Money Illusion in King Arthur's Court

Mark Twain channels the frustration of thousands of future Econ 104 lecturers confounded by popular unwillingness to note the difference between the nominal and the real.

Twain's Connecticut Yankee tries to explain to some local freemen that the combination of high wages and high prices in their part of the country, still protected by tariffs, makes them worse off than the combination of lower wages and lower prices in his part of the country, where they have been easing towards free trade.*

After explaining, in what he thought was a crusher, that wages were twice as high in the protected region but that prices were more than twice as high, his audience still preferred higher nominal wages.

"Wait!  Now, you see, the thing is very simple; this time you'll understand it. For instance, it takes your woman 42 days to earn her gown, at 2 mills a day—7 weeks' work; but ours earns hers in forty days—two days short of 7 weeks. Your woman has a gown, and her whole seven weeks wages are gone; ours has a gown, and two days' wages left, to buy something else with.  There—now you understand it!"

He looked—well, he merely looked dubious, it's the most I can say; so did the others. I waited—to let the thing work. Dowley spoke at last—and betrayed the fact that he actually hadn't gotten away from his rooted and grounded superstitions yet. He said, with a trifle of hesitancy:

"But—but—ye cannot fail to grant that two mills a day is better than one."

Shucks! Well, of course, I hated to give it up. So I chanced another flyer:

"Let us suppose a case. Suppose one of your journeymen goes out and buys the following articles:

  "1 pound of salt; 1 dozen eggs; 1 dozen pints of beer; 1 bushel of wheat; 1 tow-linen suit;    5 pounds of beef; 5 pounds of mutton.

"The lot will cost him 32 cents. It takes him 32 working days to earn the money—5 weeks and 2 days. Let him come to us and work 32 days at half the wages; he can buy all those things for a shade under 14 1/2 cents; they will cost him a shade under 29 days' work, and he will have about half a week's wages over. Carry it through the year; he would save nearly a week's wages every two months, your man nothing; thus saving five or six weeks' wages in a year, your man not a cent. Now I reckon you understand that 'high wages' and 'low wages' are phrases that don't mean anything in the world until you find out which of them will buy the most!"

It was a crusher.

But, alas! it didn't crush. No, I had to give it up. What those people valued was high wages; it didn't seem to be a matter of any consequence to them whether the high wages would buy anything or not. They stood for "protection," and swore by it, which was reasonable enough, because interested parties had gulled them into the notion that it was protection which had created their high wages. I proved to them that in a quarter of a century their wages had advanced but 30 per cent., while the cost of living had gone up 100; and that with us, in a shorter time, wages had advanced 40 per cent. while the cost of living had gone steadily down. But it didn't do any good. Nothing could unseat their strange beliefs.

Well, I was smarting under a sense of defeat. Undeserved defeat, but what of that? That didn't soften the smart any. And to think of the circumstances! the first statesman of the age, the capablest man, the best-informed man in the entire world, the loftiest uncrowned head that had moved through the clouds of any political firmament for centuries, sitting here apparently defeated in argument by an ignorant country blacksmith! And I could see that those others were sorry for me—which made me blush till I could smell my whiskers scorching.

You'd think things would be better a few centuries later...


* It would be a fun exam question to have students lay out the conditions under which Twain's stylised facts could be true. The Boss has instituted a common coinage with lots of small change, so the big problem of small change doesn't apply. He also has been, region by region, easing back tariff protections and moving towards free trade. In Region 1, free trade is almost entirely in place; in Region 2, liberalisation hasn't started. Wages across all sectors are lower in Region 1, but prices are sufficiently lower to make real wages higher. Region 2 has higher nominal wages across the board. It is illegal under feudal structures for workers to move across regions, and it's close to illegal for them to change professions (though it seems to depend on the profession). So labour markets should only in the long term through Malthusean effects: sectors with higher real wages see higher population growth while sectors with lower real wages see starvation and decline.

I can, in that set up, see large wage effects in the import-competing sector under liberalisation. But Twain also has the wages of mechanics being lower. In the high tariff region, a master bailiff, master hind, carter, shepherd and swineherd earn 50 milrays a day: twice what they earn in the low tariff region (a milray is a hundredth of a cent). In the high tariff region, mechanics, carpenters, dauber, masons, painters, blacksmiths, and wheelwrights get a full cent a day; in the low tariff region, half. A woman labouring on a farm earns two mills a day (10 milrays, a tenth of a cent) in the high tariff region and half that in the low tariff region. So what in this counts as an import-competing sector? I'd say the shepherd to the extent that the sheep's main product is traded wool rather than non-traded meat (food preservation not yet in a state to allow meat transport across regions); the blacksmith to the extent that he makes wrought iron works for sale rather than repairs to farmers' carts; and farm labour to the extent that they work on transportable wheat and grain rather than livestock.

But Twain allows no variation in the ratio of wages between the high and low tariff regions across sectors. Maybe transportation costs in all of those sectors prevent those workers' product from moving anyway, but Twain has meat being less than half the price in the free trade region (either salt meat moves or forage does); eggs at less than half the price; wheat at 4/9ths the price; clothing at 6/13th to 1/2 the price. He also has beer being cheaper in the free trade region. And it isn't like wages in the non-traded sector are bid down by exit from the traded sector - labour mobility across sectors seems pretty limited. Maybe there's an auxillary unstated assumption that the Lords in the trade experiment regions are commanding that labourers make the appropriate movements across sectors such that we get to the observed equilibrium.

Preference falsification: King Arthur edition

Mark Twain was an awfully sharp fellow.

A seemingly throw-away line in A Connecticut Yankee in King Arthur's Court anticipates some of the more modern discussion of preference falsification and dictatorship.

In Chapter 30, our narrator (the Yankee) and King Arthur travel in disguise to learn of the land. The Lord of a local manor, seemingly a tyrant, had been murdered and his house burned down. As the Lord had been particularly harsh of late on one family, suspicion fell on them. His retainers put the blame on that family, and all the local peasantry joined in the lynching, hanging the lot of them, knowing full well that there was no evidence and that they could just as easily have been in the place of that family.

The Yankee chats with one of the mob later on, after having gained his confidence by revealing that he believed it was right that that Lord had been killed. The man then replies:

"Even though you be a spy, and your words a trap for my undoing, yet are they such refreshment that to hear them again and others like to them, I would go to the gallows happy, as having had one good feast at least in a starved life. And I will say my say now, and ye may report it if ye be so minded. I helped to hang my neighbors for that it were peril to my own life to show lack of zeal in the master's cause; the others helped for none other reason. All rejoice to-day that he is dead, but all do go about seemingly sorrowing, and shedding the hypocrite's tear, for in that lies safety. I have said the words, I have said the words! the only ones that have ever tasted good in my mouth, and the reward of that taste is sufficient. Lead on, an ye will, be it even to the scaffold, for I am ready."

One truth-teller can break a preference-falsification equilibrium. But that equilibrium can nevertheless be awfully hard to break, as truth-telling can be dangerous; while many would share the man's joy in hearing the truth, others might dob in a truth-teller. I was reminded of Xavier Marquez's discussion of Barbara Demick's work on North Korea. Xavier there wrote:

There is a terrific story in Barbara Demick’s Nothing to Envy: Ordinary Lives in North Korea (pp. 97-101), which illustrates both how such control mechanisms can work regardless of belief and the degradation they inflict on people. The story is about a relatively privileged student, “Jun-sang,” at the time of the death of Kim Il-sung (North Korea’s “eternal president”). The death is announced, and Jun-sang finds that he cannot cry; he feels nothing for Kim Il-Sung. Yet, surrounded by his sobbing classmates, he suddenly realizes that “his entire future depended on his ability to cry: not just his career and his membership in the Workers’ Party, his very survival was at stake. It was a matter of life and death” (p. 98). So he forces himself to cry. And it gets worse: “What had started as a spontaneous outpouring of grief became a patriotic obligation … The inmiban [a neighbourhood committee] kept track of how often people went to the statue to show their respect. Everybody was being watched. They not only scrutinized actions, but facial expressions and tone of voice, gauging them for sincerity” (p. 101). The point of the story is not that nobody experienced any genuine grief at the death of Kim Il-sung (we cannot tell if Jun-sang’s feelings were common, or unusual) but that the expression of genuine grief was beside the point; all must give credible signals of grief or be considered suspect, and differences in these signals could be used to gauge the level of support (especially important at a time of leadership transition; Kim Il-sung had just died, and other people could have tried to take advantage of the opportunity if they had perceived any signals of wavering support from the population; note then the mobilization of the inmiban to monitor these signals). Moreover, the cult of personality induces a large degree of self-monitoring; there is no need to expend too many resources if others can be counted to note insufficiently credible signals of support and bring them to the attention of the authorities.

It's well worth re-reading A Connecticut Yankee in King Arthur's Court, especially if you'd only read it as a kid. There's an awful lot of decent political economy in there. Imagine yourself in the place of Twain's narrator, with a comprehensive understanding of late 19th Century technology, put into the Court of King Arthur, and with the helpful conceit of remembering the date of an eclipse. I'm hard-pressed to imagine a better plan for social change than that which Twain's narrator attempts to effect. You can't oppose the Church directly, but you can start building up education and training in rational thinking. You can't oppose the nobility directly, but you can start building up a moneyed industrial class. And you can create a King's Own Regiment filled with useless nobles and hope to get them all killed off in some future battle while building a professional standing army under officers you've trained. Beautiful stuff. Heinlein imagined future revolutions; Twain imagined his as alt-history.

I've also loved:

• The narrator's trying to start an insurance company, being opposed by the Church for gambling on the will of God;
• Discussion of the merits of local newspapers, and his establishment of one at Court;
• The merits of competition in religion, to prevent the tyranny of any monopoly Church;
• The complete destruction of any romantic fantasies of life under a feudal monarch, even one as decent as Arthur. 

We're listening to it as audio-book on the morning commute. The finer nuance will be going over the five-year-old's head, but the kids will hopefully be picking up some lovely turns of phrase.

On the value of Wikipedia

Mark Twain tells the story of a New Zealand Professor coming to call at Yale. Whether it's true or manufactured - who knows.* But it could be true.

Yale etiquette, says Twain's correspondent, required that foreign visitors be flattered by laudatory comments about their country. But nobody at Yale knew anything about New Zealand other than that it was somewhere near Australia, perhaps connected by a bridge. The visit was very short notice, so the whole of Yale wound up spending the day trying to figure out where New Zealand was and some nice things to say about it.

According to the story, highlighted below, a reasonable part of a major academic institution shut itself down for a good part of the day trying to figure out anything about New Zealand - searching the libraries for anything relevant - while their wives kept the visitor busy and distracted.

Today, we can have a 5 minute flip through Wikipedia before the seminar speaker shows up.

Here's Twain's account of the story recounted him by another, HT: @LyndonHood.

"Last autumn I was at work one morning at home, when a card came up - the card of a stranger. Under the name was printed a line which showed that this visitor was Professor of Theological Engineering in Wellington University, New Zealand. I was troubled - troubled, I mean, by the shortness of the notice. College etiquette required that he be at once invited to dinner by some member of the Faculty - invited to dine on that day - not, put off till a subsequent day. I did not quite know what to do. College etiquette requires, in the case of a foreign guest, that the dinner-talk shall begin with complimentary references to his country, its great men, its services to civilization, its seats of learning, and things like that; and of course the host is responsible, and must either begin this talk himself or see that it is done by some one else. I was in great difficulty; and the more I searched my memory, the more my trouble grew. I found that I knew nothing about New Zealand. I thought I knew where it was, and that was all. I had an impression that it was close to Australia, or Asia, or somewhere, and that one went over to it on a bridge. This might turn out to be incorrect; and even if correct, it would not furnish matter enough for the purpose at the dinner, and I should expose my College to shame before my guest; he would see that I, a member of the Faculty of the first University in America, was wholly ignorant of his country, and he would go away and tell this, and laugh at it. The thought of it made my face burn.

[Nobody at Yale knew anything but that New Zealand was close to Australia...]

"...Lawson must give the dinner. The Faculty must be notified by telephone to prepare. We must all get to work diligently, and at the end of eight hours and a half we must come to dinner acquainted with New Zealand; at least well enough informed to appear without discredit before this native. To seem properly intelligent we should have to know about New Zealand's population, and politics, and form of government, and commerce, and taxes, and products, and ancient history, and modern history, and varieties of religion, and nature of the laws, and their codification, and amount of revenue, and whence drawn, and methods of collection, and percentage of loss, and character of climate, and - well, a lot of things like that; we must suck the maps and cyclopedias dry. And while we posted up in this way, the Faculty's wives must flock over, one after the other, in a studiedly casual way, and help my wife keep the New Zealander quiet, and not let him get out and come interfering with our studies. The scheme worked admirably; but it stopped business, stopped it entirely.

"It is in the official log-book of Yale, to be read and wondered at by future generations - the account of the Great Blank Day - the memorable Blank Day - the day wherein the wheels of culture were stopped, a Sunday silence prevailed all about, and the whole University stood still while the Faculty read-up and qualified itself to sit at meat, "without shame, in the presence of the Professor of Theological Engineering from New Zealand:

"When we assembled at the dinner we were miserably tired and worn - but we were posted. Yes, it is fair to claim that. In fact, erudition is a pale name for it. New Zealand was the only subject; and it was just beautiful to hear us ripple it out. And with such an air of unembarrassed ease, and unostentatious familiarity with detail, and trained and seasoned mastery of the subject-and oh, the grace and fluency of it!

"Well, finally somebody happened to notice that the guest was looking dazed, and wasn't saying anything. So they stirred him up, of course. Then that man came out with a good, honest, eloquent compliment that made the Faculty blush. He said be was not worthy to sit in the company of men like these; that he had been silent from admiration; that he had been silent from another cause also - silent from shame - silent from ignorance! 'For,' said he, 'I, who have lived eighteen years in New Zealand and have served five in a professorship, and ought to know much about that country, perceive, now, that I know almost nothing about it. I say it with shame, that I have learned fifty times, yes, a hundred times more about New Zealand in these two hours at this table than I ever knew before in all the eighteen years put together. I was silent because I could not help myself. What I knew about taxes, and policies, and laws, and revenue, and products, and history, and all that multitude of things, was but general, and ordinary, and vague-unscientific, in a word - and it would have been insanity to expose it here to the searching glare of your amazingly accurate and all-comprehensive knowledge of those matters, gentlemen. I beg you to let me sit silent - as becomes me. But do not change the subject; I can at least follow you, in this one; whereas if you change to one which shall call out the full strength of your mighty erudition, I shall be as one lost. If you know all this about a remote little inconsequent patch like New Zealand, ah, what wouldn't you know about any other Subject!'"

Twain's account of his trip to Christchurch also merits reading.


* At least part of the story seems wrong: The university at Wellington was called Victoria University College - a college of the University of New Zealand. I'm not sure that there ever was a Wellington University. And "Theological Engineering" seems dubious. And the book is known to have a couple of fictional tales included among the non-fiction. How do I know all this? Wikipedia. Except for the dubiousness of "Theological Engineering". [Update: Dave Guerin notes it was indeed called Wellington University.]