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Politics, Language, and George Orwell May 31, 2010

Posted by David in Personal stuff, Politics.
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In 1946, George Orwell wrote the essay “Politics and the English Language,” which is one of my favorite “style guides,” even though it is difficult to follow Orwell’s six rules if you write papers in one of the social sciences. The kind of writing that Orwell deplores is especially common in journal papers. My guess is that the very worst offenders are sociologists.

Orwell had a healthy distrust of politicians. And he claimed that politicians are more likely than others to use meaningless words and phrases to hide brutal goals. As an example, he suggests that a typical professor would defend the Soviet Union (or any other dictatorship) using language such as this:

While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigours which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.

An honest way of expressing the same thoughts would be to say that

I believe in killing off your opponents when you can get good results by doing so.

Orwell writes that

[I]t is broadly true that political writing is bad writing. Where it is not true, it will generally be found that the writer is some kind of rebel, expressing his private opinions and not a “party line.” Orthodoxy, of whatever colour, seems to demand a lifeless, imitative style. … When one watches some tired hack on the platform mechanically repeating the familiar phrases … one often has a curious feeling that one is not watching a live human being but some kind of dummy: a feeling which suddenly becomes stronger at moments when the light catches the speaker’s spectacles and turns them  into blank discs which seem to have no eyes behind them.

And then Orwell comes to a conclusion that I think was not only true of most politics in his time but remains true today:

In our time, political speech and writing are largely the defence of the indefensible.

Growing up in Sweden, I witnessed how politicians stopped talking about “the state,” preferring first ”the public sector” and then the “common sector” and finally “our common sector.” I noticed how various prohibitions were called “public safety” or “public health.” I watched how American “pro-life” politicians are more likely than “pro-choice” politicians to adore a state that kills. And I discovered that “democracy” was invoked to explain why I and many others had to give up a year of our life to do whatever the state told us to do.

The good side effect of the evil system of “national service” was to turn me into an anti-collectivist and anti-nationalist for life. That not all others had the same conversion experience is actually a good thing: it shows that the social determinism that Marxists and fascists believe in is false. Different individuals respond in different ways to the same experience.

#3 Ludwig Lachmann: The Radical Subjectivist May 23, 2010

Posted by David in Economics, Personal stuff, The Social Sciences.
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In my view, Ludwig Lachmann is the most underappreciated 20th century thinker. Perhaps for that reason, I’m adamant in my commitment to include some of Lachmann’s theories and ideas in all of the courses that I teach. I have also tried to build on his work in my two books, particularly in Property Rights, Consumption, and the Market Process from 2008.

While Lachmann belonged to the Austrian tradition in economics, he was without doubt its most unusual member. In part, this was a result of his educational background. From Berlin rather than Vienna, he first studied with Werner Sombart, before his encounter with Hayek at LSE in the 1930s. While not especially fond of Keynesian policies, he was nevertheless influenced by Keynes’s focus on expectations, and developed an approach to economics that was actually quite similar to that of George Shackle.

In the 1870s, the marginal revolution in economics owed much to the recognition that consumer preferences are subjective and the source of all economic valuations. Hayek’s great contribution was to extend the subjectivist framework to knowledge; information is not equally available to all market participants and the interpretation of this partial information is in itself subjective. Frank Knight and John Maynard Keynes stressed the structural uncertainty of the future, which rested on the insight that expectations of the future could not be assumed to be objectively true, since this would require knowledge of the future state of knowledge, which is a logical impossibility. Thus, expectations are also subjective. Lachmann, more than anyone else, stressed the threefold nature of subjectivity. Preferences are subjective, but so is knowledge and so are expectations.

Taking expectations seriously has enormous implications for our understanding of capital markets. The earlier conception of a homogeneous capital stock becomes untenable. Equilibrium and equilibration can no longer be assumed. Instead we are left with a capital structure that is in a state of permanent flux, as the different expectations of experimental entrepreneurs cause changes to the uses of various capital goods and changing market valuations that may or may not lead to greater coordination over time. However, in the Lachmannian framework market coordination is not automatically desirable. Economic development leads to increasing complexity, and the more rapid this development, the less likely it is that we will see stable equilibrium prices for various production factors.

This does however not mean that there is never any coordination in dynamic economies. For goods and services with a short time horizon, there may very well be market coordination along the lines that was described by Hayek in “The Use of Knowledge in Society.” Consequently, expectations become less important in markets for the short-term rental of services and the transfer of perishable goods. Still, the focus on equilibria, “circular flows,” and “evenly revolving economies” inevitably becomes less central if one adopts a radical subjectivist framework.

Lachmann realized that there were also stabilizing features in society. These stabilizing features are institutions, which implies that to the extent that relatively durable equilibria do in fact exist  they will have to be explained by the role of institutions in making expectations converge. The influence of Max Weber was very much in evidence when Lachmann discussed such institutions. He even wrote a book called “The Legacy of Max Weber.” In that book, he uses the German political system as a case study of how institutions sometimes stabilize expectations, while sometimes they do not. In the post-war German political system, there has been a general expectation among all the major political parties that democracy is here to stay; there is thus an institutional equilibrium in the political sphere. The Weimar Republic was also a parliamentary democracy, but in that case there was no shared expectation or even shared desire for democracy to endure; it was at most regarded as a transitional compromise prior to achieving a socialist, nationalist or national socialist revolution.

It is this emphasis on institutions that sets Lachmann apart from Shackle, who otherwise shares a similar open-ended view of the economy. While Shackle claimed that there is no such thing as good policy advice (we know too little), Lachmann was more optimistic, being generally supportive of the market economy, entrepreneurship, and non-inflationary monetary policies. But it is still fair to conclude that Lachmann was never an ideological firebrand; he was more interested in economic theory than in the organization of society.

Perhaps this is the reason for Lachmann’s relative obscurity. It is simply not as easy to attract followers when the goal is theoretical rather than political reform. In this sense, Lachmann was the “anti-Rothbard” of Austrian economics (Rothbard had few original economic contributions, and instead developed an extreme version of libertarianism that would seek to abolish the state in its entirety). But it is my conviction that Lachmann will be read by more people in 100 years than read him now, whereas Rothbard will by that time be no more than a footnote in the history of political ideas.

There are already encouraging signs that Lachmann’s theories are being taken more seriously. Peter Lewin has produced a historical account of the development of capital theory which presents Lachmann more or less as the guy who corrected the flaws in Bohm-Bawerk and Hayek. With his Big Players theory, Roger Koppl has attempted to look at the interplay between expectations and institutions within the framework of long-term economic development. Other economists who have extended Lachmannian ideas include Mario Rizzo, Don Lavoie, Brian Loasby, Nicolai Foss, Paul Lewis, and Jochen Runde.

Migration Is Both a Human Right and a Key Economic Freedom May 21, 2010

Posted by David in Economics, Personal stuff, Politics.
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One of the worst features of the old East Bloc governments was that they prohibited most people from leaving. The Iron Curtain and the Berlin Wall were built not to keep out evil western capitalists, but to prevent eastern Europeans from enjoying the benefits of leaving for more prosperous and open societies. It is no exaggeration to say that the countries of Eastern Europe constituted the world’s largest prison camp before 1989. Curtailing the freedom of exit has perhaps been the most important way for authoritarian governments to insulate themselves from pressures to improve their human rights records or their economic policies.

But the freedom to exit is not enough. There also has to be freedom of entry to make exit rights effective. While liberal democracies are universally associated with freedom of exit, they have at best a mixed record on freedom of entry, which is what immigration laws regulate. One of the great achievements of the European Union (or the European Economic Area to be more precise) has been to give people within that region the right to choose in which of 30 jurisdictions they want to live (the 27 EU member states plus Norway, Iceland, and Liechtenstein). As regards global migration, Canada probably has had the least restrictive policy, which among other things has resulted in Toronto becoming the most ethnically diverse city in the world, with 12% Asian Indians, 11% Chinese, 8% Afro-Caribbeans or Africans, 4% Filipinos,  3% Latinos, and 3% Arabs  in 2006.

Free entry and exit is not just a matter of human rights. It is also an economic freedom on a par with free trade in goods and free capital flows. In fact, it may be even more important than those other economic freedoms. This was the message of a 2003 speech by Richard Florida that I discussed with four students at a research seminar yesterday. Florida’s idea is that immigration encourages innovation by facilitating the mixing of diverse ideas and also that it encourages tolerance, at least in the long run. His message for San Diego, which was where he gave his speech, was that the best regional development policy would be to abolish border controls between San Diego and Tijuana. I couldn’t agree more.

I remain mystified as to why so many self-described pro-market economists and politicians focus so much more on the benefits of free trade than on free migration. For example, both economic freedom indices (Fraser Institute and WSJ) include freedom to trade internationally as a key indicator of economic freedom, while immigration regulations are not even included. But then the distinction between ”economic freedom” and “non-economic freedom” is itself spurious, as has been  shown by property rights theorists such as Armen Alchian or Harold Demsetz. If people care about freedom of speech, it will affect migration patterns and land values. The freedom of people to start a business or negotiate employment contracts or buy housing is compromised if residence permits are at the discretion of politicians. And most politicians are even worse than economists when it comes to neglecting the dynamic benefits of immigration.

Conservative politicians often claim that they are more “pro-market” than liberals, socialists or greens.  And they usually point to the benefits of free trade and international capital flows more often than their political opponents. But conservatives are often the most restrictive when it comes to immigration. Hardline anti-immigrant rhetoric is much more likely to come from Republican candidates in the US, Conservative candidates in the UK, Gaullists in France or Christian Democrats in Germany than from candidates of any other mainstream party. The abominable immigration policies of the British Labour Party administration - rejecting most non-European immigrants as well as almost all applicants for refugee status - was criticized as being too lax by Conservative Party politicians! And in the coalition negotiations with the Liberal Democrats, the Tories stated clearly that a more restrictive immigration policy was one of only a handful of non-negoitiable election promises.

A policy of free migration (unrestricted emigration and immigration) would be an even more important free-market policy than free trade becuase it does not just lead to a greater division of labor and the demise of substandard products and wasteful production processes. It also has an even greater potential than unrestricted international trade in goods to encourage creativity, innovation, and tolerance as different world views and habits come into contact with one another. Perhaps transaction costs would increase somewhat. But this would be a small price to pay for the vibrancy and dynamism of truly cosmopolitan cities, the benefits of which gradually spread to all parts of the economy.

There are political movements that have anti-migration policies as their top priority. The Front national, the Dansk Folkeparti, the British National Party and so forth have put immigration at the top of their respective policy agendas. Isn’t there a need for a countermovement that prioritizes the liberalization of migration regulations with similar passion? I have always voted for the party with the most liberal immigration policy (and switched parties in response to changes in migration policy), but unfortunately these parties don’t tend to put increased immigration as one of their key election promises.  Wouldn’t it be great if migration enthusiasts could be as loud and clear  as the anti-immigrant populists?

A New Gay Index May 17, 2010

Posted by David in The Social Sciences.
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Richard Florida stresses the importance of tolerance in post-industrial creative cities, since tolerance encourages creativity and imagination. He has become associated with a “Gay Index,” which measures the gay proportion of the general population in different metropolitan regions. He argues that gay people are attracted by tolerant environments, and thus they tend to flock to the most tolerant cities. And it’s exactly a tolerant environment that is needed for creativity, entrepreneurship, and innovation. Consequently, he argues that his Gay Index is a good predictor of regional economic performance in the post-industrial economy.

This assertion is not without its critics. It goes without saying that people associated with the US Religious Right are unimpressed. But there have also been more scholarly critics, such as Ed Glaeser of Harvard, who claims that the only thing that matters is human capital as conventionally measured, as has always been the case.

In my new book (English translation of title: “The Future of the Oresund Region: The Values of a Young Generation”), I set about investigating tolerance as a value (not as an assumption with observable revealed-preference outcomes, which is Florida’s approach). First I did a macroanalysis at the national level, comparing six different types of tolerance by looking at simple correlations with different measures of economic development, particularly the Human Development Index, the Corruption Perceptions Index, the Press Freedom Index, and an index of scientific publications per capita.

The analysis revealed correlations in the +0.5 to +0.8 range for all studied tolerance measures, using results from the World Values Survey. The tolerance measures were the following: justification of homosexuality, divorce or prostitution, and acceptance of gay, immigrant or other-race neighbors. I also included Inglehart’s postmaterialism index (correlations between 0.5 and 0.6). There was an important conclusion: the single best predictor of development, whether measured as HDI (income/health/education), absence of corruption, freedom of expression or science production is the degree of justification of homosexuality, closely followed by acceptance of gay neighbors! This was followed in turn by justification of divorce, postmaterialism, justification of prostitution, acceptance of other-race neighbors, and acceptance of immigrant neighbors. Moreover, partial correlation measures also supported tolerance toward gays as the most important variables.

I then proceeded to analyze tolerance among young people in the Oresund region. Generally speaking, most young people can accept gay neighbors (between 85 and 90 percent). But it was still the single best predictor of a host of variables associated with the post-industrial society. Not unexpectedly, tolerance toward gays is most strongly associated with women in college-track educational programs. More interesting is the fact that tolerance toward gay neighbors has a strong positive association with the attractiveness of knowledge-oriented occupations (e.g. scientist, engineer, physician) and an even stronger positive association with the attractiveness of “artist/entertainer.” It has a strong negative association with manual occupations (construction worker, car mechanic etc.).  In addition, tolerant students are over-represented among those who list “interesting work” and “music/art” as among their four top life priorities. Tolerance toward gays is also positively associated with geographical mobility and with other kinds of tolerance.

A geographical analysis revealed that the overwhelming majority of young people in Zealand (Denmark) and of young women in Scania (Sweden) can be described as tolerant. But there is a sizable intolerant minority among young Scanian men. Intolerance is especially over-represented among men in vocational schools. Landskrona, Helsingborg, Angelholm and other municipalities in the north-western part of Scania are especially well-endowed with intolerant young men. In some of these places, as many as a third of the population of 19-year-old men do not only reject gay neighbors, but also Jewish, other-race, or different-language neighbors. Even greater shares reject Muslim, immigrant or Romani neighbors.

Analyzing the statistical association between general intolerance and one’s favored society (among male students) produced a remarkably clear result. Among those who accept all kinds of neighbors, 80 percent did not think that “industrial society” is the most attractive type of society. They favored the given alternatives, which were “the knowledge society” and “ecological society.” Among students who disliked at least 5 of 10 mentioned “out-groups,” the corresponding result was that 60 percent prefer an industrial society, which was described as a society where manufacturing is the most important economic activity.

I think values regarding homosexuality is a very useful complement to Florida’s gay index. Florida claims that gays are over-represented in places with “talent and technology.” I claim that the relative justification of homosexuality and acceptance of gay neighbors are the two best indicators of national standard of living, absence of corruption, freedom of expression, and scientific output.  And acceptance of gay neighbors (the justification question was not included in the questionnaire) is the single best predictor of the attractiveness of knowledge-based and creative occupations, the willingness to move to another city, and the importance attached to work content (relative to salary). It is also a very good predictor of other types of tolerance and postmaterialism, but these latter measures are not as good at predicting non-tolerance variables.

We can also say something about the geography of the future on the basis both of Florida’s Gay Index and my New Gay Index. According to Florida, the future belongs to cities like San Francisco, San Diego, Austin, and Boston. On the basis of nation-level data, it seems as if the future belongs to Scandinavia, Switzerland, the Netherlands and three English-speaking countries: Canada, Australia, and the UK. And on the basis of my microlevel data it seems to belong to college-educated women in creative occupations in large cities and college towns. The people of the past are working-class men in areas with high unemployment (but that’s not really a surprise, is it?)

May Update May 17, 2010

Posted by David in Personal stuff.
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This blog has been largely inactive over the past few months, for which I apologize. This is not due to writer’s block. On the contrary, the inactivity is mainly due to an intensive writing period, which reached its end a couple of days ago.

This writing period has been unusual in that it has involved several parallel projects. As usual, I am involved in empirical analyses of housing markets. This semester I have concluded a major investigation of the effect of Taiwan’s high-speed rail on housing values, together with Olver Shyr of National Cheng-kung University. We now have a paper under review that compares estimates for all seven metropolitan regions in Taiwan. We have also submitted a paper dealing with the possible spatial enlargement of the Taipei region due to a new freeway tunnel, looking at accessibility effects on house prices at several points in time in the affected locality (Yilan County).

In addition, I have been involved in an analysis of housing markets in southern Scandinavia. Together with Zoltan Kettinger, a Ph.D. student at NSYSU, we have been estimating accessibility effects on house prices in the Copenhagen-Hamburg corridor. This is related to a new fixed link between Rodbyhavn and Puttgarden (the Fehmarn Fixed Link), which is scheduled to be completed within this coming decade. The result of our analysis will be published as a book chapter on the future of southeastern Denmark and Schleswig-Holstein, edited by Christian Wichmann-Matthiessen of the University of Copenhagen.

As I have mentioned in previous posts, I am also the co-editor of a new Handbook of Creative Cities, to which I will also contribute one or two chapters. I have already written one chapter, which deals with how the value of political decentralization and market-based regulations is enhanced by increases in the complexity of the economy. To some extent, it reflects my frustration when encountering the top-down arguments of architects and traditional urban planners (i.e. they think that they know what’s best for everyone). So writing that chapter was a kind of “theoretical therapy.”

The most time-consuming endeavor, however, was writing a popular book on the value system(s) of young people in the Oresund region. Unlike the other contributions, this will be published in Swedish, so that I also got a chance to practice my written Swedish. The analysis is based on a survey of about 2,000 final-year secondary school students (aged 19) in Scania (Sweden) and Zealand (Denmark). I used two complementary theories as a starting point: Inglehart’s “postmodernization theory” and Florida’s “creative capital theory.” While the results support both theories, I think that they are especially supportive of Florida’s emphasis on social tolerance.

Finally, I have also written a short book review of Allen Scott’s “Social Economy of the Metropolis.,” for which I have mixed feelings. Interesting analyses of spatial structures (good) are mixed with assertions of inevitable class conflicts and the determinism of historical economic forces (if you know me, you will know what I think about this. Hint: my name is David Andersson, not David Harvey).

All in all it’s been an intellectually stimulating spring semester. I have also supervised four Master’s theses, which (I hope) will be completed and defended within the next two months. One of the best things about NSYSU is that the students are as international as Kaohsiung is not.  There is also an unusual variety of topics (for one single advisor, that is). Josh Davis of Tulsa, Oklahoma, is writing about the influence of the Taiwan Lobby in US politics. Fabien Laventereux, from the Bourgogne region of France, is doing a hedonic price study of the markets for bottled water in Taiwan and in France. Germain Thiombiano of Ouagadougou, Burkina Faso, is doing an interview survey of female entrepreneurs in – you guessed it – Ouagadougou (when I was growing up, “what is the capital of Upper Volta (Burkina Faso)? used to be considered the most difficult question in geography quizzes). The fourth thesis deals with the value system of young Taiwanese, which is being analyzed by Baris Unal from Istanbul.

I will follow up this post with more detailed summaries of some of the projects. I will also present my three remaining favorite thinkers soon.

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