Tuesday Night Links

• If there are diminishing marginal returns to capital, and that is all that matters, then capital should be flowing from developed countries to developing countries. It isn’t. In fact, more skilled people (who can be thought of as possessing a kind of capital, human capital) immigrate to more skilled countries! (Lucas 1988). Even if there are bars to capital flowing between countries, no such barriers between southern and northern states in the US. Barro and Sala-i-Martin (1992) found that, with reasonable parameters, the return to capital should have been five times higher in the South in the 1880s. Yet, most capital investment took place in New England states. The bigger problem is that it predicts that growth rates should be declining over time. They are not. If anything, they are increasing over time. Even if the growth rate is constant and positive, that implies that the absolute value of growth is increasing over time. Appending human capital to the model can allow you to estimate the contribution of skills, in contrast to just tools and resources, but it is just a subset of capital and won’t lead to unbounded growth. [Nicholas Decker]
• Stigler is best known for developing the Economic Theory of Regulation (1971), also known as regulatory capture, which says that interest groups and other political participants will use the regulatory and coercive powers of government to shape laws and regulations in a way that is beneficial to them. This theory is a component of the public choice field of economics but is also deeply opposed by public choice scholars belonging to the "Virginia School," such as Charles Rowley. [George Stigler]
• I want to push back against one of the sillier claims of the left, which is that the United States, or the developed world, is dependent upon poverty in Africa, or that the poverty of Africa is due to present day exploitation by the developed world. I have often heard this in person, and it exists as a background assumption even in those who take a different view of whether or not this is a necessary sacrifice to take. In this view, the wealth of nations is dependent upon it being taken from somewhere. America will always need a supply of cheap labor to be wealthy. I find this so cretinous that it is difficult for me to restrain my feelings to argue against it, but I shall do my best. The contribution of the developing world to anything is minute – they are poor precisely because they do not make anything, not because what they make is taken. [Nicholas Decker]
• The merchant who sells poor quality goods is destroying the commons. They make it harder for other merchants to make deals. I don’t think that humans are ultimately constrained by a very mechanistic justice, where they cheat precisely to the extent it is profitable to, and are stopped only by a system of punishment. Our justice systems are inadequate to this, and exist only for unusual cases. No, people are mainly held back from anti-social actions by a sense of what is normal and what is right and wrong to do. In a place where corruption and cheating is the norm, you cannot take the existence of commerce for granted. Institutions must be evolved for it to flourish. In a world where the norms of fairness and trust are so inculcated that people do it for its own sake, you need less in the way of explicit rule-making and enforcement. [Nicholas Decker]
• Protestantism was unlike these other heresies in two important ways: it survived and it prospered. But why? The traditional story is that the invention of the printing press (c. 1440) made it possible for Lutherans to avoid their predecessors’ fates. But I don’t believe that’s the right story. I think it’s no coincidence that the Lutherans survived and prospered when the Ottoman threat to Europe was larger than ever. Were it not for the fact that the Ottomans distracted the Habsburgs and the Church, Protestantism would have been like other Christian heresies: ultimately minor and suppressed. The timeline leaves little room for doubt. [Cremieux Recueil]
• Unlike other land companies that rely on land appreciation for returns, Millrose will receive contractual option fees for maintaining options in effect. It will use these fees to pay its expenses and to make regular distributions to stockholders. In addition to option fees, Millrose will also receive the return of invested capital associated with the option exercises. Unlike traditional private equity based land banking funds, Millrose will not be required to distribute or return invested capital to investors. Instead, Millrose will repeatedly reinvest the invested capital as it is returned in future land transactions. Therefore, Millrose will be for Lennar and probably other homebuilders essentially a self-renewing permanent source of land acquisition and development capital. [Lennar Corporation]
• We have been around this merry-go-round many, many times. This is one more time. It will end the same way as all the others. We saw something strikingly resembling various very recent incarnations of leftism in the eleventh century caliphate, Barebone’s Parliament in England, the Church of Reason in France, the Nicolaitians, the Donatists and the Cathars rapidly transitioning into polyamorous communists, and many others. It is not driven by technology. It is certainly not driven by capitalism. (Watch Disney burning the IP they spent wads of money on, watch Boeing abandoning its plane and rocket business for diversity, equity, and inclusion.) It is driven by holiness spirals in the priesthood (the modern priesthood being lawyers, judges, academics, and “journalists”.) Twenty first century western leftism comes out of Harvard. Before the War of Northern Aggression, each of the American states had its own state religion, and the Vatican of New England was Harvard. After the War of Northern Aggression, the United States had one state religion, and its Vatican is still Harvard. [Jim's Blog]
• The pop culture image of Napoleon as this little bumbling dictator is so clearly a deliberate mystification by the perfidious British who felt inadequate in the shadow of this guy they (barely) beat. Remember, the real Napoleon was so impressive he literally caused a crisis in 19th century philosophy! Everybody had carefully worked out their little theories, later exemplified by Tolstoy, about how human agency doesn't matter in history and everything is just the operation of vast impersonal forces like the grinding of tectonic plates, and then boom this guy shows up and the debate springs to life again. You know it's real when two guys as different as Nietzsche and Dostoevsky are both grappling with what we can learn from somebody's existence. [Mr. and Mrs. Psmith’s Bookshelf]
• One of the reasons the French indulged Talleyrand so much and for so long was that he indulged them. He employed the best chef in Europe—perhaps in history—Antonin Carême, and entertained lavishly. His luncheons and dinners would feature up to forty-eight different entrées; he owned Château Haut-Brion; he was followed by four chefs and ten table-servers wherever he traveled. The generosity of his hospitality was undeniable, even though it was often secretly financed out of state funds rather than by him. Once, after he extolled brie as “the king of cheeses,” it was remarked in the salons that it was “the only monarch he didn’t betray.” [Andrew Roberts]