We wrapped up our unit on economic theory over the past two weeks and began our economic activity game. With the field trip last week, field day this week, and senior thesis preparations under way, we did not make much progress, but I wanted to let you know about our examination of theories of F.A. Hayek. At various times throughout the 20th century, either Keynes or Hayek has been in fashion. In the Great Depression it was Keynes, then in the mid-late 70’s Hayek began his run, and recently Keynes has made a comeback.
Keynes and Hayek differ philosophically in a few key ways. Keynes sees economics working like Legos. While certain laws govern economic activity, these laws depend more on human activity in particular contexts, especially spending. We can manipulate economies, like legos, in ways to fit our particular needs at the time. When Keynes said, “In the long run we’re all dead,” he did not mean to lay out a pessimistic philosophy of life. Rather, he argued that economics does not exist in the realm of absolutes. It is a human creation that exists for human needs. We do what we can in the moment. Bailouts are not wrong, anymore than having a cup of coffee in the afternoon to get you through the day is not wrong. Ideally we do neither, but neither are either of them wrong in the strict moral sense.
Hayek did not disagree with everything Keynes taught, but he did part ways with him in at least two key areas. First, he argued that economies function well when they reflect real value. He did not think that if you gazed into the heavens long enough you would discover that a candy bar should cost $1. Candy bars do not have an inherent value in themselves, but the market gives it a “real” value in its particular time and place. If merchants can freely sell, and customers freely buy, then the price of the item will reflect its “real” value in that time and place. The item’s price has been arrived at through a silent, though nonetheless democratic process. If the price is too high, not enough will buy it. Too low, and he won’t profit and stay in business.
We understand in general the concept that proper functionality depends on the extent to which you allow things to work as intended. Market manipulation, by government, by collusion, or other such means will create an artificial barrier between merchants and customers. An imposition has come between the people and the price. What we pay no longer reflects its real market value, but an artificial one.
This process of messing with prices distances economies from reality, and hurting the economy will hurt other areas of society. When we no longer deal in reality, we deal in fantasy, and every fantasy must end sooner or later. What will reality be like after our flight from it?
Hayek would not panic with society using a cup of coffee every so often to get through the day, but he would worry about where that cup of coffee might lead. Soon would we need it? Would we then need more than one cup? What other stimulants might we try? Would we then need depressants to sleep? In time we might be living only through constant manipulation of our moods and energy, but this would not truly be living at all. Likewise, a manipulated economy is not a real economy, and cannot reflect real value.
In his famous The Road to Serfdom Hayek felt that a process of manipulating the economy would lead to dependance on someone to deliver us from reality, a process by which we abandon our freedom and liberty. That is of course the worst-case scenario. But Hayek would add that every market manipulation messes with the people’s ability to freely negotiate prices with producers. It sets up a collusive, oligarchical barrier to democracy. And how will this price be set? Will bureaucrats know more than the aggregate wisdom of the people? Likely not, and so again, the market, and the people, will suffer.
I really enjoyed our discussions in class on these issues, and gladly saw students take both sides. Some pointed out that Hayek’s “dependance” analogy can go too far. When we are sick, we take medicine to restore normalcy, not flee from it. Of course, we could get addicted to medicines, but that doesn’t stop us from using them when we need it.
Below I include two You Tubes, both of which are admittedly a bit cheesy. All cards on the table — they are also pro-Hayek in their interpretation. But agree or not, this was a creative way to communicate the ideas!
I have noticed in some history books that certain assumptions get made about the age of so-called developing societies.
Generally one sees an argument that goes something like this:
Most societies go through a stage where laws are not written for the public. Instead law stays unwritten, in the hands of a priestly caste of some kind.
Without law as an observable guide for the public, they seek out oracles, who provide guidance, and give people direction and a measure of certainty.
This stage is supposedly evidence of a civilization in a early stage of development, which they then pass through to become more advanced.
In this advanced stage, they have written, public laws accessible to the people, which breaks the power of the once dominant oligarchic collusion.
I don’t deny that these phases exist, but as to how we label them, I’m not so sure.
Let us take the state of law in the modern day U.S., and for example of a law we’ll use the controversial health care legislation.
While technically this law is written and available to the public, is this true in a de facto sense? Can you or I actually read and understand this law and its implications? It is not written in English that the common man can understand. It is demonstrably not written with the public in mind.
Ah, but there exists a certain priestly caste that does understand this strange language. We call them lawyers.
And us, the citizen body, who have no real direct access to the law itself — we consult oracles to divine the law’s meaning. Some of us seek out the CNN oracle, or Rush Limbaugh, or NPR, or Jon Stewart, or anyone else. Many of us adhere to our oracles with a semi-religious fervor, which, as long as we’re dealing with oracles, is only appropriate.
The great thing about democracy is the proliferation of oracles.
But oracles they remain, for we cannot read and understand the law on our own.
Thousands of years from now if people write our history they might look back at us and say, due to the mystery and incoherence of our laws, that we were a “primitive” society. Most of us would probably object to this, and argue that we are hardly primitive. Look at our technology, our intricate power grids, and the abundance of bloggers!
Either we will have to change our concept of primitive societies, or our concept of ourselves. Or, I’m wrong in my theory.
If I am right, then the news is bad for us. We may be worse off than we imagined, and the problem won’t be located in either political party, but deeper, in the fundamental roots of our civilization. But all is not lost. This interpretation of our current state actually does provide a good bit of hope.
If what we called “primitive society” in the past was really an advanced stage of decay, those civilizations found a way to renew themselves. By the grace of God, that option stands open to us as well.
This is getting a bit of traffic, so I should explain. I originally wrote this after the 2012 draft. Then, I revised after the 2014 draft, so some of the comments below will be outdated.
With the recent play of Kirk Cousins, and considering that we drafted him in the 4th round the same year that we drafted Griffin, this is looking like my one real shot at an “I told you so!” moment.
I will savor it.
Many thanks!
Dave
And now, the original addition to the original post. . .
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I published this already, but the day after the first draft day has me saddened as I compare the round 1 trades of the Cowboys and Redskins.
Redskins: To move up 4 places in the draft, they swapped this #1 picks, plus the next two years of #1’s, plus a second round pick.
Cowboys: To move up 6 places in the draft they swapped #1’s for this year, and also gave up this year’s second round pick.
Both trades were made with the SAME RAMS team.
So either the Cowboys got a massive steal, or the Redskins, as usual, paid far too much to a team they probably could have given less to had they waited. Either way, the news is not good for Redskins fans.
In 1848 Charles Louis Napoleon rode a wave of popular enthusiasm and was elected President of France. He rode this same wave in 1851, declaring himself Emperor Napoleon III of France, backed by a national plebisite. Ok — so he wasn’t his more famous, more competent uncle. He did, however, seem to understand a lesson few other European leaders grasped, that leadership in France and in Europe in the post-Revolutionary era required a deep connection to “the people” to be truly effective. He began his reign with confidence.
Time passed, however, and Napoleon III proved frustrating and inadequate in his statesmanship. He flailed about, following one policy, then another, seeking the home run that would make France truly relevant in world affairs once again. First he started with an authoritarian empire, then switched to be more liberal. But as he liberalized France at the same time he undermined the power of legislature over France’s finances. He announced that “the Empire means peace,” but strengthened France’s involvement in Southeast Asia. He helped forge a new alliance system as a result of the Crimean War, but also undermined that system by his support of national independence movements. Superior statesman learned to take advantage of him in particular, and France in general. Dangle something of value, and he runs after it, heedless of the long-term consequences.
Prussia’s Otto von Bismarck would prove to be Napoleon’s undoing. In Bismarck, Napoleon dealt with a man of focus, purpose, and creativity. When Bismarck wanted war against Austria in 1866, he knew that he needed the French not to intervene. France and Austria had been enemies off and on, and he counted on Napoleon III to underestimate Prussia’s rising power. True to form, Napoleon III jumped at the chance to be needed. “Yes,” perhaps he told himself, “France and I are relevant once again!”
Prussia’s swift and crushing victory over Austria surprised many, and it gave them either direct or indirect control over most of the German provinces. In the blink of an eye, Prussia undid 200 years of French foreign policy, which aimed at keeping Germany divided. People in France turned on Napoleon III, who felt humiliated. He then came up with a solution, another attempt at a home run. He sent his Foreign Minister to Bismarck with a demand. “We insist that Prussia cede a portion of German territory as compensation for our neutrality.” Bismarck easily laughed off this suggestion, and then went one better. To further Napoleon III’s embarrassment, he published France’s demands in major French papers. The sun had set on the French Empire, and Napoleon III knew it.
I have been a Redskin fan my whole life. I had the great fortune of growing up with the glory days during the first Gibbs era. But Dan Snyder’s reign has inflicted a great deal of suffering on many fans like me. I don’t question his heart. He wants to win. Like everyone else, I question his strategy. The continual bid for the grand slam has given us Deion Sanders, Bruce Smith, Steve Spurrier, Joe Gibbs II, Donovan McNabb, Mike Shanahan, and so on. Though possessing few actual wins, Snyder managed the marginally impressive feat of staying relevant for the past 12 years by his media-worthy signings.
I can only imagine the desperation Snyder and Shanahan felt when Peyton Manning chose not to give them the time of day. He wanted nothing to do with us, and I don’t blame him. Snyder still had one more chance at executing his favorite move, the “splashy signing.” Shannahan had one more chance to salvage his legacy. Beware of an old man in a hurry. For a king’s ransom, we could still snatch Robert Griffin III.
I can’t help but see parallels. Napoleon III thought he had scored a great coup with their neutrality in the Austro-Prussian War. In reality, it was Napoleon who did the dancing. Bismarck knew just how to play him. . .
How St. Louis must have salivated at the thought of Dan Snyder desperate for relevance, desperate to sell tickets, desperate to create the media buzz he craves and needs to sell those tickets.
I am utterly flabbergasted by columnist Tom Boswell who wrote,
There’s a karmic shadow over this deal, of course. It’s the apotheosis of the whole Daniel Snyder era. Just a few hours after Peyton Manning didn’t even give the Redskins a waltz on his city-hopping dance card, the team completed this blockbuster. Maybe Griffin was always Plan A. But the appearance, around the NFL, was that the Redskins hadn’t even made the first Manning cut. “We’ll-show-’em-we’re-not-dysfunctional” decisions have long been a dysfunctional Redskins trademark. But, sooner or later, one of ’em has to work, right?
The Redskins needed a huge splash for every conceivable reason: to give their fanatic fans a glimpse of glory, not more grief; to give Mike Shanahan a realistic chance to be successful again; to stay dominant in a sports market where other rivals are emerging; and to keep printing money for one of the most valuable sports franchises on earth.
None of the reasons he gives for the trade are actual football reasons, and to hope that at some point even a dysfunctional decision will work is an abdication of responsibility, a resignation to fate. Boswell later talks about the Redskins suffering from a “curse” as he closes his column:
The Redskins just doubled down on the very same high-profile, high-cost, high-risk (or all-of-the-above) method that has introduced Washington to Deion Sanders, Jeff George, Marty Schottenheimer, Dan Wilkinson, Bruce Smith, Steve Spurrier, Mark Brunell, Adam Archuleta, Sean Gilbert, Jim Zorn, Gregg Williams, Albert Haynesworth, Donovan McNabb and Shanahan. That the list is so long and familiar doesn’t make it any less staggering. RGIII will either demolish an amazing losing streak or confirm a curse.
Again, the idea that we suffer from a curse is absurd. It reminds me of Napoleon III’s uncle Napoleon I, who said after reflecting on his defeats in exile on St. Helena
The vulgar have never ceased blaming all my wars on my ambition. But were they of my choosing? Were they not always determined by the unalterable nature of things?
and
I am the greatest slave among men. My master is the nature of things.
The most I can say for the venerable Mr. Boswell is that he too is a weary Redskins fan, and subject to that great symptom of weariness, blaming fate. If one actually looks at Napoleon I, we see that perhaps his invasion of Russia, not fate, had a lot to do with his defeat. If we look at the Redskins, we see that perhaps their addiction to big names and quick fixes, and not a curse, has put them in their current position.
Whether it be Babylonian dream interpretation during their “Time of Troubles,” or the rise of Stoicism in the Roman Empire, trusting to fate and chance is a tell-tale sign of decline. Toynbee wrote,
Chance and Necessity are the alternate shapes in which this [passivity] is saluted by its votaries, and while at first sight the two notions may appear to contradict one another to the point of being mutually exclusive, they prove to be merely different facets of one identical illusion.
Whenever you think you must trade your future to draft a player, that is a sure sign that you better not, and start dealing with reality instead.
I hate to be a curmudgeon (well — not always, sometimes it’s fun!), and I usually don’t like to agree with Steve Czaban, but he had it right when he wrote:
The other big argument in favor of this move, is purely emotional. It goes something like this… “After 20 years without a franchise quarterback, you have to pay whatever price it takes.”
Oh, really?
Why? Because Robert Griffin III is the LAST “franchise” quarterback the college game is ever going to produce? Because if the Redskins don’t make the playoffs this year, the NFL has announced the franchise will be folded forever?
Why?
The answer is simple. The owner is desperate. The coach is desperate. And when the fan base is also desperate, you have fertile conditions for “stupid.”
At least Napoleon III saw his doom approaching. When it came after the battle of Sedan, he abdicated. Snyder will not do this. We are therefore left with, “But, sooner or later, one of [the dysfunctional decisions] has to work, right?”
This week we continued our tour through prominent economic thinkers throughout history, and we began with Adam Smith.
Smith wrote in the heyday of mercantilist economic policy in the late 1700’s. Mercantilism functioned along the following lines:
Each nation sought to promote complete economic self-sufficiency.
To accomplish this, local economic industries needed protection against foreign competitors, which often meant high tariffs on imports.
The great fear in this era was having an imbalance of exports and imports — a trade defecit
A country’s money supply needed protected
Smith thought that such a system would in fact impoverish a country, and his response to mercantilism laid the foundations for free-market capitalism ever since. He revolutionized economic thinking in a variety of ways:
Money and Trade Deficits
Building off of William Petty, Smith argued that money has no value unless its used. Money is just worthless paper under our mattress. So we should have no qualms about spending money on things we need or want. For example, when we go the grocery story we do not walk out thinking, “Hey I gave them my money and all I have to show for it is this bread, milk, eggs, and cereal.” No one likes to spend money if they don’t have to, but in general we are happy to give the grocery story money rather than make our own milk, cereal, and so on. We make the exchange because it benefits us.
In the same way, we should be happy to import the goods we need to help make us productive. Just as we don’t think in terms of the massive “trade deficit” we personally have with Costco, so too we need not worry about how our nation has exchanged money for goods overseas.
Specialization
However nice ad idea self-sufficiency may be, Smith points out that it’s inefficient. We need only to think of our own talents, and how much better we do in areas of strength. Wealth should not be measured by how much money we have but the purchasing power of that money. If your economy operates more efficiently, goods become cheaper. You may still have just $1, but that $1 can buy more than it used to. You are wealthier under those circumstances. This is one way in which a more free market can increase the wealth of a nation.
The “Invisible Hand” vs. Regulation
A free market self-regulates, and the regulating is done by consumers themselves. If a company charges prices that are too high, people won’t pay it. No company can profit if it fails to sell its products or services. Ultimately, people decide the prices of the goods they buy, according to Smith. This is the market’s “invisible hand.”
The alternatives to a free market is a regulated one. And who shall make the regulations? What person has the knowledge and omniscience to set fair prices? No one does, and woe to those who imagine that they do. All regulations of the market will hinder the economy and rob people of the freedom to decide what they think is a fair price. Smith would continue and argue that economic freedom helps foster political freedom.
Smith does have his detractors, or at least, those that want to modify his ideas. Do we really want the free market to decide everything? Certainly very few of us would want the market to decide who got liver transplants, for example. If it did, the wealthy would always get preferential treatment. Would we accept a completely unregulated meat or medicine market?
Free market ideas along with technological advancements swept across Europe and helped create the Industrial Revolution, and this world gave rise to the next thinker we studied,
Karl Marx
Marx wrote during the heyday of the Industrial Revolution. Production had increased dramatically, and more products were available to more people more cheaply than ever before in human history. At the same time, the Industrial Revolution seemed to create a huge gap between the rich and poor, and this helped form the basis of Marx’s thought.
We need to approach Marx with an open mind. We know that Marxism, as practiced by socialists, did not work. But Marx himself said that would not call himself a “Marxist” as he saw it practiced in his day, and in any case, no one is wrong about everything. Marx argued the following
The End of Economic Freedom
The I.R. had its origins in economic freedom, but Marx saw it eroding freedom in the end. What would even Adam Smith think about a nation of small-farmers and independent shop keepers being put out of business. They end up as “wage-slaves” working for “the man.” Thomas Jefferson too felt that political freedom had its roots in independent landowning. Those who have freedom in their private lives will naturally want to have freedom politically. But could democracy continue if we all answer to the big boss man? Marx saw no point in pining away for bygone days or halting technological progress. Rather, as technology changes we need to find new ways to put the means of production back into the hands of ordinary people, the way it was before the I.R.
Herein lies one of Marx’s major concepts: each economic system (including free market capitalism) has an internal logic to it that eventually exhausts itself. As Marx saw it, capitalism would soon do the same.
Why?
Well, you can make good refrigerators and sell them to lots of people. But what happens when everyone has a refrigerator? What happens when the railroad company has no more land to build track on? At this point, capitalism (according to Marx) either collapses, or buys itself time.
Capitalism can buy itself time only by encouraging wasteful consumption. You can either a) invent pointless new products and try to fool people into buying them, or b) make your products worse so people will have to buy them more often. But either option will rob people of freedom, making them stooges of corporations.
All this is the gospel according to Marx. He had many things wrong. He put too much stock in the “labor theory of value.” Capitalism has also found new ways to reinvent itself. Instead of railroads we came up with cars and planes. Companies can also find profit in ways besides simple expansion. Marx also did not see how the market could improve standard of living for those at the bottom of the economic ladder. For example, think of the vastly improved quality of even entry-level cars today compared to 20-30 years ago. Or we can recall how quickly and steeply the price of dvd players fell in the span of a few short years.
But does Madison Avenue ever attempt to create needs that are not there? Does our society encourage pointless consumption — and can capitalism survive if this kind of consumption forms its foundation?
In our discussion we pondered some of the historical reasons why capitalism did not collapse when Marx assumed it would. Some suggested that beginning in Teddy Roosevelt’s presidency, we abandoned a more pure liberty/untethered market approach and began to sprinkle in a dash of equality and fairness. We began to regulate businesses in certain ways. Organized labor became more prominent. Did this switch either ..
Inoculate capitalism from the full blown socialist disease? In this view, we prevented the rise of socialism entirely by giving ourselves a small dose of it, to allow the capitalist “body” to produce the necessary resistant to socialism.
OR
Put on us on the road to socialism at some point in the future. Will this be a virus that keeps growing and slowly learn to take over the system.
Part of the nature of the debate has to do with the ever-present tension between liberty and equality in any democratic system, which can take us back to De-Tocqueville.
I posted this a few months ago, but a student of mine recently looked at it and had a brilliant observation of his own that I include below.
Here is the original. . .
I like to watch ‘Kung-Fu’ movies on occasion. Most of these used to come straight from Hong Kong, but recently movies are starting to come from China proper. I have seen two such movies and their similar characteristics raised some questions.
The first was “Bodyguards and Assassins,” set in the early 20th century. The plot revolves around an attempt to assassinate the leadership of the nascent democratic movement by supporters of the traditional monarchy.
The second was “Ip Man,” a movie where you can safely fast-forward through all talking scenes and not miss much. Thankfully, most of the movie consists of remarkable fighting scenes.
Both of these movies share in strongly nationalistic sub-plots, along with generally sub-par acting. These are perhaps to be expected. What did surprise me was the fact that each of these movies go for over-the-top drawn out emotional endings that are entirely predictable. In the case of “Ip Man,” they even rejected the real story of Ip Man’s actual resistance to Japanese invaders during World War II and replaced it with something far more maudlin.
It is these over-dramatic endings that have me curious.
Are these over-dramatic endings common to any new creative endeavors embarked upon by people for the first time? That is, are they likely to overdo it? Are there similarities between Chinese movies today and the stories (written or film) during America’s rise ca. 1890-1920? Perhaps there are some similarities with these movies and the stories of Horatio Alger.
Is this the kind of movie likely to be made by a nation on the rise? In other words, do these dramatic expressions express something of the latent emotions of a people held back for a while?
India is in a similar position to China as far as its national arc is concerned. Do Bollywood films display this same excessively manipulative emotion?
Or perhaps I am missing something and what I call ‘overdone’ is just right for Asian cultures as whole. Is anyone familiar with media from Taiwan, Vietnam, Thailand, etc?
A friend suggested that the endings I described reflected how authoritarian cultures tell stories. Think of Stalinist era propaganda stories. If so, how authoritarian is China with its artists?
Again, a comparison with India would be helpful here.
This is the extent of my knowledge of foreign film. I have many questions, and if anyone might have some answers or suggestions, do please respond.
Thus ends the original post.
The student’s theory was that Ip Man is a lot like Rocky in the construction of its story. The Rocky template is the standard underdog story, of one man rising up against the system, or an unbeatable champion. Ip Man turns that template on its head, however. It is not about an underdog. Anyone with knowledge sees he’s obviously the best at his craft. He just needs a platform large enough so that others can give him his due.
Both Ip Man and Bodyguards and Assassins are basically national epics, so Ip Man can be easily seen as a stand-in for China. In contrast, Rocky clearly is about an individual.
Great stuff! Please keep comments like that coming.
Recently I saw the Jet-Li movie Fearless. Jet-Li has starred in many American films, and has no doubt imbibed something of a western ethos. But I think this movie had many distinctive Chinese themes. The movie was just so-so for me, but I did find the tension between the two competing kinds of stories within the movie. On the one hand, it is “western” in that Li’s character goes through a transformation and has to prove himself, which is not at all like Ip Man. On the other hand, Li’s character fights “foreign-devils” just as in Ip Man 2, with strong nationalist overtones. We will see if Chinese cinema changes if their political culture ends up more western than it is today.
I always enjoy when History presents us with unexpected curveballs. Blindsided, our perceptions get challenged and the present, as well as the past, can be illumined even by so-called unimportant aspects of civilization.
One of those unusual bits of flotsam for me are toilets.
Anyone who studies History will ruminate on the question, “What part of the past would you like to live in?” It usually draws interesting responses from students. But mention the lack of indoor plumbing and most anyone gets drawn right back into the present.
Flush toilets have a longer history than we might assume. Their mass production took until the late 19th or early 20th century. When we consider the infrastructure needed, like piping, drainage systems, and so on, this should not surprise us. But the flush toilet existed long before in limited use, possibly even in ancient Minoan civilization. In the modern era, we know that Tudor England developed the flush toilet, and Eilzabeth I had the chance of using a private one herself.
But she didn’t want to.
According to curator and author Lucy Worsley, Elizabeth’s preference for the chamber pot had to do with her concept of royalty. She would not flee like some subject to the almighty toilet, the toilet would answer to her — in the form of a servant or two carrying the appropriate accoutrements. To go “to” the bathroom offended her sense of royal dignity.
Who today would choose a chamber pot while others hovered nearby over a private flush toilet? Had I heard half of the story without the ending, I would assume that Elizabeth would have claimed the new invention as an “executive privilege,” much like some Executive Washrooms today.
Elizabeth’s actions have echoes in Lyndon Johnson, who according to Robert Caro, used to make his aides follow him to the bathroom when he became a congressman. This likely had little to do with his desire to continue to conduct their business (no matter the nature of his business in the john), and served more as a way to demonstrate his power and provide a loyalty test.
But most of the time, I’m sure Johnson chose to be by himself.
Not all societies insisted even on relative privacy when it came to bodily functions. The Romans, for example, had no qualms about sharing space in what we would consider to be an intimate moment, as this public restroom makes clear:
I believe strongly in the uniformity of human nature. History makes no sense without this bedrock truth applied to it. However, I do think that a study of bathrooms reveals in a small way how the “geography” of a time and place and its context relative to other priorities, impacts other values we may have. Human nature has an unalterable core but our values may be fungible at the periphery.
We need not think that Queen Elizabeth or the Romans placed no value on privacy. Rather, in their hierarchy of values, privacy did not occupy the pride of place it does for many Americans today. Queen Elizabeth valued her sense of royal imperium more than privacy. The Romans valued community more than privacy. They could easily have erected barriers in their mini-stalls of they wanted to.
For the record — I have no problem serving as an apologist for the “Privacy” camp and advocating for indoor plumbing.
This week we began our look at economic theorists throughout history and some basic principles surrounding economics in general. This will culminate when the students form rival companies and compete with each other, with the rest of the school as customers.
We spent most of our time trying to understand exactly what money really is, and how it functions. The title of this post is taken from a book by the famous economist Hernando de Soto, but it also describes my own personal feelings. Money has a fungible, mysterious identity, but hopefully we reached common ground on a few key ideas.
We often make the mistake of thinking that money is a “real” thing, that it has a natural and inherent value to it. Rather, money symbolizes or signifies some agreed upon purchasing power. A strict barter economy makes much more sense after all. If two people exchange a bushel of wheat for a barrel of apples, we immediately see how both sides get value from the transaction. Although even the wheat and apples do not have absolute fixed values. If you hate apples, they would not be worth much to you. If the wheat harvest failed it would have greater value than in previous years. Still, the transaction seems rooted in understandable reality.
But, I wonder, who was the first person who decided to trade away something tangible and useful, such as bread or animal skins, for shiny rocks?
Of course money has many advantages to barter economies. They function much more efficiently, for one. Shopping is much easier with a pocketful of coins, as opposed to a wagon load of things to trade. However, a money economy depends on shared societal belief to a much greater degree than barter. Society must take a collective leap of sorts, for what would happen to our economy if one day the managers of grocery stores said, “Why should I give you this bread and milk? All you’re giving me in return are these small pieces of paper!”
So, the value of money depends at least in part on a shared, created belief. But this does not mean that money can simply be invented out of thin air. Money may not be fully real, but it must be based on something real, be it labor, a product — something.
After laying that groundwork we began our quick look at economic theorists throughout history. We started with a brief comparison between the Dutch and Spain around the turn of the 17th century. Spain had an overseas empire that allowed them to bring piles of silver into the country. The Dutch too, had some overseas trade, but they helped pioneer the idea of the corporation and the stock market. At first glance, we might expect a mountain of silver to defeat a nascent stock market, but in fact the reverse happened. How could this be?
When the Bush and Obama administrations gave bailout packages to various financial industries, many commented something along the lines of, “If the government is going to give out all that money, they could just give it to families, and each would receive $35,000.” Would this have worked? I asserted that if this had been done, everyone would have more money, but no one would be any richer. If everyone is special, no one is. Prices would likely rise, and inflation would kick in.
This happened in Spain. The supply of silver increased significantly, but prices even more so. Part of this had to do with how the Spanish used their silver, but the basic principle still holds. Their silver created no wealth. In contrast, the Dutch stock market created a system whereby the flow of capital could be constant, and that money would be used to further develop companies. Thus, the stock market would have a better chance of reflecting “real” value than a pile of silver. Of course, this serves as only a cursory explanation.
John Law had a checkered career as a financial advisor, but he came up with a couple financial innovations that have done much to influence modern finance.
Credit is Money
Money’s value comes from the fact that people trust it. Without trust, money could not function. Thus, trust forms the basis of all purchasing power. Suppose you had no actual money to your name, but did possess a notarized I.O.U. from Bill Gates for $1 million, payable by the end of next week. We surmised that you could use that credit as money, or at least to secure a loan.
When we use credit cards, for example, no money changes hands at that moment. The store trusts the credit companies to pay them, the credit companies trust us to pay our bill. Credit would not work without trust, but we can take it one step further. Trust can function like money.
Credit and Governments
Law argued that since governments have the power to tax, they can issue money against themselves in a crisis. Borrowing against yourself would force governments, he argued, to pay it back. To not recollect the money would de-legitimize their whole standing with the people and destroy their currency. If the people don’t trust the government to pay it back, then you have bigger problems than mere financial difficulties. The government itself would collapse. Given that this option comes with more pain than repaying the loan, Law thought, governments would choose to recollect in the form of taxes later.
Governments certainly have used this idea numerous times, sometimes with great success, other times it has led to disaster. But that is part of Law’s point. Governments risk a lot through this mechanism, and if they’re not “good for it” than they don’t deserve to govern.
In his book, The Cash Nexus, historian Niall Ferguson speculated that one reason why democratic countries have more financial success than other forms of government is the flexibility given through governing by consent. Since governance through consent has more stability, these governments have more trust in the international community. This trust leads to more purchasing power.
Next week we’ll look at Adam Smith, Karl Marx, Keynes, and Hayek. Have a great weekend.
Soon Romney will have enough delegates secured and the 2012 presidential campaign will begin in earnest. All who lack excitement are forgiven.
One theme of the coming campaign is sure to be the economy. Candidates will talk about creating jobs, and innovation as the key to a strong economy, and a strong economy as the key to a strong country.
Sir Peter Hall’s Cities and Civilization is quite a long read and I have just started it. But already I am intrigued at the prospect of trying to achieve historical perspective on just what makes cities thrive, and how “golden ages” come about. Though I have just begun, a few things have already struck me:
Vienna glittered in the late 19th and early 20th century, but not for its creature comforts. Hall noted that the Viennese remained almost indifferent to the new technologies that had arisen in their time. In contrast to other cities, suburbs had no piped water, with hardly any phones, and almost no bathrooms.
Vienna’s cultural golden age owed much to immigrants, or at least, non-Tuetonic Viennese like the Jewish middle and upper-middle classes (cheers from the left and libertarians).
In Periclean Athens, perhaps the most glittering of all western epochs, citizens faced no direct taxation (cheers from the right), but all were more or less expected to voluntarily donate money to the state, especially the rich (cheers from the left). Indirect taxes had erratic application. Of course we should realize that Athens financed much of their democracy through tribute from their overseas empire (cheers from hopefully no one!).
As in Vienna, Athenian creature comforts practically did not exist. We are used to the glory of the Acropolis, but archaeologists reveal that Athenian homes were bare and primitive. Athenian diets did not venture beyond the staples, and foreign visitors remarked how badly planned Athens seemed (cheers from the “back in my day” crowd).
Both Athens and Vienna created golden ages, by seemingly
Not caring about technology
Combining a curious mix of strong individualism and strong public attachments.
Not caring much about personal wealth.
As Kenneth Clarke noted, civilization needs a moderate amount of wealth to get by, but too much money will make any nation lethargic.
In short, vibrant economies and technological innovation will not create greatness. Greatness comes by seeking something else, something higher. St. Augustine said as much when he wrote in his The City of God,
Accordingly, it is recorded of Cain that he built a city, but Abel, being a sojourner, built none.
And C.S. Lewis discussed something similar when he elucidated the principle of “First and Second Things,” in his classic essay of the same name, excerpted here below:
The woman who makes a dog the centre of her life loses, in the end, not only her human usefulness and dignity but even the proper pleasure of dog-keeping.
The man who makes alcohol his chief good loses not only his job but his palate and all power of enjoying the earlier (and only pleasurable) levels of intoxication.
It is a glorious thing to feel for a moment or two that the whole meaning of the universe is summed up in one woman—glorious so long as other duties and pleasures keep tearing you away from her. But clear the decks and so arrange your life (it is sometimes feasible) that you will have nothing to do but contemplate her, and what happens?
Of course this law has been discovered before, but it will stand re-discovery. It may be stated as follows: every preference of a small good to a great, or partial good to a total good, involves the loss of the small or partial good for which the sacrifice is made.
. . . You can’t get second things by putting them first. You get second things only by putting first things first.
I don’t know if I would have voted for Santorum had he received the nomination, but good Catholic that he is, he rightly stated that, “[W]e hear this all the time: cut spending, limit the government, everything will be fine. No, everything’s not going to be fine. There are bigger problems at stake in America.”
For years in the upper echelon of college football and basketball, the notion of the players as “student-athletes” has been stretched to the limit. Now, along comes John Calipari’s Kentucky Wildcats to end the charade once and for all.
In the past, we could always count on a team assembled of “one-and-done” players to self-destruct in some way. The players would be selfish, or wouldn’t gel together when it really mattered. But not this Kentucky team. Even curmudgeonly commentators noted how unselfish the players were on offense, and how well they played team defense.
But never fear, the NCAA rode into the Final Fourt to fix the situation, in the best way they know how: a silly, ridiculous rule. As Pierce notes in aforementioned article, reporters had instructions at press conferences not to call Kentucky’s players “players,” but “student-athletes.” So, for example, a reporter would have to phrase the question along the lines of, “Coach, how do you expect your, ah. . . student-athletes to handle the Louisville defense?” The press conferences came with NCAA bureaucrat attached, ready to enforce the rule.
“There’s nothing to see here!”
The NCAA has long had the problem of inherent contradictions embedded within, and has long sought to fix it in the worst way possible, through rules. As Tocqueville commented,
The best laws cannot make a constitution work in spite of morals; morals can turn the worst laws to advantage. That is a commonplace truth, but one to which my studies are always bringing me back. It is the central point in my conception. I see it at the end of all my reflections.
When you resort to law to fix culture, you reveal a weakness that predators can smell a mile away. Law cannot fix culture by itself.
But an attorney friend of mine challenged that assumption in regard to the Civil Rights movement. Surely, he argued, the Civil Rights Acts of 1965 and 1968 accomplished more change than some amorphous “culture” did . I countered with the claim that civil rights efforts from Brown v. BOE to the March on Washington laid the foundation upon which law could build, but unfortunately my knowledge of that period lacks the necessary depth for me to be sure.
Or what about the whole question of gay marriage? Some argue that law has led the fight in this issue, against the general culture, with stunning success. But again, I’m not so sure. Maybe the movies, tv shows, and such laid the groundwork for the charge? The broader question is, if the movement relies on law/judges to lead the way, will they have ultimate success? As always, I would be curious for anyone’s thoughts on the question, and here is one opinion from the UK.
Some months ago I picked up the book The Resurrection and Modern Man, by the Patriarch of Antioch Ignatius IV. I have yet to wrap my head and my heart around even the first 20 pages. But in light of the fact that Easter has come, I thought a few passages worth quoting:
Let us listen to Him who sits on the throne and declares: “Behold, I make all things new” (Rev. 21:5). “I make all things new,” is not a program; it is an event, in fact the only Event of history.
We propose to be neither archeologists of Christianity nor sociologists of a revolutionary Chruch: all that is radically outdated. We must instead be prophets of the New Creation and visionaries of the resurrected Christ.
In Christ death has been overcome, but among those who are of the lineage of the Woman of the Apocalypse, it still has to be definitely conquered (Rev. 12:17). . . . If we do not take this fact into account, our response to the Word of God will be nothing more than ecclesiastical triumphalism or pathological repentance. In other words, the New Creation appears in history as a battle against death; it can only be perceived as a paschal drama.
. . . the New Creation is explained not by the past, but by the future. It is clear that the action of the living God can only be transformative and creative. . . .Any other god than the Lord is a [dead] god. And it is high time that our modern consciousness bury him. This multiform god, who lives in the “old consciousness” of man stands behind man as a mere cause. This old god dominates, organizes, leads man backwards, and finally alienates him. There is nothing prophetic about this god; on the contrary he always follows after as the ultimate reason for the unexplainable or as the last recourse for irresponsible people and their actions. This false transcendence is as old as death itself; it is an idol made by the hands of man and for which man feels a passionate jealousy (Gen. 3).
Irenaeus of Lyon says that we are to “know that He has given us something completely new by giving us Himself, He who had been announced in former times; He is the new principle of life which was to come, to renew and enliven humanity.”
Wonderful words for a wonderful day, if only I could fully understand them!
Perhaps Paul McCartney could have been another example in this post.
His new album “Kisses on the Bottom” has occasioned a flurry of attention for the music legend. I heard his interview with Terry Gross on “Fresh Air” and enjoyed Paul talking about the music he heard growing up, and how his work didn’t seek to escape from the old standards, but build upon them.
He specifically mentioned two of what he called “tricks” from the old songwriters that he incorporated into the Beatles:
Switching from Major to Minor Key, and then Back to Major
The first example he recalled from the Beatles was one of their early hits, “From Me to You.” The verses are in major — “If there’s anything that you want, if there’s anything I can do,” etc. But then it switches to minor when he sings, “I’ve got arms that long to hold you, and keep you by my side . . .”
Taking a Song Full Circle
McCartney talked about an old standard called, “Cheek to Cheek,” which begins with a theme, leaves it, and returns to it at the end. He referenced “Here, There, and Everywhere,” and we might add on a grander scale the entire second side of Abbey Road that begins with “You Never Give Me Your Money.”
Of course the Beatles had tremendous success for many reasons, but the fact that they followed Toynbee’s prescription for successful creativity surely played a role. In the interview McCartney specifically mentioned how they consciously set out not to reject the past, but instead borrowed what they could and put their own spin on it.
And yet, his latest album seems to do exactly what the Beatles did not do, for based on what little I’ve heard, it seems that he tries to recreate the past, not make something new. Perhaps this is why his new release falls flat, for me at least.
I’m a Redskins fan. How can I possibly feel bad for Jerry Jones? For that matter, how can I root for Dan Snyder?
Recently, Commissioner Roger Godell levied fines against the Cowboys and Redskins for violating salary cap regulations in 2010. The Redskins will lose $36 million in cap space this year, $10 million for the Cowboys.
Except of course, that there was no salary cap in 2010, and all the contracts tendered by both teams that year had league approval. Beltway Sports has a good take here, with links to other articles about this issue.
Ah, but wise Godell, declared after the fact that Snyder and Jones violated the principles of competitive balance implied in the terms of the collective bargaining agreement. So they didn’t actually violate any actual rule, they merely refused to what, salute the “shield” snappily enough? Snyder and Jones have fallen victim to an ancient legal principle known as,
PRIVILEGIUM
Black’s Law Dictionary defines the term this way:
In Roman law, a special constitution granted the Roman emperor the right to confer on a single person some anomalous or irregular right, or imposed an anomalous or irregular obligation, or inflicted on some single person some anomalous or irregular punishment. When such privilcyia conferred anomalous rights, they were styled “favorable.” When they imposed anomalous obligations or irregular punishments, they were styled “odious.”
I think it’s safe to say that Jones and Snyder got the odious kind.
Numerous horrible and amusing stories abound about the worst emperors, but even some of the worst, like Nero, could be erratic in someone’s favor. In AD 68 Nero competed in the Greek Olympics and entered the chariot race. He did not even manage to finish, but the Greeks awarded him the prize for most outstanding rider in the competition. In gratitude, Nero absolved all of Greece from tributary taxes.
No fools, those Greeks.
More often than not it worked the other way, like when Caligula made looking down at his bald head a capital offense, or when Tiberius made breathing wrong treasonous (yes — the Tiberius example exaggerates a little).
Both Snyder and Jones are easy to root against. We must restrain our impulse in this case, especially if we realize that
The league said yes to the all their 2010 contracts
Now the league says, “You should have known that yes meant no.”
For not knowing that yes means no, we restrict your right to spend your money as you see fit according to the agreed upon rules for this year.
The case reminds me a bit of the trial of Charles I, another monarch easy to dislike. He had haughtiness down pat, as you can see here:
Or here:
Through various high-handed measures he alienated much of the country and provoked a civil war. After his defeat, Parliament put him on trial. By law, Parliament could hear treason cases, but the problem for Parliament was that Parliament wasn’t really there. The army had gotten rid of most of Parliament’s elected representatives, and the entire House of Lords for ideological reasons. Seeing the writing on the wall, Charles refused to recognize the court’s legitimacy and did not even enter a plea. With rare insight, he stated to the so-called court,
I would know by what power I am called hither … I would know by what authority, I mean lawful; there are many unlawful authorities in the world; thieves and robbers by the high-ways … Remember, I am your King, your lawful King, and what sins you bring upon your heads, and the judgement of God upon this land. Think well upon it, I say, think well upon it, before you go further from one sin to a greater … I have a trust committed to me by God, by old and lawful descent, I will not betray it, to answer a new unlawful authority; therefore resolve me that, and you shall hear more of me.
I do stand more for the liberty of my people, than any here that come to be my pretended judges … I do not come here as submitting to the Court. I will stand as much for the privilege of the House of Commons, rightly understood, as any man here whatsoever: I see no House of Lords here, that may constitute a Parliament … Let me see a legal authority warranted by the Word of God, the Scriptures, or warranted by the constitutions of the Kingdom, and I will answer.
If it were only my own particular case, I would have satisfied myself with the protestation I made the last time I was here, against the legality of the Court, and that a King cannot be tried by any superior jurisdiction on earth: but it is not my case alone, it is the freedom and the liberty of the people of England; and do you pretend what you will, I stand more for their liberties. For if power without law, may make laws, may alter the fundamental laws of the Kingdom, I do not know what subject he is in England that can be sure of his life, or any thing that he calls his own.
The other NFL owners have nodded in assent to Godell, just like the Roman Senate always did under the emperors. But they should be careful. If the richest and most visible can be dealt with arbitrarily, who will speak when the Bills, Browns, or Jaguars come into Godell’s sights?
In the aftermath of the horrible shootings in France, and in light of this post last week, I rejoiced to see real moral courage and clarity from Palestinian Prime Minister Salam Fayadd. After the terrorist Mohamed Merah claimed to act on behalf of Palestine, he commented.
It is time for these criminals to stop marketing their terrorist acts in the name of Palestine and to stop pretending to stand up for the rights of Palestinian children who only ask for a decent life. This terrorist crime is condemned in the strongest terms by the Palestinian people and their children. No Palestinian child can accept a crime that targets innocent people.
Walter Russell Mead has a great perspective here. I wouldn’t change a thing.
Alas, Fayadd’s words stand in contrast to esteemed Moslem scholar Tariq Ramadan who stated,
[The shooter’s] political thought is that of a young man adrift, imbued neither with the values of Islam, or driven by racism and anti-Semitism … A pathetic young man, guilty and condemnable beyond the shadow of a doubt, even though he himself was the victim of a social order that had already doomed him, and millions of others like him, to a marginal existence, and to the non-recognition of his status as a citizen equal in rights and opportunities.
…he was French, as are all his victims (in the name of what strange logic are they differentiated and categorized by religion?), but he felt himself constantly reduced to both his origin by his skin color, and his religion by his name.
Neither I or Mead seek to overlook French treatment of their Moslem population and the real problems it has caused. Nor do I wish to be unduly harsh on Mr. Ramadan, because unfortunately, many far worse things than Ramadan’s words have been said in France in the aftermath of the tragedy. But Mead rightly notes that, while Ramadan in no way approves of the shootings, he does not see (or perhaps he does all too well?) that he provides a kind of exoneration for the killer. Society allowed him no identity, thus he possessed no real will to resist the urge to some perverted form of imaginary revenge.
So many issues could be raised here, but with no disrespect to the victims intended at all, I immediately thought of the issue of fatalism. With so much focus on the “will of Allah,” Islam has always had fatalistic strands imbedded within some of its varied expressions. One could say the same thing about certain strands of Protestant Calvinism. But I do not think Calvin himself fell prey to this fatalism. And that is the point. The fatalism came later, with Calvinism in decline.
This is the way of fatalistic ideologies. They are passive, not active, and manifest themselves when civilizations/religions have played their last cards. So Babylonian dream interpretation finally covered every facet of life by Nebuchadnezzar’s time, as this partial list shows:
‘If a date appears on a man’s head, it means woe. If a fish appears on his head, that man will be strong. If a mountain appears on his head, it means that he will have no rival. If salt appears on his head, it means that he will apply himself to bald his house….If a man dreams that he goes to a pleasure garden, it means that he will gain his freedom. If he goes to a market garden, his dwelling will be uncomfortable. If he goes to kindle a firebrand he will see woe during his days. If he goes to sow a field, he will escape from a ruined place. If he goes to hunt in the country, he will be eminent. If he goes to an oxstall, (he will have) safety. If he goes to the sheepfold, he will rise to the first rank.’
And so on, and so on.
The Romans turned to Stoicism only in their empire phase. Soviet Russia followed the doctrines of economic class fatalism blindly off a cliff. Even Austrian economists, with whom I often agree, have to be careful that they don’t say, “The market made me do it.”
But some might object. “The Babylonians reached their territorial peak under Nebuchadnezzar, as did the Romans under Marcus Aurelius, a Stoic emperor, as did the Soviets under Stalin. So how can fatalism represent decay?” Hitler talked about being a mere tool of “providence,” and certainly strove for expansion. It happened with the Soviets, who took all of Eastern Europe. The most rapid period of expansion in the U.S. also matches the time when markets were at their freest,or most laissez-faire, ca. 1870-1900.
Radical Islam (which is the most fatalistic) today wants a restoration of Moslem power at its medieval apex, a significant expansion of power.
Maybe this connection is purely coincidental, but I think not. But that means we have to offer some kind of explanation for this paradoxical idea that a passive approach to the world results in territorial expansion.
I myself have no magic bullet, but will tentatively offer a personal theory. G.K. Chesterton noted that children have the capacity to delight in monotony. The world is fresh and life-giving in their eyes. Give them a ball or three blocks, and they are content. Their world can be small because everything delights them. Life is one continuous party.
The fatalist tells the sad tale of boredom. Small things in life no longer delight. For them, the world must grow larger in a desperate search to fill the void. But this search for more ironically detracts from their humanity. For soon they exhaust their own ‘inner man’ and, like bugs drawn to porch lights, they seek the collective, the ‘force,’ the vast bowl of tapioca pudding. They find meaning in having no purpose, an end to their boredom, an end to themselves. As Eric Hoffer noted, it is the bored, not the poor, that are primarily attracted to all-consuming mass movements.
I can do no better than quote Chesterton:
The sun rises every morning. I do not rise every morning; but the variation is due not to my activity, but to my inaction. Now, to put the matter in a popular phrase, it might be true that the sun rises regularly because he never gets tired of rising. His routine might be due, not to a lifelessness, but to a rush of life.
The thing I mean can be seen, for instance, in children, when they find some game or joke that they specially enjoy. A child kicks his legs rhythmically through excess, not absence, of life. Because children have abounding vitality, because they are in spirit fierce and free, therefore they want things repeated and unchanged. They always say, “Do it again”; and the grown-up person does it again until he is nearly dead. For grown-up people are not strong enough to exult in monotony. But perhaps God is strong enough to exult in monotony.
It is possible that God says every morning, “Do it again” to the sun; and every evening, “Do it again” to the moon. It may not be automatic necessity that makes all daisies alike; it may be that God makes every daisy separately, but has never got tired of making them. It may be that He has the eternal appetite of infancy; for we have sinned and grown old, and our Father is younger than we. The repetition in Nature may not be a mere recurrence; it may be a theatrical encore.
Beran’s book looks at Abraham Lincoln, Otto von Bismarck, and Alexander II, three contemporary heads of state who remade their respective countries. Beran attaches the word “revolutionaries” to each of these rulers, though not all revolutionaries are created equal.
One can read this book even if you’re only interested in one or two of the people, as I was. I thought his comparison of Bismarck and Lincoln refreshing. Historian James McPherson called the Civil War a “Second American Revolution,” and I think Beran would agree. If we think about the Civil War like this it puts a new perspective on Lincoln’s presidency.
To my mind the Confederacy acted much like the British did in the late 18th century. I think the British had technical legality on their side, but to focus on that alone missed the most important details. They were right, for example, to insist that the colonies never had a separate existence apart from England, like say, Ireland did until it was incorporated into the British empire. But though correct in the barest factual sense, England overlooked the reality that American had de facto operated independently in almost every way since the 17th century. While some townships in England had no direct Parliamentary representative (and so the colonists shouldn’t feel it their absolute right to have one), England ignored the great differences between an English township and colonies across the ocean.
So too the Confederacy may have been technically correct about federal power as it related to the slavery question. But as one student of mine said, “It’s slavery, who cares about the Constitution.” Anti-slavery advocates called for the country to be guided by a “higher law” than the Constitution. When the southern states objected to this idea, they immediately lost the real argument. They put the Constitution itself, which they claimed to follow, in the perilous ground of complete irrelevancy. If it could not solve the slavery issue, what good was it?
By 1861 the Constitution had proved inadequate to deal with fundamental questions of human existence. So yes, Lincoln did skirt some constitutional guidelines. But he must be understood in a revolutionary context. Revolutions happen in part because the current system fails to deal with reality. Revolutionaries often find themselves cast off from traditional moorings because the tradition’s failure led to the revolution in the first place. Revolutionary movements therefore have great opportunity and immense danger inherent in them. So yes, Lincoln did play fast and loose with certain constitutional provisions (as did Jefferson Davis in the South). But we should marvel at how much he preserved, rather than what he bent or broke. The Civil War did change America, but I would argue that it was Lincoln’s moral sense, and a Christian moral sense from around 1862 on, that preserved much of the best of what the founders bequeathed.
Bismarck, like Lincoln, was a brilliant politician who forged a nation from a confederacy of provinces. But that is where the similarities end. He manipulated other countries and even his own king. He cared enough about democracy and constitutionalism to use it when it suited him, but he always came back to force, his weapon of choice. Bismarck was in certain key ways a friend of the Jews, and so I very much want to believe he would have hated Nazi rhetoric. But his insistence on using force to bypass the democratic process bore terrible fruit generations later.
Most of their portraits reveal this basic difference. Bismarck, for example often posed in military garb, which suits his whole political philosophy.
On the left, realpolitik with a heart, on the right, realpolitik with nothing but politics. It sounds sentimental and mushy, but it takes a gentle hand and mercy to make sure that revolutions do not become tyrannies.
Starr wrote his book to respond to Alfred Mahan’s The Influence of Sea Power Upon History 1660-1783.Many consider that work an indispensable classic, an essential plank in the argument for sea power trumping land power. What drew me to Starr’s tome was his criticism of Mahan’s “lackluster prose,” and essential “indigestibility.” I too dipped my toe in Mahan’s waters and had the impression that it was a book that everyone says they’ve read without actually doing so.
After that, Starr gets into his thesis, which is that sea power has not been nearly as decisive as we might think. For Starr, Mahan was not all wrong, but at least mostly wrong . . . in certain ways.
And with this moderately wishy-washy thesis lies most of the problem with Starr’s book. In the end, he can’t quite deliver the coup de grace to Mahan. He only wishes us to modify Mahan . . . somewhat. This stance has the advantage of being eminently reasonable, but the disadvantage of being rather dull and not very helpful. And he only wants us to think about the ancient world. The modern era he leaves untouched and unresolved, even though that was the era Mahan mostly dealt with.
So, this book is hardly Mahan’s nemesis, but Starr still has some good points.
The first is that most major ancient empires eventually acquired navies, yet none of them met their end at sea. Persia finished off Egypt by land, the Greeks finished off Persia by land, Sparta took Athens on land (at least at the very end of the Peloponnesian War), Hannibal brought Rome to its knees via a land invasion, and Rome itself met its doom from the northern barbarians who were light years away from having fleets. So how could naval power be all that decisive?
If we carry his point to the modern era, naval dominance did not help Portugal, Spain, or the Netherlands maintain their role in world affairs for very long.
With his second major point Starr approaches something of a broad analysis applicable across time. Naval powers will usually face a Catch-22 of sorts. Only a well-organized, wealthy, and successful state can achieve naval superiority, giving that state a much wider reach. But this wide reach comes with great responsibility. As Admiral Crowe commented,
Sea Power is more potent than land power, because it is pervading as the element in which it moves and has its being. . . . A maritime State, is, in the literal sense of the world, the neighbor of every country accessible by sea. It would be natural that a State supreme at sea should inspire universal jealousy and fear, and be ever in danger of being overthrown by a general combination of the world. Against such a combination no single nation could in the long run stand, least of all a small kingdom not possessed of a people trained to arms, and dependent on overseas commerce for food.
The danger in practice can only be averted . . . on condition that the national policy of the naval State is so directed to harmonize with the general desires and ideals of all mankind, and more particularly, that it is closely identified with the primary interests of the majority of mankind.
By the time most states have the infrastructure to have a big navy they also have the arrogance to match. England avoided Athens’ fate in part because of her geography, though she certainly had arrogance. America today finds that our global reach makes us many enemies as well as friends.
Naval power opens a state up to other temptations. More efficient global markets reduce the need for self-sufficiency and fosters increased specialization. But if the global network fails, the naval power may look homeward and find an empty shell. Thus did Starr anticipate some of the problems of modern globalization.
Starr had some good ideas, but needed more audacity to carry them through. Well, perhaps Mahan’s massive reputation cannot be felled at a single blow.
Keynes and Hayek differ philosophically in a few key ways. Keynes sees economics working like 
Legos. While certain laws govern economic activity, these laws depend more on human activity in particular contexts, especially spending. We can manipulate economies, like legos, in ways to fit our particular needs at the time. When Keynes said, “In the long run we’re all dead,” he did not mean to lay out a pessimistic philosophy of life. Rather, he argued that economics does not exist in the realm of absolutes. It is a human creation that exists for human needs. We do what we can in the moment. Bailouts are not wrong, anymore than having a cup of coffee in the afternoon to get you through the day is not wrong. Ideally we do neither, but neither are either of them wrong in the strict moral sense.
