Arnold Kling  

John Nye on Economic History

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He writes,

The greatest achievement of early modern economic growth was not the Industrial Revolution itself, but the way in which the leading Western economies began to move away from highly parochial, narrow networks of personal exchange and came to rest instead on increasingly complex national and international commercial networks of impersonal exchange.

...In some ways, FDR did not so much break from normalcy as return to it. It helps to recall that large-scale systems based on anonymous exchange were a recent phenomenon. The system of orderly, global trade developed in the 19th century under the financial and political leadership of the United Kingdom, and backed by the gold standard, produced growth and prosperity. But it also produced plenty of social disruption and downward as well as upward mobility. It certainly never inspired the kind of devotion that nationalist and communal ideology more readily induce, as suggested by the rise of fascism during the interwar period. The world's experience with democracy and market capitalism was limited. The more common experience by far consisted of political systems that allowed limited access to property rights and trade, reserving the most exalted benefits for elites who treated control of the political economy as their reward for preserving peace.

...Just as an outbreak of incurable plague would lead to both a renewed search for sound cures and an atavistic appeal to folk remedies, so the Depression stimulated both productive thinking about the sources of business instability as well as destructive appeals to extreme nationalism, protectionism and military aggression.

Read the whole thing. Thanks to Tyler Cowen for the pointer.

Nye shares, along with folks such as Douglass North, a view that open-access orders are rare and somewhat contrary to human nature. What is in fact more natural are societies based on principles of an extended family. It is more natural to live in a world of Mafia Godfathers than one with fair, open, competitive markets.

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CATEGORIES: Economic History

COMMENTS (4 to date)
agnostic writes:

There's a good interview with him on this topic at EconTalk also.

Loof writes:

According to Arnold:
Nye shares, along with folks such as Douglass North, a view that open-access orders are rare and somewhat contrary to human nature. What is in fact more natural are societies based on principles of an extended family. It is more natural to live in a world of Mafia Godfathers than one with fair, open, competitive markets.

Nye and North seem somewhat wrong headed, if this is their view. Open-access orders with fair, open competitive markets are quite common; not contrary to human nature in societies constructed on principles of the extended family. As such, the Asian village dwarfs the Judea-Greek patriarchal social construct of "Mafia Godfathers": expanded in different ways by society to the state in ancient, medieval and modern eras.

With patriarchal society the person as an individual is different in kind (man-women; man-child; freeman-slave): i.e. the Roman patriarch of pater familias is all about Men and private property. In the Asian village paternal authority is relative for sure, even dominates, but it is more paternal less patriarchal in ancestor reverence; and, maternal authority is well-placed in family and village life. This extends to free marketing when Household and Firm are in the same social setting with voluntary exchange usually at the village level - but open to everyone. In observing the emergence and development of markets in Asia for many years, its amazing at how entrepreneurial the women are.

As I see it, libertarianism with its idealism of selfishness, elitism and private property appear as backroom Mafia Godfathers with women having the equal right to be a “patriarch”, to own and hoard property absolutely. Perhaps the pivotal question as to whether this is so: do libertarians honestly believe that a free person is at liberty to sell himself or herself as a slave, even for a moment?

Ryan Vann writes:

This is completely unrelated to the post, and might get deleted, but if George Lucas ever makes another Starwars, he should have John Nye do the voice of Vader. I've had a terrible time sleeping since I heard Nye's Econtalk. Ok, moving past the weird aside.

Loof, what are you prattling on about? "The Asian village dwarfs the Judea-Greek social construct...." How can a physical thing, a village, dwarf a social construction. What are you saying here?

Nothing you are writing seems to have any relevance to open-access orders Nye is talking about. As far as I can discern, you are talking about ancient Asia, which was dominated by caste systems and institutionalized elitism. How does that run counter to the claim that open access systems are a rarity in human history?

Loof writes:

As I ramble along, I’ll continue to “prattle” about the traditional Asian village functioning economically with free and fair enterprise with a marketplace. As such, open-access orders are customary and common to human nature – not rare.

There could be a categorical difference between what Nye sees and whom I see as having open access. I’m referring to people in households having open access to markets as producers and consumers. I believe Nye is referring primarily to a “what”: corporations, legal “persons” as individual firms, having access as producers. All households and firms have open access as consumers.

The point regarding “castes” as a rigid class system is relevant, but minor relative to Asia as a whole. Also, don’t stereotype. They are diverse, more relative to class than stereotyped as caste. Bali’s Hindu “caste system”, for instance, lacks outcasts and patriarchal elitism; and has an open access system more typical of Asian villages as a whole.

Even within villages systems with extreme patriarchal elitism like Islam there is still a lot of open access for people as producers and consumers. Take the recent NATO invasion of Marjah (hyped as a “city” of 80,000) in Afghanistan. “Marjah” is actually a rural region and a centre for numerous farmer markets with a central bazaar and a mosque surrounded by villages. The region and people have been war torn for a generation, the people have been on the receiving end of an invasion by the USSR, corruption by government officials, pressure from warlords. Further, farmers have had crops razed, controls have been imposed by the Taliban, and occasional raids on the marketplace have occurred: like the 2009 NATO invasion of the bazaar to confiscate hashish, opium, etc. Despite all this, and even though I’ve not being in southern Afghanistan for 35 years, I believe this cluster of markets would be relatively open and accessible to producers and consumers.

On the other hand, communist collectives absolutely restrict farmers: dictating what’s produced, determining price and controlling markets. Laboring people are virtual slaves to a monopoly - and somewhat similar to farmers employed serf-like in oligarchic agribusiness.

A generation ago, Cambodia had all societal structures obliterated: after the USA bombed the country to bits, after the Pol Pot genocide (20% of the people killed) and after the Vietnamese invasion. It was amazing to watch Smith’s “invisible hand” at work, as the people labored to reorder their lives – naturally creating an open order system accessible to all. They produced and marketed their products in markets that spontaneously emerged with free and fair enterprise.

Over the years I’ve also observed how these free and fair enterprising people are getting more limited access to markets as producers. “Open-access ordering” is being socially engineered for corporations. Government-corporate partnerships are making the public markets more akin to private markets for special interests.

So: open-access orders are customary and common to human nature – not rare at all. The social engineering of an open-access order for collectives of communism and corporatism is unnatural and a societal construct for political special interests: exemplified by one party in China, two parties in America and multiple parties elsewhere.

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