Sunday, 18 January 2015

Some Notable Quotables

Willaim Somerset Maugham once said that "the ability to quote is a very serviceable substitute for wit". Here, in no particular order, are few quotations from some of my recent and not-so-recent readings.
"What is called the existing distribution of income is simply a set of retrospective data at a given point in time. These data are generated by an ongoing process in which buyers choose among alternative products available at varying prices, and the sum total of these prices paid during some time span become various people's incomes. The question is not what to decide, as to whether specific retrospective data are justified, but rather who shall decide what prospective transactions are justified on what terms in an on-going process."
From Thomas Sowell's Knowledge and Decisions (p. 77). People respond to incentives and tinkering with income distributions means changing those incentives. Economists mainly know this, but among non-Economists there is need for constant reminders. He goes on to make the Hayekian point that those who wish to change the distribution by imposing different prices are unlikely to appreciate the information which the former prices transmitted. This is a great book for laymen who wish to gain an understanding of Economics, but it's a nice read also for professional Economists.

Here's an unrelated quotation:
"Unfortunate is the king who has only one head! In guarding it with all his power he only shows the first upstart where to strike."
From Montesquieu's Persian Letters (Letter CIV). This is a remarkable book, though some of the exchanges between the Persian travellers in Europe and their many mistresses get a tad lewd. The problem of marginalism and punishment is lucidly described, too:
"A Persian who, imprudently or by mischance, draws upon himself the displeasure of his prince, is sure to die; the slightest fault or the slightest caprice reduces him to that necessity. But if he had attempted the life of his sovereign, if he had intended to betray his towns to the enemy, he would have atoned as before by losing his life; he runs no greater risk in the latter case than in the former.
"And so, under the least disgrace, death being certain and nothing worse to fear, he naturally applies himself to disturb the state, and to conspire against the sovereign - his only remaining resource."
This is from the previous letter of the very same book. I cannot vouch for the historical accuracy as I am too ignorant on the subject, but Economists are sure to appreciate this titbit, as well as many others.

Back to Economists for the last quotation in this instalment:
"In everyday usage, unfortunately, competition is used in a very personalized sense. One football team competes with another; one brand of cigarettes attempts to gain the customers of another. Competition can be 'cut-throat' - a contradiction in terms to the economist. Perhaps the best single warning to the student with regard to the use competition is this: economic relationships are never perfectly competitive is they involve any personal relationships between economic units."
George J. Stigler, The Theory of Price, p. 24.

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