Subject: Re: The term "intellectual property" considered useful
From: "Ben Tilly" <>
Date: Sat, 13 May 2006 00:07:47 -0700

 Sat, 13 May 2006 00:07:47 -0700
On 5/12/06, Stephen J. Turnbull <> wrote:
> >>>>> "Ben" == Ben Tilly <> writes:
>     Ben> My point was that they knew their business better than you
>     Ben> do, and it is highly unlikely that they really were that
>     Ben> stupid.
> True.  However, business is generally an evolutionary process, as we
> see with the "herd mentality of VCs" that we love to lament.  That is,
> like the dinosaurs, the slave owners knew *their* business; what they
> didn't recognize is that reality had changed the nature of business
> while they weren't looking.

Actually I've seen the point made that VCs know their business very
well.  It just isn't the business people think that they're in. :-)

VCs are in the business of investing other people's money in emerging
business opportunities.  However VCs typically get paid a cut of the
money invested.  That means that VCs are under pressure to try to
manage more money than the size of the investments that they can
locate.  Which means that they are under pressure to throw more money
at the companies that they invest in than most will support, and then
they are under pressure to push those companies to grow fast enough to
justify the investment.

Furthermore VCs don't control how much money there is to invest,
people who choose to have VCs invest their money do.

This theory neatly explains many otherwise puzzling aspects of VC
behaviour.  And, armed with this theory about their incentives, even
their boomtime excesses make a fair amount of sense.

>     Ben> Incidentally to your destruction of capital comment, Dr
>     Ben> Fogel's estimates *also* showed that materially slaves were
>     Ben> better off than Northern factory workers.
> Again beside the point.  OTOH, the rising price of slaves does suggest
> that capital destruction was not occuring at that point, but it's not
> conclusive (if capital destruction was occurring, that might also
> drive up price through relative scarcity).

The continued growth of the slave population also indicates that
capital destruction was not occuring.

>     Ben> If the South is considered to include all inhabitants
>     Ben> thereof, then ....  If the South is considered to include all
>     Ben> members who were free before Abolition, then ....
> Why bother with that?  Simply look at gross regional product.  The
> productivity question is whether GRP be increased by changing business
> model, given the same set of resources.

Well there is no doubt that the gross regional product dropped
drastically after the Civil War.  In fact it took over a generation
before income/person reached pre-Civil War levels (unadjusted for
inflation), and the region was locked into a cycle of poverty for
several generations.  Of course that change of business model took
place under *ahem* rather suboptimal conditions...

>     Ben> You assume correctly.  What I was trying to say is that the
>     Ben> presence of starving Irish in New York did little to affect
>     Ben> the economics of growing cotton in the South, and did little
>     Ben> to change what other industries made sense in the South.
>     Ben> Of course once I've said that, I realize that I was wrong.
>     Ben> Starving Irish in New York who were willing to work for low
>     Ben> wages in textile factories increased the profitability of the
>     Ben> textile industry, and therefore increased the demand for
>     Ben> cotton.  Which *increased* the value of slavery in the South.
>     Ben> So there was a connection - it just happens to be opposite
>     Ben> what Robin thought.
> Once again you are looking at the wrong thing.

How so?

>     Ben> The fact that Southern states were more economically
>     Ben> efficient than Northern suggests that wage labour was not
>     Ben> more productive.  The lack of successful plantations that did
>     Ben> not use slave labour points in the same direction.
> Point taken.  I'll have to look more closely at that.  (Because I
> might learn something, not because I expect to find a hole in the
> argument.)
> However, note that (as Russ pointed out) there were various subsidies
> and regulations that strongly favored slavery.  This could support
> both your "individual slaveholders were not stupid" and my
> "slaveholding society as a whole blew it" positions at the same time.

That was a fascinating point.  We certainly have no shortage of silly
things happening today because of perverse incentives from government,
everything from adding ethanol to gas (by some estimates this is a net
loss of energy) to using high fructose corn syrup in multitudes of
products (remove the tariff on sugar and we'll get something that
tastes better and costs less).

>     >> Sez Ben.  One would think you measured everything in dollars,
>     >> and cared nothing for freedom.  ;-)
>     Ben> The question at hand was whether slavery made economic sense.
>     Ben> I measure what makes economic sense in dollars.
> No, the immediate question at hand was whether the OVERALL improvement
> for slaves was minimal.  At that point you must take their preference
> for freedom vis-a-vis dollars into account.

That may have been your point.  But the point that caused me to get
involved in this discussion was the assertion that slavery made no
economic sense.  This is a claim that seems so immediately absurd to
me that I had to try to verify it - and after I tried my initial
reaction was only confirmed.

Incidentally in a different message you stated the reason why this
claim seemed absurd to me - slavery is the stealing of other people's
work.  It is very easy for unrectified theft to be worthwhile for the

>     Ben> The question of whether it should have been abolished is not,
>     Ben> however, an economic question.  In THAT question, freedom
>     Ben> makes a great deal of sense.
> Of course it's an economic question, and of course freedom qua freedom
> makes a great deal of sense in economic terms, despite the fact that
> my colleagues and I have yet to find a good way to measure it or
> implement it in our models.

Only if you believe that all things should become part of the province
of economics.  This is a belief that I do not subscribe to.
Furthermore I would point out that you can say everything about
nothing, and nothing about everything - so the more that you try to
make economics apply to everything, the less it says about anything.

> I agree it's not moral to let the answer to the economic question be
> the only, or even the primary, driver of the social decision.  But
> please, stop demonizing economics and economists.  There IS a strong
> bias in the profession, but you're not doing any favors to anyone by
> taking the easy route of condemnation.

There is no condemnation on my part.

When I go to an accountant, I want an accurate answer, no matter how
much I dislike it.  When I go to a doctor, I want an accurate answer,
no matter how much I dislike it.  I likewise want scientists of all
kinds to not shy away from unpleasantness, and give the most accurate
answers that they can.  No matter who it offends.

If economics doesn't shy away from explaining illegal behaviour (eg
when black markets will arise), then why should it shy away from
analyzing the potential returns on immoral behaviour (eg slavery)?  In
neither case should a reasonable observer conclude that economics or
economists say that the studied behaviour is good.  Economics merely
informs us of what is.