Managers are strange people. My grandfather was one and smoked two packs of cigarettes everyday, which is also why I never got to meet him. But anyways, they act in ways that seem unbecoming of pure profit maximization; for instance, they seek to increase asset size, or buy machinery that cuts beyond the profit maximising point. Why? Armen Alchian explains. More specifically, managers are observed to emphasize growth in total assets and sales, instead of purely targeting profit. Also they try to reduce cost and increase efficiency in response to demand falling; under wealth maximization this would be default. They also do things such as, say, buy more expensive computers that are not very conducive to profit maximization.

In Economics, as with many other fields, there are many good papers, if you know where to look. A lot of stuff recently published in the American Economic Review, or NBER, or Econometrica is world-class. But, there are very few masterful papers. That is, papers that can change or shape an entire worldview. Papers that propose conclusions that seem trivial but are reasoned beautifully. This is one of these papers that transcend common criteria for quality. This is one of the greatest papers of all time. We want to create a system of rational economic planning. Or, put more simply, we want to create institutions that can, when given certain information, preferences and knowledge of technological means, use these parameters to produce and allocate scarce goods. If all the information, all relevant preferences and all knowledge of the best means are given, then of course everything becomes easy. Then planning just becomes an optimisation problem.

The sharp Armen Alchian read, as a junior professor at UCLA, the bitter marginalism debate between Lester and Machlup (with Stigler helping the latter), and was confused about why the debate was so long and acrimonious. In his view, the solution was simple and intuitive: behold one of Prof. Alchian’s best papers. Alchian proposes a framework where incomplete information and uncertainty in the Knightian sense is included and incorporated. In this framework, we would also not assume profit maximation and predictable behaviour, but this framework does not preclude economists from making prescriptions.

The notion of reform is not new to Cuba. In the mid 1990s, when Cuba was reeling from the loss of the USSR and Comecon, Castro decided to become a pragmatist and allowed citizens to hold bank accounts, open small businesses, and (de facto) employ others, before allowing farmers to sell their surplus at market prices (like Deng), hold private farmland and give more land-use rights. He then allowed people to sell—individually sell—handicrafts, light manufacturing and consumer goods in public markets; and even allowed foreign direct investment.

Companies like Sheritt International of Canada committed billions of dollars for oil exploration, sugarcane, nickel mining, tourism, etc. This was despite the Helms-Burton Act which was designed to keep other foreign companies from investing in Cuba. The overall effects of the reforms were highly positive, with a growth in output, a fall in the price of the dollar, and greater abundance of foodstuffs and electricity. However…

https://x.com/austrosillyism/status/2067735067397423300

These reforms were not all too comprehensive and were met with limiting conditions in nearly all aspects. This is because in Castro’s cabinet during this time there were a mixture of technocrats who had studied abroad, hardliners, military officials and loyal officials; Castro sided with the hardliners so it keep them in power and to reform with them more cautiously than needed.

I talked about the Coasian theory of the firm here: [x.com/austrosillyism…] and to be sure, it is a very good paper. Perhaps one of the best of all time. However, Coase's paper was only the beginning of a long and firm-standing tradition. Oliver Williamson, another oft-overlooked economist, argues for the firm in an altered manner that I plan to discuss here. Organisation is scarcely talked about in economics. This is because in WIlliamson's view, it is much easier to say "organisation matters for economic transactions" than to detail why. Therefore, Williamson's ultimate goal is to apply the conclusions of organisation theory, but from the perspective of contract, and tie it back into the theory of the firm.

Today I will summarise multiple theories of capital, mostly the classicals and the beginning of the Neoclassical Movement, including also thinkers like Proudhon and Marx. The treatment of capital in its varying homogeneity and heterogeneity, as well as the role of the entrepreneur is worth noting as well. (This is pt. 1 of a 2 part thread) Instead of starting with Smith, who was not the founder but rather the systemizer of economic thought, let's start with Ibn Khaldoun (ابن خلدون) who wrote the مقدّمة (Prolegomena) and lived in the 14th Century. In it, Capital is taken to mean accrued assets, attained through fluctuations within the market of agriculture and commerce and undertaken for the purpose of profit. 1 People who manage to accrue an abundance of capital live luxuriously but must be protected by communities in order to prevent envious individuals (rulers) from expropriating it. 2 Capital is always, in Khaldoun's view, represented value-wise in gold and silver, 3 both intrinsically considered as treasures, and reliant on labour as it is labour that transforms useless goods to useful ones. 4

Cit 1 - THE MUQADDIMAH, trans. Rosenthal., 360. 2- idem., 426. 3- idem., 446, 4- ibid.

There are certain misconceptions about the Kowloon Walled City, the so-called anarchic and festering slum of British Hong Kong. Some include that housing quality and space was almost non-existent or that they were at least far inferior to less spontaneous public housing programmes; that poverty was significantly higher, that quality of life was far worse and that the area lacked governance (not to be equated with a state in this case). These are for the most part, misleading. Please note: although I'm pretty decent in Cantonese as it is one of my primary languages (我嘅廣東話一般般啦) I am mostly using Colonial-era Romanisation of certain location names. So don't take offence if you are one of the few people to be offended by that.

There are several problematic propositions employed when studying and understanding the role, expansion, and nature of Government, as first detailed by Robert Higgs (1991). These fallacies are employed by economists, political scientists, public choice theorists, and laymen. The first is the idea that we can universalise all actions of government into a single "size". We can say that from government doing "X" and "Y" that it is a "big" government or "small" government. This is problematic for the following reasons; suppose that government increases defence funding whilst eliminating subsidies for certain manufacturing industries for the exact same amount. Suppose that government decreases zoning regulations (in the real estate sector) but increases excise duties at the same time.

One action is associated with increased interventionism, the other one decreased interventionism; now also consider that government officials often work at odds ("churning") with each other; for instance, the USDA doing research on developing new and more efficient crop varieties may increase the supply and decrease the price of said crop; but land regulations may decrease the supply and increase the price of said crop. These two actions are countervailing but done by the same government. Now imagine that these contradictory and offsetting actions are multiplied thousandfold, as the regulatory code is hundreds of thousandsfold; it is clear that an objective unit of account is generally not possible.

Many people claim that the end of the Glided Age was a peak example of positive interventionism: big business doing whatever they wanted with little respite, which only stopped when government regulated and broke them up, freeing consumers from the yoke of unregulated capitalism. But is this true? The answer is... no. What if, instead... the regulations were done in the name of big businesses and special interests? This might seem difficult to fathom in the here-and-now, but read on. The following sections are mostly theoretical and provide for the reader a reason to believe the idea that regulation can be done for special interests, before actual empirical examples are given to bolster such an idea; if you are already well-versed in public choice theory, feel free to skip posts 3-8..)

People denounce the starvation and impoverishment in present-day society. And they have a right to do so, but one must remember how starvation and famine were often the norm for many societies pre-industrialism, even amongst "colonial powers" like Europe. The examples abound. (Disclaimer: I am not trying to say life was universally poor or that certain aspects like spirituality did not factor in quality of life. I am merely trying to show how much famine and overall suffering ruined even affluent and privileged imperial societies, and not just in mass disasters like the Black Death or the Potato Famine)...

But shortly before the February Revolution Tsarist reforms led by people like Witte and Stolypin led to drastic industrialisation. Metallurgy and mining increased 84%. metalworking 79%, textiles 46%, electrical power 83% and woollens 56%. Light industries like sugar, cotton, low-growth tobacco etc. also showed growth. The railroad boom in the 1890s also helped bolster the process of industrialisation and began to recover before the War...
x.com/ProletarioP_/s…


Output-wise Russia began at half the level of the US, 80% the UK and Germany, and only slightly below France. By 1913 output was well above France and comparable to Germany and the UK, and only really lagged behind the US. Overall growth levels were similar to the UK, Germany, Italy, etc. but slower than that of the US, Canada, Scandinavia etc. Per-capita product was comparable to Germany, the United States and Canada whom were mostly in the "late" stages of industrialisation.

Today I will talk about the case studies of private healthcare, and how they operated without government intervention; the gradual rise of regulations internationally and the vested interests behind them; and conclude with a focus on the interventionism of American healthcare and how it has not been free-market for decades. The most famous example of pre-State directed healthcare are the fraternal societies (or lodges) in America from the late 19th-early 20th century. Such organisations were decentralised, autonomous, and gave mutual aid for anyone affiliated. They were divided into secret societies, sick and funeral benefit societies and life insurance societies.
The first stressed rituals (like, say, freemasonry) and payed members based on predetermined schedules, whilst sick and funeral benefit societies and life insurance ones moreso stressed the necessity to pay for just health and life insurance protection. All would also go beyond insurance into offering actual healthcare, namely “lodge practice”, which we shall discuss later.

Water is one of the more sacrosanct commodities that are considered “public goods”, perhaps only eclipsed by healthcare. Furthermore, the majority of moralistic appeals are made pertaining to water. “Water is a basic human right”. “Everyone deserves access to clean water.” It is assumed from this train of thought that privatisation is harmful because it decreases accessibility, lowers quality, overcharges and so on. Let me refute this notion here. But before I do, to address all pertinent arguments against the idea of market failure, I shall attack some of the less moralistic arguments against water privatisation. These arguments typically are formatted in the following manner: (if you're not interested in this and only want empirical examples of water privatisation, skip the following 3 posts)

i.) The free market will not invest--or "underinvest"--in water infrastructure because the long-run infrastructure costs are prohibitively high.
ii.) The free market will overcharge compared to a nationalised firm (which of course, government can set the price at the "socially optimal" one)
and iii.) The free market will incur duplicative competition; for instance, two companies will dig up land to install a water pipe serving the same place.

"Who will build the roads?" An interesting question which obviously demands a serious and comprehensive answer. It is easy to say "private companies", but "privatisation" of utilities invites the picture of graft/corruption, and empirical examples are scarcely discussed. As such we must demonstrate that the private ownership and construction of roads is both possible and feasible. A very early example of private roads are the Viae privatae/rusticae/agrariae; or roads constructed by private individuals to connect their home, villa or farm to rome. Viae vicinales were roads that connected districts or villages through or to other villages and had some private funding, and could be maintained by landowners. This is not to say the entire Roman system was privatised, but that individual initiative on a reasonable scale funding roads is not at all a modern phenomenon.

Today I will briefly discuss private education and how it may not have been, historically speaking, a market failure. The pro-market failure argument stems from externality theory: namely the idea that educating people benefits those who are not getting educated (positive externality), but this benefit is non-monetary, and difficult to identify. As such, profiting off education services is difficult, market failure occurs, and therefore, the government must step in. This argument is first espoused by Adam Smith in the Wealth of Nations, Sec. VI. He argues that societies of animal husbandry (and barbarism in general) obviously don't have any such system, as they precede the division of labour. People know just the basics of governance and innovate just enough to subsist. They don't have time to know about Latin, theology, philosophy, geometry, etc. There are very few variations of jobs and thus very few ways to examine civil society.

It is much the same in the common people, especially the "labouring poor". They have little time for education, and education is expensive. And they work very menial, redundant jobs which means they become dull machines of sorts. Teaching them a bit of Latin, geometry, and mechanics can "open their minds", so to speak. But private schooling cannot necessitate it, and it might also be difficult for families to afford it, so this externality is covered with the public sector covering a small premium to build a parish school.

Today I will summarise Alchian & Demsetz's seminal paper, which deals with the theory of the Firm. Why do firms exist? What purpose do they serve? How do they coordinate? All of these are questions they consider. A&D start with a basic definition of market capitalism: non-governmental control over the means of production. Corporations, households and so on own the goods and decide how they are allocated. They will inevitably seek cooperation and specialisation with other economic actors within this process, (take Adam Smith's famous pin example) which also increases the demand for institutions in which this cooperative specialisation is facilitated.
It is important, they go on, to consider if the gains from cooperative specialisation is higher in the institutions in which they transpire (the firm) or the market (an uncoordinated entity), and the structure of said institutions.

Today I will talk about historical price controls in several areas. Many people think price controls are a somewhat modern invention, as part of a spurn towards interventionism, but they are in fact very ancient. Since the dawn of time bureaucratic governments (There are several categories of "Statism", as David Gra*ber was kind enough to point out) have been interested in controlling foodstuffs, for everyone needs food and having supreme power in regulating it makes the statesman have disproportionate control over the citizenry.

Today we will talk about Cowperthwaite's paradox. I already talked about it awhile ago, but that got zero traction, so I will talk about it again. I will also talk about Cowperthwaite and his policies as a whole, as well as Hong Kong's journey from fishing village to industrial powerhouse. The paradox is basically as follows: without statistical figures (nat'l income, unemployment rate, etc.) government can't plan (because it can't set parameters).

But, government is such an incompetent planner that perhaps it's good not to give them more information.

Today we will talk about the Cuban economy. It’s a very interesting case study on how central planning can have superficially positive aspects whilst being a hindrance to the general economy. We will first talk about Batista’s use of state planning before we talk about Castro’s, the special period and Cuba’s transition to a modern economy. Let us proceed. We first begin at around the 1920s-1950s, long before the Cuban Revolution. Si no hay azúcar, no hay cuba. That was a very common slogan repeated before Batista took power in 1952. As one can see, half of the total land in Cuba was dedicated to growing sugarcane.

Prio had approved prior to Batista’s coup the production of 5,900,000 tonnes of sugarcane but the actual output exceeded the approved amount by 20%- 7,300,000 tonnes in total. Sugarcane accounted for 90% of Cuba’s exports and reached 31% of Cuban national income in 1949. It was in essence a “one-trick pony”, and an aging pony at that.

This is probably one of the most famous works in all of economics history. Amongst the same realm of Kapital, The Wealth of Nations, and General Theory. It paved the road for an entirely new field of research, and has almost 60,000 citations. But what does it argue? A 🧵 Coase begins the paper very clearly: economists have failed to state and rationalise their assumptions.

This is not good because it leads to needless controversy about the set of foundations, but also because it stops us from choosing the right set of assumptions. The colloquial definition of "firm" and the economic definition of "firm" are very different.

As economists have increasingly gravitated to studying economics through the firm--and not by an industry--we must not only define what "firm" means in economics and how it differs from the colloquial meaning of a "firm", if there is any. But not any mere definition will do.

@nullmalimnockin @F22_Raptor_0 Bueno, esto es más un juicio filosófico sobre qué modo de producción era la China maoísta que un análisis de la China maoísta en sí misma. Pero supongo que podemos ser algo generales: 🧵 @nullmalimnockin @F22_Raptor_0 En primer lugar, la idea de modo de producción es muy controvertida. Si el modo de producción se refiere a quién controla las fábricas, los bienes de capital, etc. y el socialismo es cuando los trabajadores lo controlan, entonces claro, la China maoísta nunca fue "socialista",