Review: The Invisible Hook

I read Peter Leeson’s The Invisible Hook: The Hidden Economics of Pirates a few months ago, but now I have time to write out some thoughts on his entertaining and educational book.

Leeson is a professor of economics at George Mason University, where the default ideology favors free markets and the norm of public engagement means that many professors are active with blogs, podcasts, and popular books.

Leeson’s Hook fits squarely in that tradition by explaining how pirates managed to plunder without fighting each other or getting caught.

Leeson’s central question is: “How can pirates cooperate without appeal to the formal authorities that most of us rely on to maintain order and promote cooperation?”

Related: The rules prisoners enforce among themselves.

The short answer is: By establishing institutions (formal rules and informal norms) that reward cooperation and punish defection. These institutions, Leeson writes, bring wealth to pirates as if “guided by an invisible hook” — a rephrasing of Adam Smith’s famous observation — that investors benefit others as a side effect of pursuing their own profits, i.e., 

He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

As an interesting footnote, consider that the “golden age” of piracy (1716-1726) took place before Smith discussed the invisible hand. I don’t think he was thinking of pirates, but here’s yet another example of academics “discovering” a phenomenon that’s been obvious for ages to normal people.

Contextual preamble done. Now let’s get to my notes on the book:

  1. Many pirates had been abused as sailors on merchant ships whose (distant) owners gave officers leave to do as they pleased. The resulting cheating and bad treatment (under the protection of law and contract) led many sailors to abandon ship as soon as they could. Pirate ships were “cooperatives” that were owned by their sailors and managed under pirate articles that allowed sailors to fire officers who mistreated them. These “democratic checks and balances” set expectations on officers’ behavior and protected sailors from abuse.
  2. Pirates flags signaled mercy on surrender but death for resistance. Given their superior firepower, pirates would win most battles, but the best battle was an early surrender. Captains often surrendered to pirates because pirates wanted to steal (the boat owner’s) cargo, not kill them.
  3. All sailors agreed to the ship’s rules before departure. Changes in the rules required unanimous agreement, which ensured that nobody would be (immediately) disadvantaged by changes.
  4. Pirates separated power a century before governments did. The captain would decide where to go and how to battle, but the quarter-master was in charge of arms, discipline, and dividing loot.
  5. Pirate democracy, likewise, predated America’s revolutionary democracy by a century. The crew voted for the captain and quartermaster, and could vote them out for abuse of power (or any reason). The worst captains were turned over to the authorities, who would hang them.
  6. Near equality on pay also reduced friction. The captain’s quarters were not private. The captain and quartermaster usually received two shares of loot, compared to one for ordinary sailors. The surgeon and carpenter also received two shares, due to their important roles in keeping sailors healthy and the ship at sea, respectively. That said, nothing was distributed until casualties of battle were compensated. This “insurance” maintained morale in a deadly trade.
  7. Pirates gossiped. Everyone knew which ships were well or poorly run. Given the norm of joining boats for one voyage at a time, pirates would shift to better boats if they could. Such freedom meant captains competed for crews, resulting in Tiebout competition that raised the standards for all pirates. I lean on the same dynamics with my idea of giving everyone on the planet a second passport, which would improve life for citizens everywhere. (Think Uigurs in Chinese concentration camps, Kurds in Turkey, Venezuelans, et al.)
  8. Pirates made rules to reduce “negative externalities,” i.e., prohibiting women, drinking, and fighting on board, or smoking below decks (where powder was stored). These rules kept the crew united in its mission to plunder other boats and not blow up, respectively.
  9. Pirates were (relatively) non-discriminatory among each other. They treated other personalities and races equally. They did not force captured prisoners to join them, as that would violate the basic norm of voluntarily agreeing to abide the ship’s constitution. Pirates did not (collectively) keep slaves on ship very often, as the benefit of “free labor” was often outweighed by the cost of losing their boats or lives to a slave’s betrayal. They either invited captured slaves to join as free crew or (more often) sold them at their next port of call.

Leeson’s book gives an entertaining insight into the world of pirates — and the economics under which they lived and prospered (until authorities changed rules and applied far more effort into capturing them around 1730). 

My one-hooked conclusion is that that anyone interested in economics (or piracy) should read this book (rather than Freakonomics or Doughnut Economics) because it’s fun and thought-provoking. I give this book five stars.

Interesting stuff

  1. Melting permafrost is putting climate chaos into overdrive (and we barely know what’s happening)
  2. Informal urbanism makes cities human-friendly
  3. The Economist, commenting on “unexplainably low” inflation, suggests “a uniform handout to the public in which every adult received an equal share of newly created money.” I like that idea — and suggested it 3.5 years ago!
  4. Amsterdam will tax street advertising (i.e., sidewalk-boards or windows-ads). Love this.
  5. Stockton’s basic income experiment is improving lives, not slackers.
  6. Jeff Bezos, SciFi nerd, is taking humanity to space.
  7. The simple math of mass transit (7x capacity) over private cars 
  8. A scalper’s life and retirement…
  9. Maybe climate chaos disrupting sports will get men to turn away from muscle cars, red meat, and competitive (positional) consumption?
  10. Water quality is important, but it’s getting worse.

H/T to PB

Review: Through the Language Glass

I’m a language geek and borrowed this 2010 book by Guy Deutscher from a friend.

The book is interesting but poorly edited too long. Deutscher takes too much room for his own work, i.e., over 100 pages on words to describe color (more below) but only 20 pages on the language of gender. 

This review will therefore record my summary takeaways, for those readers who have better things to do with their time 😉

  1. All languages use different means to convey ideas at what turns out to be the same pace. Thus, they may differ in verb endings or placement, noun complexity, etc., but they more or less work with the rate at which we can hear and understand speech. Languages are not equally complex, but they can convey the same information.
  2. Languages spoken by small groups can be very complex (e.g., a single word for “your brother-in-law’s father”) as a reflection of complex social relations. In “mass languages,” words and structures are simpler, to help strangers construct shared perspectives. 
  3. A single word might be translated into one of several words in another language that does not use relation to convey meaning. Some languages have groups of words to explore nuances (the famous example of eskimos and snow). 
  4. The most important colors are black, white and red. Other colors are added to our vocabulary (it seems) as our need to discriminate among them. The sky has always been blue, but the color blue has only come into use as we began to make and trade blue objects.
  5. After 150 years of debate over the naming of colors, it turns out that cultures with a limited range of colors are not “color blind” as much as “color indifferent.” They can tell the differences between unnamed colors but don’t bother to differentiate in everyday life. This phenomena is the opposite of eskimo-snow vocabulary (or academic jargon defining obscure ideas), but similar to the practice of counting “1, 2, many” in some cultures.
  6. Perhaps the easiest way to show that limited vocabulary does not indicate limited thinking is when someone switches from one language “lacking X” to another where they say “X”. Unspoken doesn’t mean unknown.
  7. Languages gain and lose words all the time. If gains exceed losses, then the vocabulary is growing. If the word falls out of use, then it disappears forever. More people speaking the language can reduce word count as they settle on more basic words that more people can understand.
  8. Academics have misinterpreted languages for centuries. Languages (and cultures) have been maligned by outsiders imposing a “Latin grammar structure” on the local language, or mistaking someone’s poor use of their non-native tongue for stupidity in their native tongue. German or French philosophy cannot be traced to their native grammars, nor can they be superior due to their expression in a “perfect” language (a common claim).
  9. “Languages differ in what they must convey not in what they may convey.” We can say “Dr. Jones” without knowing if the doctor is male or female, but we must know gender if we want to use “Mister” or “Miss.”
  10.  The original use of “gender” referred to “type,” e.g., humans, big things, small things, collectives or liquids. Gender became associated with male and female because European languages (and the scholars who speak them) were not aware of how other cultures grouped words.
  11. That said, male or female words can influence how one thinks of an object, e.g., the French associate a fork (la fourchette) with feminine qualities while Spaniards use masculine words when thinking of el tenedor.
  12. Some languages (especially among Aboriginals in Australia) use cardinal coordinates (N, S, E, W) to refer to objects (“my western hand”) whereas most of us use egocentric coordinates (“my left hand”). Both systems work, but mixed conversations can be confusing.

My one-handed conclusion is that all languages are useful, but some are harder to learn than others, often due to their distance from one’s mother tongue. I give this book three stars.

 

Interesting stuff

  1. Lenin: The ruthless creator of inhuman totalitarianism
  2. Think your phone helps you be more social? Think again.
  3. Executives don’t decide; they establish and protect the mission
  4. She was interested in becoming a writer and she was interested in herself—she was made for Instagram.”
  5. What’s clear is that climate change is going to reshape every system made of water on Earth.”
  6. “Being educated means “being able to differentiate between what you know and what you don’t.” As it turns out, this simple ideal is extremely hard to achieve…”
  7. The British are happy to profit on selling weapons to kill civilians.
  8. Government failure has destroyed Lebanon’s water resources
  9. A novelist gives hints on improving academic writing
  10. “Technical protein” will end farming animals for meat.

H/T to PB and MK

World War CC

I’ve been alarmed about climate change chaos (CC) since 2016 (before that, I thought it was a distant, negligible threat to me), and I’ve been evolving my perspective on what it means to us.

My first conclusion was that mitigation had failed. So I turned my attention to adaptation, which was easy because it means dealing with a more aggressive water (and thus heat, storms, floods, etc.) cycle. 

In my first vision, I thought of a zombie apocalypse, of great waves flooding unprepared cities, Zero-day events everywhere, etc. I don’t think that any more because I see CC as a series of small cuts that draw a drop of blood per occurrence but, taken together, bleed you out.

Slightly off-topic, but Richard Tol is an idiot if he doesn’t understand that different places with different climates are not interchangable (10K = 10C). Ask a tree, for example.

But what does it mean to suffer these cuts? Can’t we ignore them, as we get richer and thus able to afford the costs of CC? Unlike William Nordhaus or Richard Tol (right), I think not. Indeed, I think that these cuts will resemble World War II in their impact on our lives, but be worse due to their never-ending nature that will build, exponentially, until our descendants curse our blind stupidity.

So what would a perpetual WWII (WWCC) look like?

First, there will be a permanent decline in our standard of living. We will have shortages, disruptions, additional costs, and spend way more time worrying about what we’re missing, what we “really need,” and if things will be better in the future — or not. (One woman is giving up a lifetime of buying new fashion for second-hand clothes.)

Second, the future of “growth/development” will not be hopeful. Our  productive assets will be destroyed. The resources directed to defense and recovery will leave less for production. People will not choose jobs for ideals, prestige or salary, but because those jobs still exist, are protected in some way, or must be done.

Third, everyone will experience a different type of WWCC. Politics, violence, alliances, and migration will vary from place to place, with laws, nationalism, (failing) institutions, and so on. My advice is to make sure you have all your paperwork in order. Many Jews (including Anne Frank) died because they couldn’t get visas to escape the Nazis. Don’t forget the horrors of recent civil wars in Rwanda or Yugoslavia, where close neighbors (and sometimes relations) turned genocidal. Many politicians will make matters worse.

Finally, WWCC, like the war on poverty or war on drugs, will never end. That fact will make it hard to “plan for the future” and depress a lot of people. It will also undermine business investment, innovation, and the dynamism of markets that originates in our basic optimism and tendency to trust. Human society will experience dark ages not seen since the Black Death, colonization, the Little Ice Age, etc. People will die in mysterious ways, strange goings on will surprise people, witches and healers will promise redemption to those who can cross their palms with silver.

My one handed conclusion is that humans will definitely survive in a climate chaos future, but sometimes wonder if it would be better to be dead.

Addendum (19 Oct): “Ultimately, capitalism is going to lose its customers. There won’t be anybody to buy the product because everybody is going to be so poor.

Interesting stuff

  1. The Waze algorithms don’t care about the societal cost they inflict and neither does Waze
  2. From Intellectual to influencer: “In the case of the public intellectual, the institution was the academy and the role was thinking. In the case of the public influencer, the institution is the corporation and the role is marketing. The shift makes sense. Marketing, after all, has displaced thinking as our primary culture-shaping activity, the source of what we perceive ourselves to be.”
  3. Read this long, detailed exploration of how renewables are more cost-competitive than fossil fuels for electricity. Also see this detailed forecast.
  4. A young ecologist disrupts the conversation on ecosystems
  5. “These results indicate that using measures such as citation number, h-index, and impact factor are useless when comparing researchers in different fields, and even for comparing researchers in the same subfield.”
  6. Cities, markets and people
  7. “‘If we go into a runaway climate effect, the damage may be between €100 trillion and the loss of civilisation,’ he said. ‘The probability, I would say, is about 10% that this is going to happen. And when it comes to the urgency of decarbonising society and keeping the forests alive, we need at least 20 years. We have only 30 years left to do this… [Taken together, this] simply means that we are in a deep state of climate emergency.'”
  8. Dictators are great performers, so let’s yank them off stage.
  9. India’s demonitization is a great example of how engineers do not understand economics people.
  10. A lovely comparison of Dutch and English, e.g., “I realized then that the trouble was in the tuning of the ear. Past the words, there is the listening to place. To the sea winds that blow inland, speaking the hollow, quickened syllables of flames, and blow over the dunes…”

H/T to PB

Libraries and revolutions

I was thinking of doing two posts (one each on libraries and revolutions), but I think I found a reasonable way to combine them.

First, revolutions.

Some claim that low union membership in the US is a sign that unions are no longer valued by workers. I think something the opposite, i.e., that unions did such a good job that they were taken for granted by middle-class workers who felt their quality of life was secure from the depredations of “capital” and other “class enemies.” Today, few union jobs remain as a combination of declining membership and right to work laws have undermined the coordinated collective action necessary for unions to represent a countervailing force against employers.

The post-WWII decline in unions has been accompanied by increasing inequality in many countries — an increase that took off under the influence of Thatcher/Reagan reforms in the 1980s and has resulted in the crisis of inequality highlighted by Piketty, Occupy Wall Street and the Tea Party. (Trump has used a version of events to justify his moronic and self-serving agenda. His actions have worsened conditions, as I’ll explain when we get to libraries below…)

These post-WWII inequality dynamics got me to thinking of two ideas: First, revolutions up-end the old order, resulting in short term losses but then medium-term prosperity. In the long run, however, the rich/powerful/elite tend to centralize their control and direct income and wealth to themselves.

Thus, the agricultural revolution occurred ±10,000 years ago, replacing semi-egalitarian hunter-gatherer societies with settled communities. In the “short-run” of the first 4,000 years (!), this system was bad for the individual but good for the group (read my reviews of Sapiens and The Secret to Our Success). After that long adjustment, however, agriculture fed an explosion of human flourishing in which the average person was better off and communities were reasonably egalitarian, at least compared to the late middle ages, when the rich and royal owned most of the land and many slaves as they grew fabulously wealthy. 

The end of this age is often linked to the French Revolution (1789) but the Industrial Revolution also played a part in overturning power relations and opening up an entirely new set of possibilities based on a different model of production. 

The industrial revolution followed a similar pattern of painful disruption, growing benefits to the working classes, and a resumption of control over income and wealth by the rich and powerful, this time at about 50 times the speed (i.e., “bad times” for 80 years rather than 4,000 years). The beginning was terrible for workers (thus the rebellion of the Luddites), but matters improved as workers unionized, slaves were freed, and the benefits of mechanized agriculture and manufacturing went to the working classes. Industrialization brought globalization (the telegraph, steam ships, migration) but also total war, as seen in the millions of victims in the two world wars. After the Great Depression and WWII, there was a firm improvement in living conditions (from a very low base) that benefitted the “average Joe” between 1950 and 1980. (These benefits didn’t go to poorer countries, some of which were lucky to escape colonial rule.)

The 1980s is seen by many as a turning point of inequality, which I’ll agree to. Yes, there was more freedom for “individuals,” but there was also a massive swing of wealth, from the majority to job creators, masters of the universe, and global tax dodgers.

The information revolution began in the 1960s, but it really took off in the 1990s, as the Internet matured and spread, driven ahead by Moore’s Law and an emerging economics of “winner takes all” platforms and economies of scale. In this scenario, short-term disruption and middle-class gains took only a decade to process before the elites were again collecting the majority of gains. Yes, Facebook is free. Yes, many people spend hours being “entertained” by their feeds. But most of this activity is a distraction from the massive concentration of income and wealth in tech companies based in the US and China (except when it comes to taxes). I’ve complained before about the negative impacts of tech — and its loss of innocence — so I’ll just leave it there.

My one-handed perspective is that revolutions are temporarily disruptive, until the elites find a way to regain control and enrich themselves at the expense of the rest of society.

So how does this relate to libraries?

A few months ago, my girlfriend was telling me that her old hometown in Romania did not have a library, as there was “not enough money” to support such an institution.

I went on a rant about how a library is probably more important than a school, as a library provides a public, free meeting space for people to study, talk and cooperate in tackling problems, planning their future or doing their homework. These “public good” services help allow anyone in the community to benefit without payment, unlike private clubs, most schools or cafes. Those benefits are probably radically higher than the cost of libraries to taxpayers, which means that they should be set up as soon as possible in new communities and protected for as long as possible in the face of tight finances. (Read this, this or most anything here.)

Try telling that to Trump voters. In this NYT article, the author visits an Arkansas community that supports Trump but doesn’t see the point of a library — or paying taxes. Instead, they seem to think it’s better for folks to “take care of their own” without funding or support from the government. I see their “go it alone” attitude as the product of a mix of bravery, naiveté and ignorance: They beleive they don’t need help, assume they can survive everything from medical emergencies to natural disasters with their own resources, and believe that taxes and spending represent a zero-sum game. This last point is perhaps the most damaging, as it denies the main reason that we have governments: the provision of public goods that cost some money to provide but provide much greater benefits to people. More importantly, public goods (like the library but also security, information, clean air, etc.) are pro-poor because they are free to users. (This article makes that point indirectly, as students care more about the basics — quiet space, wifi — than the fancy bells and whistles that tech consultants sell to trend-chasing bureaucrats.)

Thus, we arrive at a terrible paradox: Inequality is rising as the information revolution rewards elites but the poor are turning against means of helping themselves (libraries, Obamacare, etc.) due to their mistaken belief that Trump and Republicans — their tribe — cares about them. They don’t.

My one-handed conclusion is that America’s less fortunate are only going to be worse off as the rich and Republicans conspire against them. What happens next? Either they will eat cake or start another revolution — and it won’t be pretty.

 

Interesting stuff

    1. The art of people-smuggling (out of Venezuela)
    2. A fascinating (realistic) perspective on how primitive humans were far more likely to be experimenting with social structures than falling into rigid power hierarchies based on agricultural surplus.
    3. How to make meetings less terrible
    4. Why are Republicans increasingly willing to “throw America under the bus”? Their aging white male supporters doubt they’ll ever be able to fairly win an election. #timeforchange
    5. Religious orders in Germany are disappearing because so few people want to dedicate their entire lives to God
    6. China’s leaders try to quantify everything, and that’s too much.
    7. Why can’t we agree on what’s true any more?
    8. Why is there less money spent on US politics than almonds? Free riders creating collective action problems.
    9. “Hydrogen” means “creates water” because burning hydrogen leaves water behind. #mindblown.
    10. Need to write an abstract for a paper but don’t have time for individual words? Use Big Data/AI/Machine learning!