Why protect speech?

The U.S. Supreme Court has extended more protection for speech than other major courts that adjudicate rights, such as the European Court of Human of Rights. Nonetheless, the Supreme Court is frequently wrong about why speech deserves constitutional protection. That error has undermined the First Amendment that the Court purports to protect. Continue reading

Communism / socialism is rubbish – both in theory and in practice.

I’m getting tired of reading and listening to so-called libertarian or conservative people saying that “in theory socialism is beautiful.” No, it’s not. In theory, socialism can be summed up as “the end of private property.” This is how Karl Marx summed it up. The genius of Ludwig von Mises is precisely in the fact that he did not have to wait until 1989, when the Berlin Wall fell, to realize that this does not make sense. When the Soviet Union was still a young country sweeping intellectuals around the world, von Mises made the following remark: without private property, there is no supply and demand. Without supply and demand, there is no price formation. Without prices the economic calculation is impossible. And that is precisely what happened in the USSR and happens in countries that follow the path of socialism: without the compass of free market prices, governors can not make decisions about allocating resources. Socialism is the death of rationality in economics. Socialism is rubbish in practice because before that it’s rubbish in theory. Please stop talking nonsense. The free market, on the other hand, is beautiful in practice because first of all, it is beautiful in theory.

Revisiting Epstein’s Freedom and Growth


I was fortunate to be invited give the Epstein Lecture at LSE this March. The series is named after the great LSE economic historian Larry (Stephen) Epstein. Here I’ll summarize why it was such an honor to give the lectures. The content of the lecture will be another post.

Epstein was a historian whose origin field of expertise was medieval Italy. I encountered him through Freedom and Growth. Published in 2000, I first read it a couple of years later, perhaps in 2002 or 2003. At the time I was devoted to a story of economic growth shaped by Douglass North, particularly Structure and Change in Economic History (1981).

The focus of Structure and Change was on transaction costs. High transaction costs limited market exchange and kept societies poor for most of history. Sustained economic growth could only occur once transaction costs fell to a level that allowed markets to expand and the division of labor to develop. On this view, market expansion or Smithian growth was itself a stimulus to technological innovation. But what kept transaction costs high?

One answer North gave was the state. To paraphrase: the state had the ability to both keep a society mired in poverty through predatory behavior and to provide the preconditions for growth by securing property rights. The origins of sustained economic growth for North lay in institutional changes that occurred secured property rights and lowered transaction costs. The most important such institutional change was the Glorious Revolution of 1688.


North’s account received many challenges, but the issue that Epstein honed in on was the assumption that there was such a state, able to either revoke or secure property rights. It was assumed that “rulers rule”. Epstein contested this arguing that New Institutional Economists

“project backwards in time a form of centralised sovereignty and jurisdictional integration that was first achieved in Continental Europe during the nineteenth century; they therefore fundamentally misrepresent the character of pre-modern states.”

North, Wallis, and Weingast would address this in their 2009 Violence and Social Orders. But Epstein’s criticism was spot on in 2000. Epstein argued that alongside the problem of predatory states, a central problem was the lack of integrated markets. He attributed market disintegration to coordination and prisoners’ dilemma problems between political authorities. In so doing, Epstein set the agenda for the subsequent “state capacity” research agenda.

Epstein made several points which continued to be expanded upon by current research (see here). First, he documented that the lower interest rates that the British state paid after 1688 were characteristic of city republics from the middle ages onwards. He argued that the English monarchy in the 17th century was characterized by an anomalously backwards financial system. Lower interest rates after 1688 partly represent a convergence to the Republican norm achieved by Italian city-states centuries earlier.

Second, he challenged the argument that monarchies “overtaxed” cities. There was “no evidence that townspeople paid higher taxes under monarchies than republics”. Per capita taxes were likely higher in Republican city-states.

Third, he disputed that Republican city-states like Florence brought economic freedom noting that “republican subjects faced several limitations to their economic and political freedoms that monarchical subjects did not”. All of this challenged generalizations made by historical sociologists like Charles Tilly and economic historians like North.


Epstein’s historical evidence came from medieval Italy. Late medieval Italy was highly urbanized and prosperous by pre-industrial standards. According to Broadberry’s estimates, per capita GDP in Italy in 1450 was not matched by England until 1750. Like growth elsewhere in the premodern world, it was Smithian growth, driven by trade, market integration, and the division of labor. But unlike in England, this Smithian growth did not continue and blossom into modern growth. Epstein’s explanation for why this did not take place was that late medieval Italy suffered an “integration crisis”.

He saw the late medieval period as characterized by new opportunities for growth and innovation. Urbanization increased. Capital markets expanded and deepened. Interregional trade developed. Proto-industrialization took place. But Epstein contended these opportunities were only seized in areas where political authority was centralization.

In reference to proto-industrialization, he observed that

“Crucially, the success of regional crafts was inversely proportional to the concentration of economic and institutional power in the hands of a dominant city.”

With respect to the establishment of permanent fairs, he noted that

In fifteenth-century Lombardy, new fairs proliferated only after the balance of power shifted decisively from the former city-states to the territorial prince with Francesco Sforza’s victory in 1447.

Market integration was complemented and perhaps driven by political integration. Integrated urban hierarchies were themselves the product of political centralization.

“Centralisation underlies all the major institutional changes to market structures previously described. It lowered domestic transport costs, made it easier to enforce contracts and to match demand and supply, intensified economic competition between towns and strengthened urban hierarchies, weakened urban monopolies over the countryside, and stimulated labour mobility and technological diffusion.”

The more centralized parts of Italy — notably Lombardy — were better able to benefit from these trends than was Tuscany. But in general, political fragmentation and regional diversity were “distinctive features of pre-modern Italy” in general and an impediment to its long-run growth prospects.

Unlike in his analysis of interest rates, Epstein brought little data to bear on these claims and I am unaware of subsequent research on late medieval Italy. As such, the thesis of a late medieval integration crisis laid out in Freedom and Growth remains speculative. Epstein would no doubt have fill in the details had he lived longer. Subsequent research has mostly focused on early modern rather than medieval Europe (see here).  But the larger message: the importance of the state for premodern economic development has been central to subsequent research, including my own work (e.g. here).

The Knife is Coming

From yesterday’s (Nov. 11 2017) Wall Street Journal, P. 1:

Top brass at advertising giant Interpublic Group of Cos. told its 20,000 US employees last week they had until year’s end to complete sexual-harassment training. The session quizzes employees on what to do when a co-worker discusses weekend sexual exploits at work or when a colleague comes on to a colleague’s girlfriend after hours […]

“Women are crucial to our business,” says Mr Roth [CEO]. “We need our environment to be safe for all.”

(All boldings mine.)

Let me put the two statements together for you in a familiar television-like form.

John, Mary, and Peter work together in the same office. One day, they go out together for drinks after work. Jane, John’s girlfriend – who works elsewhere – joins them. Peter flirts with Jane (JANE); he even slip her his cell-phone number. Mary (MARY) feels unsafe.

It’s bat shit crazy. Is there no limit to the absurdities we will listen too peacefully?

If a man can create an unsafe work environment for a female colleague by hitting on another woman employed somewhere else and who welcomes the advances, is there any limit to what constitutes sexual harassment?

How about Mark looks at Jeanne – whom he does not know – at the bus stop, and Mark’s coworker, Jennifer catches his look and feels unsafe?

Will anyone shout: “Absurd”?

Myself, I don’t see just absurdity here. Since the Weinstein explosion less than two months ago (but still no lawsuit to tell us what really happened, if anything), I have begun to discern an attempted mass castration. If there is nothing men can do to stop from being sexual harassers who make women feel unsafe – even indirectly, as in the example above – it’s the fact of being a man itself that is offensive and that needs to be repressed. The knife is coming, ladies and gentlemen!

The most disturbing and the most worrisome aspect of all this mass movement is the lack of backbone demonstrated by many male decision-makers, such as Mr Roth, in this story, who hardly needs the operation, by the way.

Not far behind, is the passivity – so far – of rational women who stand to lose a great deal of peace of mind and other benefits, to the extent that the mass surgical intervention succeeds.

Note that I am not hinting at conspiracy. With the powerful domination of a few newspapers and of fewer TV channels, with the effectiveness of the social media, conventional conspiracies have become obsolete. Throw wet garbage and see if it sticks. If it does not, you and your actions will have been forgotten tomorrow anyway. Some harm done; no price to pay!

What needs to be done? Fight back. Denounce every crazy statement. Affirm rationality. Be ready for a little temporary social exclusion. You will soon find that most people are on your side. They just couldn’t believe what they saw and heard until you gave them a shout-out.