The Tang Coinage Debate of 734

Chris Stewart’s excellent podcast, The History of China, had an interesting discussion of an economic debate that happened in 734. The debate in the Tang court was between Chang Chiu-lin, a Confucian who favoured legalizing illicit minting, and many Legalist officials who opposed legalization. I was so intrigued that I read through the source material on the debate, a 1976 article by Penelope A. Herbert.

The background for the debate was an ongoing crisis of too little coinage to “meet the demands of trade.” This apparent shortage of coinage led many people to take up counterfeiting. Counterfeiters would mint coins with lower precious metal content than the official coins. They risked the death penalty if caught, but the privately minted coins were widely traded nonetheless. All the historical sources seem to agree that this was the problem, but as we know, economic problems are easy to misdiagnose.

This apparent lack of currency was confusing to me because any amount of currency can meet the demands of trade at the right price level. Herbert (1976) writes,

“For the first half of the [Tang] dynasty, the administration succeeded in confining the large scale activities of the merchants in the provincial urban centres and capitals to official markets, supervised by bureaucrats. The administration reserved the right to manipulate prices by a system of officially imposed price controls, based on the standard coinage.” (p. 258)

That clears things up. “Not enough coinage” apparently means that there’s not enough coinage to facilitate trade at the official prices. In other words, the official prices were habitually set too high! Nobody in the debate seems to have realized that you can just let prices float and they’ll converge on the appropriate price level for the amount of coinage you have. Continue reading The Tang Coinage Debate of 734

Three Videos About Drug Prohibition

I can’t be sure that people who listen to my podcast, read my blog, or watch my YouTube videos are aware of the other content I create. I made three videos to promote my recent interview with Mark Thornton. I used the audio from my interview along with stock footage, some archival footage, images, and kinetic typography to make short videos dealing with individual topics from the episode. Continue reading Three Videos About Drug Prohibition

Drugs, Prohibition, and the Suburban Overdose Crisis with Mark Thornton

Mark Thornton is a Senior Fellow at the Mises Institute. He is the author of many books, including The Economics of Prohibition (which you can access for free here), which is also the topic of this episode.

1. Does drug prohibition help stop poverty and homelessness?

The conventional wisdom on drugs is simple: you see drugs and drug abuse mixed with poverty and homelessness and it makes intuitive sense that drugs play a role in causing poverty. It seems to follow that by criminalizing drugs, you can take them out of the equation and help solve the other problems.

Mark disputes this conventional wisdom. First, the causation doesn’t necessarily go from drugs to poverty. Poverty can cause people to abuse drugs and mental illness can cause both self-medication and poverty. Second, if you legalize drugs, they won’t be sold on the street. Instead, they’ll be sold by legitimate businesses with a particular interest in maintaining their reputation and not harming their customers. Prohibition is what creates the black market, which in turn generates violence, crime, and more potent and dangerous drugs, all of which exacerbate poverty. You can’t clean up the social problems related to drugs by criminalizing them when criminalizing them is what caused many of those problems.

2. The Suburban Heroin Epidemic

Mark recently authored an article called The Legalization Cure for the Heroin Epidemic. In the article, he calls attention to the rising number of overdose deaths in the United States:

The number of drug overdoses in the US is approaching 50,000 per year. Of that number nearly 20,000 are attributed to legal pain killers, such as Oxycontin. More than 10,000 die of heroin overdoses. I believe these figures vastly underestimate the number of deaths that are related to prescription drug use.

Continue reading Drugs, Prohibition, and the Suburban Overdose Crisis with Mark Thornton

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Prediction Contest 2016

In my capacity as President of the Economics Graduate Student Society at SFU, I set up a prediction contest. We hosted a pub night and I used the opportunity to solicit predictions on a wide range of topics. The person with the lowest Brier score will be the winner.

The predictions were made on March 12th, 2016 (before Lee Sedol’s fourth match against AlphaGo) and they will all be resolved on July 1st, 2016. I report the predictions and their outcomes (when they occur) in the table below: Continue reading Prediction Contest 2016

I Went on a Twitter Rampage for #TheTriggering

Fellow Vancouverite and accomplished internet troll Lauren Southern started a hashtag called #TheTriggering. The idea is that every March 9th, everyone tweets out all their non-PC opinions and jokes at the same time under this hashtag in defense of free speech.

I’m usually not big on participating in the culture war, but what the heck? Might as well have fun with this hashtag while it lasts. I started with the most controversial statement I could think of:

Typing that, I noticed something strange. Even though #TheTriggering was the top trending hashtag, it wouldn’t auto-complete when I typed it. Other people noticed it too.

It’s strange that a company like Twitter would take a side in the culture war. After all, the harder the culture war rages, the more people flock to Twitter to complain about it.

Continue reading I Went on a Twitter Rampage for #TheTriggering

A Minor Correction to Richard Posner

I quoted the following passage from Richard Posner in my recent article on Scotland’s three-verdict system:

When . . . judges and juries are asked to translate the requisite confidence into percentage terms or betting odds, they sometimes come up with ridiculously low figures-in one survey, as low as 76 percent, see United States v. Fatico, 458 F. Supp. 388, 410 (E.D.N.Y. 1978); in another, as low as 50 percent, see McCauliff, Burdens of Proof: Degrees of Belief, Quanta of Evidence, or Constitutional Guarantees?, 35 Vand. L. Rev. 1293, 1325 (1982) (tab. 2). The higher of these two figures implies that, in the absence of screening by the prosecutor’s office, of every 100 defendants who were convicted 24 (on average) might well be innocent.

See if you can spot the error in this reasoning. Continue reading A Minor Correction to Richard Posner

Scotland’s Curious Three-Verdict System

Lately I’ve been interested in true crime stories. It started with Serial and Undisclosed, two excellent podcasts on the case of Adnan Syed, a Baltimore teenager wrongfully (yes, wrongfully) convicted of killing his girlfriend in 1999. Then came the popular Netflix documentary Making a Murderer, which detailed the case of Steven Avery, who was wrongfully convicted of rape in 1985, released in 2003 after being exonerated by DNA evidence, and then (apparently) framed for murder.

Kill the wife, frame the husband. Only an owl could be so dastardly.
Kill the wife, frame the husband. Only an owl could be so dastardly.

Because of my interest in these stories, my parents recommended I watch another, less known documentary series called Death on the Staircase. The series documented the trial of Michael Peterson (no relation) for allegedly killing his wife Kathleen. He found Kathleen at the base of the staircase and assumed she had taken a fall. The prosecution claimed that he actually beat her to death. However, the physical evidence didn’t really match a beating (no skull fractures or brain contusions, no splatter on the ceiling), nor did it match a fall (falls don’t usually cause that amount of bleeding). Neither theory can explain the microscopic owl feathers found in Kathleen’s hand, nor the suspiciously talon-shaped lacerations on her scalp.

In all four of these cases (including both of Steven Avery’s convictions), the jury found the defendant guilty on the basis of flawed, circumstantial evidence. I think all three men are innocent, but even if I’m wrong or have been misled (though I’ve done independent research on all three cases), it seems like there must be at least a reasonable doubt of their guilt. So how could the juries convict them? Unless… Continue reading Scotland’s Curious Three-Verdict System

Rome’s Economic Suicide with Lawrence Reed and Marc Hyden

Ancient Rome went from a thriving civilization to a dystopia before its eventual collapse. My guests today explain how that happened. Lawrence Reed and Marc Hyden co-authored “The Slow-Motion Financial Suicide of the Roman Empire.” Lawrence is the President of the Foundation for Economic Education, and Marc is a political activist and amateur Roman historian.

Many accounts of the fall of Rome focus on military problems and the barbarian invasions. However, the Empire was in decline long before the barbarians showed up to finish it off. The barbarians didn’t kill the Roman Empire; the Roman Empire committed suicide. There were six important factors in the Empire’s decline:

1. Political violence became normalized.

The populist reformer Tiberius Gracchus redistributed public farmland to Roman citizens. His reforms angered the Senate, and his political enemies clubbed him to death in 133 BCE. This was the first open political assassination in Rome in nearly four centuries, but it wouldn’t be the last. Suddenly, it became acceptable for powerful Romans to kill their political enemies, and this would spell doom for Rome’s republican government.

2. The Roman state gave ever-increasing amounts of free food and entertainment to the masses.

Despite having killed Tiberius Gracchus, the senate did not repeal his reforms in an effort to assuage the masses. Tiberius’ brother Gaius Gracchus would take his brother’s position and further his reforms, also introducing a system of subsidized grain for the masses. When Gaius also succumbed to political violence, most of his reforms died with him, but not the grain dole. The dole was retained and expanded, proving a huge burden on the Roman state. Successive generations of Roman leaders would buy political popularity with panem et circenses (bread and circuses). The Roman people came to value the dole over all other values. When the emperor Caligula was assassinated, there was a brief opportunity to restore the Republic, but the people preferred the rule of strong men who could provide them with ever more panem et circenses.

3. Roman armies became personally loyal to their generals rather than being loyal to the Roman state or the people. Continue reading Rome’s Economic Suicide with Lawrence Reed and Marc Hyden

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Predictions for 2016

This year I will be making a series of predictions about the future, and assigning each of them a probability. I was inspired to do so by Scott Alexander and Phillip Tetlock. Too many commentators make vague predictions about future events and then declare victory however things turn out. So, in the interest of holding myself to a higher standard than a fortune cookie or horoscope, here are my predictions for 2016:

World Events

  1. Canadian year-over-year CPI growth will be higher than it was in December 2015: 90%
  2. Canadian year-over-year CPI growth will be at least 2.0%: 60%
  3. American year-over-year CPI growth will stay below 1.0%: 60%
  4. American year-over-year CPI growth will stay below 2.0%: 80%
  5. Unemployment in the US will be lower than it was in December 2015: 60%
  6. Unemployment in Canada will be lower than it was in December 2015: 60%
  7. Canadian year-over-year real GDP growth will be lower in 2016 than in 2015: 70%
  8. American year-over-year real GDP growth will be lower in 2016 than in 2015: 60%
  9. Iranian year-over-year real GDP growth will be higher in 2016 than it was in 2015: 80%
  10. The S&P 500 will end 2016 lower than it started: 60% (note that I am making this prediction on January 26th, and it has already fallen since January 1st)
  11. The price of crude oil will be above $35 USD at the end of 2016: 70%
  12. The price of crude oil will be above $30 USD at the end of 2016: 90%
  13. The price of Bitcoin will be above $400 USD at the end of 2016: 70%
  14. The Canadian Federal Government will not decriminalize marijuana: 90%
  15. The US Federal Government will not decriminalize marijuana: 99%
  16. At least one more US State will decriminalize adult use and cultivation of marijuana: 60%
  17. Donald Trump will not win the Republican nomination: 60%
  18. Conditional on Trump winning the nomination, voter turnout as a percentage of the voting age population will be higher than it was in the 2012 presidential election: 90%
  19. Conditional on Trump losing the nomination, voter turnout as a percentage of the voting age population will be lower than it was in the 2012 presidential election: 60%
  20. Hillary Clinton will be the Democratic nominee: 80%
  21. Hillary Clinton will be elected President: 60%
  22. ISIS will hold less territory than it did at the beginning of 2016: 90%
  23. ISIS will lose Raqqa: 60%
  24. The Force Awakens’ worldwide gross will exceed that of Titanic: 80%
  25. The Force Awakens’ worldwide gross will not exceed that of Avatar: 80%
  26. No 2016 movie will gross more than The Force Awakens: 90%
  27. Leonardo DiCaprio will finally win an Oscar: 90%

Continue reading Predictions for 2016

Hive Mind, IQ, and the Wealth of Nations with Garett Jones

Garett Jones is Associate Professor of Economics and BB&T Professor for the Study of Capitalism at the Mercatus Center, George Mason University. His book, Hive Mind: How Your Nation’s IQ Matters so Much More than Your Own is the subject of this episode.

Hive Mind CoverThe book deals with an empirical puzzle: IQ is a weak predictor for earnings. We all know high-IQ people who live paycheque to paycheque, and lower IQ people who succeed brilliantly. And yet, when we look at the relationship between nations’ average IQ scores and their incomes, the relationship is strong. Nations with the highest average IQ scores are eight times wealthier than nations with the lowest IQ scores. How can we resolve this apparent contradiction?

Garett documents five main channels for the spillover effects of IQ:

1. Smarter people are more patient, they save more and build up more capital.

When economists test people’s patience, high-IQ people tend to be more willing to wait for a larger amount of money in the future rather than taking a smaller sum now. This is important at the national level because savings tend to stay within a country* and fund investments within that country. That means living in a higher IQ nation generally means having more capital available to compliment your labour. Continue reading Hive Mind, IQ, and the Wealth of Nations with Garett Jones

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Garrett M. Petersen's blog about markets, institutions, and ideas.