraguay over oil, Brazil over rubber and Chile over guano, of all things. The Chilean war led to the loss of its coastal territory, and simmering resentments over a century later led its government to commit the seemingly suicidal act of refusing to run a pipeline for Bolivian gas through Chile to the sea.)

Below is a chart that plots, on the vertical axis, the percentage of exports in 2003 that were fuels – oil, gas and coal mostly. On the horizontal is the population’s average years of schooling in 1995 times its life expectancy – a proxy for human capital. According to the theory, countries in the upper-left portion of the chart – those with the least human and the most extractable capital – are the most prone to economic nationalism. (For space reasons I only include countries with per capita GDP of less than $15,000 in 2003.)

Lo and behold, the country most obviously so characterized is Venezuela. Others making appearances in the populist zone include the Comoros Islands (a nation with 19 coup attempts since independence in 1975), Syria, Russia, Ecuador, Colombia and Bolivia. Among them only Colombia has been largely free of successful appeals to populism in the last twenty years. The consistency of economic policy in Russia, Venezuela, Bolivia and increasingly Ecuador with the nationalist model in recent years is obvious.

It is a very simple test, ignoring all sorts of complicating factors. Taking note of those caveats, populism would nonetheless appear to be the revolt of those who are frustrated by being unable to marry enough human capital to their resource base to make the latter profitable for the average citizen. Alas, to go down the statist route is typically only to make the problem worse. Bolivia and Venezuela are now in fact repeating mistakes made by previous generations. They are temporarily buoyed by favorable export prices, but if that stops the party will too.

The good news is that, if the predictions I made in a previous posting come to pass, nationalism will be on its way out soon. As nations become more integrated, and as they increase investments in the production of ideas, their stake in property rights become greater. And so we witness the spectacle of leaders in Spain and Brazil, with undeniable bona fides when it comes to fighting U.S. hegemony or insisting on greater transfers of wealth from the world’s rich to its poor, nonetheless having the unique zeal of the convert when it comes to property rights in other countries. And that is obviously all to the good.

Friday, May 05, 2006

The Immigration Game

Imagine there are two countries, Mexico and the United States. The U.S. government is worried about illegal immigration from Mexico, and the Mexican government is trying to avoid the political pain that comes from fixing its badly mismanaged economy. Here is how we might imagine that problem playing out:

U.S.ReformDon’t Reform
No Fence(-d,c-b)(-d,c)

a is the cost to the U.S. of building a fence to keep migrants out. b is the domestic political cost to the Mexican government of economic reform. c is the gain to the Mexican government when illegal immigrants send money back from the U.S. And d is the cost to each country of providing public services to those who migrate if there is a fence. Under each combination of actions, the table thus shows the payoffs to each government.

The way economists solve this problem – to find out which combination of actions by each government is rational – is to look for the Nash equilibria, the combination of actions where each party is taking the best action given the other party’s action. There are potentially two: if a is less than d then the U.S. builds a fence and Mexico doesn’t reform. If a exceeds d then the U.S. doesn’t build a fence and Mexico doesn’t reform.

In other words, it never pays Mexico to reform. The political costs of reform never make it worthwhile, whether the immigrants are there or not. And thus we have the U.S./Mexico immigration problem in a nutshell: the presence of the U.S. labor marker gives the Mexicans no incentive to take the painful steps to make their economy more efficient, preferring instead that that economy’s victims go north and send money home. I have recently argued that the costs to the U.S. of “fixing” the illegal immigration problem would be prohibitive – not just the lost productivity, but the gradual evolution into a police state with its hands deeply involved in every business in the land.

From the Mexican government’s point of view the current situation is about as good as can be expected. It would much rather have all those surplus, unemployable workers working hard up north then back home causing trouble. And they seem to know that the American anger over illegal immigration is a thing that comes and goes. Unless the Mexican people can be given a stake in economic reform back home, so that the Mexican government will have an incentive to overcome the high but short-lived political costs of major change, it will never pay the Mexican government to take tough steps.

How might that happen? One way would be if workers and businessmen in Mexico suddenly found that they too had a greater stake in domestic reform. And that in turn might happen if the two economies become more closely connected – in particular, if Mexicans living here and there could be induced to set up more cross-border commerce, which would put everyone – workers and managers, Mexican and American – on the side of better governance. And the best way to make that happen is probably to free the restraints on cross-border movements of factors, including labor, as we did already for goods. While the assumption is that this would cause Mexicans to come here by the tens of millions and stay permanently, in fact once they were free to come and go as they pleased they could work here and return home and speed up the reform of the society to which they are most attached, their own.

In other words, a North American version of the European Union round about 1990, without the ambition-destroying welfare/regulatory state and the demographic death spiral, would be just the thing. Mexico would become like Spain or Ireland, a nation that egested immigrants for decades before they made enough money elsewhere and, thanks to free labor flows, came back home and revitalized their own societies. I am hard-pressed to think of anything else that would get two nations out of a very costly equilibrium.

Wednesday, May 03, 2006

Sobre Tierra de Libres

Should the national anthem be sung in Spanish? The recent release of Nuestro Hymno, a Spanish version of “The Star-Spangled Banner,” has been greeted with rabid ambiguity. On some Spanish-language stations it was widely played, but some avoided it. President Bush has recently criticized it, saying that the anthem should simply be sung in English, period, even though the Drudge Report notes, quoting the Kevin Phillips book American Dynasty that Bush himself sang it in Spanish when campaigning among ”Hispanics”.

FYI, here are two translations of the anthem, one old, one new. The first is from a version that, according to Wikipedia, was issued in 1919. (In both versions I include only the most well-known first verse).

Amanece: ¿no veis, a la luz de aurora,
Lo que tanto aclamamos la noche al caer?
Sus estrellas, sus barras flotaban ayer
En el fiero combate en senal de victoria.
Fulgor de cohetes, de bombas es truendo,
Por la noche decian: "¡Se va defendiendo!"
¡Oh, decid! ¿Despliega aun su hermosura estrellada,
Sobre tierra de libres, la bandera sagrada?

Below is a largely similar translation of the current version, copied from NPR, with their accompanying translation:

Verso 1
Amanece, lo veis?, a la luz de la aurora?
lo que tanto aclamamos la noche al caer?
sus estrellas sus franjas
flotaban ayer
en el fiero combate
en señal de victoria,
fulgor de lucha, al paso de la libertad.
Por la noche decían:
"Se va defendiendo!"
Oh decid! Despliega aún
Su hermosura estrellada
sobre tierra de libres,
la bandera sagrada?

English translation:

Verse 1
It's sunrise. Do you see by the light of the dawn
What we proudly hailed last nightfall?
Its stars, its stripes
yesterday streamed
above fierce combat
a symbol of victory
the glory of battle, the march toward liberty.
Throughout the night, they proclaimed: "We will defend it!"
Tell me! Does its starry beauty still wave
above the land of the free,
the sacred flag?

I don’t speak Spanish at all and read it very poorly, and so I am not in a position to assess either the accuracy or any deeper meaning in the more recent translation, nor the importance of any inconsistencies between the two. But given the changes in that language since 1919 there doesn’t appear to be much to choose from between them (although something is clearly lost in the translation to English). So what are we to make of this act?

Economic theory suggests two possibilities, as does the very title (“Our Hymn’), with its confusion over whether the possessive adjective refers to the nation as a whole or is an exclusive possession of its Spanish-speaking subset. The first is that it is an expression of devotion to the U.S. In this instance, it is an attempt to marry one’s own culture with love for the melting pot. It joins the Jimi Hendrix version at Woodstock, Marvin Gaye’s memorable one from the 1983 NBA All-Star game and others as loving variations on a theme. Each one is an addition, making the anthem more meaningful as its sentiments spread to more communities.

Another possibility, one feared by many, is that it is the foot in the door of balkanization. In this view Spanish speakers will have one anthem, English speakers another, and so it is a declaration of independence of sorts – we are here, and we will alter the anthem to suit our needs. A person truly fearful of demographic trends might argue it is outright linguistic colonization, a takeover of the anthem by those not interested in assimilating.

So which is it? The trouble with the diversity interpretation is that no one who is skeptical will believe it, because it is what economists call cheap talk. Cheap talk occurs in some games of signaling, in which the buyer of a product can’t observe some trait, but by incurring some cost the seller can persuade the buyer that he has invested a lot in the product. Car buyers, for example, don’t know car quality but the seller will invest in a warranty. Or universities trying to persuade would-be students and faculty that they invest a lot in instruction and research, when the actual investments are largely unobservable, might invest a lot in something that is unrelated but observable and expensive, like a big football stadium.

But when the signal is costless to invest in, it has no value because the buyer knows it is free to offer. He is therefore not persuaded that the seller is offering a high-quality product. Here the act of translating and performing the anthem is not a big sacrifice, and so no one takes it seriously as a sign of commitment to the U.S. A much more serious sign is enlistment in the military, and all too many illegal immigrants have in fact done that, with some being killed in the wars in Afghanistan and Iraq. Less serious but still very informative signs might include such things as contributing to American social institutions. Jews and Catholics, viewed skeptically by many Americans in earlier eras, did this by building hospitals to serve their own communities which eventually became essential for the broader society.

And so the anthem has to be interpreted at best as an empty gesture, at worst a hostile one. Lee Harris has a fascinating article in which he analyzes a sign in the recent protests over immigration-law changes that called for a “Paró General,” or “general strike”:

A general strike is not to be confused with a normal strike. A normal strike takes place when workers refuse to work until a specific set of demands is met by those who have been employing them. Sometimes the workers get what they want; sometimes they reach a settlement; sometimes the strike is simply broken, as occurred during the strike of the air traffic controllers under Ronald Reagan. But the general strike is not targeted at any particular businesses or industries -- its target is the state itself. It is designed to intimidate the state into acceding to the political objectives of those who have called for the general strike.
The very idea of a general strike runs contrary to all the traditions of American politics. Instead of working within and through the traditional political system, those who championed the general strike have used it as a method of forcing the government to give into their demands by tactics such as taking to the streets and paralyzing the normal course of life.

The demonstrations are in this interpretation an attempt to import a foreign culture that gets what it wants through the mob rather than through the slow course of politics, with the latter being essentially to both liberty and stability. While the insight is provocative, it is surely too much to make of a single sign, although it does jibe with my own concerns about the fallacy of the public will that many participants in mass demonstrations often fall prey to. Overall, while I find the Spanish version of the anthem interesting and aesthetically pleasing, I find it hard to see how it makes people more comfortable with the political aims of those who recorded it.

Tuesday, May 02, 2006

Forgetfulness and its Consequences

In 1900 life expectancy in the U.S. was roughly 48 years. The average time spent on household chores – cooking, cleaning, etc. – was twelve hours. Clothes were often washed by pounding them on rocks, and bacterial infections that are now routine were major killers. Many Americans still had actual memories of the Civil War, in which hundreds of thousands of their countrymen were killed and raiding parties made life terrifying in much of the country.

It goes without saying that life is dramatically better than that now, not just here but in much of the world. Since roughly 1750 every generation has lived roughly 50 percent better than the one that came before it, and so at some point we must suppose that this has now become a self-sustaining process. And yet polling data often show surprising numbers of people who are pessimistic about the future. (This currently afflicts Europe more than the U.S., but there are plenty of people with this view here as well.) According to a World Economic Forum survey in 2004, 36 percent of the world’s population, including an astonishing 49 percent of Western Europeans and Middle Easterners and 42 percent of those living in the Asia/Pacific region thought future generations would have less economic prosperity, despite reams of historical evidence to the contrary. This is troubling because pessimism is the mother of populism, and populism in turn more often than not spawns disaster, economic at a minimum and perhaps comprehensively social as well.

The inability to remember the past is not confined to the distant past either. Today the Bolivian president announced that his government (which means he) is seizing the oil and gas fields in that country. (Natural gas is that country’s dominant export.) He promised to do this, so presumably has the support of much of the population that elected him. And the reasoning is presumably that the combination of high oil and gas prices and an impoverished country must be explained only by foreign oil companies stealing the birthright of Bolivia.

His country, like many in increasingly radical South America, has been down this road before. When commodity prices soared in the 1970s governments throughout Latin America and the entire developing world funneled commodity income through the state and used it to build lavish populist temples in health care, education, etc. These empires ultimately descended into a quagmire of corruption, so that many countries (including Bolivia) soured on the public sector once commodity prices declined in the 1980s. But old lessons die hard, and will have to be learned once again.

Historical forgetfulness is a very costly problem. The inability to recognize progress, and the absence of first-hand remembrance of the cost of restraints on trade both illegal and legal (it was almost impossible to travel more than 30 miles in much of 18th-century Europe without encountering a bandit or a toll gate erected by a local prince) make us more likely to fail to understand how we got to where we are, when where we are - prosperous and largely peaceful - is by historical standards a wonderful place to be.

If one could invent a time machine and send everyone back for a month to 1900, or 1800, or 1500, pessimism about the future and the failure to understand why we are in such great shape would probably vanish. But of course we are stuck with the level of historical knowledge that the educational system has dealt us. Quite a bit of survey-based research on the determinants of happiness indicates that people do not compare themselves with hypothetical past selves, or with ancestors long since dead and buried. Instead many compare themselves with others of their own era. If they see other people around them who are richer, they become unhappy (despite envy being a sin in most religious belief systems). They see wealthy celebrities, industrialists and heirs and imagine that that is what they too should by right be. In other words they define what is possible for them by the far right tail of the distribution in their own society, and when they do not achieve that (as by construction very few people can) they indict the society for failing to achieve this result. This perhaps explains why state-based income redistribution is so popular despite its long-term consequences. Even many scholars who are generally favorable to economic liberalism and very aware of the long-term nature of human progress (see William Bernstein’s The Birth of Plenty, for example) argue that societies will collapse in acrimony absent a substantial welfare state to spread wealth more uniformly.

The future is generally better than the past, but there are exceptions – the collapse of ancient Rome and indeed most once-flowering empires being obvious examples. When the citizens of the Republic forgot the principles that necessitated the Roman law and traded the justice they had established for the charisma of the Caesars, they sowed the seeds of their own enslavement. Enslavement turned to empire, empire turned to overextension, and empire turned to the sacking of Rome by Alaric. When modern citizens of the West forget the essence of equal treatment under law for building a better future, even if it leads to inequality of result, the results are different only in manner rather than degree.

Monday, May 01, 2006

Google Learns to Rent-Seek

The International Herald Tribune reports that Google, the search-engine giant with the “Don’t Be Evil” mission statement, is trying to sic the Department of Justice on Microsoft:

With a $10 billion advertising market at stake, Google, the fast-rising Internet star, is raising objections to the way that it says Microsoft, the incumbent powerhouse of computing, is wielding control over Internet searching in its new Web browser.

Google, which only recently began beefing up its lobbying efforts in Washington, says it expressed concerns about competition in the Web search business in recent talks with the Justice Department and the European Commission, both of which have brought previous antitrust actions against Microsoft.

The new browser includes a search box in the upper-right corner that is typically set up to send users to Microsoft's MSN search service. Google contends that this puts Microsoft in a position to unfairly grab Web traffic and advertising dollars from its competitors.

The move, Google claims, limits consumer choice and is reminiscent of the tactics that got Microsoft into antitrust trouble in the late 1990's.

"The market favors open choice for search, and companies should compete for users based on the quality of their search services," said Marissa Mayer, the vice president for search products at Google. "We don't think it's right for Microsoft to just set the default to MSN. We believe users should choose." Microsoft replies that Google is misreading its intentions and actions. It says the default settings in the browser, Internet Explorer 7, are easy to change.

Google is a babe in the woods when it comes to spending scarce resources to benefit from special privileges dispensed by government, what economists call rent-seeking. But apparently it is learning fast. According to this chart which I have been able to confirm myself from Center for Responsive Politics data, Google spent $80,000 in 2003 and$180,000 in 2004. Microsoft, in contrast, spent over $9 million in 2004.

Suppose that for the next five years Google expenditures continue to grow at this rate. (They surely won’t for too many years, because of diminishing returns). By 2009 they would be spending roughly $10 million. Now how much value could those resources create if they were devoted, to say, improving Google’s search technology so that consumers would choose it even with Microsoft’s bundling advantages? By making such expenditures the decision-makers at Google have decided that the marginal return to spending that money getting the government to cripple a rival is greater than the marginal return to spending it trying to improve their product.

And for what? Note first that it is pointless to talk about such a policy in terms of what is “fair.” That is the language of law and philosophy, and is utterly unhelpful when deciding which pressure group to favor with a government decision. To say also that "the market favors open choice for search" is similarly unhelpful, as it means instead that "the government should adopt our "definition of 'open choice for search.'" A sensible person might wonder whether "open choice for search" should mean that Google offers its product, and Microsoft offers its own, and consumers choose between them. That the phrase must be so meticulously deconstructed is a warning sign that it is unhelpful for the purpose of crafting law.

Let us speak instead of costs. To switch the default search engine is a trivial task, requiring, according to the article, all of four clicks. It is true that there are some Net users for whom such costs will be large, but it is such users who have made Microsoft what it is. Windows is unpopular with many technologically savvy people, who prefer Linux or Apple, but for those for whom the computer is a means to a much more important end rather than an end in itself the ease of use of Windows, combined with the suffuciently wide variety of capacities and software available for is, is valuable. And so there are undoubtedly many people who are perfectly content to let Microsoft, including the new Microsoft search engine, do the work for them. Furthermore, the people who might be most inconvenienced by the four clicks are likely to be mostly those who came to the Net in middle age and older, and this is a problem that is already vanishing as young people generally come to adulthood completely computer-literate. To set the precedent of having antitrust regulators pronounce on the acceptability of browser technology, for the (asserted) benefit of a small and vanishing number of computer users, is to set a disastrous precedent.

Note also that Google is hardly powerless in persuading people of the value of its search engine. It too is frequently subject to charges of unfair domination, but it attained that position by creating a technology that the greatest number of users find both easy to use and productive in yielding valuable information. Like switching the default browser, learning Google has fairly modest fixed costs, particularly involving search syntax. (These costs are of a similar variety to the ones Google is complaining about now because Google was a latecomer to the search-engine market, and many people, including me, had to get out of the habit of Alta Vista or Yahoo syntax as we became acclimated to Google. But we did.) But Google created a technology that made incurring these trivial costs worthwhile (and indeed has for several years made it possible to install a Google search bar in Explorer that negates the requirement to type in the Google URL), and so it would be best to have an environment in which their response to the Microsoft browser’s redirection of people to MSN if they use the default search is best met on the competitive rather than the political battlefield.

But that they see the benefits of lobbying as justifying the costs is disturbing, another sign that information technology is every day becoming more like cars, oil, and every other industry where the returns to pressuring the government are large. And that can have no good effects on the progress of the information revolution.