May 13, 2008

A Theory of the History of Everything

I'm a fan of ultra-ambitious History of Everything books that try to explain the whole world in terms of the author's pet ideas, such as Jared Diamond's Guns, Germs, and Steel, Michael H. Hart's Understanding Human History, and Gregory Clark's A Farewell to Alms.

So, I was surprised to stumble upon one such book that I'd never heard of: Raymond D. Crotty's When Histories Collide: The Development and Impact of Individualistic Capitalism. The lesson appears to be: don't die before your book tour. Crotty died in 1994 with the manuscript unfinished, and it took his son until 2001 to get it published. It was barely reviewed anywhere and doesn't appear to have been released in the U.S.

Still, the fragments that are available through Google Books are thought provoking, to say the least. Crotty presents in the early chapters what could be called a lactose tolerance theory of why capitalism arose in Europe.

Is he correct? Beats me, but from what little I've seen of the book, it stands comparison to Jared Diamond's huge bestseller.

Crotty was an Irish farmer in the 1940s and 1950s, who then became an economist. He's best known in the Republic of Ireland for having filed a landmark lawsuit as a private citizen protesting the Irish legislature's assumption that it could vote to join and further give up sovereignty to the EU without referendums. The Irish supreme court agreed with Crotty's case, and ordered that referendums be held on EU treaties.

As a historical theorist, Crotty resembles Victor Davis Hanson, whose experience as a warm-weather farmer in California gave him important insights into the development of warfare among Ancient Greek farmer-soldiers. Crotty's similar troubles making a living as a cool weather farmer in Europe gave him insight into the development of Northwestern Europe's unique historical accomplishments. After all, most people down through history have been farmers, but not many recent books have been written by farmers.

As an economist, Crotty's experience as a farmer made him a fan of Henry George, the late 19th century American economist whom contemporary economists seem to assume has been decisively refuted, but nobody can ever remember just how George was debunked. Crotty tried to bring capital intensive farming to rural Ireland, but he never seemed to make any more money, despite working twice as hard, as his neighbors, who just let some cows graze on the fields while they saved their money to buy more land. To "encourage agriculture," the Irish government taxed everything except land. So, as Henry George would have pointed out, it didn't pay to invest in your land. It just paid to buy more of it. And, as real estate salesmen point out, they ain't making anymore land, so aligning all the incentives to encourage buying land didn't create more of it, it just meant the Irish economy stagnated decade after decade.

My published articles are archived at iSteve.com -- Steve Sailer

36 comments:

nzconservative said...

I would have thought the big critics of Henry George would have been town planners and environmentalists, since progressive land tax encourages more intensive use of agricultural land and in-fill housing development in cities.

Georgist style land taxes are apparently still used to some extent in Taiwan and Hong Kong, as well as in the progressive rating systems used by local government in Australia and New Zealand.

Herry George was very popular downunder in the late 19th/early 20th Century, when large areas of pastoral land were being sat on by "squatter" farmers, who had obtained large sheep runs at very low prices in the mid 19th Century.

Tino said...

“whom contemporary economists seem to assume has been decisively refuted, but nobody can ever remember just how George was debunked.”

Well, we can start by the fact that in a 19th century farming society “pure” land (the part of land value that has nothing to do with improvements, like roads and buildings) was a large part of the economy, whereas today it’s not. This doesn’t prove Georg wrong, but it does make his insight irrelevant.

Maybe in 1880 if land rents were 10-15% of GDP taxing them could government. Today pure lands rents are probably more like a couple of percentage points of GDP, and the government costs 35-40% of GDP.

Anyway Henry George – of whom I am a great fan – would still have been wrong. Just confiscating the land or putting a 95% tax on it will obviously not work; people would stop investing in land, in buildings, and in infrastructure complementary to land value. Plenty of “land reforms” and other expropriation of property since the 19th century have shown this.

Well, George really advocates that only the pure rent should be taxes. The problem here is that there is no meaningful way to administratively or through market prices separate the “pure rent” part of land value from the total value.

beowulf said...

That sounds like an interesting book. I do wonder why Henry George fell off the intellectual cliff. Apparently, he was quite the celebrity when he was active in the late 19th century, but now, Who ever hears about the guy?

His idea to tax land values (and not improvements) seems radical but that's only because the field of the politically conceivable is narrower in finance than in any other area.
http://www.tpaine.org/tphgprop.htm

Radical would be the plan of my new favorite crank, Rodger Mitchell. Why should the government tax money when it can just print it? http://rodgermitchell.com/usnationaldebt.html

Anonymous said...

Crotty's book "When Histories Collide" is only $27 at Amazon.

Steve Sailer said...

We have property taxes just about everywhere in the U.S. now, which is kind of like what George wanted. But those tax both land and improvements.

I wonder if there is a Georgist perspective on the current mortgage meltdown?

Steve Sailer said...

One general rule is that you can't have a single big tax, or some people will figure out how to evade it completely. You have to have a bunch of different taxes so that nobody can get away Scot free.

(How do you spell Scot free, anyway. And are we still allowed to say that, or is that verboten like welshing and gypping? I can never remember if the Scots are officially oppressed or oppressors.)

dearieme said...

My mother visited the land of her forefathers in the 60s. She described the very well kept farms of Galloway (SW Scotland), the rather more erratic farms of Ulster, and then the dismally awful farms of the Irish Republic - no hedge, fence or gate was in good order. She started sobbing while she described the squalor. Mind you, travel writers had said much the same about Ireland outside Ulster for many a day.

Graham said...

'scot' is a tax - nothing to do with 'Scot', a person from Scotland. It's connected to Swedish 'skatt', tax.

simon newman said...

You can see the difference in attitudes to maintenance between Scotland and the Irish Republic (or being Protestants & Catholics in Ulster) in the gardens, not just the farms. The Scots follow the English approach of well maintained front gardens with flowers. The Irish have a grubby patch of grass. Possibly with a horse.

simon newman said...

Re: are Scots oppressors?

Although Scotland currently runs England as a colonial resource extraction colony*, I believe that per Gramscian victomology they are still victims, not oppressors. White Protestant Scots sit pretty low on the victim pole though, and become oppressors when dealing with Catholics (who dominate Scotland's legal profession & Labour party), non-whites, etc.

*My parents live in Scotland, while I live in London. Good to know I'm funding their retirement.

Ian Lewis said...

Steve, as a Scottish American with most of my family living in Scotland, I feel comfortable in saying these two things:
- Feel free to say Scot Free whenever you want.
- We were absolutely the oppressed.

However, nowadays, Scots are more likely to be whiners and complainers, at least on a political level.

Oh, if you do want to offend us, just simply call us "Scotch".

As in, Scotch-Irish. No one in Scotland referes to anything as being Scotch, INCLUDING THE DRINK!

Scots call that particular drink Whiskey (outsiders refer to it as Scotch or Scottish Whiskey).

Anonymous said...

How do you explain Ireland's wealth, the richest real country, when Lynn & Vanhanen list the national IQ at 92?

Hibernia Girl said...

Dearieme: My mother visited the land of her forefathers in the 60s. She described the very well kept farms of Galloway (SW Scotland), the rather more erratic farms of Ulster, and then the dismally awful farms of the Irish Republic - no hedge, fence or gate was in good order.

That's a very accurate description of the differences between Lowland Scotland, (Protestant) Ulster and (RC) Ireland. The differences are not so pronounced nowadays in these 'booming' economic times, but they are still there -- because the different peoples are still here. ;-)

BTW, the recent film, 'Becoming Jane', about Jane Austen was filmed in Ireland purportedly because: "Hampshire now is groomed and manicured and what we were able to find in Ireland was a sense of countryside that felt more unchanged."

Hibernia Girl said...

How do you spell Scot free, anyway. And are we still allowed to say that, or is that verboten like welshing and gypping?

Scot free (or scot-free) apparently doesn't have anything to do with the Scots, but comes from a Norse word and had to do with getting away with not paying one's taxes!

BTW -- three cheers for Raymond Crotty! Without him, Ireland would be in the same position as the rest of the European countries today and would not have had an opportunity to vote on the dreadful Lisbon Treaty/rehashed EU Constitution. (Not that it's going to matter much, I fear -- I have a feeling Ireland is going to vote Yes on the d*mnable thing.)

Anonymous said...

It's my understanding in a nutshell that a land value tax like George advocated would tend to keep housing prices lower because the tax would discourage speculation or people holding on to fallow or unused land. Not to be a shill but I've read some on George online. I think the land value tax is a very intriguing idea.
http://tinyurl.com/4ryyng

One thing I don't like about George is that he was a free trade advocate by the time of his death. With the rise of China I find myself increasingly skeptical of free trade.

-Vanilla Thunder

Bill said...

As a historical theorist, Crotty resembles Victor Davis Hanson, whose experience as a warm-weather farmer in California gave him important insights into the development of warfare among Ancient Greek farmer-soldiers. Crotty's similar troubles making a living as a cool weather farmer in Europe gave him insight into the development of Northwestern Europe's unique historical accomplishments. After all, most people down through history have been farmers, but not many recent books have been written by farmers.

-SS


This is true, and a point I almost never see made. Some things that escape academics are just obvious to people who still have some things in common with the old lifestyle.

Veracitor said...

There's a long-operating prototype Single-Tax town in Delaware: Arden (and its satellites). Of course the purity of the scheme is sullied by taxes levied by higher levels of government.

(I remember reading a fascinating article about Arden decades ago. In the Smithsonian magazine, perhaps?)

Single-Taxers argue that no one, even if they live an itinerant lifestyle, can evade the land tax, since at a minimum they must trade with people who do pay it and the tax will be reflected in the prices of goods and services.

I think the real objection to the Single Tax isn't whether people will evade it, but whether such a flat tax is politically acceptable. Single-Taxers can vary land assessments, but they can't match tax rate to income or wealth very effectively. So if you tax, say, beachfront property enough to soak the rich who want to occupy it, you price out the poor (with the tax, I mean, never mind the value in trade of improvements or right to occupy).

Flat-taxers ought to be satisfied with the Single Tax in theory. (Of course, the devil's in the details-- how is land assessed?)

Tino said...

In Milton and Rose Friedman’s autobiography it is described how at the founding meeting of the Mont Pelerin society (later Nobel winner) Henry George believer
Maurice Allais had a huge fight, ending with him storming out and refusing to sign the society statement of aims. Allais wanted an exception for land from the principle of protecting private property. This was in 1947, so I guess the ides had survived.

For what it matters the Anglo-Saxon countries tend to tax property more heavily than other industrialized countries, property taxes are about 2-2.5% of GDP in the US and 3-4% in UK for example. I don’t know if this is a lingering influence of George or due to a tradition of stronger local government.

Gross real estate values are something like 100-150% of GDP in the US. That gives a ballpark estimate of a tax rat around one third, assuming a 5-6% return on investment. This is a little higher than the average tax on capital investments or labor, but not much.

The biggest flaw in real estate taxation is the mortgage deductible. Because of this only the equity in the property value is taxes, whereas George would want the gross value to be taxes (home equity is right now a little less than 50% of total value, historical low). This rule encourages people to borrow instead of saving in equity for tax proposes. This is the opposite of what you would want people to do, have as much equity as possible, in order to reduce fluctuations and cushion crisis.

Tino said...

On the fun topic of optimal taxation:

For a classically liberal society with limited government it makes a lot of sense to find optimal tax objects. Property, seignorage, polluting activities, fines and court stamp duties, tobacco and alcohol, natural resources and the like can add up to a few percentage of GDP, maybe around 5% with almost no costs on the economy.

But once you want to have a welfare state you are forced to go for the big parts of national income, which is work, education, entrepreneurship, investments. Sailors principle to spread out taxes is sound, but becomes impossible at a certain level, once the state needs 35% of GDP as revenue as in the US, or 45-50% as in much of Europe/Canada.

People seem to have a hard time distinguishing the average cost of government with the much higher marginal cost of adding new activity. If you want to finance some Obama health program you can’t finance it with easy money, and have to further increase already high marginal taxes. But a 10% higher tax rate starting from 45% is far worse in terms of discouraging economic activity than going from 0 to 10% or 10% to 20%.

The cost of taxation for every tax based is more like an exponential function than a linear one, and the number of tax bases are limited. This makes the cost of expanding government exponential.

simon newman said...

anon:
"How do you explain Ireland's wealth, the richest real country, when Lynn & Vanhanen list the national IQ at 92?"

The IQ figure is based on old data, it'd probably measure a few points higher now (no other northern European country scores under 98). That said, most of the Irish from the deep South of the Republic do seem rather simple minded, so maybe there's something in it.

But Ireland was poor, despite massive EEC/EU subsidy (around £1,500 per household per year) until the Irish government massively cut corporation tax, spurring massive inward investment in the '90s. They basically took the EU's money, that was supposed to keep them as a welfare dependency on Brussels, and used it to cut a critical tax, kick-starting the Irish economy. Pretty smart.

Anonymous said...

"The IQ figure is based on old data, it'd probably measure a few points higher now (no other northern European country scores under 98)."


IQ and Global Inequality sounding less convincing.

-Same anon

Anonymous said...

Simon Newman:"Most of the Irish from the deep south of the Republic do seem rather simple-minded." Simon,you DO seem like an idiot!

tommy said...

How do you explain Ireland's wealth, the richest real country, when Lynn & Vanhanen list the national IQ at 92?

It would be interesting to see the distribution of IQ in Ireland. It's completely anecdotal, but I've long had the suspicion that the Irish bell curve might be flatter than those of other northern European groups. It often seems that I encounter a greater number of Irish-Americans both to the right and the left of the intelligence spectrum than I would expect to find if their distribution was similar to other groups. There seems to be less middle ground.

Xenophon Hendrix said...

This is pure speculation, but Ireland did have a huge fraction of it population emigrate. Emigration itself is something of an IQ filter.

TGGP said...

Kevin Carson has a roundup of Georgist and Geolibertarian links here.

John S. Bolton said...

The lactose-tolerance theory of geographic performance differences is a formidable candidate. Look at Murray's Human Accomplishment maps for Europe and America. The historical dairying region from New England to Wisconsin is the high concentration area, Likewise in Europe, of areas excluding low-density ones such as mountain or bog districts, the match-up is high between lactose-tolerant districts and high significant figures ones. Similarly in the world, comparing only districts above some threshold corresponding to longtime full agricultural occupation of land, the correlation could hardly be less than 90% of lactose-tolerant districts with high significant figures ones, on Murray's mapping. One suggestion is that the haplotype of lactose tolerance is 1million DNA units long, so huge that it could be a target of recognition in which people are pushed towards treating those who share it as relatives, cousins or otherwise much more closely related than they are for other genes. This would allow more large-scale cooperation without compulsion, more freedom from aggression, since there is less need for a despot to force competing families to cooperate as if they were much more losely related than they are. Possibly a lactobacteria could induce this effect, tricking the kin recognition systems into falsely registering those who share only the one giant lactase haplotype, as much closer relations. This would benefit the lactobacteria as the spread of the whole-milk consuming culture gains vast acreage for the lactobacteria, which it could not otherwise gain. One such lineage would gain over others of its same kind. the connection to significant figures would be that they get the rich and powerful to treat them as kin, or by a merit system, when the other districts are stuck in the patronage for close relatives only pattern, which ignores great merit.

Anonymous said...

I think Ive already pointed this out...

Many businesses moved into Ireland after the tax cuts, yes. But Ireland didnt have the market to support all these corporations - but they did have close proximity to the UK, a large English speaking market. So while basing themselves in next door low-tax Ireland they could still effectively operate in the UK market.

I mentioned Gateway computers as a prime example. Loctite (the super glue makers) did something similar. Their UK set-up was the usual office operation and a factory that repackaged foreign made (US?) glue products for the British market. Then they upped and went to Ireland. Because the Irish market for superglue had exploded? No, because in effect they could run the same operation in a low tax environment, just a few extra communication/transport costs between UK & Ireland.

Ireland's success with its low corporation tax has to be seen in context with its English speaking population and proximity to Britain. If the Irish spoke English but Ireland was located a few miles off southern Italy I suspect its tax cutting would have had rather less dramatic affects.

The final irony is that the Irish governments tax cutting was enabled by massive subsidies from the EU, in a period when the UK was making the largest single contribution to the budget.

Anonymous said...

"Emigration itself is something of an IQ filter."

Enough to account for 6 points? The theory is cracking.

--same anon

simon newman said...

anon:
"Ireland's success with its low corporation tax has to be seen in context with its English speaking population and proximity to Britain. If the Irish spoke English but Ireland was located a few miles off southern Italy I suspect its tax cutting would have had rather less dramatic affects."

Yes, multinationals base in Ireland and do their business in the UK. It's not just goods, everything from American Express to Youtube put their EU base in Ireland for tax purposes.

My own suspicion is that the low* measure of Irish IQ was less to do with emigration (the smartest and most successful rarely emigrate, it's more likely those in the middle who feel they can do better elsewhere) and more with an education system and culture that discouraged certain forms of analyical reasoning measured in IQ tests. AFAIK there has been no research into any genetic component.

*Low only compared to the rest of northern Europe, still above average for Caucasoid populations worldwide, which have overall median IQ around 90.

simon newman said...

anon:
"Simon,you DO seem like an idiot!"

Well, I AM half Irish... >:)

Hibernia Girl said...

Re.: Irish IQ -- I babbled about the scores a bit on my blog here. (Keep in mind, I'm no expert on these matters -- just trying to work it all out from what I've read.)

Here's part of what I said:

Lynn and Vanhanen in their book, IQ and the Wealth of Nations, estimated the average IQ for Ireland to be 93. This figure was based on the average of two studies: 1) the first* from 1972 in which 3,466 6- to 13-year olds were tested using Raven's Standard Progressive Matrices -- the average score was 87; 2) the second** in 1981, 75 adults were tested using the Cattell Culture Fair Test -- the average score was 100.

In IQ and Global Inequality, Lynn and Vanhanen gave the average IQ for Ireland as 92. I haven't seen that book so I don't know why the score was one point lower as compared to WoN.

In a recent article***, Lynn, et. al., demonstrated that there is a very high correlation (0.92) between national IQ scores and national achievement test scores in mathematics and sciences (TIMSS and PISA scores) amongst 8th graders. The 1995 TIMSS score from Ireland (532.5) is the equivalent of an IQ score of 98. The 2003 PISA score from Ireland (503) is equivalent to 98.6.

So, according to all this data, the average Irish IQ is somewhere between 92 and 98.6. 96 perhaps? Given the way things function in Ireland (or often don't), I wouldn't be surprised at all if our average IQ isn't a bit below 100. Further testing would obviously be useful.


I'd like to know more about that first test from 1971 which found the average score to be 87. What I'd like to know (and I've never seen the publication) is where these tests were conducted.

I, too, have a suspicion that IQ might vary regionally in Ireland. I would guess that the difference is more of an east-west one. The eastern areas of the country have, of course, had greater English and (in the North) Lowland Scottish settlement -- both very much Anglo-Saxon groups. I bet a pint of Guinness that IQ are probably higher in the east than in the west. But, that's just a guess.

The majority of my family comes from the west of Ireland, btw. ;-)

Joshua Vincent said...

Well, the ideas of Henry George still survive and are gradually being introduced into declining towns in Pennsylvania. We work with them and we are the Henry George Foundation ;)

Some places, like Clairton now get about 90% of property tax revenue from land values. US Mayor of the Year, Steve Reed of Harrisburg calls the land value tax on of the "major tools" in turning around that city's long decline.

The success in Pennsylvania is being noted in other places, and some very heavy hitters indeed have supported the idea and the implementation. Nobel-Prize winner Bill Vickrey on land value tax for New York City:
http://cityeconomist.blogspot.com/2008/05/site-values-in-nyc-and-genius-of-bill.html

Most of our supports are, actually, town planners and environmentalists. They carry much of our water. The Scots Green Party is insisting on land value tax as a condition for their coalition with the SNP. As for Eire, the Irish Greens also support LVT, as does FEASTA.
Cheers, Josh

simon newman said...

Irish IQ (again) - I wouldn't be surprised if modern Ireland's median IQ was 98, in line with other northern European countries. I agree with Hibernia Girl that any spread is likely at least partly east-west, I think possibly as much related to relative urbanisation as to Anglo-Saxon settlement.

Personally, my mother's family are McBrides, from Donegal in north-west Ireland.

Anonymous said...

"TIMSS and PISA scores"

Can someone please provide a link?

Bert Rustle said...

Crotty's book is reviewed here pages 4 to 6, by Denis O'Hearn of Queen's University, Belfast.

sara said...

Crotty has been proved right, re the Irish econoomy , subsequently collapsing.