Quoting Scott Sumner:

It doesn’t matter whether Chile grew faster or slower after 1973, what matters is that after 1973 Chile became the most successful economy in Latin America.

…

I’m sure that economy was successful for somebody. For example, there was tremendous growth in the electrical services sector.

John V:

You can’t possibly agree with part of what Pinochet did without the other parts!

Sumner wasn’t talking about “part of what Pinochet did.” He made a global statement about the Chilean economy as a whole.

I think that if it were prominent industrialists who were being left in ditches with their faces hacked off, instead of unionists, Sumner might be more hesitant to call that a “successful economy,” or to treat what happened as progress in the direction of economic liberalism. Comparative GDP figures notwithstanding.

Will:

That a wide variety of governments under a wide variety of political circumstances all implemented similar pro-market reforms in the last few decades of the 20th century is a point that is relentlessly ignored by those … who want to say these reforms were everywhere put in place in defiance of popular opinion.

That, or they believe in a theory of politics which holds that decision-makers in a wide variety of governments in a wide variety of political circumstances are operating within an incentive structure which isn’t always closely aligned with enacting policies that reflect “popular opinion.”

Which may be a good thing or a bad thing, in any particular case. Popular opinion is sometimes right and sometimes wrong. But I do think that public choice economics has something to say about arguments which make a naive inference from the behavior of governments to conclusions about the majority opinion of their alleged constituents.

Will:

I sense you get pretty frustrated about the fact that you tend not to be persuasive to people with a background in relatively orthodox economics (or mildly heterodox economics).

Maybe. But if you use your sense of sight to read what Kevin wrote, it seems like part of what’s frustrating for him in the current exchange is that his views on benefits of specialization and economies of scale were misrepresented so that the crude cartoon version of his analysis could be waved off as “totally incompetent.” I don’t know about you, but I don’t find that a very auspicious beginning for a conversation.

There are lots of ways to discuss a view that you don’t find persuasive, and lots of people have criticized smaller or larger parts of Kevin’s writing on agriculture and local production. (I have, for one. William Gillis has, from a position arguably to the left of Kevin’s. Etc.) But there’s responsive criticism which attempts to clarify and hone in on the issue, and thee’s non-responsive attacks. What you’re doing in this most recent comment is something like the former. What you led off with is more like the latter.

And so I’m incredibly skeptical of the idea that more than a few people would find it worthwhile to support a restructuring of institutions to shift to a radically different structure of food production.

Well, the suggestion is not necessarily that lots of people would direct their economic activity towards restructuring etc. Some food faddists like that kind of thing, but the main suggestion here is that that would be an unintended consequence of the final prices for the produce of capital-intensive centralized agriculture with long-distance shipping rising relative to the final prices for the produce of more localized, informal, and labor-intensive county-scale, neighborhood-scale, or home-scale alternatives. (Note that you would see this effect even if absolute prices for all kinds of produce were to fall.)

The real price of food is declining. True or false? Real average wages are increasing. True or false? I think the evidence is very, very clear that both are true. And I think this largely explains the dramatic decline in the household production of food. But you apparently don’t. Why not? Would you agree that if the cost of food continues to decline as a percentage of the average wage, then the average-wage worker WILL hit a point where she is better off buying than growing?

1. What’s happening to real wages over time is a lot more complex than that, because, as I’m sure you know, modal workers don’t make mean incomes. When you separate it out by socioeconomic class, you get very different pictures for different kinds of families. Particularly over the last 35 years or so.

2. As specified, you haven’t yet given enough information to determine whether or not a wage-worker will or will not reach an equilibrium point where the trade-off of cash for saved labor is worth making. If tomato prices decline relative to wages for non-food-related wage-labor, then that would tend to favor doing the wage-labor, buying the tomato, and pocketing the difference — if there’s no comparable decline in the marginal time that it takes to grow the tomato yourself. But I don’t think that the antecedent of that conditional has been established.

And if your alleged facts are facts, why are they not exploited to create huge fortunes? If I’m a farmer with x acres, and I would get more output per acre by switching production techniques and substituting labor for capital, why wouldn’t I sell a bunch of my machines, buy a bunch of labor at the average wage or below, and make higher profits?

Well, if we’re just looking at the input side, and not the effects of (say) government action on competition, then Kevin’s alleged fact was that if you hold the acreage fixed, large-scale mechanized agribusiness will produce less total output than soil-intensive horticulture, but it will produce more output per marginal hour of labor expended on the acreage. The question then is whether it’s more profitable for the farmer to economize on the costs of labor or to economize on the costs of land and capital. For people with relatively little access to large, concentrated tranches of land and capital, the trade-off may go one way; for people with better access, perhaps even access that’s facilitated or directly provided by the actions of state or federal government, the trade-off may go the other way.

John,

1. It’s not my case. It’s Kevin’s case. He gives the argument for it in his book and a series of articles which I’m certainly not prepared to reproduce in full here in the comments thread. My point so far has simply been that specific criticisms Will has offered as a reply to the case are in fact crude misrepresentations of the case he’s allegedly replying to.

My own view is that Kevin probably overreaches on the extent to which centrifugal effects on agriculture will result specifically in sustenance kitchen-gardening. But I’m not prepared to wave that off as “bullshit” in the absence of a reply to the evidence he gives, and I’m not about to try and make the case that he overreaches based on the (clearly false) claim that he just denies the existence of benefits from specialization or economies of scale.

1. That said, it’s also simply not true that centralized growing of fruits and vegetables “aren’t subsidized” in the U.S. They receive far less in the way of direct federal subsidies (in the form of domestic price supports and export subsidies), compared to (say) cereal grains, soybeans, sugar, etc. But many vegetables (e.g. potatoes, onions) are bought up heavily through government purchase and donation programs (school lunch program, military procurement, etc.), many are included in government agricultural export financing and promotion programs (e.g. the Market Access Program), the market is just as heavily regulated as the cereal markets in favor of large incumbents by means of USDA and state and local regulations, they are covered by federal crop insurance bail-outs, and — this happens to be awfully important in the agricultural markets near where I live — benefit very heavily (especially with crops like melons, which are now mostly grown in the Southwestern desert) from government irrigation subsidies and engineering projects.

Moreover, Kevin’s point is not simply concerned with the effects of direct government subsidy to producers. It’s part of a larger case which significantly has to do with (among other things) the suppression of potential competitors and substitute goods, either by government-enforced cartelization, direct legal suppression of the product, by direct legal suppression of necessary inputs, or by the ripple-effects of economic distortions that make the inputs artificially expensive compared to how they’d be in a free market, or that make the inputs for centralized business models artificially cheap.

Is all of that enough to demonstrate that there’d probably be a large scale shift towards home food production in a free society? I dunno. In any case, we’re still talking about a really heterogeneous set of products (the economics of tomato growing are quite different from those of cantaloupe farms, and both are awfully different from banana plantations), and all this is no doubt beyond the scope of this comment thread. But it’s certainly a reason for believing that the market we have to look at now is pretty damn skewed, and so that pointing to revealed preferences under those market conditions is not a very reliable guide to what would be economically efficient in a genuinely free market, which was my point in mentioning all this stuff in the first place.

Will,

As you please, but to back someone into a corner you need to actually start with the position that they have, not some a strawman position that’s easier for you to attack. To attribute a claim to Kevin which he does not hold (for example, that there is just no such thing as gains from specialization or economies of scale, and that he is just in “denial,” rather than having given a specific argument with specific evidence as to why there are countervailing costs and diseconomies that are important in the case of a particular set of potential producers and a particular good) and then smugly ridicule this cartoon version of your interlocutor, rather than replying to the argument that was given you, is something quite different. To then describe your interlocutor as “totally incompetent” at economic analysis on the basis of this ridiculously crude strawman, when he has repeatedly and at length set out a more nuanced view, is awfully graceless, not to mention unreliable as a way of getting to the truth.

As for ad hoc rationalizations of prior convictions, I suppose that the charge against Kevin would be just if Kevin hadn’t ever set out in any systematic or comprehensive way to provide evidence for his claims that a shift, on the margin, away from wage-labor (yards, whatever) and towards home food production, might be preferable for some significant number of current wage-workers under free market conditions, or that state intervention systematically tends to favor hypertrophic centralized producers, to subsidize centralized capital-intensive agribusiness (and centralized, cash-lubricated capital-intensive business in general), etc. Or if he simply stopped and then refused to consider any kind of countervailing factors that might tend to push in the opposite direction under the conditions he is supposedly considering. But if he has provided such a systematic investigation and argument ahead of time, and has considered the countervailing factors, then we’re not talking about an argument ad hoc; we’re talking about the application of prior evidence to a specific case. And, well, you know, I hear he did already write some stuff about that stuff, even at some length. Maybe you think that what he wrote about it is underargued, or “terribly unconvincing,” or maybe even that it’s “bullshit.” But you’ve not yet given any reasons that anyone else can inspect or has any reason to care about for finding it so. Because, at the level of principle, I am fairly sure that no competent economist would deny that there are limits to the benefits of specialization and to economies of scale, that those limits are not homogeneous across all goods and all producers, and that large-scale government interventions may have large-scale systemic ripple-effects which tend to skew the trade-offs in some markets towards artificially centralized or capital-intensive equilibrium points. And on the level of detail, Kevin has presented some detailed evidence in favor of his take in many different books and articles, whereas you’ve offered “people like yards” and some contemptuous ad hominem swipes at smug urban eco-asshole basil growers, without any concerted effort to show that Kevin’s wrong on any particular point that he made. Maybe you don’t want to spend the time necessary to respond point by point, or even on one point. Which is fine; everyone’s got preferences and priorities. But if you’re not prepared to present a systematic response, then summary handwaving about what’s “bullshit” and what’s “terribly unconvincing” to you seems like an immoderate way to respond to an argument you’re not actually willing to reply to. And the fact that you don’t like the conclusion of the argument (that revealed preferences on this point under actually-existing capitalism reflect the influence of government intervention and not what people would likely do in a free market) doesn’t mean that citing the premises by way of explaining how Kevin came to the conclusion is an “ad hoc” response.

As for my own prior convictions, you seem to know more about my prior convictions than I do. Try finding anything that I’ve personally written which makes a detailed claim about how much wage-workers would shift towards kitchen-gardens for personal or family use in a free society. Insofar as I’ve argued about any of this stuff, it’s in the form of pretty broad claims about shifts on the margin, ceteris paribus, away from centralization, dependence on cash savings, and employer-employee relationships, in a free society. I’m not an especially good gardener myself, would most likely still be doing web development to pay for my food if laissez-faire broke out tomorrow and would be happy to do it, and generally have a much less detailed set of expectations about what free labor would look like in practice than Kevin does.

I do, however, have a pretty strong prior conviction in favor of playing an argument where it lies. And what I get really tired of is seeing Kevin put as much work as he does into putting out interesting, original, and detailed writing and analysis specifically on the question of economies of scale and benefits of specialization, producing reasoned responses to inappropriate and out-of-context applications of the economics of scale, division of labor, and roundabout production, only to see that work casually misrepresented and ridiculed as if he were simply unaware of, or trying to wish away, elementary pin-factory economics.

Will,

This, for example, is bullshit…

Maybe, but I can’t see that you’ve earned this assertion by means of argument, at least not as presented here.

(1) People like yards.

Sure. And people also dislike their jobs, and like cheap fresh produce.

People also typically like gardening work more than their jobs up to some point of labor-intensiveness, after which they start liking gardening work a lot less.

Given all this, the question is one of trade-offs among alternative uses for land and labor — whether people’s desire for (say) maintaining a grassy yard as a consumption good is strong enough, on the margin, to outweigh the countervailing benefits of small-scale biointensive vegetable gardening on the same land and with the same labor-time.

No doubt this will in fact be different for different people: some people really like yards; other people really hate their jobs; etc. But of course Kevin is not suggesting that, given the choice, all workers will prefer to transform some marginal units of lawn into marginal units of a kitchen garden as a means of reducing work hours. Nor is he even claiming, in the passage quoted, that any workers will withdraw entirely from the wage system in favor of gardening. What he does suggest is that, given the choice, some (significant number of) workers will prefer to trade out some (significant amount of) marginal wage-work, yardwork and yard-land in favor of marginal increases in garden-work and garden land. Of course, it’s easy to throw around isolated bits of data about what people “like” and don’t “like” in the abstract without considerations about opportunity costs, substitute goods, or division of the stock into marginal units, but given that Kevin’s point was about people’s preferences over alternatives on the margin, I can’t see how that gets any serious economic work done by this kind of response.

You might then ask, “Well, why don’t they already do what Kevin suggests? Seems like people’s revealed preferences tell us all we need to know about the trade-offs involved.” Which would be true — (1) if decisions were being made under conditions of adequate information (so that there is no need for, say, “mutualist propaganda” to offer information to people currently dependent on wages for their food about available alternatives which they may not have known about), and (2) if those preferences were revealed in a free market, where (among other things) substitute goods aren’t subsidized by the government, the wage-system isn’t made artificially difficult to escape by government-imposed needs for ready cash on hand, research and dissemination of information aren’t artificially skewed towards the needs and interests of competing business models, necessary inputs (notably, a patch of land, space to compost, etc.) aren’t made artificially expensive by government price-fixing and government-imposed restrictions on use; etc.

But they aren’t.

(2) The claim that it’s cheaper for families to grow their own than to buy from a store amounts to a denial that there are gains from specialization plus a denial of economies of scale (a Carson specialty), …

Well, no, what it amounts to is a specific application of a denial that gains from specialization and economies of scale are (1) unlimited (2) homogeneous across all goods and all producers.

Whether the application is apt or not is something that depends on more data than you can get from a one-paragraph pull quote (and is something that Carson discusses at length throughout his work on questions relating to, e.g., cottage industry and home food production). But the principle being applied is that there’s an equilibrium point at which marginal gains from specialization are outweighed by marginal costs (transaction costs, heterogeneous preferences for marginal labor-time, etc.), and an equilibrium point at which marginal gains from economies of scale are outweighed by marginal costs of scale, and that this equilibrium point may be different for, say, low-wage service sector workers than it is for highly-paid professionals, and may also be different for tomatoes or chili peppers than it is for pickup trucks or jumbo jets. Remembering which is not “totally incompetent,” but rather a prerequisite for actually doing any kind of serious economics in the real world.

I’m pro-gardening, but I’m smart enough to know that my investment doesn’t begin to cover my opportunity cost.

Maybe the kind of gardening that you do, and the alternative uses of your time that you have in mind, are different from the kind of gardening that Kevin has done, and the alternative uses of his time that he has in mind.

Or maybe that’s a bad example because cars would not exist in freed markets because we’d travel attached to inexpensive homemade kites which the corporatist conspiracy has brainwashed us into believing are impossible!

Is this kind of rhetorical broadside at ridiculous cartoon versions of your interlocutor supposed to be funny?

Because it sure isn’t necessary to make the point you’re trying to make, and it’s also neither particularly fair nor particularly reliable as a way to get out a relevant response to the argument your interlocutor actually made,rather than other, different arguments that he didn’t make, but which you find easier to lampoon.