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Culture War Roundup for the week of June 26, 2023

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I finished reading Peter Turchin's new book, End Times this past week, which visits many elements of the culture war, including Trump, immigration, 99%ers, even Ukraine. I hadn't read his previous books, but apparently they included more of the data and graphs that he works with for his research. This one is branded more populist, from the name, bright red cover, and relegation of models and graphs to the final third of the book, which is all appendix. He comes across as a moderate Marxist, who's trying not to alienate American conservatives.

The basic argument is that a core part of nation ending turmoil is a cycle of what he calls the wealth pump and overproduction of elites. A society will start out an epoch with a more or less equitable share of power and money between the workers and the elites, but at some point, this is disrupted by the elites ovedrawing resources from the economy, often because they have too many children, or allow more upward mobility than downward. Then popular immiseration sets in, where the workers have decreased access to the kind of resources they need to thrive -- land, capital, opportunities -- and the elites have a "wealth pump," which seems to be his way of talking returns on capital outpacing returns on labor. Also, increased immigration to keep labor costs low, and benefit employers. The wealthy grow, the poor grow, and the middle class shrinks. Elite competition becomes more and more intense, both because there are more people competing for roughly the same number of positions, often simply because population growth outstrips the growth of important positions, and because the alternative of downward mobility looks worse and worse in comparison. So everyone with any money or influence tries extra hard to get their kids a good position at whatever their era's version of the ivy leagues are, so they can benefit from the growth of the top 10%, while desperately fearing falling into the precariat. There are a bunch of young intelligentsia without money or positions, but a lot of education and family investment, ready to become counter elites or revolutionaries. Often they wage wars until enough of them die to relieve the social pressure, and the cycle starts over.

Turchin's main prescription follows the outlines of the New Deal -- high tax rates for the rich, a growing minimum wage, labor unions, low immigration, perhaps public works projects, that kind of thing.

I found the prescription, especially, underwhelming. Turchin doesn't really go into the kinds of jobs workers do, or how that might influence things, and there's no real commentary about going from an agricultural labor base, to industrial manufacturing, to service, and the growth of a suspicion that it isn't just the aspiring elite jobs that are basically useless, but many of the "workers" are as well. A large component of the current malaise seems to be the impression not only that there are too many leaders, not enough followers, but that, increasingly, the followers are all simulated, automated, or passive consumers, not workers at all. It seems like any plan that could hope to stabilize society over the next hundred years would need to incorporate the possibility that most middle class jobs, especially, as well as a decent number of working class ones, will be automated, while higher level positions and things like garbage collection and construction continue to be necessary much longer. Sure, we could probably move to an economy where each person's job is to care for some other person's parent, child, or pet, but that doesn't seem like a great outcome. He does not mention this at all.

Ever since the ACX guest review of two Jane Jacobs books, I haven’t been able to get the idea out of my head.

Take a city like Detroit. When Detroit’s exports (primarily cars) decrease, Detroit gets no feedback about this, because its currency is the United States dollar, and the United States dollar’s value depends on much more than Detroit. It depends on other cities whose foreign exports might be increasing at the moment. And on rural regions that are selling resources like oil abroad. Also, trade between Detroit and other cities that use the United States dollar — i.e., American cities — is structurally unable to provide any feedback whatsoever. So Detroit doesn’t get the signal that it should buy less stuff from other cities and replace the missing imports with local production. Instead, it just declines.

Jacobs focuses on this “import replacement” as the force of actual quality-of-life improvement. Replacing imports means capital investments pay back into your own city. Otherwise you’re just getting wealth siphoned off to someone else. Someone with a cooler city.

Here we have our analogy to Turchin’s wealth pump. Elites concentrated in the most effective city. A precariat born of those lower-class, fortunate enough to occupy the city regions, who transition to a service economy. And proles populating the rest of the country, unable to share in the proverbial rising tide.

So nations and empires will embark on every possible solution to reverse the decline. All of their solutions will look like good ideas at first, and yet fail at helping the peripheral regions. Worse, these solutions will weaken the cities, thereby destroying the only real wealth of the country and bringing untold hardship for everyone. …

Jacobs calls these false solutions transactions of decline.

Her three categories are military production, specific types of unbalanced trade, and…oh. Welfare. Turchin’s prescription cannot make more successful, growing city regions. It just delays the descent of flyover country into open rebellion. (Wait, now I want to read an application of this theory to the National Socialists.) Jacobs’ outlook is quite grim, and the closest thing she gives to a solution is secession. I guess that beats the mass die-offs hypothesized by Turchin?

There might be a third way. Jacobs notes the importance of “city regions,” hinterlands surrounding a productive city core. These sort of reap the benefits of that city investment, engaging in some form of import replacement. They’re explicitly much better off than the periphery of her model. Can we incentivize development of these regions wherever past nations, with worse transportation and less surplus, might have sucked them dry?

Turchin seems to say—it doesn’t matter. Fill a nation with productive, import-replacing regions, and you’re just going to overproduce elites faster. Human nature ensures the rest. I am very uncomfortable with this conclusion! I don’t want the future to converge on separatist social Darwinism, nations doomed to collapse or fission. Neither does Turchin, I suppose. Maybe he can keep the intelligentsia busy until we work something out.

I would use the detroit example to go the exact opposite direction. There actually is a very strong signal to detroit when their trade balance is off. If detroit is consuming more than it's producing then on net dollars are flowing out of detroit and very quickly the citizens will run out of money and be forced to either start making detroit more productive or move somewhere else where they can be productive. The only way a city in decline can be sustained long term would be if somehow dollars were continually being injected into the local economy in a way that was completely disconnected from production. Oh wait, that's exactly what's happening. So now the prescription is clear, end the entitlements and redistribution and the city will be forced to come back to a trade balance.

The thing is, though, that Detroit's trade balance isn't really off. The city itself is bad but the more accurate indicator is the metro. For all the talk about how the city has become a ghost town, the metro population has been stable since 1970, and is higher than it was at any time prior to that. This would be pretty meaningless if everyone left were poor, but that isn't the case either; the metro GDP per capita ranks 92nd out of 382 metros in the US. It's not great, but it's higher than a lot of trendy Sun Belt metros like Phoenix, Tampa, Hampton Roads, Las Vegas, Orlando, and Jacksonville.

The city itself, on the other hand, lost half of its population since 1970, and that's its biggest problem—it's underpopulated. The infrastructure was built for double the population, and combine that with the fact that the only people left living there are those without the resources to move to the suburbs, and the tax base erodes further, making it even harder to maintain all that infrastructure, making it even more desirable to leave, etc. Meanwhile, all the people from the good old days who got nice municipal pensions are retiring, and, you get the idea. Then again, the same thing happened in Pittsburgh except people left the area entirely and it never got nearly as bad as Detroit and is now one of the better-regarded cities in the country so you're mileage may vary.

The issue isn't that there isn't a signal, the issue is that prices and wages are sticky. This is just basic Monetarist/New Keynesianism macroeconomics. Foreign exchange markets are extremely price flexible they change every second. Wages from union contracts are not. Their is a whole literature on optimal currency areas that covers this.

This is also why I think Jane Jacobs is severely overrated. She seems like someone who wants to opine on macroeconomics without even having an undergraduates understanding of the topic. If you don't even try to deal with and refute the ideas they teach in an undergraduate course how can you even say you are making a serious intellectual contribution? There are ideas like Paul Krugman's new trade theory and the agglomeration effects that deal with these things that could make your ideas work, but you don't understand them; or, even macroeconomics 101 stuff like price stickiness.

Isn't her quote above basically about nominal price rigidity and optimal currency areas? She's saying that if Detroit, hypothetically, had its own currency, it would depreciate and the real prices and wages would decrease, but this isn't possible because its currency is shared with the entire US.

That can't explain the long run growth of countries overtime; unless, you also allow for something like agglomeration effects. Detroit having it's own currency prevents a short run recession, but doesn't prevent the auto industry moving to other areas and depressing the economy in the long run. Once again, assuming agglomeration effects like those Paul Krugman talked about in his work.

That was a good review.

It's plausible that more city region autonomy could help both Jacob's problem, and Turchin's, since part of the problem of elite overproduction is that influential positions don't scale with population. When the US population increases by 100 million people, we don't automatically get more Ivy League universities, legislators, states, or even newspapers. He likens this to a game of musical chairs, where instead of removing a chair each round, you keep the same number of chairs, but add more contestants and higher stakes.

If a region grows a mid-sided city like Phoenix, maybe some power should be encouraged to build there, even if it's kind of an ugly city in the middle of a desert, and not a cool, hip, popular coastal city. Maybe it wouldn't be so ugly if there were a mechanism for people to gain status from improving it. Perhaps there should be things for aspiring elites to do there, and a currency to keep track of how well they're doing at it, so that there's some status to be had out of managing it well. Maybe it was a bad idea to concentrate all the most capable young people at a few colleges on the East Coast and perhaps a couple in California. It's not so bad even now. Sure, Phoenix isn't cool, but it's sort of competently run, and its university is sort of acceptable, with a few good programs, its state legislature occasionally makes useful decisions, so things aren't completely failing to work, but it does seem like there's a lot of room to improve without millions of people dying as in most of the examples. Unfortunately, there don't seem to be too many cases of this happening without societal breakdown.

I also liked the review, but I feel like this is too pessimistic:

Jacobs’ outlook is quite grim, and the closest thing she gives to a solution is secession. I guess that beats the mass die-offs hypothesized by Turchin?

IIRC, the main issue was that there isn't a feedback mechanism for cities to realize when they aren't gaining from trade, since they don't have their own currency. Jacobs recommends secession because if there are a bunch of city states, they can all have their own currency, and the value of that currency compared to other cities will give them a very accurate and up to date feedback mechanism of their local surplus.

Now let me think... isn't there a bunch of stuff going on with some sort of... digital currency...? Could it be that this is actually a real problem solvable with crypto?!

Jokes aside, I really do believe that if you buy into Jacobs' import replacement hypothesis, city based or city + hinterland based cryptocurrencies are the solution. Many smaller countries and places like Miami have already experimented with it. While it hasn't exactly gone well, I think the better explanation to the failure of these projects is that the traditional finance system essentially tried to sabotage crypto for over a decade, before declaring outright war.

If we could bring in crypto protocols and clear, fast, transparent exchange rates to merge with the traditional finance system, I don't see why over time we couldn't build a state that gives each city its unique currency, without the risks and impossibilities of secession in the modern world.

What is the advantage of cryptocurrency here as compared to conventional digital currencies, or indeed conventional currencies?

Utah has a state level currency called the Goldback. No one uses it.

It seems like adoption issues are the main obstacle to local currencies.

If Turchin is a Marxist, then that conclusion follows.