taw comments on Hayekian Prediction Markets? - Less Wrong

9 Post author: David_J_Balan 15 February 2010 11:50PM

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Comment author: Chronos 16 February 2010 12:59:07AM *  10 points [-]

Have you ever worked at Wal-mart? I have: I worked overnights as a shelf stocker for almost 5 years. The Soviet Union analogy is quite apt, although I'd peg it as closer to being a less gruesome version of the Great Leap Forward.

  • We'd joke to new hires about the Sam Walton statue in the basement. (The humor came from the non-existence of the basement, and the unease underlying the humor came from the fact we had posters instead of statues only because Bentonville was too cheap to spend more than $1.99 decorating the breakroom. In hushed tones, cracks about Chairman Mao were common between the better-read employees.)
  • Bentonville issued ridiculous edicts that completely ignored the situation on the ground in individual stores.
  • Edicts were replete with unrealistic quotas. For example, all employees were expected to stock 70 cases per hour, regardless of department: boxes full of tiny cosmetics bottles are treated identically to cardboard trays holding large blocks of Velveeta cheese (where the tray doubles as the customer display).
  • Edicts were inconsistently enforced. One week, the edict is to run backstock. A week later, the edict is to spend more time "zoning" (arranging the product on the shelf for aesthetics). The week after that, the edict is zero overtime. And a week after that, the edict is case counts for everyone (timed speed runs). Then it loops back to a previous edict, and everyone is scolded for not following that edict all along.
  • It was physically impossible to perform the job while fulfilling all edicts.
  • Sometimes, the more sympathetic managers would commiserate with us about being ordered to enforce the edicts. These were usually the managers who quit, got fired, or voluntarily stepped down because of the stress. One manager disappeared for six months, rumor has it due to a stress breakdown.
  • The less compassionate managers attempted to groom themselves for a position within The Party^W^WHome Office. Looking good to the higher bureaucrats was the only concern. They were the only ones who got promoted to Store Co-Manager and above.
  • If a plan failed, it was because the store (managers, employees, or both) had failed to execute it.
  • If blame for failure could be pinned on a specific person or team, they would be drummed out.
  • "Drumming out" would consist of enforcing all standing edicts to the letter, then punishing them for insubordination when an edict was broken: "verbal" coaching, written coaching, decision-day, fired.
  • A verbal coaching still involves written documentation, because Bentonville does not permit managers leeway, interpretation, or anything that can be swayed by compassion.
  • A "d-day" would send you home for a paid day: you were required to write an essay explaining why you deserved to keep your job.

EDIT: Oh, and how could I forget: this was replete with visits from Party Officials^W^WRegional Managers. The visits were officially "secret", but of course the Store Manager would be tipped off by someone in the Regional Office. Thus, the next 24 hours would be spent artificially polishing the store (zoning, filling holes on the shelves with products that don't belong there) at the cost of doing the real work.

Comment author: grouchymusicologist 16 February 2010 01:14:53AM 6 points [-]

The good old-fashioned "list of the insane things Wal-Mart employees are made to suffer" is a minor literary genre of which I will always be fond.

But I do think you may be missing the point, which is that Wal-Mart is a highly profitable corporation and, from what I've read, one of the more systemically efficient organizations in human history, whereas the Soviet Union was an economic disaster from day one. Maybe it's as simple as good execution vs. bad execution, but notwithstanding inefficiencies and/or insanities at the level of what individual employees have to put up with, Wal-Mart does indeed seem to be getting the (faintly repulsive) job done.

Comment author: taw 16 February 2010 01:54:21AM 3 points [-]

Contrary to what everyone is absolutely certain of, Soviet Union was not an economic disaster.

Russia and Eastern Europe were much poorer than USA and Western Europe before Soviet Union even started. During Communism economic growth in Soviet Union and other Communist countries was quite close to global average - and it doesn't change when you correct for initial income and supposed catch-up effect. The big loser economically were supposedly capitalist countries like India, Chile, Argentina (and most of South America), and UK. The big winner being East Asia, but Western Europe doing somewhat better than average.

There's a helpful scatterplot in the paper linked.

tl;dr Much higher starting point of Western Europe + better than global average growth of Western Europe together created illusion that Communist countries were unusually economically unsuccessful, while in fact they've been fairly unremarkable either way.

Comment author: teageegeepea 16 February 2010 09:12:20PM 3 points [-]

What about North vs South Korea? And were East vs West Germany so different?

A point near the end of the linked paper seems in some ways to support Caplan's take on Soviet industrialization.

Comment author: taw 17 February 2010 01:29:23PM 1 point [-]

Theories that Soviet growth was fake are nonsense. If you don't trust GDP you can look at hard to fake proxies like life expectancy.

  • 1917 Russia - 29 years (last full year before the war)
  • 1953 Russia - 65 years (at time of death of Stalin)

For comparison, during the same time life expectancy in Capitalist Mexico (closest dot on 1913 gapminder chart) grew only from 30 to 52.

Comment author: michaelkeenan 18 February 2010 09:15:07PM 5 points [-]

I think you need to think in more categories than just capitalist and communist.

Comment author: MichaelVassar 19 February 2010 10:19:15AM 1 point [-]

I have made your point about econ growth not being so low under Soviet system, if one even believes in economic growth as it's usually reported. I'm fantastically skeptical of Soviet life expectancy data from Stalin's life, especially when they are one year short of current (57 Year later!!!) figures. What was the population of the USSR in 1953 and in 1917? What birth rates were reported? Are the data even consistent?

Comment author: taw 19 February 2010 11:28:39AM 2 points [-]

What I have seen in this thread is an amazing collective display of this.

Every single claim like that ("but Soviet gdp is not real", "what about East vs West Germany", "what about Stalin killing millions of people" etc. etc.) is refutable with modest effort. What will have no effect on anyone, as in any context only one of the claims is refuted, so people look at their lists of arguments - most still unrefuted - decide by proportion that Communism must have been an economic disaster, and forget about that particular problem and their original extremely low prior probability they attached to it.

As for life expectancy, I'd bet you on intrade the data is self-consistent.

Comment author: MichaelVassar 22 February 2010 06:36:40PM 3 points [-]

Given the fact that Czarist Russia had poor organization, wars and revolutions create chaos and destroy information, contemporary people have difficulty agreeing to within a factor of two as to how many people the Gulags or Chinese Cultural Revolution killed, and Russian population numbers in 1960 may have been lies (see http://www.heinleinsociety.org/readersgroup/AIM_06-20-2002.html ) I am very skeptical of the claim but much less skeptical of its logical consistency.

I'm seriously curious about the life expectancy consistency (and even more about Cuba's life expectancy legitimacy, but that's less easily checked) but not willing to do a serious analysis myself, as it sounds time-consuming. Don't want to set up an account on in-trade, but it you will do the analysis with even odds for $10 and propose a third party judge who I find credible to look over my counter-arguments and make a decision it would be worth my time to look over your data analysis and look for counter-arguments. My experience on Long Bets though makes me doubt that the third party judging etc can be done all that easily and in that satisfactory a manner, but it's worth a try.

i definitely don't accept your claim that the other claims are refutable, but that doesn't deny me the opportunity to gain a some new factual knowledge cheaply or profitably.

Comment author: RobinZ 19 February 2010 12:43:29PM 0 points [-]

I'm confused - your link suggests one thing, but your comment text could mean the exact opposite. What are you arguing?

Comment author: knb 03 March 2010 05:05:18AM 0 points [-]

Describing Mexico under the PRI (Institutional Revolutionary Party), which was a member of the Socialist International, and nationalized large chunks of the economy, as "captialist" is something of a stretch.

Comment author: taw 17 February 2010 01:18:25PM 0 points [-]

Focusing on success stories of Capitalist growth (Western Europe and East Asia) and not on global average is simply wrong.

South Korea and West Germany are atypically good performers for Capitalist world, which has its growth failure stories like India, Indonesia, Peru, Chile, Argentina, UK, and New Zealand (going from extreme poor to extreme rich).

The paper does not include North Korea, but it's so atypical for a "Communist" country it really shouldn't be treated as one - it is more like an isolationist militaristic monarchy.

Comment author: teageegeepea 17 February 2010 03:27:57PM *  3 points [-]

My point is not that East Germany and North Korea are typical communist countries, but that they can be easily compared to a neighboring capitalist country sharing much of the same culture and history: a "natural experiment" in the effect of policy differences.

Also, I think life expectancy is very different from GDP. Death rates appear to go up during economic booms and down during recessions.

Comment author: taw 17 February 2010 04:07:55PM *  3 points [-]

First, in the long term, GDP - life expectancy correlation is ridiculously high - just look at gapminder.

Now back to the main subject.

With Korea it's not much of a natural experiment - it involves two extreme outliers in their camps, so every explanation should also explain why North Korea was so much less successful than almost every Communist country, and why South Korea was so much more successful than almost every Capitalist country.

Anyway, Germany. It is comparable enough to work as a "natural experiment" - but then:

  • West Germany got plenty of money from USA, while East Germany was looted by Soviets and forced to pay reparations
  • West Germany traded with rich countries, while East Germany traded with poor countries, and by argument of regional convergence mentioned in the paper we should expect West Germany to do much better.
  • East Germany was actually the richest Communist country, due to its atypically high starting point.

And the big argument. According to data I've been able to find - almost all of the difference comes from very early time - in 1950 West Germany to East Germany GDP per capita ratio was 2.04:1.00. In 1989 it was almost identical 2.14:1.00. So 40 years hardly widened the gap, and 1950 gap can be easily blamed on harshness of Soviet occupation and reparations.

German "natural experiment" provides very little support for Capitalism vs Communism economy. On the other hand it seems to show quite well (together with Japanese / South Korean etc. examples) that American/British occupation is much better thing to happen to you than Soviet occupation.

Comment author: knb 03 March 2010 04:54:07AM *  1 point [-]

South Korea and West Germany are atypically good performers for Capitalist world, which has its growth failure stories like India, Indonesia, Peru, Chile, Argentina, UK, and New Zealand (going from extreme poor to extreme rich).

Most of those countries were not capitalist, but rather socialist mixed economies. New Zealand is actually rather capitalistic, and has respectable growth for an advanced economy and persistent low unemployment, so I'm not sure what you're getting at there. Here's Wikipedia on India:

Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialization, state intervention in labor and financial markets, a large public sector, business regulation, and central planning.[8] Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalized in the mid-1950s.[9] Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.

India liberalized starting in the 1980s but mostly since 1991. Growth accelerated rapidly after the state declared bankruptcy (basically) in 1990 and liberalization began. When Chile liberalized its economy, it went from one of the poorest to the wealthiest country in Latin America, which strongly refutes your hypothesis.

Dividing countries into two categories, as TGGP says, is not the best option. Most countries aren't fully capitalist or communist but rather a mix. On the one extreme you have countries like Singapore, Switzerland and Hong Kong, on the other you have North Korea.

Comment author: Technologos 22 February 2010 07:13:10PM 2 points [-]

I think much of the problem here comes from something of an equivocation on the meaning of "economic disaster." A country can post high and growing GDP numbers without benefiting its citizens as much as a country with weaker numbers; the linked paper notes that

real per capita private consumption was lower than straight GDP per capita figures suggest because of very high investment rates and high military expenditures, and the quality of goods that that consumption expenditure could bring was even lower still."

Communism is good at maintaining top-line growth in an economy because it can simply mandate spending. In much the same way as US government spending can directly add to GDP growth (even if incurring substantial debt), the Soviet Union could make massive military expenditures even while running factories that produced goods not based on consumer desires but state beliefs about those desires or needs.

In short, communism was not an economic disaster in that it effectively industrialized a great many nations and brought consistent top-line growth. It was an economic disaster in that state power allowed or created widespread famines and poor production of consumer goods.