"Gift" Exchange

Hot on the heels of "The Birth of Plenty", I've devoured "A Splendid Exchange", another book by William Bernstein on economic history. As is my wont, let's compare and contrast them!

 

 

"The Birth of Plenty" felt like a book that was written around a thesis, and used examples from history to demonstrate that its thesis was correct. On the other hand, "A Splendid Exchange" feels like a book that's primarily interested in telling stories from history, and then allowing observations from those examples to bubble up. It actually reminded quite a lot of Piketty's transition from Capital in the Twenty-First Century to Capital & Ideology, where the earlier book makes the argument that certain phenomena will occur whenever other preconditions arise, while the latter book looks at the many varied ways different cultures have behaved over time.

"A Splendid Exchange" tells the history of global trade, and it turns out, it's a very long history indeed. Bernstein starts with prehistoric evidence we have of tools, metals and decorative stones being moved far from their point of origin, showing that in addition to conquest and raiding there was also an innate drive to "truck and barter" in goods that's been with us from the beginning. Most trade was regional, but there was intercontinental trade over two millennia ago, when Chinese silks made their way to Rome. Romans had no idea that China existed; they got their silks from Asia Minor, which got them from Persia, which for them from India, which got them from the Moluccas, which got them from China. Roman silver coins made their way in the other direction, mysteriously appearing in the Far East.

One of Bernstein's overarching ideas is that, while we think of global trade is being a modern phenomenon that started after the Industrial Revolution, it has been with us for much longer than that, and it really hasn't changed all that much. We have faster and safer ships now, which brings down cargo cost and puts the price of goods within reach of people other than the Roman Emperor, but the overall system and drive is remarkably similar. (And, not to keep on comparing authors to one another, but that perspective also reminds me a lot of Neal Stephenson's view of currency, which is basically that nothing new has happened for hundreds of years and the systems set up under Isaac Newton are basically the same ones we're using today.)

There is definitely a rise and fall to global trade, and that Roman-Chinese silk trade is a great example: after the Pax Romana ended and the trading routes grew too dangerous to travel, the doors swung shut. China still made silks, but they no longer traveled all the way to Europe; Italians still mined gold and silver, but it stayed on the continent.

Islam plays a huge role during the book, dominating international trade for nearly a millennium. I thought Bernstein was much more complimentary of Islam in this book than he was in TBoP. In the earlier book, he examines why Muslim countries have so badly lagged Western countries, and concludes that it's due to cultural values driven by their religion: a distrust of scientific rationalism and a prohibition on paying or receiving interest on investments. In A Splendid Exchange, he focuses more on the positive aspects of Islam. He notes that it's the only major religion to be founded by a trader, and there's a higher esteem given to traders and merchants under Islam than, say, under Confucianism. He also notes how, for many centuries, the Islamic world was a beacon for scientific advances, with some centers like Baghdad particularly known for attracting scholars. Bernstein observes that the growth of Islam was in large part fueled by economics, and economics drove the further expansion of Islam: Muslims were allowed to raid and pillage non-Muslims, but couldn't raid other Muslims, which gave a strong incentive for nearby neighbors to convert; in doing so they joined a cooperative economic community of lighter taxation and access to markets across Europe, Africa, the middle-East, Asia and Indonesia.

So, what ends Islam's control over world trade? Mostly technology and guns. First the Portuguese, then the Dutch, then the British establish their own trading system, forcing their way into ancient entrepots and enabling single voyages from Asia to Europe without passing through the Red Sea or the Persian Gulf.

Perhaps even more so than with The Birth of Plenty, I thought a lot about Europa Universalis IV while reading this. The trading system in particular is really closely aligned with it and reflects how different nations profited from, say, the Spice Trade or Cloves over time. I found myself wondering whether Paradox was directly inspired by these books; but also, Bernstein relies on distilling the research from historians, economists and scientists in writing these books; it isn't like he's just making it up, so it makes sense that both these books and this grand strategy video game would reflect the same understanding of truth.

In EUIV, you will generally make income through some combination of the following:
1. Production; that is, the direct value of things you grow and produce.
2. Trade, which is based on the value of goods you export and your level of control over their distribution.
3. Conquest; directly pillaging enemy land and/or demanding tribute to end wars.
4. Directly mining gold.

#2 is pretty much always the best approach in the game. Production is decent, but if you cede control of trade to your neighbors, they will profit from your own production. Conquest and mining can give significant short-term boosts in revenue, but can spell the long-term death of your economy as they cause inflation to grow, so once you run out of rich neighbors to fight or your mines are depleted, you'll be far poorer than you would have been without conquering or mining to start with. In these books Bernstein shows how, say, Rome and Spain and other once-powerful empires were built on unsustainable expansion and that led to decay and collapse, while other nations like the Netherlands had outsized success and much more graceful declines once they were surpassed.

Back to the book: In Birth of Plenty, Bernstein has a laser-sharp focus on 1820 as a sort of magical year that separated the pre-modern world of stagnation with the modern world of endless growth. A Splendid Exchange portrays a much smoother and more gradual transition. We see how sailing technology gradually improved, thanks both to scientific discoveries and advances in engineering. Seemingly simple ideas like "Let's cut out some big chunks of ice and sell it!" opened up huge new markets for the export of fresh produce and meat; interestingly, sometimes those businesses started a generation or more after the technologies that enabled them. And while the telegraph was a huge advance in instantaneous communication, even the humble postage stamp was a huge jump forward in the de-facto ease and speed of communication.

Bernstein seems to have very strong opinions, but he also seems to let the data drive his conclusions. Overall he is extremely pro-free-trade and anti-tariff, and looks critically at the wave of protectionism that arose in the 19th century; but based on studies, he rejects the idea that protectionism caused or prolonged the Great Depression. (Though, as with Chernow's House of Morgan, he does believe that the one-two punch of reparations and tariffs after World War 1 directly led to World War 2, as the defeated Central Powers were unable to acquire the foreign exchange necessary to service their crushing debt.)

He sees everything through an economic lens, and so, for example, he sees the American Civil War as more of a result of trading factors than a moral crusade. The South favored free trade, as they wanted to export cotton to Britain, while the North favored protectionism, as they sought to grow their industrial base while keeping out superior British products. I'm personally skeptical that trade policy was the primary factor in sparking the war, but I can definitely understand how it would contribute to tensions.

Late in the book, Bernstein presents a really interesting and cool framework for analyzing trade disputes within and between nations. When two nations trade with one another, prices tend to normalize between them: so if Country A was selling bread for $1 a loaf, and Country B was selling bread for $5 a loaf, then after they open markets between them, bread will most likely grow more expensive in Country A (as they're exporting more of it and so there's less to sell) and less expensive in Country B (as they can import cheaper foreign bread, driving down the price local bakers can charge). Very crudely, consumers will benefit in County B and be hurt in Country A, while producers will benefit in Country A and be hurt in Country B. Bernstein argues, pretty convincingly, that opening up trade in this way will be a net benefit for the entire system, growing total wealth and lowering total costs; but some individuals will be greatly harmed in the process.

Bernstein identifies three groups of "scarce factors": land, labor and capital. There's no intrinsic link between these, and depending on a nation's natural resources, population, technology and other concerns, their allegiances can shift dramatically. For example, in the 1800s America had abundant land, but scarce labor and capital; Britain had abundant capital and labor, but scarce land; India had abundant land and labor, but scarce capital. So, it makes sense that in the 1800s America tended towards protectionism, benefiting domestic bankers and factory workers, while Britain promoted free trade, benefiting its own workers and financiers. British farmers were hurt by free trade, but only a tiny fraction of Englishmen were engaged in farming; in contrast, France employed a much higher share of its population in farming, and so their concerns were heeded more than on the other side of the Channel.

While he's very pro-Free-Trade, he cheerfully concedes near the end that trade is actually a relatively small factor in overall economic growth. The US was highly protectionist throughout the 19th century, yet had enormous growth. Since World War 2, trade has been an increasingly large factor for growth, but far from an unalloyed good.

The very end of the book covers much the same ground as the end of The Birth of Plenty: looking at the rise in income inequality (which was already evident when he wrote these books 15-20 years ago and has only accelerated since then), the poisonous effects that has on international amity and domestic social cohesion, and what to do about it. He makes a very vigorous case for a stereotypical Liberal program: unfettered private-sector free-market activity, including low tariffs, combined with redistributive taxation that compensates the "losers" with the excess wealth generated. That includes people like laid-off factory workers in America, poor craftspeople in Uganda, and so on. It's a very different approach than the more muscular Progressive economic policy proposals I've been focused on lately, but I can definitely see where Bernstein is coming from and his reasons to advocate for this approach.

Mo' Money

I was more surprised than I should have been to learn recently that Mint will be shutting down at the end of this year. Mint is a free online personal finance tool that I've been using for well over a decade: it consolidates all of your linked accounts (banks, credit cards, loans, and investments), giving you a great holistic view of your finances. At the granular level you can see every transaction you've made (so credit card and debit card purchases appear in the same view); you can also zoom out and see how your savings have changed over time, what you've been spending most of your money on, and so on.

 

Mint is one of those services that I've felt a lot of irritation at over the years, and yet now that it's going away I feel a lot of disappointment. It had obviously been under-invested in for years and years after Intel acquired it, most obviously in continuing to use Macromedia Flash up until the very last possible minute that Apple and the web browsers eliminated it. A lot of little things irked me, like transfers between accounts showing up as "expenses" that dwarfed my actual expenditures; but still, it's been a really helpful tool for me to keep on top of my personal financial picture for a good chunk of my life.

I've never been good at budgeting. I think I'm good at spending - I'm a natural saver, and have consistently lived below my means, and don't feel much regret about hings I've bought. But never in my life have I sat down and actually made a plan about what I'm going to spend money on in a given month. That seems so dull!

That's another way where Mint has been really helpful for me. Where old-fashioned pen-and-paper budgeting and most modern software programs require forward planning, Mint supported a more passive form of reactive budgeting: it tracks how much you've spent on, say, groceries or restaurants over a series of months, and calculates the average you've been spending. It then presents that for the current month, along with your costs to date. This gives a good way to see trends and notice when you're skewing higher or lower, without requiring any up-front work.

As with a lot of Mint stuff, I tended to focus more on the annoyances. For example, there's a "Gas" category. Since I mostly take transit and rarely drive, I would only need to fill up once every 3 months or so. Mind happily assigned an "average" expense of, like $15 on gas a month, but my actual spend would either be $0 or $45 depending on whether I filled up that month or not, so it wasn't very useful. Still, in retrospect what it was doing was pretty cool.

The most value I got out of Mint was probably as a short-cut to filling out a separate spreadsheet I maintain. Basically, whenever I'm moving money from a short-term spending account into long-term investments, I want to look at my overall asset allocation between my 401k, my Roth and my taxable account, and direct the incoming money into the appropriate asset class. For example, I'm currently aiming for around 28% of my assets to be in an International Stock fund, so if I'm currently at just 26%, I'll direct most or all of the incoming money into that fund. With Mint, I can just lot into one service, look up the balances for all my accounts and funds, plug those into the right cells on my spreadsheet, and figure out what to do.

I imagine a lot of other people are in the same boat as me: people use Mint for different reasons, but no matter what that reason is, they'll need a new option. In the past I've occasionally searched for alternatives to Mint, and found that there aren't any other good free services that exactly replace it. Since it's going away entirely, I decided to take another look.

There are apparently a lot of banks and brokerages that now offer free Mint-like services, where you can link other accounts to the bank, and view all your balances, transactions and history in a single place. Unfortunately, neither my credit union nor Vanguard are among those offering it.

Intuit is hoping to move the Mint users to Credit Karma, another service it runs. Credit Karma doesn't come anywhere close to replicating Mint's features, though: it mostly shows you your credit score and steers you towards sponsored products.

From some reading around Reddit, Bogleheads and other sites, it sounds like YNAB (You Need A Budget) is the most popular alternative. I've been reading about YNAB for years, and it has a lot of enthusiastic adherents. After some more investigation, though, I don't think YNAB is a good match for me in particular. For better or worse, it's heavily budget-based, and is built around the kind of prescriptive forward planning that I dread. I'd need to change my whole approach to personal finance, and man, I just don't want to make that effort!

I'm currently trying out Monarch Money, which was started by one of the original founders of Mint and seems to share some of its DNA. Like all of these alternative services, it does cost money; I'm on a 30-day trial at the moment, and they're offering a coupon code for half off the first year: ordinarily it's $100 a year, but the first year will be $50. That feels like a lot compared to the $0/year I've been spending for over a decade, and I'm still trying to make up my mind whether that's worth it or not. Mint was my go-to for a financial overview, but I probably only opened it a couple of times a month. Looking at the data is interesting, and it would save me some time over logging into like four accounts individually. Is that worth eight dollars a month? I don't know.

I can tell that Monarch Money is relatively new, for better and worse. The UI is much better than Mint's: well-designed and intuitive, with nice colors and organization. The default categories are much more 2020s than 2000s; Mint has a category for DVDs! One of the more glaring things I've noticed so far with Monarch is with its charts; after importing 10+ years of data from Mint and viewing my account histories, I noticed that the labels for, like "June 9" and "December 13" were only giving dates and omitting years. If I'm looking at 13 years of history, I want to see those years in the labels!

One thing that is cool about Monarch is that they are very transparent about what they're doing, unlike the absolute silence from Mint for the last decade-plus. Monarch has a really cool public tracker where you can see what feature requests users have made, can vote on the one(s) you want to see, and see what items are in progress and recently completed. Their CEO and their engineers are fairly active on their blog and Reddit, not just writing about what they're working on but the reasons behind decisions they're making. Among other things, they have given a frank explanation of the reasons why they charge: as the old adage has it, if you're not paying for a product, then that means that you are the product.

Monarch does have a Budget (/Plan) option, which I haven't really checked out yet, but from what I've read it's more similar to the reactive Mint approach, so I'm hoping that it works for me: more of an occasional temperature check of how I'm doing than a detailed roadmap of what I should do.

So anyways, it's been an interesting experiment so far. Part of me kind of wants to massively build out my existing spreadsheet to add transaction-tracking and categorization, but while that would be fun to set up, I doubt I'd have the patience to keep it up-to-date. It's possible that some new free alternative will come around, or maybe Vanguard or my credit union will start integrating the core features for me... or maybe I'll just get used to spending eight bucks a month on this. That's a lot less than Netflix costs nowadays, I guess.

Bronze Sunset

I think my mind must be slipping. I've been reading "Iron Sunrise", a hard sci-fi novel from Charles Stross. It's the sequel to Singularity Sky, which I knew I'd read previously but couldn't remember when. I just checked my blog and saw that I read it, um, just about four months ago! It feels like a lot longer.

 

I've now enjoyed reading quite a few of Stross's series. While they've all been sci-fi, they've explored very different flavors of the genre. These two novels form what's apparently called the Eschaton series, and are the most science-based books of his I've read: he grapples really deeply with the implications of faster-than-light travel, how that impacts causality and time travel and such. He also looks at how those technologies impact civilizations, society and culture, but the science is the key to it. (Unlike, say, the Merchant Princes series, where the main impetus seems to be exploring a social/economic framework, with the science a convenient excuse to do so.)

MINI SPOILERS

Iron Sunrise starts with a literal bang: a man-made nova, destroying a star by means of temporal manipulation, essentially accelerating the passage of time of the star's core, fast-forwarding it a few billion years until it has collapsed into iron, then snapping it back into the "present" and unleashing incredible destruction over the entire bounds of a solar system. It's an awe-inspiring bit of prose that makes the stakes feel incredibly high.

This is set in the same universe as "Singularity Sky", and also shares some of the main characters, particularly Rachel Mansour and her now-husband Martin. The action takes place in different places, though: from the destroyed system (confusingly named "Moscow", apparently named after the Idaho city rather than the Russian capital) to Earth to several other planets, stations and large starships. And other than Rachel and Martin there's a large cast of new characters. For better and worse, they are unevenly represented in point-of-view: some just pop up for a chapter or two, while others end up driving most of the narrative.

The main character is probably Wednesday, who seems to be inspired by Wednesday Adams: she's a very Gothy teenage girl, always dressed in black and often sulking. Her family are refugees from the Moscow system: they lived on a station outside the Oort cloud equivalent, and so had time to evacuate before the blast wave reached them. She's also in contact with "Herman", a component of the cluster of intelligences and agents that make up the Eschaton, the totally-not-a-god entity who touched off the singularity and has shaped the fate of humanity.

MEGA SPOILERS

The pacing in this novel feels a bit uneven, with a ton of setup and backstory and musings for the first 7/8 or so and then a ton of action crammed in at the end. It's all very readable and fun, though.

The main villains are, unsurprisingly, the ReMastered. From the beginning they have strong Nazi overtones, with Stross calling out their blond hair and blue eyes. He's pretty vague about what their whole deal is for much of the book, but you can piece it together and infer a lot, so much of the big reveals near the end feel more like the characters catching up than us being surprised.

It's interesting to think that this book was published in 2004, likely written during 2003, during the height of the rush to the Iraq War. I don't think this book is directly commenting on that, but when Stross notes how the ReMastered used the threat of security and terrorism to whip local populaces into a panic and use that fear to install their own leaders and carry out their agenda... well, I don't think that storytelling is happening in a vacuum. Of course there are the straightforward analogies to the Reichstag Fire besides the more sideways links to yellowcake.

The plot gets pretty messy and complicated near the end, but I actually really liked that. As Herman warns, there isn't just one group of "good guys" and one of "bad guys", but multiple sub-factions, with the same group often at odds with itself. That feels a lot more real to life than most books; I mean, just look at how frequent turf wars between bureaucracies in the US play out. I appreciated how the characters in the book would share the reader's confusion, with their assumptions of who was responsible for what and to what end being upended, and subsequently questioning the rightness of a course of action.

Some of the "twists" in the book are incredibly choreographed: it's pretty obvious that Svengali the clown is an assassin long before it's officially revealed. Others did catch me by surprise, especially Steffi's role in the action: it is a neat trick to use a character's POV but elide some topics.

END SPOILERS

Ordinarily this is where I would write "I'm looking forward to reading the next book in the series", but in this case, there are no other books. Apparently Stross has found irresolvable problems with how he's set up this particular universe and won't be returning to it. I'm not surprised about the trouble - causality is such a delicate idea both in reality and in fiction, and while it's ballsy to play with it (even within constraints) like Stross does, doing so seems especially fraught. Especially in a hard-science-fiction context like this, where you can't just hand-wave away problems and attribute them to midichlorians or The Weave.  I am a little sad we won't get more, especially since (unlike the first book) this one ends by strongly setting up the next course of action. Still, I hugely respect that decision, and hey, there's still plenty more Stross for me to read!