A more immediate problem many countries face is population aging. In the near future, some countries will have a surfeit of jobs they need to fill, rather than too few jobs. They will have excess physical capital—infrastructure, plant and machinery, buildings and houses—that will go waste. For countries like Japan that have largely homogenous populations, the temptation will be to use more machines, thus avoiding the problems of coping with the diversity that stems from immigration. That is a choice aging countries with homogenous populations will have to make—to choose loneliness for their elderly or to accept initial culture shock and then adaptation. For aging countries with already diverse populations, the responsible choice ought to be steady and controlled immigration, with the objective of integrating immigrants and making them full and active citizens. Once again, the path I propose offers ways to attract and integrate immigrants, while maintaining the support of the native-born population.
I have said little about one of our most pressing problems, climate change and associated problems like water scarcity. It may well be that technological change will allow us to address this more easily in the future. For instance, cheap renewable energy like solar or wind power, storable in large batteries and powering our cars, trucks, and factories, can help us reduce carbon emissions significantly. If it also powers reverse osmosis plants generating fresh water from sea water, and helps pipe that water inland, we can solve problems of water scarcity, and transform many a desert into lush farmland. We must also be prepared, though, for the possibility that technology develops too slowly, and we do have to deal with climate change through more painful collective measures. We cannot afford self-interested, zero-sum nationalism if the fate of the world is in question. Instead, we need responsible internationalism. By weakening our propensity for jingoistic nationalism, inclusive localism will allow us to embrace responsibility as a nation.
Finally, the historical excursions in this book suggest hope. Our values are not static—they change. Dr. Martin Luther King Jr. said, “The arc of the moral universe is long but it bends towards justice.” When seen over short stretches, it seems that history repeats, that racism and militant nationalism erupt periodically in the world to sow hatred and spawn conflict. Yet the society that experiences these movements is not the same, it trends toward being more tolerant, more respectful, and more just. Around that trend line, we do go up and down. We may be down today, and we have a long way to go, but the distance we have come should give us hope. Let us not let the future surprise us. Instead, let us shape it. There is much to do. We have to, we must, choose wisely if we want to live together well and in peace. I am confident we can.
ACKNOWLEDGMENTS
This book is a collective effort, even if it has a single author. My wife, Radhika, has been with me every step of the way, debating, correcting, criticizing, and always encouraging. This book has come together only because of her, and is as much a product of her effort as it is mine. My children have constantly challenged my thinking and forced me to sharpen my ideas. I also owe any appreciation of modern sensibilities and social media that I have to them. My mother-in-law passed away suddenly during the writing of this book. She was always eager to engage in debate, and taught me much, even while showering me with love. She will be deeply missed. My parents have, as always, been supportive, and I thank them every day for the childhood they gave me that, alas, too few children in this world get.
I owe many of the ideas in this book to the stimulating environment at the University of Chicago’s Booth School of Business, where I have spent the best part of my academic life. The work I have coauthored with Luigi Zingales is central to some of the ideas in this book. Work with Rodney Ramcharan has also been enormously relevant to some of the themes in this book. Both were very generous with their comments on an earlier draft. I have also benefited from discussions with, and comments from, Marianne Bertrand, Steve Davis, Douglas Diamond, Eugene Fama, Rob Gertner, Chang-Tai Hsieh, Erik Hurst, Steven Kaplan, Anil Kashyap, Yueran Ma, Bhanu Pratap Mehta Lubos Pastor, Sam Peltzman, Eswar Prasad, Ram Shivakumar, Amir Sufi, Chad Syverson, Richard Thaler, Rob Vishny, and Eric Zwick. Rohit Lamba and Prateek Raj were especially kind in going through the early chapters and giving me detailed useful comments. Krishna Kamepalli and Adarsh Kumar provided very helpful research assistance.
I had very useful conversations with Douglas Baird, Marshall Bouton, Mark Carney, Dipesh Chakrabarty, Raj Chetty, John Cochrane, Matt Gentzkow, Rakesh Kochhar, Prachi Mishra, David Nirenberg, Josh Rauh, and James Robinson over the course of this book.
Max Brockman, my agent, has been very supportive of this project from the outset and helped get the book into the hands of my editor, Scott Moyers. Scott is the ideal editor, always encouraging while shaping early drafts of the book into something far better. I also am grateful to the team at Penguin Random House, including Christina Caruccio (who did a fine job copyediting the book), Mia Council, Sarah Hutson, and Christopher Richards.
Finally, I thank the Center for Research on Securities Prices, the Stigler Center, and the Initiative on Global Markets, all at the University of Chicago’s Booth School, for funding support.
NOTES
PREFACE
1. Anne Case and Angus Deaton, “Rising morbidity and mortality in midlife among white non-Hispanic Americans in the 21st century,” Proceedings of the National Academy of Sciences 112, no. 49 (November 02, 2015), doi:10.1073/pnas.1518393112.
2. This is from dictionary.com. http://www.dictionary.com/browse/community?s=t. According to Merriam-Webster online, a community is “the people with common interests living in a particular area.” https://www.merriam-webster.com/dictionary/community
3. Raj Chetty and Nathaniel Hendren, “The Impacts of Neighborhoods on Intergenerational Mobility I: Childhood Exposure Effects,” rev. ed. NBER Working Paper No. 23001, May 2017.
4. See Hannah Arendt, The Origins of Totalitarianism, (Orlando: Harvest, 1994).
5. The term “imagined community” is associated with Benedict Anderson, Imagined Communities: Reflections on the Origin and Spread of Nationalism (London: Verso, 1983).
6. University of Illinois, Chicago Great Cities Institute, Pilsen: October 2017 Quality of Life Plan, October 2016, https://greatcities.uic.edu/wp-content/uploads/2015/10/FINAL-Pilsen-QoL-Plan-Full.pdf.
7. Robert Sapolsky, Behave: The Biology of Humans at Our Best and Worst (New York: Penguin Press, 2017), 311.
8. “My Neighborhood Pilsen—Safety,” WTTW (website), accessed August 07, 2018, https://interactive.wttw.com/my-neighborhood/pilsen/safety.
9. See, for example, Allen Berger, Nathan Miller, Mitchell Petersen, Raghuram Rajan, and Jeremy Stein, “Does Function Follow Organizational Form? Evidence from the Lending Practices of Large and Small Banks,” Journal of Financial Economics 76, no. 2 (2005): 237–269.
10. Raghuram G. Rajan, Fault Lines: How Hidden Fractures Still Threaten the World Economy (Princeton, NJ: Princeton University Press, 2010), 45.
11. Daniel Burnham (1907) quoted in Charles Moore, Daniel H. Burnham, Architect, Planner of Cities. Volume 2. (Boston: Houghton Mifflin, 1921), 147.
INTRODUCTION: THE THIRD PILLAR
1. See Amartya Sen, Identity and Violence: The Illusion of Destiny (New York: Norton, 2006).
2. Ferdinand Tönnies, Community and Society—Gemeinschaft und Gesellschaft, trans. Charles P. Loomis (Mineola, NY: Dover Publications, 2002), 65.
3. See Stephen Marglin, The Dismal Science: How Thinking like an Economist Undermines Community (Cambridge, MA: Harvard Business Review, 2010). This excellent book also points to the fragility of the community in the face of advances by the market and the government; he is more skeptical of the broader role of markets.
4. See, for example, Robert Sapolsky, Behave: The Biology of Humans at Our Best and Worst (New York: Penguin Press, 2017).
5. See Sebastian Jung, Tribe: On Homecoming and Belonging (New York: Twelve,
2016), 37; Desmond Morris and Peter March, Tribes (London: Pyramid Books, 1988), 34–35.
6. Elenore Smith Bowen [Laura Bohannan, pseud.], Return to Laughter (New York: Anchor Books, 1964), 47, 131.
7. Kaivan Munshi and Mark Rosenzweig, “Networks and Misallocation: Insurance, Migration, and the Rural-Urban Wage Gap,” American Economic Review 106, no. 1 (January 2016): 56, http://dx.doi.org/10.1257/aer.20131365.
8. Avner Greif, “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders,” Journal of Economic History 49, no. 4 (December 1989): 857–82.
9. Douglas Oliver, A Solomon Island Society (Cambridge, MA: Harvard University Press, 1955), 454–55, cited in Marshall Sahlins, Stone Age Economics (Chicago: Adline-Atherton, 1972), 197.
10. Robert C. Ellickson, Order without Law (Cambridge, MA: Harvard University Press, 1991), 61–62.
11. Ellickson, Order without Law, 60.
12. Edward C. Banfield, The Moral Basis of a Backward Society (Glencoe, IL: The Free Press, 1958), 10.
13. Banfield, Moral Basis, 22.
14. Banfield, Moral Basis, 92.
15. Banfield, Moral Basis, 17.
16. Banfield, Moral Basis, 17.
17. Banfield, Moral Basis, 19.
18. Banfield, Moral Basis, 18.
19. Mitchell A. Petersen and Raghuram G. Rajan, “The Effect of Credit Market Competition on Lending Relationships,” Quarterly Journal of Economics 110, no. 2 (May 1995): 407–43.
20. Peter Mathias, The First Industrial Nation: An Economic History of Britain 1700–1914 (New York: Charles Scribner, 1969), 158–160.
21. There is a long literature that worries about the damage to community caused by change, including the appearance of market forces. Thinkers like Edmund Burke, Justus Moser, Karl Polanyi, Jean Jacques Rousseau, and, of course, Karl Marx and Frederick Engels have commented on the destruction of the community and its culture. For an excellent overview, see Jerry Muller, The Mind and Market: Capitalism in Western Thought (New York: Alfred Knopf, 2002).
22. This paragraph draws on Mathias, First Industrial Nation.
23. Duncan Bythell, “The Hand-Loom Weavers in the English Cotton Industry during the Industrial Revolution: Some Problems,” The Economic History Review 17, no. 2 (1964): 339–53.
24. Ellen Barry, “In India, a Small Band of Women Risk It All for a Chance to Work,” The New York Times, January 30, 2016, https://www.nytimes.com/2016/01/31/world/asia/indian-women-labor-work-force.html; Ellen Barry, “‘We Will Not Apologize’: Chronicling the Defiant Women of India,” The New York Times, January 30, 2016, https://www.nytimes.com/2016/01/31/insider/we-will-not-apologize-encountering-the-defiant-women-of-india.html.
25. See Avinash Dixit, “Governance Institutions and Economic Activity,” American Economic Review 99, no. 1 (March 2009): 5–24, for an example where the community is worse off as its size grows because of the difficulties of sharing information.
26. David de la Croix, Matthias Doepke, and Joel Mokyr, “More than family matters: Apprenticeship and the rise of Europe,” Vox, CEPR Policy Portal, March 2, 2017, https://voxeu.org/article/apprenticeship-and-rise-europe.
27. Joel Mokyr, A Culture of Growth: The Origins of the Modern Economy (Princeton, NJ: Princeton University Press, 2017).
CHAPTER 1: TOLERATING AVARICE
1. Kautilya, The Arthashastra, ed. L. N. Rangarajan (New Delhi: Penguin Books, 1992), 426.
2. Edward L. Glaeser and José Scheinkman, “Neither a Borrower Nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws,” Journal of Law and Economics 41, no. 1 (April 1998): 1–36.
3. Clyde G. Reed and Cliff T. Bekar, “Religious Prohibitions against Usury,” Explorations in Economic History 40, no. 4 (October 2003): 350.
4. R. H. Tawney, Religion and the Rise of Capitalism (New York: Mentor Books, 1963), 39.
5. See Henri Pirenne, Economic and Social History of Medieval Europe, trans. I. E. Clegg (New York: Harvest, 1937), 7–8.
6. Ibid., 9.
7. R. H. Tawney, The Agrarian Problem of the Sixteenth Century (London: Longmans, Green and Co., 1912), 264.
8. Alan Macfarlane, The Origins of English Individualism (New York: Cambridge University Press 1979), 18.
9. See ibid., 124–26, and H. J. Habakkuk, “English Landownership 1680–1740,” Economic History Review 10, no. 1 (February 1940): 2–17, for comments on the hostility of courts to entails.
10. Douglass C. North, John Joseph Wallis, and Barry R. Weingast, Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (Cambridge, UK: Cambridge University Press, 2009), 84.
11. Much of this paragraph draws on Jack Goody, The Development of the Family and Marriage in Europe (Cambridge, UK: Cambridge University Press, 1983), 118, 132.
12. Reed and Bekar, “Religious Prohibitions,” 352.
13. D. N. McCloskey, “English Open Fields as Behavior Towards Risk,” ed. P. Unselding, Research in Economic History 1, cited in Reed and Bekar, “Religious Prohibitions.”
14. See Reed and Bekar, “Religious Prohibitions.”
15. See Harold J. Berman, Law and Revolution, The Formation of the Western Legal Tradition (Cambridge, MA: Harvard University Press, 1983).
16. Goody, Development of the Family.
17. Aristotle, Politics, trans. Benjamin Jowett (Kitchener, Canada: Batoche Books, 1999), 17.
18. Albert O. Hirschman, The Passions and the Interests: Political Arguments for Capitalism before Its Triumph (Princeton, NJ: Princeton University Press, 1977).
19. Tawney, Religion and the Rise of Capitalism, 36.
20. C. Dyer, “Standards of Living in the Later Middle Ages” (Cambridge, UK: Cambridge University Press, 1989), 141–42, cited in Reed and Bekar, “Religious Prohibitions,” 363.
21. Barrington Moore Jr., Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World (1966; repr., Harmondsworth, UK: Penguin University Press, 1974), 460–64.
22. E. L. Jones, The European Miracle, 3rd ed. (1981; repr., Cambridge, UK: Cambridge University Press, 2003), 57–58.
23. Pirenne, Economic and Social History, 53.
24. Jones, European Miracle, 130.
25. Jones, European Miracle, 130.
26. Geoffrey Parker, The Military Revolution, 2nd ed. (1988; repr., Cambridge, UK: Cambridge University Press, 1996), 18–19.
27. Immanuel Wallerstein, The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century (New York: Academic Press, 1974).
28. Parker, Military Revolution, 1.
29. Jones, European Miracle, 130.
30. Pirenne, Economic and Social History, 83.
31. Pirenne, Economic and Social History, 118–19.
32. Jared Rubin, “Bills of Exchange, Interest Bans, and Impersonal Exchange in Islam and Christianity,” Explorations in Economic History 47, no. 2 (April 2010): 213–27.
33. Goody, Development of Family, 165.
34. Nicholas Carr, “Is Google Making Us Stupid?,” The Atlantic, July/August 2008, https://www.theatlantic.com/magazine/archive/2008/07/is-google-making-us-stupid/306868/.
35. Timothy Egan, “The Phone is Smart, but Where’s the Big Idea?,” The New York Times, July 7, 2017, https://www.nytimes.com/2017/07/07/opinion/iphone-apple-printing-press.html?smprod=nytcore-ipad&smid=nytcore-ipad-share&_r=0.
36. Lester K. Little, Religious Poverty (Ithaca, NY: Cornell University Press, 1978), 57.
37. Tawney, Religion and the Rise of Capitalism.
38. Max Weber, The Protestant Ethic and the Spirit of Capitalism, trans. Talcott Parsons (London: Routledge, 1992), 32.
39. Cited in Benjamin Nelson, The Idea of Usury: From Tribal Brotherhood to Universal Otherhood (Chicago: The University of Chicago Pre
ss, 1969), 75.
40. Nelson, Idea of Usury, 75.
41. James Ackerman, “Interest Rates and the Law: A History of Usury,” Arizona State Law Journal 27, no. 61 (1981): 78.
42. Tawney, Religion and the Rise of Capitalism.
43. See Reed and Bekar, “Religious Prohibitions,” for a development of this theory.
44. See, for example, the articles in Michael Duffy, The Military Revolution and the State 1500–1800 (Exeter, UK: University of Exeter, 1986); Jones, European Miracle; and Charles Tilly, Coercion, Capital, and European States AD 990–1992 (Oxford, UK: Blackwell, 1992).
CHAPTER 2: THE RISE OF THE STRONG BUT LIMITED STATE
1. This section draws on Raghuram G. Rajan and Luigi Zingales, Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity (Princeton, NJ: Princeton University Press, 2003), chapter 6.
2. Lawrence Stone, The Crisis of the Aristocracy, 1558–1641 (Oxford, UK: Clarendon Press, 1965).
3. Stone, Crisis of the Aristocracy.
4. S. E. Finer, The History of Government, vol. 3 (Oxford, UK: Oxford University Press, 1999).
5. Frederick C. Dietz, An Economic History of England (New York: H. Holt, 1942).
6. Ibid.
7. Stone, Crisis of the Aristocracy; also see R. H. Tawney, “The Rise of the Gentry, 1558–1640,” The Economic History Review 11, no. 1 (1941): 1–38.
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