Saturday, June 29, 2002

ht:dig for rosewater I set up my own search engine for the sight -- ht : / / d i g    Installed pretty easily.   I had been trying to use Google but have so far found that it isn't very thorough at indexing my site -- not sure why.    The index for this site updates twice a week. 11:08:05 PM

muddling through bottom up Finally finished Reinventing the Bazaar: The Natural History of Markets  -- nice book about how markets work (and don't) with lots of examples pulled from every corner of the globe.   I thought one of the most interesting things was the comparison of the market reforms in New Zealand, Russia, and China: New Zealand used to have a lot of state control over business in the form of state ownership and excessive regulation -- to the point where their productivity numbers had begun to drop noticably behind the rest of the developed world.   In less than a decade they were able reform their markets using drastic, directed, top down reforms.  There was pain, but because they were already market driven, the reforms were quickly successful despite their severity. Russia is in the process of transition from a centrally planned economy to a market economy.   They've followed the "shock therapy" course with the government actively fostering the transition.  Like NZ, they were a pretty thoroughly industrialized economy.  Unlike NZ, the reforms have not been particularly successful.  In fact, early in reform, the country spent several years losing productivity.  Why?   For one, markets are in the details -- what makes them efficient is the movement of micro information about pricing, supply and demand on a local level.   Russia's years of central planning left them without the infrastructure and relationships that allow this to happen.  Second, corruption has flourished and this generally stifles entrepreneurship -- with out predictable, enforceable rights, people are reluctant to take risks. China has also introduced a series of market reforms.   Unlike Russia, the reforms have primarily taken the form of inaction -- for example, allowing and eventually encouraging excess production from state-owned businesses and farms to be sold on a local basis.  In the process, some unorthodox (from a western capitalist view) entities have emerged -- for example, town-funded entrepreurial ventures -- and been very successful.   The reforms, despite their subtelty and despite the lack of direct support from the government, have been very successful, boosting productivity and standards of living dramatically -- far more successful than Russias.  It's funny -- the West, in a way, repeated the mistakes of central planning in trying to help Russia transition -- repeated in the sense that we overestimated our ability to predict and control the economy.    How arrogant it was to think that a Western-style economy could just be dropped in overnight.   Economies are interwoven, interdependent things that must grow up over time -- they are also very likely to develop in ways you can't anticipate, given the chance.    The best results come from letting people muddle through their local problems, bottom up, in an environment that allows them to reap the benefits of initiative without unduly harming others. There was also an interesting story about William F. Buckley in the last chapter -- an interviewer asked him on his 74th birthday what he thought he'd believe if he were 20 instead.  He said he'd be a socialist, perhaps a communist -- because their were so many problems exacerbated by the single minded pursuit of free markets, which he thought were just not that interesting in the final analysis.   While the author didn't agree with his off-handed dismissal of markets, I thought it was interesting to be able to see yourself in such a different way (Buckley is an icon of conservative, free-market ideology).    What would I believe if I were 20 today? 5:45:05 PM