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Public Goods are not Consumed Equally

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We discussed public goods in Micro Theory yesterday, and it was asserted that they are always consumed equally by all parties, whether they are the two consumers in a Kolm Triangle or everyone in a nation or world.  Our professor usually points out assumptions that seem very strong or unrealistic, but he seemed to endorse this one without reservation.

Myself, I don’t see how this comes close to holding for any definition of “public good”, “consumed” or “equally”.  Consider national defense, the archetypical public good.  I don’t think anyone would contend that all Americans pay for national defense equally or derive the same utility from its provision.  The assumption is that we all receive the same “amount” of national defense, though this is admittedly hard to measure (perhaps we get two Major Theatre Wars worth).

In reality though, some members of a nation receive more military protection than others, and often the scarce resources of the military are used to protect some people at the expense of others.  Historically, armies were used to protect the people near a frontier, often from threats that had no chance of harming those in the interior.  The US used forts and raids to protect frontier Americans from Native Americans who posed no threat to those in major east coast cities.  Today our War on Terror is supposed to prevent terrorism, and so benefit people in New York City and Washington more than those in rural Kansas or Montana.  In a two-front war, the military must allocate resources between fronts.  For instance, in WWII the US prioritized the European theatre over the Pacific, so that east coast citizens received more defense resources than those in the west.  Today US forces arrayed against North Korea provide much protection to South Koreans but very little to the majority of Americans one would think to be the relevant “public”.

Other kinds of “public” goods are even more obviously consumed at different levels.  Those without cars don’t “consume” public roads as much as those with them, those without televisions don’t consume public TV, those without boats don’t get as much out of lighthouses.  Even knowledge, especially when broken up into various subdomains, is not consumed equally and in some cases perhaps cannot be consumed directly by all people (if they are not capable of understanding it and it has no “practical” uses).

This seems to be an open and shut case of a super-unrealistic assumption.  So the next questions for an economist are, how much does the math and the theory of public goods rely on it?  Can we generate results if we relax it, and if so what are they?  Have people done this already?  These are the questions I will be thinking about in our further study of public goods.

Written by James Bailey

September 15, 2010 at 1:23 pm

The World Though Einstein-Colored Glasses

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Just read Albert Einstein’s The World As I See It. The book, published in German in 1933 and in English a year later, was Einstein’s first publication directed at a general audience. The first half is devoted to science, both to an explanation of Einstein’s work and a record of his thoughts on the work of others and on the scientific method.

Next follow a series of letters about what it means to be Jewish and about the Zionist cause. Einstein thought highly of the value placed by Jews on learning and on justice. He hoped they would be able to integrate into Western, Christian societies without losing their own traditions and identity, and he saw the Zionist project as a way to bring all Jews together, whether or not they actually went to Palestine. His views are striking today do to the form of Zionism he advocated. He did not envision Israel as a political entity, a national state; he thought it enough that Jews were once again living together in their ancient home. It was not a problem to be living under British or Arab rule. Significantly, Einstein repeatedly states that the Jews and Arabs must be reconciled, so that when someday when the British would leave, then they could still live together in peace and friendship. I imagine that this very sound advice in 1933 was deemed too much of a risk after the experience of the Holocaust; after an experience like that any people must be reluctant to leave their security in the hands of others.

Einstein proceeds to turn his great mind to the problems of peace, war, economics, religion and philosophy. Einstein was an ardent pacifist, and a believer in the human potential for goodness. He earnestly hoped to see disarmament and the end of war in his own lifetime. He went about pursuing this goal every way he knew how, from attending peace conferences to fostering international ties among scientists to giving public speeches to writing prominent political figures.  But he was not a naive idealist.  He realized the collective action problem presented by disarmament, where each nation has an incentive to cheat; so he hoped for simultaneous universal disarmament.  Second-best would be attempts to punish those who start wars, regardless of the short-term interests of the other nations- so at best, every country would fight against an aggressor; or barring that, every country wold forgo potential war profits and put sanctions on the aggressor.  These last options border on the realistic.  Einstein’s foremost peace crusade was to fight against what he saw as the most evil part of war, but at the same time one of the easiest to eliminate: conscription.  He hoped, through changed laws and widespread conscientious objection, to eliminate the draft, and usher in a world where no man was forced to fight against his will.  In this, at least, he has been largely vindicated.

Einstein praises Americans for many reasons- our technology, our generosity, our freedom.  Much of this praise is still deserved today, to a greater or lesser degree than it formerly was.  But it is sad to see that in his time he placed the highest hope on Americans as the most peaceful large nation and the one most likely to bring about the end of war.  But seventy-five years later, it is the Europeans who have bucked their long history of warmaking, while America still engages in aggressive wars of choice.  I as much as anyone can give many reasons why our continued use of war is a good, or perhaps on balance even a peace-promoting strategy.  But it is sad to realize that a modern-day Einstein’s praise would flow the other way, and that America has given up a part of the moral high ground we long held relative to Europe.

If Einstein’s thoughts on peace do not now seem silly or naive, I thought perhaps he might slip as he waded into economics.  But his thoughts there too seem both wise and intelligent, especially in the desperate era of the Great Depression which left most economists baffled.  He advocated the regulation of monopolies and cartels, a maximum work-week, and a minimum wage.  Most importantly, especially as a German, he recommended the stabilization of the price level, to be achieved by controlling the money supply- Milton Friedman, twenty years early.  He hoped that the economy could be improved through regulation and organization, but recognized the severe inherent limitations of state enterprise:

“It is no accident that capitalism has brought with it progress not merely in production but also in knowledge.  Egoism and competition are, alas, stronger forces than public spirit and sense of duty.  In Russia, they say, it is impossible to get a decent piece of bread…. bureaucracy is the death of all sound work.  I have seen and experienced too many dreadful warnings, even in comparatively model Switzerland…. the state can only be of real use to industry as a limiting and regulating force.”

He saw Soviet communism as a grand experiment; he wondered whether it could work there, or work in a Western nation that would not tolerate such “terror” to enforce it.  But he expresses much skepticism in the project.  All in all, his views pass economic muster today, and are stunningly prescient for 1933.

Finally, Einstein puts forward some views on fundamental questions.  He sees a search for the meaning of life as an absolute necessity.  “The ideals which have lighted me on my way and time after time given me new courage to face life cheerfully, have been Truth, Goodness and Beauty.  Without the sense of fellowship with men of like mind, of preoccupation with the objective, life would have seemed to me empty.”  Yet despite this need for fellowship, he feels “an obstinate sense of detachment” and a “need for solitude”, and is “sharply conscious, without too much regret, of the limits of mutual understanding and sympathy between one’s fellow creatures.”

Einstein sees science as a sort of religion.  He abhors religions based on fear, whether of God or death, and eschews anthropomorphic conceptions of God.  But he believes “a knowledge of the existence of something we cannot penetrate, our perceptions of the profoundest reason and the most radiant beauty, which our minds seem to reach only in their most elementary forms; it is this knowledge and this emotion that constitute the truly religious attitude; in this sense, and in this alone, I am a deeply religious man.”

Einstein really opened his mind and his heart to the world in this book.  He demonstrates that his intelligence is wide-ranging, and in his letters shows himself to be wise, kind, and generous; a truly great man.

To end on a lighter note, and again recall a similarity to Milton Friedman, I quote Einstein’s views on prohibition:

“The prestige of the government has undoubtedly been lowered by the prohibition law.  For nothing is more destructive of respect for the government and the law of the land than passing laws which cannot be enforced.  It is an open secret that the dangerous increase of crime in this country is closely connected with this.”

Clearly a wise man!

Written by James Bailey

August 4, 2008 at 11:07 pm

Guns of August, Pity of War

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I’ve been delving into histories of the First World War. I recently finished two books by popular historians, Barbara Tuchman’s The Guns of August and Niall Ferguson’s Pity Of War. Though the first covers only the first month of the war, and the second examines several topics over the time frame of the whole conflict, they try to answer many of the same questions.

With any war, but especially one so destructive and world-changing, we are naturally curious about the causes of the war and whether it could have been prevented. Ferguson begins by examining pre-war thriller novels, gauging the fears held by some of spies, plots, invasions. Tuchman begins with the funeral of the English king in 1910, the largest-ever gathering of royalty, the last time the Kaiser could be seen in England as a friend and a sympathetic figure.

Tuchman blames the war on Germans’ desire for power, paranoia about encirclement, and poor ability to win allies, as well as elaborate military planning that made major strategic decisions extremely difficult to change or reverse. War in the era of poor communications and precise railroad schedules meant that once an operation began, it had to be seen through for better or worse; path dependency doomed Germany, a single step into the Schlieffen Plan, to stay the course till the end.

Ferguson, a proponent of alternate history, tries to imagine how things could have worked out differently. Being Scottish, his book largely focuses on the war from the British perspective. He wonders what would have happened had Britain stayed out of the war- if Foreign Minister Grey and the Germans could have reached a diplomatic understanding in earlier years, if a definite commitment to France had dissuaded Germany from attacking, or if the cabinet had simply decided not to fight (as it very nearly did). He imagines that Germany would have quickly won the war, humiliated France, and begun to dominate central Europe. He argues that Britain should have stayed out; that a quick German victory would have been better for Britain than a war which brought so much death, the end of British domination of finance, and the beginning of the end for the British Empire. Furthermore, Bolshevism in Russia would have been delayed or avoided entirely; a shorter war would likely have left the government more stable, and Germany certainly would not have sent Lenin to Russia in 1917 had they not been in desperate straits themselves.

Tuchman also imagines another war. She describes how narrowly the Ottoman Empire entered the war, how Britain would never have fought with such unity and intensity, or even at all, had the Germans not chosen to invade through Belgium. She focuses heavily on how the abilities and personalities of those who happen to be in the right place at the right time have enormous impacts on the course of the war and on world history: a King of Belgium willing, perhaps irrationally, to stand up to a much more powerful enemy; a stunningly corrupt and incompetent Russian Minister of Defense; a cowardly leader of the British Expeditionary Force; the last-minute appointment of a French general who vowed to make a stand at Paris even as the government fled to Bordeaux. These were the people on whom suddenly so much would depend. With every change in command and in plans, Tuchman wonders what else might have been.

Ferguson likes to incorporate the thoughts of people who at the time were marginal figures, but would later become important. He quotes Wittgenstein- who hoped the war would bring him a “variety of religious experience to turn him into a different person” but worried that “the English- the best race in the world- cannot lose. We, however, can lose, and will lose, if not this year than the next. The thought that our race will be defeated depresses me tremendously.” He quotes Churchill (who was important in the Admiralty, but whose greatest hours lay ahead), “I think a curse should rest on me- because I love this war. I know its smashing and shattering the lives of thousands every moment- and yet- I can’t help it- I enjoy every second of it.” He continually refers back to Hitler, who in the post-war economic chaos said “I’ll see to it that prices remain stable… that’s what my stormtroopers are for.” Ferguson paints a very unflattering portrait of a young John Maynard Keynes. He sees Keynes as a man who badly misunderstood war finance, regurgitated German propoganda in The Economic Consequences of the Peace and in his other essays on the topic. Ferguson appears to blame Keynes’ poor judgement on his homosexuality, saying “it may be that Keynes’ subsequent declaration that he ‘got to love’ Melchior[a German represenative] during the armistice negotiations at Trier and Spa obliquely alluded to a sexual attraction. As we have seen, Keynes was an active homosexual at this time.” Ferguson seems to have almost a vendetta against Keynes, who appears to be consistently wrong throughout the 30-odd pages he occupies. He also refers often to homosexuality, usually in even less relevant situations, though sometimes quite amusingly; a caption of a photo from the Eastern Front of naked German soldiers on horseback reads “Homo-erotic connotations should probably be ignored.”

Tuchman is something of a British partisan, genuinely offended the large-scale killing of civilians in Belgium and France, and appalled at the German destruction of the library at Louvain and the cathedral at Rheims.  She maintains the absolute moral superiority of the allies, even as her tactical criticisms fall most harshly upon them.  Ferguson, himself Scottish, thinks the Germans have been judged too harshly in almost every field, maintaining that their morals, diplomacy, and wartime economy were not all that bad, while their tactics and manouvers were vastly superior for at least the first three years of the war.

Both are quality books; Pity of War is more balanced and comprehensive, Guns of August a more gripping narrative.

Both raise important questions about the meaning of the war and its political implications that I plan to address in a future post.

Written by James Bailey

July 25, 2008 at 8:02 pm

Arthur Conan Doyle- Historian

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The man remembered for Sherlock Holmes was not only a novelist, but a contemporary historian as well.

Searching for a good history of WWI in the Widener Library, I stumbled across his 5-volume his of the war. I decided to see whether his writing ability carried over to this new field.

One might expect that a man famous as a novelist would deliver a gripping narrative full of beautiful prose, but one lacking in historical accuracy and a thorough understanding of the political situation and military tactics.

One would, however, be wrong on all counts.

Conan Doyle wrote 1914 like a traditional historian. His prose mostly consists of precise descriptions of military actions- X unit attacked Y place on D date for R reason, and sustained ABC casualties. But he demonstrates a thorough knowledge of tactics, strategy and politics.

1914 was written and published in 1916, while the war still raged. Conan Doyle admits that his narrative is handicapped by a lack of information about the enemy and the allies. For this reason, his focus is on the British Expeditionary Force.

For a book written during an ongoing war, it is surprisingly fair. The author continually praises the courage of the German forces. He admits that “Germany was grievously handicapped at sea, and that she deserves the more credit for whatever she accomplished.” The book is not exactly wartime propoganda. His criticisms of Germany are restricted to the same sort impartial people made in hindsight- that invading a small, neutral country, sinking civilian ships, and wearing enemy uniforms are not good things to do. When he does editorialize, however, his words are passionate:

“The German representative at Brussels was perjuring his soul”

“The long-meditated crime had been done, and, with loud appeals to God, Germany began her fateful campaignby deliberate perjury and arrogant disdain for treaties. God accepted the appeal, and swiftly showed how the weakest State with absolute right upon its side may bring to naught all the crafty plottings of the strong.”

The author, like so many others, struggled to understand why the war started, and especially what could have brought English and Germans to fight each other.

“Up to the year 1896 there was a great deal of sympathy and of respect in Great Britain for the German Empire. It was felt that of all Continental Powers she was the one which was most nearly allied to Britain in blood, religion and character.”

He expressed continued consternation that two branches of the German race should be warring against one another, that the Saxons who went upriver should, after only 1500 years, be so different from those who went across the sea. He notes how English regiments would find on the corpses of their Hanoverian enemies insignia matching their own, from campaigns when they had served together.

He lays the blame for the English-German estrangement on the Kaiser, the construction of a massive German navy- and on the most dangerous people of all, fellow writers.

“a number of writers, of whom Nietzsche and Treitschke are the best known, had inoculated the German spirit with a most mischievous philosophy, which grew the more rapidly as it was dropped into the favourable soil of Prussian militarism. Nietzsche’s doctrines were a mere general defence of might as against right, and of violent brutality against everything which we associate with Christianity and Civilization….. The typical brute whom he exalted was blond, but a brute of any other tint would presumably suffice. It was different in the case of Treitschke….. he taught the rising generation of Germans that their special task was to have a reckoning with England and to destroy the British Empire, which for some reason he imagined to be degenerate and corrupt.”

Writing often exerts a power of the minds of men. With such power comes the potential for great danger. Why is it that the German writers of the nineteenth century, Nietzsche, Trietschke, and Marx, could sow so much sorrow in the twentieth? Will books of such power, for good or evil, ever again be written?

Moving back to more definite matters. As he wrote this book in 1916, Arthur Conan Doyle could still speak unashamedly of war in terms of honor and chivalry. He constantly praises self-sacrificing courage on the part of the troops. He refers hundreds of times to “gallant” officers, even as the absurdly high casualty rate meant that most references were to their deaths. Modern war, with its accurate rifles and its machine guns, did not permit many people to survive long enough for a real narrative to coalesce around them. But the author tries his best to see purpose and courage and avoid the words like “pointless”, “futile”, and “stupid”, to which men would soon turn. He could still speak of

“the days when the high gods of virility would smile as they looked down upon the chosen children of Odin, the English and the Germans, locked in the joy of battle.”

Written by James Bailey

July 14, 2008 at 11:25 pm

An End to War: Don’t get even, get MAD

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My last post was a lengthy attempt to explain how the two World Wars changed Europeans’ philosophy, making another major European war unlikely.

In this post I will propose a shorter, simpler explanation.

It’s all about technology.

Before World War One, the logistics of transportation and supply did not allow for large armies to take the field. From the First World War on, each major combatant was able to send millions to war, greatly expanding the amount of casualties possible. Combined with new weapons like poison gas and machine guns, this meant war killed more soldiers, faster than ever before.

People had second thoughts about going to war.

World War Two brought the carnage home with massive fleets of powerful bombers. Going to war meant not only risking the lives of millions of young men, but also the entire infrastructure, economy, government, indeed the entire civilian population- every man, woman and child was in danger of the rain of steel and fire.

The benefits of winning a war have stayed relatively constant over history; indeed, they have diminished as the structure of the economy makes plunder relatively less lucrative. But the cost of losing, and the cost of fighting at all no matter the outcome, have risen dramatically.

“Total” war, where everyone is a target, means war isn’t a very good deal. People really started to look for other ways to solve problems.

Then came the Cold War, when both sides had large nuclear arsenals. Now not only were soldiers bound to be killed, not only were the civilians of the combatants afraid of being bombed; now those who would start a war were forced to consider the possibility that they might annihilate the entire human race.

Major European wars, where both sides possessed weapons of such power, became really bad ideas.

People changed their philosophies, morals, and world-views as necessary to ensure their continued survival.

Now Europeans sort out political issues by arguing in Brussels, and reserve their aggression for soccer riots.

The atomic world is a bright one after all.

Written by James Bailey

July 3, 2008 at 10:29 pm

The War to End All Wars

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The memory of the Great European War, of millions of young men fighting and dying to win a few yards of shell-pocked mud, was enough to convince many that war was an ugly, irrational, pointless endeavor which civilized nations should have the good sense to avoid in perpetuity.  They hoped that something good could emerge from the mass of suffering, that this worst of all wars would also be the last.

Modern minds, in the knowledge that this war would only be the First to earn the dubious honor of being a “world war”, have looked back on the inter-war idealism as hopelessly naive.  I myself have ridiculed their dream, and still do feel safe predicting that wars will be with us for some time yet.

But in some sense, the dreamers and pacifists were right.  World War One did not instantly bring perpetual peace.  But it was the beginning of the end for European war.

In the ninety years since World War One, only a single inter-state war has erupted in Western or Central Europe, and the prospect of another seems quite unlikely.  The length of the peace and the current absence of plausible threats to it marks a major departure from millenia of European history, a history often remembered as one war after another.

There remained only one detour on the road to peace.  World War Two would wrest from the First World War the grim title of deadliest war of all time.  New technology and extreme mobility meant that the Second World War would be fought very differently.  But while the how of the war was very different, the why was largely the same.  The unification of Germany fundamentally changed the geopolitical balance of Europe.  The Germans thought that their newfound strength deserved recognition.  The spirit of the age was one of imperialism and social Darwinism.  German philosophers had spent a century glorifying the will to power and dismissing morality as born of slavery and meant for the weak.

Before each World War, the geopolitical situation of a rising Germany able to dominate its neighbors combined with a philosophical and ideological situation which made Germans willing to invade their neighbors.  Just as with previous attempts by the Hapsburgs and the French to establish European hegemony, Germany’s naked desire to dominate the Continent inspired her neighbors, individually less powerful that her, to form coalitions able to defeat her.  Geopolitics functioned as always.  Fundamental change came not when the European map was redrawn for the thousandth time, but when the hearts and minds of Europeans were realigned.

Human beings are naturally aggressive, and tend to cluster into groups distrustful of outsiders.  A disposition toward war is bred into our very beings.  It is there in babies jealous for food, there in children fighting in streets and in playgrounds.  This tendency from our nature requires a strong dose of “nurture” if it is to be overcome.  Instead many children of the time learned from parents and teachers that war was honorable and glorious and that other countries were untrustworthy and must be taught respect.  Nurture, rather than fighting the worst tendencies of nature, reinforced them.

World War One drove people to deeply question the beliefs that allowed such a war to take place.  Germany had sent a generation to die on French soil and gained nothing.  Germans questioned their beliefs, but in the end elected a man who give their beliefs one more try, saying in essence- we had the right idea, we just didn’t try hard enough.  So they did try harder, they even succeeded in conquering France.  But a second defeat, this time with Germany not only bled dry but also bombed out and occupied, finally convinced them.  They didn’t need to fight harder, or come up with a better plan of invasion; they needed a total gestalt shift.  They needed to look at their neighbors and see people like themselves, people who could be lived with.

You put you hand into a fire and it gets burned.  You might wonder if your technique of fire-touching was incorrect.  The more scientifically minded way wonder if fire caused pain or was only sometimes correlated with it.  But if you get burned again, and worse than the first time, you learn your lesson, and stop touching the flame, lest it consume you.  It took two World Wars, but Germany and Europe along with them learned their lesson.  The next geopolitical imbalance, pitting the U.S. and Western Europe against the Soviet Union and Eastern Europe, lasted forty years, but saw no no major war.  The Americans and the Russians had learned along with Europe, and saw major wars in Europe as a very last resort.  Gone were the days when a European nation would dare to, or even desire to invade their neighbor.

Written by James Bailey

July 3, 2008 at 10:03 pm

Maliki on Iraq

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Iraq’s Prime Minister writes about his country’s past and future in the Wall Street Journal.

There’s a lot of fluff, but also a lot of badly needed perspective.

Written by James Bailey

June 14, 2007 at 2:41 am

Posted in Iraq, military, Politics