Thoughts on economics and liberty

Tag: My book reviews

A new young classical liberal writer: Ben Wilson

Months, maybe a year ago, I bought Ben Wilson's 2009 book: What Price Liberty? How Freedom Was Won and Is Being Lost but never found time to read it. Recently I was able to flick through it (haven't finished it yet: there are about 10 half-finished books lying on my bedside), and have found it to be quite a remarkable piece of work – a valuable addition to my library

Wilson is very young (less than 30 years of age, perhaps) and provides a Whig (classical liberal) perspective on issues, using Isaiah Berlin's negative liberty concept.

This book is essentially a history of the growth of freedom in UK and its current decline. He believes that "the liberal phase in our history seems to be coming to an end". I'm particularly impressed with his analysis of the destruction of freedom of speech in UK over the past decade, with the rise of multiculturalism and political correct speech and laws (Racial and Religious Hatred Act) against "public offence", following the publication of cartoons about Mohammed. 

I wish I had time to extract some excellent sections I found in this book, but at this stage all I can do is do is to strongly recommend that you buy/borrow and read this book.

Reviews:

I found many reviews of the book on the internet. I don't agree with these reviews entirely, but here are short extracts from two of them:

a) The Independent "Ben Wilson chronicles the always-disputed rise and fall of individual freedoms in Britain from the civil wars, military and ideological, of the 17th century to today's intrusive age of "dataveillance", statutory bans on "religious hatred" and catch-all anti-terror laws."

b) Politics.co.uk: "He doesn't view the glorious march of progress towards the modern world. Instead liberty is something which has to be fought for afresh by successive generations."

I look forward to finishing this book and reading more works on liberty by Ben Wilson as soon as he finds time to write them.

I'd also like to get in touch with Ben – anyone know where he works?

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The Big Questions by Steven Landsburg

Finally, this book, that I had advance-ordered some months ago, arrived, and in a day's spare time reading, I had finished it. This was about 2 weeks ago. I found a few moments to review it only now.

The book is very well written, very easy reading. One can read it in a breeze. The book deals with a wide range of 'big' and small issues such as ethical rules, cost-benefit analysis, interesting puzzles, and, finally, Frank Ramsey.

But I give this book 4 stars out of 5, not the 5 stars I'd give Landsburg's earlier books The Armchair Economist or More Sex is Safer Sex.  

a) This book is more disjointed reading than the other two, even though it is very similar to them in format (all his books skip from topic to topic fairly rapidly).

b) Somehow I couldn't get myself to become excited by Landsburg's proposal that mathematics is not only extra-sensory (not in the traditional usage of this word) but is the only reality. Thus he says, "I believe that everything – you, your consciousness, and the Universe that you and I inhabit – exists because everything is a mathematical structure" (p.8).

That mathematics as an explanatory tool is perfectly fine by me. I agree that everything obeys laws that can, at some level, be always broken down in to mathematics – although we struggle to "mathematise" most complex systems (such as the human body or climate). Where I can't agree with Landsburg is when he claims that mathematics is everything! To me it is self-evident that energy is everything, and no one has yet explained the existence of energy to my satisfaction. To say that energy is just mathematics is nonsense. Motion is not mathematics. It is a real movement. Its explanation is mathematical, but the energy inside atoms is real. Energy thus represents actualised mathematics.

I believe that not everything in mathematics exists, else all string theories would be true, else all our imaginations would be true, all our dreams would be true. I consider all possibilities that are not measurable (in some form or shape, including subjective) to be beyond our need for explanation.

c) On the question of ethics, he raises a number of hypothetical dilemmas. On at least a few of them I can't agree with him, for he distorts Kant's fundamental caution to treat others as ends in themselves and not as means to an end. Yes, we might well save more lives by 'sacrificing' someone, but I disagree with the idea that we are entitled to use others as sacrificial goats. I hold this position no matter how important the end.

Thus, even if an evil dictator standing below a bridge was about to press a button to blow up the entire world, and the only option to prevent him from doing so was for me to throw a person standing on the bridge on top of the dictator, I would not do that.  Permitting such action is a slippery slope from which we can never recover unscathed. If someone wants to voluntarily 'sacrifice' in this case by asking us to push him in order to save the world, or jumping on top of the dictator, that is a different matter, but we can't physically push anyone onto rail tracks (or off a bridge) to save others. All life is in that sense of equal, infinite value. Hence one life is equal to all lives. Infinity equals infinity. (This logic won't work when we apply it to investment decisions by governments in public services, but there we are not deliberately taking a particular persons life: we are taking risks that may potentially harm someone. 

Overall, though, I strongly recommend this book if only for the fascinating journey in critical thinking Landsburg undertakes. There is none better than Steven Landsburg today to question one's preconceived notions.

And by the way, the Ramsey story provides a fantastic ending to the book! 

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PS. You might be wondering why I've not published this on Desicritics. It appears that my first article (different to this one) on desicritics has been put on "Hold". I'm not happy! If Desicritics even remotely tries to over-ride or edit my posts, then I'll have to bid them goodbye! I'll watch for a day and see what happens. I expect my articles to be instantly published on Desicritics. If not then I don't think the effort is worth my while.

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The myth that urbanisation reduces poverty

I'm flabbergasted by the extent of logical fallacies constantly churned out by popular authors (at times, even academics who should know better). 

The other day I commented on the foolish claim that ecological degradatation causes poverty

Today  I've just come across a claim by Doug Saunders ("Cities of Hope", The Weekend Australian Magazine, August 21-22, 2010) that "The dramatic declines in the number of very poor people in the world around the beginning of this century were caused entirely by urbanisation." [Saunders has published a book, Arrival City: How the Largest Migration in History is Reshaping our World, Heinemann.]

What's the fallacy here? – That urbanisation CAUSES anything! Urbanisation is a necessary  outcome of the choices exercised by free people. It is not a cause. It is CAUSED.

Of course, urbanisation has some direct effects, through networking and division of labour – but this is a weak effect compared with the primary cause, which is freedom. It crucial to understand that urbanisation is not the engine of change; it is a transmission mechanism. It merey reflects the level of freedom in society. The underlying engine of urbanisation (and reduced poverty) is freedom

Saunders will find it impossible to show me ANY example of successful urbanisation (and I mean successful, not like Pyongyang) that was not directly caused by increased freedom. 

India continues to remain a good example of socialist obduracy that prevents both freedom and (hence) urbanisation. It has one of the world's lowest rates of urbanisation AND the highest rate of poverty, not because low urbanisation causes high levels of poverty, but because lack of freedom and good governance causes both.

Central planners in India want to keep Indians out of the cities. They have managed to do so through a range of statist policies. Unless India becomes more free, and unless local governance reforms are introduced, India will face political resistance to urbanisation – and, of course, these lower levels of freedom will mean that most Indians will remain poor. 

Freedom eliminates poverty through many transmission mechanisms. Urbanisation is just one of them. The level of urbanisation is at best a partial INDICATOR of the level of freedom in a society, not the cause of poverty reduction!

Saunders's confusion about the concept of causality is even more pronounced in his statement: "When villagers migrate to the city, their family size drops, on average, by at least one child per family." This is flawed because the SAME underlying cause, namely, greater freedom, drives these (and many other) outcomes: urbanisation, lower fertility, and poverty reduction. If freedom to migrate is facilitated, this process can be rapidly accelerated. 

Greater freedom causes MANY things to change simultaneously. These include:

– better environment (reduced destruction of natural habitat; better wildlife management, etc.)

– greater demand for education (and consequently reduced demand for children), and increased IQ of children [IQ is not fixed: it changes, within limits]

– greater division of labour and networking effects, hence greater urbanisation, innovation and wealth (and hence reduced poverty)

– better governance (which means better health, better longevity, lower infant mortality, etc.)

I would suggest that most policy variables are endogenous. The truly exogeneous variable is the level of freedom (including all its implications, as detailed in BFN and DOF).

GOVERNANCE reforms can dramatically change a lot of things by increasing freedom. That is what Saunders should have tried to investigate and advocate. Instead, he is looking at an outcome and mixing it up as a cause. Poor logic. 

However, the book is interesting, and might provoke thought. I'd not recommend buying it, but if you find it in your local library, skim through it.

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An economist after my heart: Steve Landsburg

As I noted here I don't know what led me to my earlier accidental ignorance of Steve Landsburg's outstanding books. But fortunately I'm now actively working to restore my hitherto unknown loss!

After reading two of them: More Sex is Safer Sex and The Armchair Economist I find that both are outstanding, but perhaps The Armchair Economist  is the best layman's economics book so far (or close to the best)

I now keenly await the publication of The Big Questions – an advance copy of which has been received by the American Economic Review which annotated it in its recent journal, but which the Book Depository tracking system tells me is still not published. When I receive it (in the next few weeks surely) I'll talk about it as well – time permitting (I don't review all the books I read!).

In the meanwhile, here's a very brief review of The Armchair Economist.

Review

A fabulous book that takes you across a good number of foundational economic concepts, but more importantly, provides a deep insight into the way a good economist should think. 

In particular I liked his exposition of the Coase theorem and the benefits of using cost-benefit analysis (CBA) to assess the value of a policy. Chapter 10 is absolutely fantastic ("Choosing sides in the drug war: how the Atlantic Monthly got it wrong"). Simple principles with far-reaching implications are discussed, such as: Only individuals matter and All individuals matter equally. Also:

Principle 1: Tax revenues are not a net benefit, and a reduction in tax revenues is not a net cost.

Principle 2: A cost is a cost, no matter who bears it.

Principle 3: A good is a good, no matter who owns it.

Principle 4: Voluntary consumption is a good thing.

Principle 5: Don't double count.

It is true that CBA has philosophical and practical implications that are hard to fully reconcile (and I talk about some of these briefly in DOF in relation to the limits of utilitatrianism, but without doubt it remains the clearest and most objective principle for policy making; almost "scientific". 

In a couple of areas his views challenge concepts that I currently hold – such as in occupational health and safety where he suggests (at p.91) that miners should bear the costs of accidents so that every cost-justified method of preventing accidents can be undertaken. A similar unexepected approach is offered for the justice system, to ensure that judges reduce their tendency to lock up people for minor offences (or in some cases, depending on the design of the system, to let most people free). It will take me at least another round of reading the book carefully, and asking questions, before I can start owning some of Landsburg's redical ideas. But his points are deep and well-argued. It is a hard ask to find counter-arguments.

Another area where I am unable to follow his argument is in relation to dollar-cost averaging which he believes is bad financial advice. I'm not convinced because I find it sensible to diversify risk by investing in an index-based fund through a monthly drip-feed. In my view this is sensible given one's ignorance about details of the millions of thing that impact an economy, but with broad knowledge of the overall long-term trend of economic growth. The alternative to dollar-cost averaging through a drip-feed is to pick shares (like Warren Buffet does) and time the market which is too time-expensive and likely to be a fool's errand in most cases. But maybe I've misunderstood what he is trying to say, and perhaps I need to read his ideas again.

If you want to expand your critical thinking abilities, then read this book and re-read it. I plan to re-read it at least once. That is a privileged status I have accorded to less than two per cent of the books I've read in my life. So this is definitely a top-end book. Well worth having in your libray, and reading it at least twice.

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