Jared Diamond on economics

[DialecticMaterialist]

Excellent article found here on what helps spur the creation of wealth:

http://www.edge.org/3rd_culture/diamond_rich/rich_p1.html



Also very interesting is that Bill Gates appears to be a Jared Diamond fan:

http://www.edge.org/3rd_culture/diamond_pulitzer/diamond_index.html


In any event Diamond makes some interesting observations/comments:

Of course there are also the famous differences between the productivities of the economies of different countries: the differing national average productivities of Japan and the United States and France and Germany. Actually, though, there are differences between the productivities and wealths of different business sectors within the same country. For example, the German metal-working industry has a productivity rivaling that of the United States, so the Germans are certainly capable of organizing industries well, but the German beer-brewing industry is less than half as productive as the American beer-brewing industry. Or take Japan ? we Americans are paranoid about the supposed efficiency of Japanese business, and the fact is that the Japanese steel industry is 45% more productive than the American steel industry. Why is it, then, that the Japanese food-producing industry is less than 1/3 as productive and efficient as the American food-processing industry? Still another example: in Korea, the steel industry is equal in efficiency to American steel making, but all other Korean industries lag behind the United States. What is it about the different organization of the German beer brewers and the German metal workers, or the different organization of the Japanese food processors and the Japanese car manufacturers, that accounts for the different productivities of these sectors within a given country?

I propose to try to learn from human history. Human history over the last 13,000 years comprises tens of thousands of different experiments. Each human society represents a different natural experiment in organizing human groups. Human societies have been organized very differently, and the outcomes have been very different. Some societies have been much more productive and innovative than others. What can we learn from these natural experiments of history that will help us all get rich? I propose to go over two batches of natural experiments that will give you insights into how to get rich.

So these stories of isolated societies illustrate two general principles about relations between human group size and innovation or creativity. First, in any society except a totally isolated society, most innovations come in from the outside, rather than being conceived within that society. And secondly, any society undergoes local fads. By fads I mean a custom that does not make economic sense. Societies either adopt practices that are not profitable or for whatever reasons abandon practices that are profitable. But usually those fads are reversed, as a result of the societies next door without the fads out-competing the society with the fad, or else as a result of the society with the fad, like those European princes who gave up the guns, realizing they're making a big mistake and reacquiring the fad. In short, competition between human societies that are in contact with each other is what drives the invention of new technology and the continued availability of technology. Only in an isolated society, where there's no competition and no source of reintroduction, can one of these fads result in the permanent loss of a valuable technology. So that's one of the two sets of lessons that I want to draw from history, about what happens in a really isolated society and group.

Essentially the same thing happened in China with clocks: one emperor's decision abolished clocks over China. China was also on the verge of building powerful water-powered machinery before the Industrial Revolution in Britain, but the emperor said "Stop," and so that was the end of the water-powered machinery in China. In contrast, in Europe there were princes who said no to electric lighting, or to printing, or to guns. And, yes, in certain principalities for a while printing was suppressed. But because Europe in the Renaissance was divided among 2,000 principalities, it was never the case that there was one idiot in command of all Europe who could abolish a whole technology. Inventors had lots of chances, there was always competition between different states, and when one state tried something out that proved valuable, the other states saw the opportunity and adopted it. So the real question is, why was China chronically unified, and why was Europe chronically disunified? Why is Europe disunified to this day?

The answer is geography. Just picture a map of China and a map of Europe. China has a smooth coastline. Europe has an indented coastline, and each big indentation is a peninsula that became an independent country, independent ethnic group, and independent experiment in building a society: notably, the Greek peninsula, Italy, the Iberian peninsula, Denmark, and Norway/Sweden. Europe had two big islands that became important independent societies, Britain and Ireland, while China had no island big enough to become an independent society until the modern emergence of Taiwan. Europe is transected by mountain ranges that split up Europe into different principalities: the Alps, the Pyrenees, Carpathians ? China does not have mountain ranges that transect China. In Europe big rivers flow radially ? the Rhine, the Rhone, the Danube, and the Elbe ? and they don't unify Europe. In China the two big rivers flow parallel to each other, are separated by low-lying land, and were quickly connected by canals. For those geographic reasons, China was unified in 221 B.C. and has stayed unified most of the time since then, whereas for geographic reasons Europe was never unified. Augustus couldn't do it, Charlemagne couldn't do it, and Napoleon and Hitler couldn't unify Europe. To this day, the Europe Union is having difficulties bringing any unity to Europe.

Or again, what about the contrast between Microsoft and IBM? Again, since my book was published, I've acquired friends at Microsoft, and I've learned about Microsoft's organization, which is quite distinctive. Microsoft has lots of units, with free communication between units, and each of those units may have five to ten people working in them, but the units are not micro-managed, they are allowed a great deal of freedom in pursuing their own ideas. That unusual organization at Microsoft, broken up in to a lot of semi-independent units competing within the same company, contrasts with the organization at IBM, which until four years ago had much more insulated groups. A month ago, when I was talking in the industrial belt of North Carolina, the Raleigh-Durham area industrial belt, I met someone who is on the board of directors of IBM, and that person told me, Jared, what you say about IBM was quite true until four years ago: IBM did have this secretive organization which resulted in IBM's loss of competitive ability, but then IBM acquired a new CEO who changed things drastically, and IBM now has a more Microsoft-like organization, and you can see it, I'm told, in the improvement in IBM's innovativeness.

From all this he concludes:

So what this suggests is that we can extract from human history a couple of principles. First, the principle that really isolated groups are at a disadvantage, because most groups get most of their ideas and innovations from the outside. Second, I also derive the principle of intermediate fragmentation: you don't want excessive unity and you don't want excessive fragmentation; instead, you want your human society or business to be broken up into a number of groups which compete with each other but which also maintain relatively free communication with each other. And those I see as the overall principles of how to organize a business and get rich.

Basically common sense stuff I believe. Being an open society helps one develope, learn from others, and progress economically. Fragmentation, spurs competition, innovation, diversity etc, and helps economically as long as information is shared and fragmentation is not too extreme.


IMO this refutes, at least in part, the socialist model, or at least shows it to be inefficient.

However Diamond is hardly arguing for Laissez-faire capitalism.

Diamond points out first that too much fragmentation is like too much medicine, it harms. Such is best used in moderation.

Second Diamond points out:

But, let me conclude by emphasizing some obvious restrictions. I'm sure all of you are already thinking to yourselves, "But, but, but, he's forgot ? but but but...."? Yes, let's go back to those but-but-buts. One restriction is, I mentioned at the beginning, "all other things being equal". Obviously the best organization is not going to help with an idiot as a CEO, and the success of Microsoft certainly depends, at least in part, on the unusual qualities of Bill Gates, as well as on the unusual organization of Microsoft.

In addition, I've been talking about conditions to maximize productivity and creativity and moneymaking ability. There are other considerations in organized human groups, and there are conditions under which productivity is not the thing you're most interested in. There are conditions where more centralization may be appropriate. For example, during a war, you do not want your air force, army, and navy to be fiercely competing with each other, but instead you want during a war more centralized control than you do in peace time.

Basically sometimes in an industry any fragmentation is too much, as it harms efficiency and our values. Production is not always the goal of any enterprise.


To me, this argues for a mixed economy, not pure capitalism. How mixed I don't know. But that goes along with the well established idea of doing things in a situational manner, not absolutist, and in moderation, not extremist. For with extremism we pursue one value to a great degree at the cost of others, but in moderation, we can attain the same value, at the same time as others.

 

[Gem]

An interesting point on Europe. But there is a big difference between the E.U. methods and previous conqueror's methods.

It also goes into internation politics. How powerful should the UN be? A UN that is too powerful would be too despotic. A UN that is too weak is too inneficient.

As for economics, I always thought that "cooperative competition" was the way to go for nations. Like South America and Africa would benefit much more under a unified nation rather than many smaller nations fighting each other for political ideals.

Gem

 

[arcticpenguin]

but the German beer-brewing industry is less than half as productive as the American beer-brewing industry.

Obviously his idea of "productivity" concerns quantity, not quality.

 

[Drooper]

Obviously his idea of "productivity" concerns quantity, not quality.

Indeed.

 

[Cain]

Obviously his idea of "productivity" concerns quantity, not quality.

This is crap and let me tell you why.

A friend and I found ourselves trekking through a blazing hot desert. I'm not sure how we got there, but it sucked. Awful conditions. As we made our way up a steep dune my friend Brian spied a reflection not far in the distance. We cautiously walked over to the shiny the object and discovered an ice cold six pack of Miller! The moment after we crashed our bottles and triumphantly took our first sip, it began snowing. Snowing! And it wasn't cold at all. Then really hot girls in bikinis came down from heaven. I mean, lots and lots of girls.

I highly doubt this happens very often with German beer (if at all).

_____________________________

Back on topic: Jared Diamond has already been discredited as woo-woo socialist who perpetuates the global warming hoax. See for instance the following post.

Note: Even a few statists confessed they had started a reply to the below message but couldn't finish it; presumably, the evidence and ideas overwhelmed them.

*sigh*, enough with the statist propaganda.

Jared Diamond should stick to physiology, and it's an open secret that the National Academy of Sciences is populated by liberal crusaders.

I suggest you check out the ICR-- that is the Institute for Climate Research based in San Diego. Practically every researcher there has a Ph.D and they'll happily debate anyone on the sad hoax that is "global warming."

You might also want to consult truly independent sources like www.cato.org/, the American Petroleum Institute, and www.junkscience.org/

See also _Reason Magazine_ and Penn & Teller's episode of "◊◊◊◊◊◊◊◊!" dealing with the topic. A host of respectable voices in American discourse disprove the proclamations of these so-called "scientists" daily. A brief list off the top of my head: Rush Limbaugh, Larry Elder, G. Gordon Liddy, Tom Delay, the _Wall Street Journal_ editorial page, Bjorn Lomborg, Shanek, Shane Costello, and Ronald Bailey.

Unlike Jared Diamond -- a notorious socialist -- or the Academy of Sciences -- a bastion of anti-gun hard-core leftism -- none of these commentators hold strong ideological beliefs that may blind their understanding of the actual science.

Publications directed at layman like _Scientific American_ and _New Scientist_ are not to be trusted. And all of us know, for example, how un-American the "scientific journal" _Nature_ is.

How many more times will the politically unbiased, scientifically-inclined JREF posters among us have to tolerate another thread perpetuating the left-wing global warming myth?

 

[arcticpenguin]

I suggest you check out the ICR-- that is the Institute for Climate Research based in San Diego. Practically every researcher there has a Ph.D and they'll happily debate anyone on the sad hoax that is "global warming."

Are you sure about that? The ICR I am aware of in San Diego is the Institute for Creation Research and I wouldn't trust their opinion on the time of day.

Edited to add: It appears this is not your own position and you are quoting someone else. Sorry for any confusion.

 

[Andonyx]

Now this is the subway diet guy?

 

[DialecticMaterialist]

Jared Diamond has already been discredited as woo-woo socialist who perpetuates the global warming hoax. See for instance the following post.

Oh yeah? He's a woo-woo socialist...is that why Bill Gates supports him?

Is that why he's on the skeptic society's Book List .

I guess the SS must like vouching for woo-woo books. I mean its not like anyone supports the global warming hypothesis, only the National Academy, Royal Society, Scientific American and Nature Journal.


http://www4.nationalacademies.org/o...f6335bf011038bb185256a84005838c7?OpenDocument

http://www.nature.com/nature/links/030102/030102-3.html


http://www.sciam.com/article.cfm?articleID=0008C7B2-E060-1C73-9B81809EC588EF21


http://www.royalsoc.ac.uk/templates...vents/discussion_meetings/reps/feb_clim03.htm


Guess they are all woo-woos too.......

 

[DialecticMaterialist]

BTW Diamond isn't even a socialist. Did you not read the article? He was refuting socialism. Diamond was going into why competitive-fragmented markets work.

 

[Cain]

Arctic Penguin writes:

Edited to add: It appears this is not your own position and you are quoting someone else. Sorry for any confusion.

The caution and reflection demonstrated here is admirable, but *I* did in fact write those words. Again, though, it's good to finally see somebody slow down and say, "Hey, let me make sure I got this right."

Are you sure about that? The ICR I am aware of in San Diego is the Institute for Creation Research and I wouldn't trust their opinion on the time of day.

Absolutely I'm sure. Based down in San Diego. Calls global warming a hoax. The Institute for Climate Research. Any parallels must be purely coincidential.

Oh yeah? He's a woo-woo socialist...is that why Bill Gates supports him?

Yeah, see above post.

Is that why he's on the skeptic society's Book List .

Yeah, so? Carl Sagan was another socialist and beloved skeptic.

I guess the SS must like vouching for woo-woo books. I mean its not like anyone supports the global warming hypothesis, only the National Academy, Royal Society, Scientific American and Nature Journal.

I've already undermined the credibility of those institutions and publications. Well, actually, I didn't say anything about the Royal Society (they're unabashedly unAmerican).

I guess some people get it and some people don't .

 

[DialecticMaterialist]

*chuckles* This is ridiculous. You undermimed the National Academies, Royal Society and Nature journal? Do you seriously think I or anyone else would believe that for a second?

Also of course Sagan is on the Skeptic's book list, he was a decent scientist and a great skeptic.

Your whole post sounds like someone saying the Bible disproves science. Bass akwards.

 

[Cain]

chuckles* This is ridiculous. You undermimed the National Academies, Royal Society and Nature journal? Do you seriously think I or anyone else would believe that for a second?

Man, I thought you had it figured out! You're so close but so far. I can keep going though.

Also of course Sagan is on the Skeptic's book list, he was a decent scientist and a great skeptic.

Oh, so that's why even the knee-jerk liberal National Academy of Sciences refused to make him a member?

Your whole post sounds like someone saying the Bible disproves science. Bass akwards.

Read your first paragraph quoted above again. Then read the second part of my first post.

 

[DialecticMaterialist]

I believe you are joking.

LOL. I guess my ability to detect sarcasm is a bit sub-standard.