The price of everything

On the wealth, and poverty, of nations

“There’s a great deal of ruin in a nation.”

• Adam Smith, in correspondence discussing the Battle of Saratoga, which marked a turning point in the American Revolutionary War against the British.

Every year at around this time, something rather magical happens to Edinburgh. The population of the Scottish capital swells by over 4 million people – and in a very good-natured way. Only the Olympic Games and the World Cup sell more tickets – and they only take place once every 4 years. As the comedian and writer Dominic Frisby puts it,

If Margaret Thatcher, Adam Smith or Friedrich Hayek were watching they would glory in this free market at work. Everyone is out for themselves, and yet there is huge camaraderie. You can be rubbing shoulders with a student one moment, an Oscar-winner the next. If one performer is having a hard time, you can be sure others will help him out in some way. There is no higher authority providing compulsory care. Everything is voluntary. Nobody is forcing anyone to do anything – except to turn up their show on time and not overrun.

The more successful performers do not have 45 per cent of their audiences taken from them and re-distributed to other more deserving or needy acts. It is known that, in most cases, a performer has worked hard to get where he or she is, they’ve done their hard yards, and the reason they are where they are is that they’ve played the game well. Injustice and inequality are everywhere, but it is an accepted norm in this world. The answer is to work harder and get better.

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Less is more

“There is a profound conflict of interest built into the [fund management] industry’s structure, one that grows out of the fact that (mutual fund) companies are independently owned, separate from the funds themselves, and managers profit by maximising the funds under management because their fees are based on assets, not performance.”

• Louis Lowenstein, The Investor’s Dilemma.

Having finally gotten around to watching John Krasinski’s A Quiet Place, we can side with the consensus: it’s a modern day classic. It clocks in at just 90 minutes, but there’s not a single idle second. The whole film is pared down to the bone. And it’s a ruthlessly efficient exercise in sustained suspense. The film is an elevator pitch made flesh: if you want to stay alive, don’t make a sound. Simply brilliant.

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Three years down the toilet

“You think the odds look right, that they are in your favour ?

This is a billiard table. An easy, flat, green billiard table. And you have hit your white ball and it is travelling easily and quietly towards the red. The pocket is alongside. Fatally, inevitably, you are going to hit the red and the red is going into that pocket. It is the law of the billiard table, the law of the billiard room.

But outside the orbit of these things, a jet pilot has fainted and his plane is diving straight at that billiard room, or a gas main is about to explode, or lightning is about to strike.

And the building collapses on top of you and on top of the billiard table. Then what has happened to that white ball that could not miss the red ball, and to the red ball that could not miss the pocket ? The white ball could not miss according to the laws of the billiard table. But the laws of the billiard table are not the only laws in this particular game.”

• Extract from the novel From Russia with Love, by Ian Fleming.

 

“In the 1970s, the Yale economist Herbert Scarf determined that the time to equilibrium scales exponentially with the number of products and services in the economy to the power of four. The intuition behind this relationship is straightforward: the more products and services, the longer it takes for all the prices and quantities to adjust.. if we optimistically assume that every decision in the economy is made at the speed of the world’s fastest supercomputer (currently IBM’s Blue Gene, at 70.72 trillion floating-point calculations per second), then using Scarf’s result, it would take a mere 4.5 quintillion (4.5 x 10¹⁸) years for the economy to reach general equilibrium after each exogenous shock. Given that shocks from factors such as technological change, political uncertainty, weather and changes in consumer tastes buffet the economy every second, and the universe is only about 12 billion (1.2 x 10¹⁰) years old, this clearly presents a problem.”

• Eric Beinhocker, The Origin of Wealth.

 

Up and down the land, hundreds of thousands of students have been receiving their A-level grades. Some of them will doubtless plan to read PPE at Oxford. Others will doubtless aspire to studying Economics at Cambridge (note: at the time of writing, the Cambridge economics web page was broken, much like the spirit of its students soon will be). In any event, in each of these cases, those economics-minded students will be flushing three irreplaceable years of their young lives down an intellectual toilet.

 

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Speaking truth to power

“You won’t learn much about capitalism at university. How could you ? Capitalism is a matter of risks and rewards, and a tenured professor doesn’t have much to do with either.”

• Jerry Pournelle.

 

Being There is a bizarre little curate’s egg of a film. Directed in 1979 by Hal Ashby, who by all accounts at this stage in his career was no stranger to substance abuse, it also happens to be Peter Sellers’ last film, and it maintains an elegiac quality throughout. The film is punctuated by illness and loss. Sellers plays a simple-minded gardener named Chance, unable either to read or write, who has spent his entire life tending the garden of a wealthy businessman. After the death of his patron, and after a sequence of improbable coincidences, Chance ends up as a strategic adviser to another wealthy businessman, and then to the US President himself. Devoid of artifice, and with no practical experience of the real world, Chance is an almost total cypher, a latter-day Candide, whose only engagement with the outside world is through gadfly consumption of TV, and who speaks only in the language of gardening. Asked about his recommended economic stimulus, he replies: “As long as the roots are not severed, all is well. And all will be well in the garden.” Naturally, his near imbecilic horticultural argot is universally mistaken for genius. After his second patron dies, pallbearers at the funeral conclude that Chance has the best prospects for taking the next US Presidency.

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Tangled web

In April 1999, Rick Levine, Christopher Locke, Doc Searls and David Weinberger created a website called Cluetrain. The Cluetrain Manifesto was a modern day reworking of Martin Luther’s 95 Theses – the pamphlet which, nailed to the door of the church at Wittenberg, is credited as having triggered the Reformation.

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