Friday, March 27, 2009

Into the Darklands

Forensic psychologist Nigel Latta’s book Into the Darklands and Beyond: Unveiling the Predators Amongst Us is about working with sexual predators and other criminals as well as troubled adolescents (many of whom are well down that same path). Reading about the evil, sad and depraved I found a distinct relief after The Al Qaeda Reader because—unlike the narrow bombastic hatred of bin Laden and al-Zawahiri—Nigel Latta’s witty perceptiveness about the human condition was engaging itself and informed by an appreciation of the human so lacking in al Qaeda’s paeans to murder and mayhem.

Nigel Latta describes the book as a travel diary, which it is: a series of vignettes mostly (but far from only) about working with the troubled and the evil. Nigel Latta starts with a conversation with James, a man who expresses his desire to kill children. Here and elsewhere in the book, Nigel Latta conveys vividly both the sort of people he deals with and how he deals with them. As he explains, any relationship with the person he is dealing with is all he has: if he does not establish any at all, he has nothing to work with. Not that he takes interview reports all that seriously—he is not interested in the lies perpetrators have told previous interviewers. The trick is to ignore what they say: they reveal themselves in what they do: hence he concentrates on the trial records, the records of what actually happened. (Economists call that revealed preference.)

As far as he is concerned, niceness (or what people generally view as niceness) is not therapeutic: he spends a chapter on that.
Nigel Latta found his first murderer very frightening. The frightening thing was he found himself liking said murderer: a man regretful of the burden his past placed on a daughter he was worried about.

Nigel Latta had good parents and, at the age of 14, experienced a dead man vomiting into his mouth. (An elderly man had collapsed and the young Nigel was helping with CPR.) That experience gave him a benchmark for what was a bad experience. Generally, what he subsequently experienced as a teenager really did not rate as bad. Not compared to a dead man vomiting into his mouth.

Nigel Latta got into working with criminals due to a happenstance while doing his Master’s in Psychology. He was talked into doing his research report evaluating a program treating sex offenders. After participating in a weekend workshop on getting sex offenders to empathize with their victims, he was hooked. Within a couple of months, he was working as a therapist in the program.

His writing style is clear, engaging and vivid:
... politics is the organisational fluff that gathers in our collective navels. It feels important, but in the end it’s just lint and dead skin. (p.137)
I hate the suffocating gasp of political correctness. It is noxious weed choking the soul out of the world … It is bullshit dressed us as divinity and I hate it to the very core of my being. Political correctness is the modern-day Emperor’s new clothes. We all ‘oohh’ and ‘aaah’ but really all of any of us see is a butt-ugly naked guy (p.147)
... it doesn’t matter what comes out of your mouth, it’s what you hold in your heart that counts … Compassion is not something you say, it’s something you do. (p.153)
Originally I had wanted to call [my paper] ‘Taking the Fuck out of Fuck up’( p.299)
Common sense died somewhere in the late eighties. This was sad and as a working concept it will be greatly missed. … at about the same time, personal responsibility also quietly passed away. In this brave new world, common sense is but a memory and no one is really responsible for anything. (p. 319)
Problems are not excuses, even very bad problems. (p. 324)
I have never found it hard to figure out what to say. Mostly I just open my mouth and the stuff comes out. I have an enormous amount of faith in my jabbermouth. (p.326)
I’m not sure I believe in God, but I believe in souls, so God doesn’t seem that much of a stretch. (p. 329)
Sometimes Nigel Latta captures the eloquence of others, as in the social worker commenting on the suicide of an teenage girl who seemed to be getting it together:
'I think she saw the light at the end of the tunnel, but it was just too far away.’ (p. 303)
His therapeutic style is very much about being truthful even when it is not a nice truth: hence the pointlessness (or worse) of being politely false. Hence also his hatred of political correctness as it sugar coats the truth away: sometimes out of existence altogether. He is scathing on anti-smacking activism (p.320ff).

He is, however, rather keen on Edward de Bono’s Lateral Thinking.

As we travel with Nigel Latta, we meet Henry, a paedophile out of fear of his own homosexuality. Nigel Latta prescribes as treatment Henry going to a gay sauna and having sex and coming back and telling him about it. Henry, given permission to embrace his homosexuality, does: and stops molesting boys.

Nigel Latta tells us that parents should make it an absolute rule: never have a teenage boy (or a teenage girl with boyfriend) baby sit your kids: likewise no teenage girls who have boyfriends (p.263). The odds are not worth the risk.

We also get to meet many people who had truly vile and appalling childhoods. But he is very much of the view that you can choose what to make of your burdens—and destroying other people's lives has no excuse, no matter how troubled your own.

There are some absolutely charming moments, such as talking, on a mountain hike, about the joy of writing, and the need to write, to a trouble teenage kid who wrote poetry (p.294). Meeting a Quaker lady whose meeting had taken his suggestion that compassion was doing—that those who think “something should be done” should go and do—to heart and had gone out and done (Pp 300-1).

He explains the special curse of being vaguely recognisable (p.327). He discourses powerfully on the utter inadequacy of words to convey the intensity and nature of certain experiences (p.332). (It struck me that use and mention is another way of saying that the map is not the territory. Zen thought wrestles with not confusing the tool of words, even the tool of thought, with the experience itself.)

Nigel Latta has a chapter on the work of Parole Boards examined through a particularly disastrous release decision—a prisoner on Parole fleeing being recalled to prison who killed a father of two just to distract police (Pp.334ff). On the way, we become very well informed about the research on risk factors of re-offending. But Nigel Latta regards the entire operation of the Parole Board as being based on the wrong question. The question is not whether X is sufficiently low-risk of re-offending to release, it is whether X’s release is a reasonable gamble with innocent lives.

He is an honest empiricist, describing how he finds a psychic apparently startlingly accurate, despite his own presumptive scepticism (Pp 308ff).

And, having started the book with James, we end the book with him too.

Into the Darklands is all about meeting the Bad Man at one remove, through the eyes and actions of an engaging, memorable therapist. At the end, one finds one has been entertained, informed, engaged, disturbed and—if one has been awake and aware—had your view of things that matter moved: a fine book, full of wit, perception and wisdom.

Wednesday, March 25, 2009

Why wages are "sticky" downwards

It is an established fact of economic life that wages are “sticky” downwards. That is, that sacking people is typically resorted to more than cutting wages to existing employees. There is no doubt a vast economic literature on this, one that I have not read. Nevertheless, as part-owner of a business that pays some people a regular weekly salary, others are on an agreed number of hours at an agreed rate and still others on an “offer and accept” basis, I have some observations about why wages are sticky downwards.

The short answer is that it is much better to terminate a working relationship than to poison continuing ones.

An employee and employer are not engaged in one-off interactions as in a “spot” market. They are in a continuing interaction. The more mutually beneficial the interaction, the longer and stronger it is likely to be. How they behave towards each other is going to both determine and reflect the quality of that interaction. What they have is an ongoing, even evolving, contract: one more defined by their interactions than by any written agreement.
For an employer to cut wages without cutting hours is to expect the same level of work (a benefit for the employer) for less benefit to the worker. It also signals a subordination of the employee to the convenience of the employer. That is, it signals both power and disregard: that the employment contract is one that the employer can determine unilaterally to the employer’s benefit and against the employee’s benefit. Which, in a fundamental sense, makes it not a contract at all: for any sense of mutual consent becomes enormously and openly attenuated. If a contract is to function, it must be at the very least, agreed (or implied) restraints on adverse behaviour towards by the parties to the contract each other on matters covered by the contract. And how much pay for how much work is basic to a contract of employment.

So, for an employer to cut that rate is to poison—perhaps irrevocably—their relationships with their employees by undermining the notion that there is any contract the employee can rely on at all. Sacking people merely ends the contract, and therefore the interaction. Cutting wages poisons a continuing interaction by undermining any notion of there being a contract. And an employer simply does not, and cannot, fully control an employee. Not only can they seek an alternative position, but they have at least some control over how hard they work.

That inability to completely control employees is also why, I would argue, large firms which find it difficult to monitor the contribution of each employee to overall output tend to pay more than smaller firms which have less difficulty doing such: the extra pay creates a “hostage premium” that makes employees more likely to be self-policing.

Increasing pay (either by increasing the rate or by paying bonuses) improves the situation of the employee and sends positive signals. Nor does it undermine their basic contract. A contract, after all, does not generally preclude one side choosing to do more for the other than agreed. Increasing the rate changes the contract, but one to the benefit of the employee. It does not undermine the notion of a continuing contract. Attempting to force them provide more work for a given amount of pay fundamentally undermines the notion of there being any contract.

It is theoretically possible to renegotiate the contract to reduce pay rates. But the employee has limited information about total financial flows of the business they are working for. This “information asymmetry” makes the implied asymmetry of benefit (employer gets same work for less pay) even harder to sell. It will generally be easier to cut hours while keeping the rate the same than cutting the rate while keeping the hours the same since merely cutting hours does not provide a pure benefit to the employer—an extension of it being easier to sack people than to reduce pay rates.

Employees, after all, have a standard pattern of expenditures that they wish to cover (and some of which they have to cover to maintain a certain basic standard of living). They can be expected to have some idea about likely alternative employment positions: in particular, how much pay would be gained for how much work. Cutting wages both makes alternatives more attractive in simple comparative terms while undermining the stability of presumed income from the current job.

The effect is less severe if the downward pressure on wages is clearly happening across an industry, rather than in just one firm. But, since each firm has the above considerations, there will be significant lags before any such change manifests and it still makes exiting that industry more attractive.

To summarise, because employment is a continuing interaction and it is fundamental to a contract to include agreed restraints on adverse behaviour, wages will be much “stickier” downwards than will levels of employment.

ADDENDA 1. My attention has been drawn to Arnold Kling's post on the issue. It strikes me as too removed from the reality of the employment relationship itself. Yes, cutting wages will make working for you less attractive than places which pay higher wages but the damage done to any notion of there being any sort of contract between employer and employee seems to me to be much more to the point.

An example a work colleague provided to me of a factory he knew of which announced to its workforce they could not continue to trading as they were so they offered all their workers the choice of one (1) resigning and collecting their redundancy payment or (2) going casual and receiving a higher hourly rate but no sick leave, etc and no guarantee of the same hours fits nicely in with my analysis above. It was a way of cutting both the expense of employing people and (given the shortening of hours) a cut in their total wages but not in a way which undermined the notion of having a contract.

ADDENDA 2. Richard Posner includes a discussion of why wages are "sticky" downwards in his critique of recent economic text. We reach similar conclusions, though, ironically, I (as a small employer) are more struck by the importance of contracts than Mr Justice Posner.

ADDENDA 3: That people resent nominal wage cuts is noted here :
Employers almost never cut their employees' wages because they fear that doing so would cause serious morale and staff retention problems. Studies of popular sentiment suggest why. Most people consider it unfair for a firm to cut wages, except in extreme circumstances. On the other hand, most do not consider it unfair if a firm fails to raise wages in the face of high inflation.
And further discussed here.

Saturday, March 21, 2009

Al Qaeda in its own words

Islam and democracy are incompatible because democracy makes the people sovereign, an offence against the sovereignty of Allah; because democracy claims the right to legislate, taking what is Allah’s; and because democracy allows infidels to have authority over Muslims.

Islam and equality of rights are incompatible, because freedom of religion permits apostasy, abolishes jihad, fails to enforce the legal inferiority of non-Muslims as dhimmis on whom the jizya is to be levied and abolishes man’s dominion over woman.

Liberal democracy is thus un-Islamic, indeed blasphemous. So Ayman al-Zawahiri, the Egyptian theorist who is second-in-command of al Qaeda assures the world in "Sharia and Democracy", a treatise extensively excerpted in The Al Qaeda Reader edited by Raymond Ibrahim, an American of Coptic background. The Al-Qaeda Reader provides a selection of texts from Osama bin Laden and Ayman al-Zawahiri, al-Qaeda’s chief ideologist.

In a document entitled Moderate Islam is a Prostration to the West, al Qaeda states that:
Muslims are obligated to raid the lands of the infidels, occupy them, and exchange their systems of governance for an Islamic system, barring any practice that contradicts the sharia from being publicly voiced among the people, as was the case at the dawn of Islam (p.51).
An impeccably Islamic sentiment, given that is precisely what Muhammad, and his Companions, did. As al-Qaeda points out:
it is, in fact, part of our religion to impose our particular beliefs upon others. Whoever doubts this, let him turn to the deeds of the Companions when they raided the lands of the Christians and Omar imposed upon them the conditions of dhimmi[tude] (p.51).
the West’s notion that Islam is the religion of jihad and enmity towards the religions of the infidel and the infidels themselves is an accurate and true depiction (p.52).
We need to take the words of al-Qaeda (and the jihadis generally) seriously—particularly when they are justifying themselves to potential supporters and recruits—for that is when they reveal what they are about. One of the things which crippled responses to Hitler in the 1930s is that people read him according to their own theories, not according to what he said he wanted to do, even though it was all in Mein Kampf for everyone to read.
Robert Fisk, in his normal purblind arrogance, informs us that:
There is no connection between Islam and "terror".
This is news to al-Qaeda, whose writings make it very clear indeed that what they do they do for very Islamic reasons. The longer texts are full of citations of the Qur’an (particularly, of course, the Medinan verses) and to hadith providing further and better particulars. What the Prophet said the Allah said, and what the Prophet, as the source of Revelation, said and did is clearly the ultimate authority. So terror attacks become raids to deliberately invoke the Prophet’s own raids. If one is propounding an ideology of warrior action and conquest, there is plenty in the words and actions of the Prophet to give you sustenance.

Fisk goes on to say
But there is a connection between our occupation of Muslim lands and "terror".
To al-Qaeda, Spain (or, rather al-Andalus) represents “occupation of Muslim lands”. Fisk is in such denial, he is reduced to saying that Osama is lying about his motivations when expressing an Islamic justification for the Bali bombing which is entirely in line with al-Qaeda’s rhetoric to fellow Muslims. The “West has been bad to them” is a pathetically inadequate explanation for the extent of Islam-motivated violence which extends way beyond attacking “Western” targets. (As it is for the lack of similar violence from others “the West” has been bad to.)

Fisk, and those who argue like him, are the analogues of those in the 1930s who argued that the Versailles Treaty was unfair to Germany (true) and that Germans have legitimate grievances (true) and so the proper thing to do was to accede to Herr Hitler’s expression of German grievances (road to disaster). It was the road to disaster because Hitler really believed in the program he outlined in Mein Kampf. Giving in to his “legitimate” demands did not take the “sting” out of his ideology, it confirmed it as the path forward.

And Hamas, Hezbollah and the jihadis are the contemporary analogues of fascism—modernising revolts against modernity (seen as alien, anti-religious and Western), preaching an atavistic (and anti-traditionalist) form of Islam, promoting a cult of death and violence, engaged in brutality and murder; the rhetoric of violence backed up by deeds of violence: in Hezbollah’s case with a uniformed paramilitary, straight-armed salute and all. (Osama bin Laden even has the war veteran mystique working for him that both Mussolini and Hitler did.)

In the face of threatening modern “corruption”, one gets atavism—rejection of recent tradition in favour of “original purity”. The Protestant Reformation—with its notion that Scripture creates or founds the Church rather than the Catholic notion that the Church produces Scripture—was one such case, as Pentecostalism is in our time. The rise in esoteric/occult views, particularly in the C19th, was another such atavism, as is the neo-pagan movement that descends from it. Both Italian Fascism and (especially) German Nazism were atavistic—invoking either pre-Christian Rome (in both cases) or pre-Christian German (“Aryan”) purity (in the case of the Nazis).

In contemporary Islam, the modernist impulse (the attempt to “update”) Islam wars with the reformist impulse (the attempt to “return” to original purity). This is an old pattern in Islam which has particular urgency in the contemporary world due to the omnipresence of modernity, Islam’s confronting weakness and the existence of the “free wealth” of oil money giving the reformist impulse extra impetus (as it weakens the pressure to adjust to modernity, as distinct from defying it in various ways).

And there is a long tradition within Islam that, except as pragmatic convenience, peaceful co-existence is unIslamic. As in Ayatollah Khomeini’s view that:
Islam is a religion of blood for the infidels but a religion of guidance for other people: though, given he was a Shi’a “corpse worshipper”, al-Qaeda would not quote him approvingly.
For the jihadis, secularism is anti-Islamic, democracy is anti-Islamic, equal rights is anti-Islamic. As long as we can understand the nature of the grievances, it is perfectly clear that the West is hateful for what it is, and particularly for being successful. While all the jihadi rhetoric about Middle East regimes being “infidel” because they are not true Muslims applies even more so to those who are not Islamic in the first place. Given the omnipresence modern communications give the products of Western culture, there is a sense in which the West cannot be escaped from. Osama bin Laden is the “mad mullah” of the global village, with rather fewer good points than the original.

What comes across strongly is how very much the example of the C7th in particular, and Islamic history in general, matters to al-Qaeda. The jihadis fought the Soviet Union in Afghanistan—with “Allah’s will” this led, they believe, to the collapse of the Soviet Union. So Allah will give them victory over the US. This model is straight out of the C7th, when Muhammad’s Companions—in the world’s greatest burst of religious conquest—overran the Persian Empire and half the territory (with two-thirds of the population and revenue) of the Eastern Roman Empire. (Which we call, quite anachronistically, the “Byzantine” Empire.)

The one point where it is clear that al-Zawahiri is stretching is trying to justify suicide bombing on Islamic grounds. Islam regards suicide as a sin and—while it is perfectly clear from the words of the Prophet that the archetypal Muslim martyr is one who slays and is slain—there is nothing in the Qur’an or in hadith which justifies deliberately killing oneself to kill infidel (as distinct from accepting one is likely to die). Al-Zawahiri is reduced to making a very weak inference from a parable hadith about a young boy who is a martyr to Islam by telling the evil king how to kill him after Allah had saved the boy more than once and claiming there from that it is the intention in the suicide which makes all the difference.

The argument for the permissibility of killing civilians is stronger (the Prophet bombarded an infidel city with catapults) but al-Zawahiri does have to make an distinction between defensive jihad (where more is permissible) and offensive jihad. But, given the September 11 operations (which al-Qaeda take full credit for) were “defensive”, it is not a distinction worth much.

Reading document after document, one is struck by the consistent tone: full of hate but also a pervasive bravado that seems to be shouting to hide a deeper insecurity. Bin Laden and al-Zawahiri are clearly deeply offended by the success of the West and relative weakness of Islam, an Islam that should be the triumphant vanguard of Allah’s sovereignty.

Reading an interview with al-Zawahiri is like reading an interview with a particularly sophomoric Western leftist with Islamic rhetoric tacked-on – the failure to put things in anything but a propagandistic context, the West (particularly the US) and West-friendly regimes are to blame for everything, nothing the speaker is associated with has any connection to anything bad, if everyone would just agree with the speaker things would be fine (and they only fail to so agree because they are wicked and malicious).

Raymond Ibrahim, who works for the Library of Congress and did a Masters in Middle Eastern history on early Eastern Roman-Muslim interaction, has done an excellent job in putting together the collection, handling the translation, providing short introductions to each major document putting it in context. (Though he does not always explain why particular documents are not dated.) I was particularly struck by a footnote that provides an excellent short summary of the closing of itjihad:
since the beginning of the tenth century, after all four school [of Islamic jurisprudence] had reached a level of development where almost everything had been codified, the doors of itjihad were said to have closed.
A very useful text – by letting al-Qaeda speak for itself, loud and clear – for understanding a mindset that is both religious and murderous.

Thursday, March 19, 2009

Wars and Medieval Rulership

Mass prosperity was developed first by in North-Western Europe and its offshoot societies in North America and the Antipodes. The first non-European society to also adopt that achievement was Japan. To understand why, we need to look to their similar, yet entirely independent, medieval periods of Latin Christendom and Japan and the institutional developments there from.

Joseph Strayer’s classic essay On the Medieval Origins of the Modern State is a fine read on the medieval roots of the modern. Though it seemed to me that the apparent "mystery" he refers to of greater propertied cooperation with the state in the late C15th and early C16th (pp 91-92) was a result of seeping change in the balance of coercive power. Crossbows and handguns, plus greater royal administrative capacity (so troops could increasingly be centrally paid, trained & equipped), were undermining the value of the knight (i.e. the propertied warrior elite and retainers) as protectors of the realm and enforcers of order and their independent coercive power socially downwards. Similarly, the castle as a base of operation were eclipsed by royal artillery parks. As centrally trained, paid and equipped mass once again dominated warfare, and knightly castles were replaced by royal forts, the propertied classes had less leverage against royal authority and more need to rely on it. Hence they became more tractable. The final mark in the process is the disappearance of the tournament as a great public display – too much danger, too much expense for too little pay-off. And so the medieval becomes the modern.
Yet it is not merely technological change in itself that does it (however important that might be). This is demonstrated by the case of Japan, which never suffered the collapse in trade, literacy and administrative capacity of post-Roman Europe and where the samurai persisted for three centuries after the introduction of gunpowder weapons by the Europeans in the C16th. (The Japanese being the Japanese, they were soon making better arquebuses and using them more effectively than the Europeans.) The extra element Europe had that Japan didn’t was foreign threat. The effort and expense of the institutional and social transformation required to change to mass gunpowder weapons drove European states to the point of bankruptcy and beyond. But if one state didn’t, its neighbour did. Keeping up with the Valois or the Hapsburgs was an expensive business. Within 20 years of Japan being confronted an equivalent level of foreign threat (Commodore Perry and his ‘black ships’ followed by gunboats of the European Powers), samurai society had gone the way of knightly society. The samurai, like the knights, being replaced by tax-paid peasants with guns. And, again, the medieval became the modern.

Which is a way of saying I found Warrior Rule in Japan both a great read in its own right and very revealing about medieval European history, given that it was an independent, non-Christian (and, for that matter, non-Germanic) evolution which nevertheless produced a series of remarkable similarities. They even had their very own C14th schism – the period of Southern and Northern Courts (1336-1392).

It can be hard keeping track technical Japanese terms (the difference between jito and shugo for example) and that Warrior Rule is selections from the Cambridge History of Japan is also a little awkward, since references are made of chapters not included. But reading about the slow unfolding of warrior rule as coercive leverage worked itself out was fascinating. And it improves one's grasp on the complexities of Japanese institutional development (for example, that talking as if the shogunate became 'the government' is far too simple).

Just to list some of the similarities, in no particular order, between medieval Europe (900-1500) and medieval Japan (1100-1860): temperate agriculture; geographic area very accessible by sea but separated by significant geographical barriers, particularly mountain ranges; later marriage; continuous institutional development over long period from at least C8th AD onwards (in particular, never conquered by steppe nomads), warrior elite as "permanent investors" (rather than "temporary share-croppers"), chivalry & bushido (glorification of the moral warrior); heraldry; diversified political structures with high degree of institutional autonomy; the novel; eroticisation of love & death in a literary tradition of tragic love affairs; primogeniture; highly developed legal codes with competing jurisdictions; replacement of servile with free peasantry; extensive wage labour; elected village and guild offices; wealthy & powerful merchant class; property rights, including corporations and extensive market in land; highly developed financial markets: including tradeable shares, bills of exchange, futures contracts.

To study each in the context of the other, and their differences from other societies and civilizations, can be a deeply revealing exercise.

Wednesday, March 18, 2009

Winning by making things worse

If you block the responsiveness of a system to change so it becomes increasingly dysfunctional, you can point to that dysfunction as evidence for the need for change. In other words, in certain circumstances, the worse you make things, the stronger your case looks.

For example, if you make creating new dams politically untenable, then investment in water infrastructure will not keep up with growth in population. So the society becomes more vulnerable to drought. The resulting water restrictions are then paraded as evidence of the need for restrictive environmental controls. The fact that your hostility blocked the responsiveness of policy to changing population does not undermine your case, it reinforces it. You win by making things worse. The effect can also be generated—or magnified—by blocking water prices from reflecting actual demand.

Similarly, the obvious response to population spreading into rural areas is to clear trees and keep down build-up of flammable undergrowth. If environmental controls—based on a green aesthetic—ban tree clearing and block forest management by back-burning, rural and semi-rural areas have increased vulnerability to bushfires. So any resulting disaster can be touted as showing the need for strict environmental controls due to an increasingly dangerous environment. Once again, you win by making things worse.
Of course, this relies on people not being called on the actual effects of their policies. But if you have established that supporting such policies mark one as a “good person”, this makes such “calling” both less likely and much harder. That is, if such beliefs have become status markers, then a lot of people (including people in the media) have a vested interested in not “calling” you. For, in such circumstances, the moral status of one is the moral status of all. All those in the “club of the virtuous” have an interest in maintaining the value of the markers of virtue. This works to discourage awkward evidence from having effect in the public arena: it certainly discourages the “club of the virtuous” from examining their own actions and beliefs.

It is not only environmental policy that works this way. Any situation where there is delayed causation, so that the actual effects of actions are obscure, can operate this way. For example, starving a system of capital investment and/or maintenance so that they service deteriorates so that the drop in patronage can be used as an excuse to further cut spending on the system.

This is even more so if:
(1) beliefs are status markers establishing a “club of the virtuous”,
(2) there is an underlying presumption that the existing system is dysfunctional, so any dysfunction is blamed on “the system”, not actions you have done or supported within it, and
(3) moral legitimacy is established by one’s intentions, so failure do not detract from your legitimating intentions.
Such a situation is rife for “winning by making this worse”.

All the more because this is in no sense a conspiracy. People playing such games do not do it deliberately, they are acting out the presumptions of their worldview. Bad outcomes reinforce their world view, since it is based on a presumption of dysfunction (of markets, of capitalism, of private action, etc). That presumption then legitimates their intention to change things—particularly by having more resources controlled by people like them.

In the case of indigenous policy, having destroyed previous responses to the interaction between indigenous people and the mainstream (missions and pastoral work) and replaced it by mechanisms legitimated by their intentions, not their responsiveness to circumstances, any disastrous outcomes (of which there have been plenty) can just be blamed on “racism”. The cited dysfunction that justified the disastrous policies in the first place.

If you justify your preferred policies in terms of opposition to a fundamentally very successful social system, one is likely to end up embracing a lot of failure.

Consider using official discretions to limit the use of land for housing. By limiting responsiveness to increased demand for housing, that increases prices, which adds the demand for inflation-beating-assets to the demand for houses, which creates housing bubbles. Add in official actions to encourage more lending to the riskier (in part because housing has become more expensive), and you make the financial system more vulnerable to stress. Once that vulnerability is manifested, it becomes “a useful crisis”.

When things are obviously working poorly, the obvious response is to take actions to “fix” the problem. In a market economy, regulatory failure manifests as market outcomes. Blaming “markets” is an obvious and simple thing to do. Explaining the effects of regulatory failure requires telling a longer causal story, which puts one at a rhetorical disadvantage.

Hence one can win by making things worse.

Monday, March 16, 2009

Medieval Business

Edwin S. Hunt and James M. Murray’s A History of Business in Medieval Europe 1200-1550 is an excellent history of medieval business. The business focus gives it an alertness to practicality which is not always a feature of writing on medieval history, even medieval economic history. Having a retired businessman as one of the authors (Hunt, Murray is an academic medievalist) seems to have helped.

Early on, however, I did note a surprising analytical lapse. Examining the economic relationship between peasant and lord, Hunt and Murray see it as having exploitative and cooperative elements, which is entirely fair enough. But what is startling about their discussion otherwise intelligent and informative discussion (pp18ff) is the complete absence of any mention of the protective role of lordship. Yet, when one considers the costs of weapons, warhorses, armour, training and castle-building, the resources consumed by military purposes were enormous. Its demands—the provision of well-equipped, skilled, effective mounted warriors and the consequences of doing so—were fundamental to the evolution of political structures. (Including, I would argue, the evolution of primogeniture.)

In a situation where trade had largely collapsed—one estimate, based on counting shipwrecks in the Western Mediterranean, is that trade in the period after the collapse of the Western Roman Empire was a mere fifth of the level at the height of the Roman Empire—the most important sources of (personal) wealth were labour-applied-to-land (which produced food and clothing) and violence (i.e. stealing from, or controlling and protecting, those who worked the land). Those who were best at violence came to dominate those who worked the land.

Commentators at the time were quite clear that the role of lordship was to fight: and not merely in the sense of supplying armies, but in enforcing local law and order. Indeed, given the scattered nature of the population and the extent of wilderness, the latter was much the most important role of the lord. Medieval lordship was first and foremost a warrior elite, a fighting elite. Even the Church had milites or bellatores (to simplify, knights) beholden to it.

A recent edition of Ramon Llull’s Book of Knighthood & Chivalry (published along with Ordene de Chevalerie: the poem of Saladin's "knighting", which is entertaining) brings out the hoped-for protective role quite clearly. Llull’s piety makes this at least as much a religious text as a chivalric one, yet there was a clear emphasis on the local social protection role of the knight. There is a tendency for modern historians to be rather too struck by the role of knights in armies. This is certainly easily the most historically dramatic and visible of their roles, but it was relatively minor compared to their much larger local social enforcement and protection role. When, for example, the French Crown sent commissioners around after the massacre of French knights by Flemish pikemen at Courtrai selling lordships, it was at least as much about maintaining domestic order as any issue of external military effectiveness. (See also my review of Bartlett's The Making of Europe.)

Hunt and Murray are not wrong to see cooperative elements in the relationship between peasants and lords. Nor to note the care and attention lords applied to the economic exploitation of their lands. But to pay no attention to the protective role (apart from a passing mention at the beginning of Chapter 2), and the resources consumed for military purposes, in relations between lords and peasants is Hamlet without the Prince.

Nevertheless, A History of Business in Medieval Europe is a very enlightening read. It is divided into two parts. The first deals with the last part of the “long boom” which started about 1000 before ending in the famines of the early C14th and then demographic disaster of the Great Pestilence, as it was known at the time. The second covers the period after that demographic disaster up to the creation of the global economy following the Spanish crossing of the Atlantic and the Portugese penetration of the Indian Ocean.
The study is concerned with the traders and merchants—and, to some extent, the skilled craftsfolk—who operated between the lords who fought, the priests who prayed and the peasants who sowed and reaped. (Who made up, between them, over 90% of the population.) None of whom cared for business for its own sake but all of whom had reasons to appreciate what it provided.

Business had to deal with lordly exactions (taxes, tolls, rules, fines). Clever businessfolk could use what they offered to bargain for privileges (typically exemptions from said taxes, tolls, rules or fines). Business wanted liberty and security, and some of the bargains made with lords to get it turned out to be somewhat Faustian. But a learning process went on, leading to a range of innovations and developments. A key point is that, despite the amazing demographic disaster of the Black Death—the population of Europe crashed from probably about 74 million in 1300 to likely about 50 million in 1400—little in the ways of skills were lost. On the contrary, the circumstances encouraged even more innovation. One gets a very good picture of the sheer resilience of medieval society.

The first Part looks at the economics, culture and geography of early medieval trade, the forms of business organisation, traders and their tools, the politics of business and the “super-company” phenomena as business got bigger.

But it was not only lords that business had to deal with. Much of what they did was regulated by canon law, and thus Church doctrine. Interaction with the Church moulded medieval business in a creative tension between doctrine and practicality. Especially over the ban on usury. (See my review of Diana Wood’s Medieval Economic Thought.) The imposition of an Interdict on a city was particularly bad for business. It stopped church bells, which marked time, and released outsiders from moral obligations on contracts (p.96).

Cooperation and competition molded business. Folk had basically same reasons to cooperate across Latin Christendom, but the local context varied greatly (Pp77ff). English and French business took very different paths due to different institutional context. How much say business folk had, how much civic freedom, varied widely. Even areas with relatively powerful cities—Italy, Catalonia, Flanders, Germany—showed variations in patterns. Common patterns, local variations—very much how the medieval world operated.

Hunt and Murray are good at debunking glib simplifications—for example about the alleged "disappearance" of the fairs and firms misleadingly labelled “banks”. Business did become bigger and more complex (pp 72-73), leading to the growth of very large companies, what Hunt and Murray call the “super-companies” but are often referred to in the literature as “banks”. The latter is not an adequate description. They were more like commodity traders with a financing side.

It is striking how small medieval bureaucracies were (p.109). The largest, the Avignon Papacy, had 250 staff and most government administrations were considerably smaller. The later Medici Bank had 57 staff. Of the “super-companies” which collapsed in the 1340s, the Peruzzi had, in addition to working partners, 90 employees (48 in branches). The Acciaiuoli 43 factors in foreign branches. The Bardi in the vicinity of 120-150 employees.

Hunt and Murray deny that the collapse of the “super-companies” came from Edward III’s failure to pay back his loans. (He never defaulted, merely audited and reneged on parts of them, while the “super companies” were given advantageous positions in the highly profitable wool trade as part of the deals.) Nor did it come from shifts in relative prices of gold and silver. Rather, they argue, it resulted from the effects of prolonged famines in the 1340s, resulting in a dramatic drop in the international grain trade, leaving the “super-companies” with overheads their cash-flows could no longer support. They were an adaptation to particular trading circumstances and when it passed, so did they.

The book is full of enlightening asides and discussions. They note the Papacy’s intention to destroy the Hohenstaufen dynasty “root and branch” (p.92). That the Corpus iuris civilis of Justinian was rediscovered at the end of the C11th and gradually spread northwards from Italy during the C12th. That interest rates on productive loans were 8% then 7% pa. (Quite low by historical standards, suggesting relatively high levels of social trust.) That Genoese merchants were notably not cooperative with other Genoese, unlike merchants from other cities (p.116).

The “long boom”, the commercial expansion from 1000 to 1300, was brought to a halt, first by a series of particularly bad famines and then the Black Death, which wreaked havoc on an already weakened Europe. Post plague, Europe was richer per capita. (The disease killed people, not land, buildings, tools, machines or coins.) The elite splurge on “eat, drink and be merry, for tomorrow we die” and the increased labour costs encouraged business innovation in production, distribution, exchange and organisation. Recovery from demographic stagnation began in the mid C15th (we don’t know why) and steady growth of business innovation meant that Europe was well suited—both rulers and business—to take advantage of any new trading opportunities which turned up. (Such as crossing the Atlantic and finding a sea route to the Indian Ocean.)

That rulers (whether monarchs or towns) encouraged foreign specialists to settle, while invoking severe penalties for local experts who attempted to leave (pp 153-4), showing keen awareness of technological advantage. Adversity (in the form of the demographic crash) and competitive jurisdictions encouraged innovation.

The “race to the bottom” allegation (that competitive jurisdictions make public policy worse) anti-globalists are fond of alleging is a proposition very much not much supported by historical experience. On the contrary—provided a certain level of peacefulness is achieved—competitive jurisdictions do limit coercive control but that is precisely what encourages better public policy. (Though any group that feels that its qualities make it uniquely fitted to rule is going to find such constraints uncongenial.)

Hunt and Murray chart the new business environment after the Black Death, the business responses thereto, the burst of innovation in the C15th, the sources of capital and the beginnings of a global economy.

Who uses and how widely is more important than who originally invented something. Hunt and Murray note the adaptiveness of Latin Christendom (p.247), though they overestimate original inventiveness (windmills and improved account keeping came from Islam, printing from China). But, in all cases, the medievals improved considerably on the original versions.

Printing clearly spread with remarkable speed because there was already a demand for printed material (p.200). Printing books created new risk of unwanted merchandise (p.201). Business folk were keen book buyers—commercial centres, not religious/university ones, dominated printing (p.202).

Commercial taxes (such as those levied in England, Flanders) encouraged ruler attention to needs of commerce more than did the wealth tax (taille) of France (p.205), while forced loans often amounted to taxation (when they were not paid back: p. 206).

They keep returning to the importance of elite demand in driving business (a problem with neo-malthusian analyses of pre-Industrial Revolution economies).

There is a great deal more. Discussion of art and architecture being useful mechanisms for absorbing wealth; the way innovation tended to outpace control mechanisms (a continuing phenomena in our own day); the importance of innkeepers as financial brokers; the burst of silver production and importing of gold along with expanded credit that kicked off the Great Inflation before American silver arrived in substantial amounts; the steps the Portugese and Spanish crowns took to exploit their global trading opportunities; and so forth. All done in highly readable prose: a very useful text on the medieval period.

Sunday, March 15, 2009

Global Financial Crisis (GFC) into Global Economic Crisis (GFC)

Recently attended a dinner meeting where a former senior economic policy person gave a talk on the global financial crisis (GFC) and its morphing into the global economic crisis (GEC). The speaker’s presentation was clear and informative (and under Chatham house rule). It also did not suffer from the America-centric problems of quite a lot of (particularly American) commentary.
The speaker argued that it was a result of a combination of factors. Global financial imbalances (basically Chinese and other Asian saving flooding into pay for American spending), the development of derivatives way in excess of understanding or law that both spread and obscured risk plus very high levels of leveraging based on the presumption of a rising market. The housing bubbles and US public policy encouraging more lending to the riskier were significant factors in these patterns. With the collapse of Lehman Brothers, this toxic brew became the GFC.

Which, in the middle of 2008, morphed into a global economic downturn that hit all major economies simultaneously. It is the simultaneous nature of the downturn that is adding to the severity since, in previous recessions, different areas of the global economy would be affected at different times and to different degrees. Not so this time, hence the GEC.

Australia is relatively well placed since we have low levels of public debt, our banks are not stressed (i.e. our prudential regulation worked better) and our lending practices have been rather better. (The first home-owner grant may be daft policy in that it increases demand in markets where supply is constrained by official discretions, but at least it does not raise risk levels.) So, for example, when the Reserve Bank cuts interest rates, our banks pass the cut on fairly thoroughly. In other economies, cuts in official interests rates are being passed on much less, since the highly stressed banks use such cuts to improve their operating balances.

The speaker was distinctly unimpressed by the various fiscal stimulus packages from the Rudd Government since (1) the speaker thought they were not well structured as stimuli (suggesting that paying the States to suspend payroll tax would be a much more effective way of stimulating employment), though they were perhaps quite well structured as political tools, and (2) bidding for bonds in a situation where so many major economies are selling bonds to pay for their fiscal stimuli at the same time ran a distinct risk of downward pressure on the Australian dollar exchange rate. Not to mention loading future generations with tax obligations. The speaker also felt that now was not the time to be reversing liberalisation of the labour market (i.e. making the labour market more rigid).

A lively discussion followed. Including an informative discussion of China's situation. The high level of Chinese saving represents quite major structural problems within the Chinese economy.

A good night.


Corey Taylor’s Naked: The Life and Pornography of Michael Lucas is about a gay Russian Jew porn actor and director who has turned himself into New York celebrity.

Covering Michael Lucas’s life from growing up in the Soviet Union to his current near A-list celebrity status, it is an admiring celebration of a classic immigrant-makes-good-in-the-US story.

The story bounces along nicely. Taylor conveys well the claustrophobic oppressiveness of the Soviet Union, the sheer unpleasantness of so much of daily life. One gets a good picture of the pervasive anti-Semitism of an officially atheist state (a case which ironically demonstrates the silliness of Marx’s understanding of Jew-hatred and how to solve it—get rid of religion).

Taylor also conveys the wounding and oppressive nature of fear and ignorance about human sexuality. He sees the Soviet Union as being, in sexual terms, like the US before the Kinsey Report(s), which seems not a bad analogy.

Ironically for a biography of a porn star and director, there are no pictures.
Taylor takes us through Michael Lucas’s childhood, adolescence, education and early working life in the Soviet Union. Michael Lucas then moved to Germany, where he worked as a hustler and dabbled in porn. Clearly, Michael Lucas likes sex but he very much saw hustling as a business (he had previous business experience having run a travel agency in Moscow), and approached it as such.

Lucas then moved to New York and used the money he saved from hustling to start a business directing porn, with himself as the prime asset of Lucas Entertainment. The business opportunity he spotted was quality, New York-based gay porn, as all the major American porn companies were based in California. Which he has been very successful at building. His 10 tips on how to be successful porn star alone are worth reading.

Michael Lucas’s commercial success illustrates Voltaire’s point about commerce reaching across sectarian divisions and diversity encouraging a free society. As the same-sex oriented experience daily, commerce has generally been much friendlier to them than politics – hence, in the US, Fortune 500 companies have recognised same-sex relationships rather more readily than US States. The openness of commerce is a common experience of minorities: as Thomas Sowell has pointed out regarding the origins of the Jim Crow laws, which were imposed by governments since commerce would not waste money racially segregating.

Lucas has also been very successful at building a public profile for himself by the simple expedients of having lots of striking things to say and being available and consistently pleasant to journalists and photographers: to the extent of being profiled in The New Republic, to his public pleasure. Being clearly photogenic doesn’t hurt, of course.

Lucas’s rather conventional private life—even with recognisable pitfalls of gay emotional life—(apart from the having-public-sex-as-part-of-his-job thing) and his devotion to his family (most of whom he arranged to migrate to New York) are also covered.

The book ends with a nice epilogue one pornography, skewering the bad scholarship and abusive reasoning of Andrea Dworkin & Catherine MacKinnon—particularly Dworkin’s misandry-parading-as-feminism where all forms of male sexuality are illegitimate.

Lucas himself clearly inspires strong reactions: gay, expatriate, Jewish, porn-star and entrepreneur, Zionist, avid self-publicist – what is there not to react to? One’s reaction to Naked is likely to coloured by reactions to the package presented as Michael Lucas.

Michael Lucas himself is not so impressed with the book. His complaints about the writing style seem rather precious. Taylor cites and thanks various friends and acquaintances of Michael Lucas for their assistance in his acknowledgments, so they contradict each other about Taylor's sources. Michael Lucas's complaints are also surprising in that Naked is very much an admiring and respectful biography. It leaves you thinking that Michael Lucas is a driven, but also self-possessed and effective, person who is probably (when the mood takes him) lots of fun to be around.

Saturday, March 14, 2009

Colonised knightly Europe

Thomas Bartlett’s excellent The Making of Europe: Conquest, Colonization and Cultural Change 950-1350 is a fine history of the development of European institutions. Bartlett traces the roots of Europe’s post-medieval colonial history in medieval history: Europe the coloniser was itself the result of a process of colonisation. Thankfully, his analysis is done as intelligent history, rather that using propositions as buttresses to the display of virtue.

Something that is very striking in Bartlett’s book, given recent controversies in medieval historiography, is how crystal clear it is that the dominant model in medieval rulers’ heads was the "feudal" one. Or, as I like to put it, franchising social protection to armoured thugs. Whether it was native dynasties importing knights (Mecklenburg, Poland, Scotland, Denmark, Hungary) or frontier conquerors (Spain, Norman Italy, Outremer, Wales, Ireland, Brandenburg, Prussia) or simple conquerors (England), the dominant model is grant-land-receive-military-service. Now, how much those grants were genuinely conditional (your continued tenure rests entirely on your continued service) or obligated (you providing service is an obligation of ownership) or the service was contractual (it’s your land but you want things from me, I want things from you) or strong expectation (ultimately, we’re in this together) is a moot, and highly variable, matter. But the pattern is clear enough.

Bartlett makes the excellent point that Latin Europe spread because it provided a self-replicating matrix of adaptive institutions: thus, monastic rule + knightly ethos => military orders; immunity + market => chartered town; priesthood + guild => university (p.310). Indeed, the medieval order was much more successful at both spreading across Europe and developing its economic resources than the Romans had been.

What is most socially distinctive about the medieval period from the C11th on (the "High Middle Ages" if you like) is the knight and their consequences. This is such a cliché, historians seem to have lost some grasp of the continuing truth of it (see my review of R. I. Moore's The First European Revolution). Yet when medieval chroniclers write histories that read like medieval romances, they are far from foolish in seeing what the knights did as central to their age.

Bartlett points out that the expansion of Latin Europe was largely not a result of the most powerful rulers: they were often too busy fighting each other. What you got was a matrix of knightly-clerical-mercantile expansionism (p.308). Yet the latter two were every bit as present in later European imperialism. That the majority of European military forces faced off against each other was also true of later European imperialism. What was different was the replacement of the knights by a mixture of adventurers and officials (not mutually exclusive categories). Medieval Europe was, to a very large extent, the world the knights built: they and their consequences were what made it most different from what came before and after.

Modern parallels

Reading R. I. Moore’s very informative description of how medieval clerks operated as they rose in social importance, it all sounded hugely familiar: the limitation of acceptable debate (which was real within the bounds), the denunciation and persecution of serious dissent as malignant and evil, seeking to have the role of gatekeepers for ideas, the use and abandonment of popular power, the generation and identification of sins and social evils to be eliminated. We live in a society surrounded by similar patterns, though without the same brutal consequences.
The modern intelligentsia used to extol popular power, it now seeks to frustrate it – through judicial activism, ideas-gatekeeping, internationalisation and so forth. The much-hailed 'proletariat' have become the much derided racist and xenophobic 'rednecks'. Thus it would be a disaster for contemporary Labor apparatchiks if the actual preferences of workers were expressed in public policy. Pauline Hanson is the modern version of the popular medieval heretic denounced with a viciousness that seems hysterical to those who don’t share the premises of the denouncers – along with said-premises importance in the denouncers’ sense of their own social status and role.

The medieval clerks allied themselves to rising royal power, their contemporary equivalents to the ever-expanding welfare state: one that is always finding new social sins and evils to combat. There is even environmentalism to give everything the necessary religious edge.

Medieval clerks denounced knightly predation and differentiated themselves from them while relying on the knights' coercive power. Their contemporary equivalents denounce corporate power and differentiate themselves from such while relying on the same to generate the wealth that keeps the show on the road.

Where the clerks of Latin Christendom used anti-Semitism to bind and differentiate, and also proclaimed their superiority over the Greek Orthodox, their contemporary equivalents use anti-Americanism (and anti-Zionism) and proclaim their superiority over conservatives and economic liberals. (The neo-cons get particularly denounced – Jewish, American, Zionist, pro-Western power. It hardly gets more evil than that.)

Yes, indeed, one has to keep one’s eye on the selection pressures of history. Who knows what might get another go around.

Friday, March 13, 2009

Warrior rule in Europe (and Japan)

The First European Revolution by R. I. Moore is the book synthesising post-Reynolds contemporary medieval scholarship on the transition from ‘Dark Age’ to ‘medieval’ that I have been looking for. It also throws surprising light on some contemporary social patterns (as I will discuss in my next post).

I enjoyed the book immensely, and found it very enlightening and informative. Moore makes it very clear just how much the creation of post-classical Western civilisation was based on the squabbling alliance of warlord and Church. What struck me though, is that Moore describes a revolution without a driver. Yet the driver is clear enough from his own analysis: the increase in the coercive power of mounted warriors and the competitive predation that released. All the changes he elucidates – the collapse of central power; the castle-building; the change to patrilineal, singular land ownership; the shift to primogeniture; the mass enserfment; the shifts in Church practice and doctrine – came from that.

In Dark Age Europe, military power rested on deploying masses of foot soldiers leavened by bodyguards. Even in conditions of scarce administrative resources, that gave an inherent advantage to kings – they could summon more foot soldiers than anyone else: mass won. But mounted, self-equipped, self-trained warriors had a level of concentrated leverage – both against royal power and against lower orders – that foot-bound troops did not have. Mass no longer won; training, motivation and equipment won. Royal power suffered commensurately since, in conditions of scarce administrative skills, it had no inherent advantage. Though, as Moore rightly argues, as administrative skills became less scarce, royal power improved. Reynolds’ later-medieval ‘feudalisation’ is clearly about how central power sought to deal with the coercive premium of self-funding knights. At least obligated, and hopefully conditional, land tenure was better for royal power than unencumbered freehold.
Moore broadly understands, but does not explicitly articulate, the central importance of selective pressures on the evolution of social formations. Thus, the sexual restriction of younger siblings who were barred from the marriage market by being landless (p.89) had to have a powerful social force behind it. Which it did – the demands of power itself. Younger sons did not inherit the patrimony, but it still equipped, trained and defended them (as it would not any sons they might have) that it could not do satisfactorily if divided: particularly in highly competitive circumstances.

Similarly, the shift from limited slavery to mass serfdom permits localised control of scarce labour but requires concentrated, local coercive power to enforce.

Castles are for mounted troops. Foot soldiers build forts. A castle can dominate up to 800sqkm, the range there-and-back of mounted troops in a day. Mounted troops have the range and concentration of effect required to impose order and extract sufficient concentrated surplus permitting localised castle-building. Hence the lack of castles, as distinct from royal burghs, in the foot-soldier-dominated Englisc (“Anglo-Saxon”) kindgom prior to the Norman conquest.

Competition to equip, maintain and develop personal warrior efficiency therefore drove demands of wealth. A more layered society created a premium to retain coherent lands, able to support wealth and maintain status: commercial variety created easier opportunities to do so. Hence the spread down the social order of primogeniture.

The medieval order is the knightly order—the social order where the milites, the bellatores, the mounted warrior was central—that is what is distinctive about it. Kings and priests existed before and after. Scarcity of administrative resources was shared with the Dark Ages. The properly medieval comes with the rise of the knights, the modern with their eclipse. The abandonment of the tournament as a great act of social display is as good enough a marker of the passing of the medieval as anything.

Moore identifies the collapse of central power as the loss of booty from conquest to buttress royal power. This is an important factor, but will not do to drive his revolution – Englisc royal power neither relied on booty nor decayed. Indeed, it was precisely the strength of royal dominance that made the kingdom such an attractive target (due to the income it could extract).

It was clearly true that booty could provide a buttress for royal power: hence the advantages of Ottonian Germany and Castile over France and Catalonia. And it provides an excellent explanation why the replacement of appointed local power by inherited local power in Japan, with its open northern frontier, was much more similar to the German than the French pattern.

Which points to Moore’s biggest analytical failing: there is not a single reference to Japan (a mistake which, for example, Marc Bloch did not make). Moore does use other societies for compare and contrast (I loved the ‘cowrie shell’ analysis of patterns of land swapping between noble clans and monasteries). Moore understands the profound difference between Latin Europe and imperial Chinese rule: but not the reasons for them – a mistake likely to be avoided if he had considered the case of Japan. Just as he would have been much better placed to understand the implications of increased coercive effectiveness of mounted warriors. Examining the samurai makes the knights so much more explicable (and vice versa). Thus chivalry and bushido are both religiously embedded warrior codes using honour to get an ethical handle on the predation paradox – we need political authority to protect us against social predators, but rulership itself is the most dangerous of all social predators – for warriors directly embedded in society. This is quite distinct from the duty-of-office applicable to centrally paid, equipped and trained soldiers: the Roman and the modern model,

But Japan and Europe shared other features. One was vertically divided authority – in Europe, Crown and Church. In Japan, tenno (imperial civil government) and bakufu (military government). (C16th European commentators on Japan, trying to understand the roles of mikado and shogun called the former ‘the Pope’ and the latter ‘the King’ of Japan: they were not so far wrong.) A book such as Warrior rule in Japan makes quite clear how central legal jurisdiction was in building authority in Japan: all the way down the society, just as in Latin Europe but not as in the rest of Eurasia, such as China (though some of the references to European medieval history and terms in Warrior Rule made me shudder.)

In China, rule tended towards being simply social predation. A minimal level of public goods being provided to make predation more convenient. In Japan and Latin Europe, with their competitive jurisdictions (both institutionally – vertically – and territorially – laterally), provision of public goods was a way of buttressing and constructing authority. So in both societies, authority was much more socially pervasive and the level of provision of public goods much higher. Which includes the way that Church sought to present itself – as arbiter and mediator (p.85) with personal chastity and poverty both differentiating from and supplementing the bellatores (p.87).

Medieval Europe and medieval Japan were both periods of warrior rule. Each is made more understandable by being examined the light of the other.

Government unlimited

What do we think is the purpose of government and what do we think is the capacity of government?

If we think the purpose of government is to “do good” and that the capacity of government is limited only by intention and resources, then there is no limit to what government ought to do.

If, however, we think the capacity of government is limited by other factors than (formal) intentions or resources, and that the formal, public purpose(s) of government are limited, undermined or subverted by the motives of people in government, then we are likely to be very sceptical about what government can or ought to do.
In a democracy, scepticism about the capacity of government (including scepticism about official processes) can be paraded as being an attack on democracy, the voters and citizenship. Not least because there is a kernel of truth in this. The greater the scepticism about the capacities and purposes of government as it actually is (or is able to be), the more limited value is being put on the utility and effectiveness of democratic processes.

That an expansive belief in the purposes and capacity of government can easily be paraded as a form of moral expansiveness adds to this effect, as it provides a basis for beliefs as status markers. Belief in the purposes and capacity of government becomes a means for conspicuous compassion, scepticism about either a form of moral (and perhaps intellectual) insufficiency.

Hayekian humility about the capacity of human actors to know enough to run a sufficiently complex system is not congenial to such moral expansiveness. But neither is Burkian humility about the legitimacy of other people’s choices. The state is first and foremost a system of coercion and the moral costs of such coercion increase the more one accepts the legitimacy of other people’s choices.

This last moral calculus is complicated, since it is clear that some government actions can expand choice. But the more expansive one’s moral vision for state action, the more likely it is one is limiting rather than expanding choice. After all, there is hardly any more unlimited vision of the moral capacity for state action than Leninism, with its belief that political action can transform people, culture and society and usher in a completely equal, stateless society, nor any philosophy which has proved more murderously and brutally oppressive.

But humility about one’s capacity to know, or about the legitimacy of other people’s wants, beliefs and actions, can lack a certain appeal. Particularly if one’s self-image is very much one of being clever, knowing and very moral. (This is not limited to one side of the political spectrum: consider the attitude of many devout Christians, Muslims or Jews to homosexuals and homosexuality.)

There are some libertarians who can be terribly, terribly convinced that they just know how things work and what is “obviously” the right approach. Nevertheless, there is a sense in which they are profoundly more humble than those expansively confident in the moral possibilities of government action because they accept Hayekian and Burkian humility (as building blocks of why they are so convinced about how little government should do).

There are clearly major difficulties with the information governments are capable of finding or using effectively. There are also major issues with the incentives of government action. The moral hazard problems with much regulation, for example. That government resources are controlled by particular humans in particular circumstances. And so forth.

The fundamental paradox of political action is that we rely on the state to protect us from social predators but the state itself is the most dangerous of social predators. We can differ where the balance between those sets of dangers lie in any given circumstance. What is disastrous is believing that we have somehow abolished that paradox.

But nor is it conducive to good public policy to believe that government action does not suffer from serious information and incentive problems. It may be very morally comforting to believe so, but that is a danger, not a recommendation.

Thursday, March 12, 2009

Medieval Economic Thought

Diana Wood’s Medieval Economic Thought is a helpful and informative journey through medieval economic thinking across time and subjects.

During the medieval period, what we now call economic commentary was dominated by churchmen, with church courts having jurisdiction over a great deal of economic activity. Such commentary’s prime concern was with sin and the state of people’s souls. But that involved attention to how things worked and what folk did. The general tendency was, as Latin Christendom became a more commercialised society, for church commentary to become more commerce-friendly and for lay commentators and courts to have increasing roles. Scripture, Aristotle and Roman law were the prisms through which economic life was examined.
Wood’s chapter headings delineate her coverage of the subject matter well. Her Introduction sets the scene, pointing out the level and extent of Church authority. Chapter 1, Private property versus communal rights: the conflict of two laws covers responses to the problem that God gave the world to people collectively, yet society divides it up into personal property: divine law contradicting human law. Commentators responded in various ways to the problem, with Wood noting an increasing tendency to accept personal dominion over property. (Which the Catholic Church still does not accept over one’s own body.)

Chapter 2, Wealth, beggars and sufficiency, charts the increasing respect for wealth and the decreasing tendency to accept poverty as an ideal along with the increasing laicisation of charity. Yet this shift over time continued to be organised around an underlying principle of balance. So the poor became the “security guards of Heaven” as folk made bequests to charity to put their moral balance into the positive and so enter Heaven.

Chapter 3, What is Money? covers the wrestling with the nature of money (a subject that economists still struggle with). Money was an authorised store of value (‘ghost money’ in books of account), a medium of exchange and, more controversially, an imperishable store of value permitting anticipation of future purchases. Which required money to have certain properties. One of Wood’s themes is how much medieval commentary on money in particular (and economics more generally) anticipates later thought on the subject.

Chapter 4, Sovereign Concerns: Weights, Measures and Coinage covers the interaction between belief, practicality and the role of rulership in matters basic to, what we would now call, transaction costs. Where standards came from, attempts to prescribe and police them, practical problems, history of coinage, problems of debasement.

Chapter 5, The Mercantile System, deals with attitudes to merchants (very condemnatory to start with, but more accepting over time), trade policy and anticipations of Mercantilism. Woods suggests that, on the evidence,
economic practice tends to anticipate economic theory (p.131).
A proposition not made less plausible by recent events.

Chapter 6, The Just Price and the Just Wage covers the wrestling with fundamental issues of economic life. Wood doesn’t cover the Salamanca School, since they are a C16th phenomenon. Prices and wages could be something set by the ruler, they could be the “going rate” or they could come from free negotiation. The Parable of the Vineyard, where the righteous landowner pays various labourers the same amount regardless of how long they had worked, was a bit of a difficulty. Wood covers such things as notions of demand and supply, attitudes to monopoly, the growth of guilds, evidence of collective bargaining and the development of the notion of unequal bargaining power. There was a shift over time from a notion of appropriate balance between buyers and seller requiring absolute equality to one of appropriate proportionality.

Chapters 7, The Nature of Usury: the Usurer as Winner and Chapter 8, The Theory of Interest: the Usurer as Loser cover the wrestling with the conundrum of usury being a mortal sin yet loans (with interest) being increasingly important to commercial activity (including the Church, especially the Papacy).

The attack on usury was based on biblical texts such as Leviticus25:36 (or Exodus 22:25, Deutoronomy 23:19, various passage in Ezekiel 18 and Ezekiel 22:13) and the Sermon on the Mount, particularly Luke 6:35.

Apart from references to Leviticus 25:36 and Luke 6:35 as examples, Wood does not go into the Scriptural basis. (The Parable of the Talents, including the version in Luke, suggested that interest itself was fine while the above passages have been variously translated as being against any charging of interest or only excessive charging of interest.)

Usury was a mortal sin—depriving the sinner of salvation—and was a form of theft (it stole God’s time and took from the borrower, via the charging of interest, what was not the lender’s). Money, scholastic doctrine held, was sterile so the notion of it being fruitful was unnatural. The overall presumption was that the usurer gained, illegitimately, from the borrower.

Natural law theory

Indeed, the scholastic attack on usury provides an excellent example of problems with natural law theory. Take a reductionist view of something’s form (money is round metal objects with no inherent generative power), and therefore its use (purely for exchange for goods), ignoring wider context (money is a store of value, a medium of exchange and a unit of account whose use promotes gains from trade: while one has money, one has use of it; in loaning it, one is depriving oneself of alternative uses: use of it includes investing in productive assets). Declare use (earning interest) outside that reductive characterisation to be against the nature of something (money-as-sterile, money-is-for-exchange) and therefore illegitimate (in this case, thieving usury).

Unlike another set of victims of natural law theory, bankers and money-lenders had powerful claims on the attention of the Church: not least because the Popes were both lenders and borrowers. So commentators began to feel the story was more complicated than charging-interest-is-the-thieving-sin-of-usury.

Hence the development of the theory of interest, the subject of Chapter 8, as commentators wrestled with commercial reality and issues such as risk, loss of use, delay and so forth. Which culminated in Pope Leo X, at the Lateran Council, ruling it was legitimate to take interest from the beginning of a loan and that
Usury means nothing else than gain or profit drawn from the use of a thing that is by its nature sterile, a profit that is acquired without labour, cost or risk (p.204).
As Wood notes, this undermined most of the basics of the theory of usury. Loans were no longer free, time could (by implication) by sold. By implication, labour, cost or risk could make money fruitful. Use implied that ownership did not pass to the borrower, separating ownership from use (as with leasing a house or other asset). All that was left was a totally idle lender making an effortless profit with usurious intent. But, by that stage, the Reformation was underway and the biblically-minded Protestants were to keep the usury debate alive.

As an aside, one can see some of the same pattern of retreat in face of reality over sex. Since the (sole) final cause of sex is reproduction St Clement of Alexandria had held that any act of sex that was not for the express purpose of having babies was to “outrage nature”. St Thomas Aquinas was more liberal, he held that all sexual acts had to be potentially procreative to be legitimate
there is the "vice against nature," which attaches to every venereal act from which generation cannot follow.
Which would bar sterile husbands or post-menopausal women from having sex. A strong interest group, so, according to the Catholic Church, it is fine if the procreative form is followed, even if procreation is not possible. (Any sex that does not involve a penis ejaculating into an unimpeded vagina is out, since folk do not own their own bodies and human intentions and aspirations are entirely subordinate to the form of what we do sexually.) This is not only form and deemed-purpose trumping consent, it is form trumping function trumping consent. Hence Aquinas defines sex “against nature” as being worse than rape “with nature” and medieval punishments for “sodomy” were typically more severe than those for rape.

Though insisting on the absolute primacy of procreative possibility—or at least procreative form—also runs into the small problem that Jesus did not think barrenness was grounds for divorce: thereby failing to define marriage by procreative purpose. Indeed, the Christian insistence on consent for lawful marriage was very appealing to women in pagan society as it was a barrier to them being forced into unwanted marriages (religious celibacy also provided refuges against unwanted marriages), treated them as something other than brood-mares (also true of barrenness not being grounds for divorce) while, at the same time, Christian ethics protected children.

In her brief Conclusion, Wood summarises her informative survey of medieval economic thought. The book also has a helpful glossary of the various commentators cited in the text.

Medieval Economic Thought is a very readable and informative study clearly based on wide and thoughtful reading. The author’s self-confessed lack of acquaintance with economic theory did not seem to be a notable handicap, since she keeps so close to the texts and practices. In particular, one gets a very good sense of the development of thinking on economic subjects over time.

Wednesday, March 11, 2009

The difference between risk and uncertainty

Football can help explain the difference between risk and uncertainty.

Economist Frank Knight famously differentiated between risk and uncertainty:
Uncertainty must be taken in a sense radically distinct from the familiar notion of Risk, from which it has never been properly separated.... The essential fact is that 'risk' means in some cases a quantity susceptible of measurement, while at other times it is something distinctly not of this character; and there are far-reaching and crucial differences in the bearings of the phenomena depending on which of the two is really present and operating.... It will appear that a measurable uncertainty, or 'risk' proper, as we shall use the term, is so far different from an unmeasurable one that it is not in effect an uncertainty at all.
OK, so not the clearest explanation. This may help. To think about the difference consider a football game. The rules of the game are understood, so players make judgements about what is likely or not likely to work and expected pay-offs. Kick the ball to player A who is alone but not well placed or player B who is well-placed but have opposing players nearby: a risk/payoff judgement. Businesses make judgements about risks and payoffs all the time, they are a normal part of business (indeed, central to commercial activity).

If the rules of the game themselves are unclear then you have uncertainty. If you put two teams of players on a field and you tell them “you are going to play a new game, which we are not telling you what the rules are, but we will penalise people randomly with highly variable severity” not much that is useful will happen. It is the same in commerce. Risk affects commerce, serious uncertainty flattens it: particularly long-term activity such as investment.

What we have now is massive uncertainty. So, far, neither the Bush nor Obama Administrations have done much to alleviate that. Indeed, arguably Obama in particular is in the process of making it worse, given the breadth of his proposed policy changes (including massive expansion in public debt). So far, he is not doing as well as FDR did in his first 100 days. While some are arguing it is deliberate, my analytical preference is always to go for screw-up before conspiracy. A clever man in the grip of unhelpful ideas is worse than a less clever man with more helpful ones. The US elected a President with limited experience, both in range and depth. This may be part of the cost.

Tuesday, March 10, 2009

Two books on Jew hatred

The Holocaust looms over C20th European history as the great evil act of that murderous century. It has made racism the great public sin of Western civilisation, even though revolutionary socialism has killed far more people. At least until recently, it also made what had been an abiding feature of Christendom-cum-Western civilisation (Jew hatred) into something that put one outside the pale of civilised people.

Jew-hatred has been making a bit of a comeback within the West, mainly due to growing Muslim communities, though wider antipathy to Israel has also played a part. Indeed, Israel provides yet another example of what Freud called the Jews “great service”—of providing a focus for violent hatred expressing various anxieties. Where once Jews were denounced as a “rootless” people, Israel’s sin is now to be a state for a people. Where Jews were once denounced as being alien to Christendom-cum-Western civilisation, Israel is denounced precisely for being an exemplar of Western civilisation. Where Jews were once despised for being not remotely warriors, Israel is denounced for its militarism. The particular anxieties may shift, but the principle remains the same: the Jews can’t win and they (or their state) attract special opprobrium (given that—even on the most hostile view of Israel’s policies towards the Palestinians—there is nothing morally remarkable about them compared to other ongoing vilenesses that attract far less passionate and sustained denunciation).

But it is the Holocaust that gives anti-Semitism its horrible fascination. Jacob Katz’s From Prejudice to Destruction: Anti-Semitism, 1700-1933 and Peter Pulzer’s The Rise of Political Anti-Semitism in Germany and Austria are both very much written as books examining the prelude to the Holocaust.
Both books focus on Germany and Austria-Hungary, though Katz also deals with France. Katz starts with the shift (1700-1780) from “conventional” Christian Jew-hatred to the development in the Enlightenment of new forms of Jew-hatred. Voltaire is a major figure here, showing how contempt for the Jews could shift from being based on them not being Christian (i.e. having the wrong religious belief) to Judaism being the precursor to Christianity (i.e. fostering religious belief: indeed, the typical claim was, a particularly superstitious form of religious belief).

Katz then moves on to resistance in Germany (1780-1819) to pressures to grant Jews civic equality, a cause associated with French aggression. Then France (1780-1880), covering the Catholic reaction to Revolutionary equality, the development of the socialist indictment as Jews as capitalist-extraordinaires (whereby Jews—the perennial outsiders—get dramatically cast as the ultimate, powerful insiders) and liberal continuation of Voltaire’s complaints.

Then back to Germany (1830-1873) and battles over Jewish equality and shifting political images of the Jews, battles that were deeply intertwined with struggles over how to conceive German identity, both culturally and politically. A story that also plays out in his examination of Austria-Hungary (1780-1880), complicated by the complexities of national identities in the Danubian monarchy.

Having set the scene, Part VI The Movement examines the crystallization of the anti-Semitism movement in Germany, Hungary, Austria and France. The book finishes in Part VII Culmination examining the failure of anti-Semitic political parties prior to 1914, the coming together of race theory from Gobineau and Darwinism with anti-Semitism, particularly in the work of Houston Stewart Chamberlain, and their culmination in the most successful of all anti-Semitic political parties, the National Socialist German Workers Party. Katz then finishes which a chapter on Jew-hatred down the ages.

The interaction with racism strikes me as being somewhat more complex, as the Spanish "cleanliness of blood" laws, the pressures of slavery, and settlement of the neo-Europes, all fed into the mix. But Katz is probably correct in suggesting the main resonance in later C19th Europe was with Jew-hatred specifically.

Pulzer’s book is much more focused specifically on anti-Semitism as a political movement in Germany and Austria-Hungary. So he starts with a short Part on the Jews and their environment, moves on to the rejection of liberalism, then examines Germany from 1867 to 1900, then Austria-Hungary from 1867 to 1900, then both from 1900 to 1914 with an Epilogue on 1914-1938.

For a long time I had a great deal of difficulty getting any handle on anti-Semitism and Jew-hatred. It seemed such a bizarre belief to me. Much reading and thought has made it more understandable (though no less reprehensible). Katz and Pulzer tell similar stories and have complementary analyses.

Pulzer sees pre-1914 political anti-Semitism as being very successful in pervading much of German and Austrian society with anti-Semitic ideas—so much so, they largely did themselves out of political role: a common feature of “single issue” political parties. That success Pulzer sees as being a result of a late-starting, hugely socially disruptive, industrialisation occurring in societies where liberal institutions and their supporting ideas had also arrived late and put down shallow roots. The combination of social disruption and weak (and, to some extent, overwhelmed) liberal structures provided an avenue for scapegoat politics seeking comfortable uniformities and certainties combined with someone to blame and who those uniformities and certainties could be defined against. He does not see anti-Semitism as merely cynical politics (Karl Lueger, the notorious Mayor of Vienna being a major exception) but as largely being a genuine, if horrid, response to social disorientation.

Katz has a more all-embracing view because his focus is much wider one. In the West, Jew-hatred starts with Christianity. Even after Christian doctrine stopped being the formal basis of law, permitting Jewish emancipation, Christianity continued to be a basic discourse within European societies. Katz identifies a raft of orthodoxly Christian writers who provided a bridge between traditional Christian Jew-hatred and anti-Semitism. Moreover, Christianity was identified with national identity, creating an immediate bridge between Christian Jew-hatred and nationalist Jew-hatred (ie. anti-Semitism proper). Anti-Semites continued to use standard Christian anti-Jewish arguments. Even secularists such as Voltaire, Bruno Bauer and Eugen Duhring saw Christianity as the “higher” religion.

Katz argues that Christianity had created a culture and language of contempt for Jews that proved portable to new circumstances and new justifications. Something that the creation of Israel did not solve, merely provided another permutation in the continuing patterns.

Katz and Pulzer’s analyses are complementary rather than antagonistic. Though Pulzer is more struck by the way anti-Semitism did not gain much traction in the Anglosphere and northern Europe. But Katz is interested in why anti-Semitism happened at all, Pulzer why it had such power in Germany, Austria and Hungary.

For centuries, Jews were people with only a degraded place in Christendom, and barely any voice—particularly not in public affairs. As emancipation loomed and then occurred, many Gentiles were clearly insulted by the notion that the Jews be treated as their equals; taking it as an affront to their sense of identity and of what sort of community they belonged to, how that community was to be defined. So the notion that Jews had legitimate voice was also unacceptable. Indeed, they could so not be conceived as equals—as simply folk—that they could only be conceived as either degraded aliens or master-manipulators: but in either form they were corrupting pollutants of the social body.

A group easy to pick on because they were a minority and their voices were so easily discounted yet, at the same, time, a group onto whom all sorts of fears, frustrations and uncertainties could be vented. And who had to be conceived as sinisterly wealthy and powerful to justify being so fearful, to mattering so much. Which, of course, also reinforced the sense of the defining difference (in religion, nationality, race) as really mattering, so that one’s own identity was shored up. Something to cling to, particularly in a disorienting world of disturbing changes.

And we know where that led.

Katz and Pulzer have provided two enlightening, and complementary, studies of the path to the Holocaust.