August 30th, 2015
(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: email@example.com
Another example of how science tends is biased toward excluding the possibilities of those things that would best explain our current situation, if we didn’t have the evidence, no one would be allowed to speculate such a situation:
The details of daily life are amazing, but another scholar, Gojko Barjamovic, of Harvard, realized that the archive also offered insight into something potentially more compelling. Many of the texts enumerate specific business details: the price of goods purchased and sold, the interest rate on debt, the costs of transporting goods and the various taxes in the many city-states that the donkey caravans passed on the long journey from Assur to Kanesh. Like most people who have studied Kanesh, Barjamovic is an Assyriologist, an expert in ancient languages and culture. Earlier this year, he joined some economists, as well as some other Assyriologists and archaeologists, on a team that analyzed Kanesh’s financial statistics. The picture that emerged of economic life is staggeringly advanced. The traders of Kanesh used financial tools that were remarkably similar to checks, bonds and joint-stock companies. They had something like venture-capital firms that created diversified portfolios of risky trades. And they even had structured financial products: People would buy outstanding debt, sell it to others and use it as collateral to finance new businesses. The 30 years for which we have records appear to have been a time of remarkable financial innovation.
It’s impossible not to see parallels with our own recent past. Over the 30 years covered by the archive, we see an economy built on trade in actual goods — silver, tin, textiles — transform into an economy built on financial speculation, fueling a bubble that then pops. After the financial collapse, there is a period of incessant lawsuits, as a central government in Assur desperately tries to come up with new regulations and ways of holding wrongdoers accountable (though there never seems to be agreement on who the wrongdoers are, exactly). The entire trading system enters a deep recession lasting more than a decade. The traders eventually adopt simpler, more stringent rules, and trade grows again.
In 1962 A.D., as our modern era of globalization was just beginning, the economist Jan Tinbergen — who would later share the first Nobel in economic science — noted something curious: Trade within and between countries followed a mathematical formula. He called it the Gravity Model, sort of an E=mc2 for global business. It comes with an imposing formula: Fij = G(Mi x Mj)/Dij. Which, simplified, means that trade between two markets will equal the size of the two markets multiplied together and then divided by their distance. (The model gets its name from its mathematical similarity to the equation in physics that describes gravitational pull.)
Since Tinbergen first published his finding, others have tested it on thousands of trade routes around the modern world, as well as on trade records going back a couple of centuries. In extreme cases (for example, trade between warring countries or during periods of sanction), the formula can fail to predict the volume of trade, but over all the model works extremely well. It’s a striking finding, suggesting that, for all the debate about trade agreements and currency rates, import duties and World Trade Organization disputes, trade tends to follow its own rules.
Economists were drawn to the Kanesh archive because it offered an unprecedented chance to see how well the Gravity Model applied in an economy entirely unlike our own. This was trade conducted via donkey, through a land of independent city-states whose legal and cultural systems were totally dissimilar to any we know. But still, the model held up: Ali Hortacsu, a University of Chicago economist on the Kanesh team, says that the trade figures between Assur and Kanesh matched the formula almost perfectly. ‘‘It was a very nice surprise,’’ he told me.
The Gravity Model may seem like bad news for people who want the economy to be fairer. I have spoken to countless activists and concerned friends who see global trade as a choice, something a specific set of politicians and businesses decided to impose on the rest of us, through all those confusing acronymic trade deals: GATT, Nafta and (probably, soon) the T.P.P. To me, though, the model suggests that these deals have less impact than either their boosters or their detractors imagine. There is a natural tendency for different regions to trade at fairly predictable volumes. However much politicians might want to change those outcomes, they have only crude tools at their disposal: They can stop trade through blockades, slow it through tariffs or try to jump-start it with trade agreements. What they can’t do, at least not reliably, is shape it with precision to achieve their preferred outcomes.