Pot smoking and freedom: ‘Murica!

My latest Tuesday column over at RealClearHistory takes aim at the history of marijuana in the United States. I’ve got a 600 word limit, but hopefully I packed in plenty of info. Here’s an excerpt:

During the much-loathed Prohibition era (1920-33), marijuana was targeted along with alcohol and other substances deemed immoral by bootleggers and Baptists. Unlike alcohol, which was re-legalized in 1933, marijuana ended up in a legal limbo that continues to this day. The legal, political, economic, and cultural battles surrounding marijuana use in the United States have helped shape three generations of lawyers, businesspeople, activists, academics, and medical professionals. Thanks to the questions posed by marijuana prohibition, rigorous and creative arguments in favor of the drug’s legalization have contributed to a better understanding of our federal system of government, of Judeo-Christian morality, and non-Western ethical systems (pot-smoking “Buddhists” are practically cliche today), of the human body and especially the brain, of global trading networks throughout history, and of intercultural exchange and communication. Freedom still defines us as a society. Freedom binds Americans together. Freedom drives our conversations and our institutional actors. This may be difficult to remember as the news cycle grows ever more sensational, but this quiet, humble truth still remains.

Please, read the rest.

Who are the protectionists in Africa?

Rwanda, a country that thankfully avoided “humanitarian” military intervention by Western powers during a nasty killing spree in the 90s, is leading the charge on free trade in Africa. Of the 54 countries on the African continent, 44 have signed the agreement, but the traditional economic giants of the continent – Nigeria and South Africa – have not. Surprisingly, Botswana, an example often cited by economists as an African success story, has not signed it either.

CNBC reports on why Nigeria has so far refused to join the agreement, citing a consultant who specializes in global trade:

There is a general sentiment among (labor unions and industry bodies) that Nigeria’s export capacity in non-oil sectors isn’t sufficiently robust yet to expose itself to external competition.

Unions and “buy local” capitalists: The scourge of prosperity and progress worldwide, but also not much of a surprise.

What will be interesting to see is where this bold experiment leads. How can 44 countries with poor institutions come together to form a free trade pact? I am hoping this will lead to more states in Africa. My logic goes something like this: stronger economic ties will hasten the demise of current African states’ superficial institutions, while allowing informal institutions to flourish. Because these informal institutions are better at solving coordination problems, they’ll eventually be recognized as states. Here’s how I put it back in 2012:

A better way of looking at it, and one that I have pointed out before, is to look at Europe realize that it shares roughly the same amount  of polities as does Africa (50-ish) despite being four times smaller. I bring up the comparison with Europe because in the Old World things like ethnicity still have a strong hold on how individuals identify themselves with their various social spheres. Rather than the 50-ish number of  polities in Africa that we have today, a better way of solving Africa’s problems would be to let the polities currently in place dissolve into 400 polities. Or 500. Then, I think, Africans would know peace and prosperity.

I’d add, today, that this would only be possible if the links built by this free trade pact endure. Economic integration is vital to the dissolution of Africa’s despotic states. (h/t Barry)

A free press, the Left, and the FBI

I taught for thirty years. That makes me an expert on verbal dishonesty. I can tell the difference between a student who let the dog eat his assignment and a student who made his dog eat his assignment.

And, I am saying this in connection to?

I am eager to read the Democrats’ and, perhaps, the FBI’s rejoinder to the memo they described as riddled with falsehoods and with omissions. I have some expectation that they will dig themselves in deeper when they try to make up for the omissions. You read it here first; please, give me credit.

The NYT and the Washington Post are on editorial record asking for prior censorship on the famous memo. It’s unheard of in times of peace. Two major leftist newspapers asked the government to violate the First Amendment, the very constitutional disposition that guarantees freedom of the press. The rank and file “liberals” I know and pay attention to in real life and on Facebook also fought transparency, in this case. Myself, and the conservatives I know, want the full sunlight on this and related matters.

I saw on CNN that House Representatives oppose releasing the Democrats’ rejoinder or version of the same memo. If that’s true (if), I am totally against this stance. I want to know everything; I don’t need babysitting of any kind.

Lunchtime Links

  1. Interview with a secessionist
  2. Ducking questions about capitalism
  3. The perverse seductiveness of Fernando Pessoa
  4. Yet in this simple task, a doffer in the USA doffed 6 times as much per hour as an adult Indian doffer.”
  5. Conflicted thoughts on women in medicine
  6. The Devil You Know vs The Market For Lemons (car problems)

Some Thoughts on State Capacity

State capacity is an important topic and the subject of much recent attention in both development economics and economic history. Together with Noel Johnson I’ve recently written a survey article on the topic (here). At the same time, many libertarians and classical liberals are uncomfortable with the concept (see here and here). I think these criticisms are useful but misplaced. Addressing them will hopefully move the debate forward in a useful fashion.

Here I will just focus one issue. This is the argument recently made by Alex Salter that state capacity is a black box. Alex notes correctly that we have a detailed and convincing theory for how markets can lead to economic growth (by directing resources to their most efficient use). In contrast, according to Alex:

“State capacity, by itself, addresses neither the information issue nor the incentive issue. While governance institutions obviously began centralizing at the beginning of the modern era, this is just a morphological description of what happened to institutions. On its own, that’s insufficient as a causal explanation”.

I think Alex and other critics are on the wrong track here. State capacity is not alternative explanation for economic growth to that offered by markets. The relevant question is what impeded market development before, say, 1700, and what enabled the growth of markets after around 1700. The evidence provided by a body of research suggests that prior to 1700 market development was impeded by political fragmentation both within and between states. Critics of the state capacity argument should engage with this literature.

A second claim Alex makes is that we lack a theory for why the more centralized states that arose after 1700 were less rent-seeking and predatory than their weaker and more internally fragmented predecessors. But in fact we have a fairly good understanding of many of the mechanisms responsible for the demise of the more costly forms of recent seeking that characterized medieval and early modern Europe. This understanding is based on the work of James Buchanan and Mancur Olson.

The basic argument is this. Medieval and early modern states were mostly devices for rent-extraction and rent-seeking. But this rent-extraction and rent-seeking was largely decentralized. They collected taxes through a variety of costly and inefficient means (such as selling monopolies). They then spent the tax revenue on costly wars.

Decentralized rent-extraction was costly and inefficient. For example, it is well known that weights and measures varied from place to place in preindustrial Europe. What is less well known is that there were institutional reasons for this, as each local lord wanted to use his own measures in order to extract more surplus from the peasants who were forced to grind their grain using his mill. Local cities similarly used their own systems of weights and measures in order to extract surplus from traveling merchants. This benefited each local lord and city authority but imposed a large deadweight loss on the economy at large.

The logic of internal tariffs was similar. Each local lord or city would choose their internal tariffs in order to maximize their own income. But we know from elementary microeconomics that in this setting each local authority will set these tariffs “too high” because they will not take into account the effect of their tax rate on the tax revenue of their neighbors who also set their tariffs too high.

When early modern European rulers invested in state capacity, they sought to abolish or restrict such internal tariffs, to impose uniform taxes, and to standardize weights and measures. This resulted in a reduction in deadweight loss as when the king set the tax rate he considered the tax revenue he gets from his entire realm, and internalized the negative externality mentioned above.  The reasoning is identical to that which states that a single combined monopolist may be preferable to an up-stream and down-stream monopolist. When it comes to a public bad (like rent-seeking) a monopolist is preferable to competition.