Friday, April 23, 2021

Former Fed Vice Chair Alan Blinder: All for 43.8% Capital Gains Taxes Because It'll Turn Out Like 1986

 Click here to read the original Cautious Optimism Facebook post with comments

The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff just heard former Federal Reserve Vice Chairman and liberal Princeton economist Alan Blinder on CNBC promoting Joe Biden’s proposed capital gains tax rate hike on high earners to 43.4%, the highest peacetime rate in U.S. history (39.6%, equal to Biden’s proposed top income tax rate, plus the leftover 3.8% investment gains tax from Obamacare) and eclipsed only by a few years during World War I over a century ago.

When questioned by CNBC commentators if raising capital gains taxes to century-plus records in the middle of what Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell call a “fragile recovery” is a good idea, Blinder threw out a list of excuses why a 43.4% capital gains tax was harmless.

First, he said he’s always believed the top income tax rate and top capital gains rate should be the same. That’s not an argument for economic growth but OK, that’s his personal preference.

Then Blinder dismissed risks to investment and asset prices citing the Reagan Years as precedent. According to Blinder…

“Go back to 1986 which is the last time that the Congress actually equalized the tax rates on gains and ordinary income—the 1986 tax reform, widely applauded by economists. That did not send capitalism into a nosedive. The later part of the eighties were very good. You may remember the stock market went to crazy heights in 1987, then plummeted, but the economy kept rolling along right through all of that.”

Well in the case of 2021 the stock market might possibly also keep rolling given the trillions of dollars of cheap money the Federal Reserve continues to pump into inflating asset prices, a policy that carries inherent risks in and of itself just as Fed cheap money in the late eighties inflated the commercial real estate bubble that collapsed and precipitated the 1990 S&L Crisis.

However Blinder’s comparison to 1986 was more full of holes than Swiss cheese, and as an esteemed Princeton economist and former Fed Vice Chairman he’s well aware of critical differences between then and now that he clearly omitted by design.

1) The U.S. economy was not in a “fragile recovery” in 1986 with a once-in-a-century viral pandemic gripping the world. It was entering the later stages of the Reagan Boom.

2) In 1986 the income and capital gains rates were equalized at *28 percent* not 43.4. Leaving out the actual rates was a huge breach of disclosure.

3) In 1986 income and capital gains rates were indeed equalized, but the capital gains rate only rose eight points from 20% to 28% while the top income tax rate was lowered from 50% to 28%, a whopping decrease of 22 points.

(see attached chart at the 1986 inflection point)

No wonder the economy did quite well given that colossal detail that Blinder left out. 

So if the GOP proposed a repeat of 1986, cutting the top income tax rate by 22 points and raising the capital gains rate by only eight, does anyone think Blinder would be praising it? Would he claim “all economists applauded it in 1986 so let’s do it again?” The Correspondent will bet the Fed’s entire next QE that he’d be calling it fiscally irresponsible and warning of impending disaster.

So much for using 1986 as a model, or rather anything more than just the one piece he cherry picked out.

4) In complete contrast to the 1986 reform where capital gains taxes rose slightly and income tax rates nosedived, Joe Biden is proposing raising both—the top income tax rate slightly, but the top capital gains tax rate by nearly double and, at the risk of repeating myself, a peacetime record. Even tax-happy FDR and Jimmy Carter stopped at 40% but Biden wants to outdo them all.

And remember that Biden wants to raise the corporate tax rate too, so call it a trifecta.

Blinder is brazenly attempting to sell Biden’s tax plan as comparable to Reagan’s 1986 reform, but the latter was a huge net tax cut and the capital gains rate stayed well below the peak. Biden is raising everything and breaking century-long records to the upside.

Finally Blinder capped off his argument with “the evidence is on our side.” 

What evidence? The one piece he presented or the 90% of the remaining evidence he deleted?

Deliberate, masterful, and meticulous cherry picking and omission of facts by Professor Blinder. Chalk another one up for the reputation of present and former Federal Reserve officials.

ps. All these proposed tax rates are for federal taxation only. Tax rates in many states, particularly blue states, are at historical records too.

In California, where capital gains are treated as income and the top income tax rate is 13.3%, a 43.4% federal capital gains tax rate will produce a combined effective rate of 57.7%. And Sacramento is agitating for a new 16.8% top state income tax rate which would push the effective capital gains tax to 61.1%. Hello Swedefornia!

Thursday, April 22, 2021

Small Doubts Creeping in About the Strength of the Recovery

Click here to read the original Cautious Optimism Facebook post with comments

The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff has studied the behavior of American boom-bust business cycles going back over 200 years, and history has informed him that the forces of free markets spontaneously adjusting to and from recessions are stronger than people give them credit for. Markets recovering from slumps are resilient to all but the most destructive government interventions, the worst of those being the tax, regulatory, wage, monetary and trade policy disasters imposed on America by and during the Herbert Hoover and FDR administrations of the 1930's Great Depression.

Thus the Correspondent has been hesitant to jump on the gloom-and-doom bandwagon that Joe Biden is going to destroy the economy, since the market forces reignited by reopening what was effectively the Trump economy are going to be very difficult to stop. 

As evidence, Barack Obama launched a full-fledged assault on markets when he inflated government spending by quantum leaps, borrowed and wasted trillions of dollars on green energy duds, wasteful "stimulus" projects, and expanded unemployment benefits, ballooned the federal registry with thousands of new job-killing regulations including Obamacare, raised taxes on the rich, and rhetorically assaulted businesses and wealthy Americans on a daily basis.

Yet the economy still managed to recover from the 2008 financial crisis albeit at the slowest rate in U.S. history after a financial crisis when measured in terms of GDP.

But lately the Economics Correspondent is having second thoughts about 2021 and 2022.

Yes, the recovery will be very strong, but the destructive forces of economic interference already passed or proposed by President Biden are getting stronger too. 

In less than three months Biden has borrowed $1.9 trillion to spend over half that amount on payoffs/handouts unrelated to Covid relief, proposed spending another $2.3 trillion on anything other than infrastructure (and calling it infrastructure) with major tax hikes to fund it, shut down a great deal of U.S, domestic energy production, killed the Keystone pipeline, plowed more subsidies into Obamacare regulations that only generate more healthcare inflation, proposed a $15 minimum wage that will cost low-skilled employees work hours or even jobs, incrementally "forgiven" more and more student debt to be paid for with even more taxes, proposed raising the corporate tax and cartelizing all OECD nations to collude in a price-fixing tax campaign, and called for America to hobble itself by carrying the disproportionate burden of Paris Accord climate change regulations while letting China and India off the hook.

Add today's report that Biden is contemplating doubling the capital gains tax rate on high-earners to 43.8%, a move that would lead to mass selling of stocks and other assets to beat the scheduled tax-increase deadline and a significant lowering of appetite for investment risk, and the Correspondent is losing confidence that the recovery will be so strong after all.

Read article of the capital gains tax proposal at:

It's not a fait accompli that the recovery will falter just yet, but by launching his anti-markets blitzkrieg Biden is doing his damnedest to make it interesting.

Friday, April 16, 2021

California Spends $11 Billion on Unemployment Fraud During Covid, Possibly $31 Billion

 Click here to read the original Cautious Optimism Facebook post with comments

From the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff.

Well the story is a couple of months old, but now we know where more than a quarter—and probably soon to be over a third—of California’s $42 billion Covid “stimulus” bailout money already went before they ever got it. Plus there’s a classic if not completely predictable punchline at the end.

"California has paid out a staggering $11 billion worth of fraudulent unemployment claims since the COVID-19 pandemic began last spring, California Labor Secretary Julie Su said Monday."

Read Sacramento Bee article here

"The fraudulent payments represent about 10% of all payments for pandemic era unemployment benefits, Su said. The percentage is likely to go higher."

"Another 17% of the dollars that have been paid out — more than $19 billion — are considered suspicious and “a large number of that could be confirmed fraud as well,” she said."

"“There is no sugarcoating the reality,” Su told a news conference. “California did not have enough security measures in place.”


"...dozens of prison inmates had been engaged in a scheme, mostly using contraband cell phones, to illegally acquire unemployment benefits for themselves and outside accomplices."

“Officials said billions of additional dollars have been siphoned off by organized cyber-crime rings operating out of Nigeria, Russia and elsewhere. “There’s a lot of sophisticated schemes out there,” Su said.”


“Su, who is reportedly about to be nominated as deputy U.S. Labor secretary by President Joe Biden, put much of the blame for the fraud problem on the Trump administration."

"She said Trump’s Labor Department “did not provide adequate guidance or information to protect against fraudulent rings state by state.”"

"The department did issue advisories for months warning about potential fraud.”

Sunday, April 11, 2021

Free vs Regulated Banking: Scotland’s Free Banking Era (Part 4 of 4)

Click here to read the original Cautious Optimism Facebook post with comments

5 MIN READ - The Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff concludes his series on Scottish free banking, addressing the controversial gold suspension of 1797.

Prime Minister William Pitt the Younger
commands the Bank of England to hoard gold
and shower Britain with irredeemable paper

Scotland's free banking era of 1716-1845 was the most unregulated financial system in modern history. Absent a central bank, deposit insurance, government granted monopolies, bailouts, backstops, and legal restrictions Scottish banks engaged in fierce competition for customers and pioneered a plethora of innovative financial services that are considered commonplace today.

And in contrast to the heavily regulated English system which endured ten banking panics in the same period Scotland was remarkably stable, suffering not a single systemic crisis for 129 years.


More sophisticated critics of the Scottish free banking system argue that it did in fact suffer one banking crisis in 1797, that it was a major and lengthy disruption, and that the alleged stability of free banking is undermined by this event.

Before we examine this accusation more closely, it’s worth noting that even if there was one bona fide crisis in 1797, a single panic during the 1716-1845 free banking era is still vastly superior to the ten that occurred in regulated England during the same period.

Moreover if the price of free banking really is to endure one panic every 129 years, then it’s a very small price to pay indeed. The United States has had ten banking crises in its last 129 years, and twenty crises since its Constitution was ratified. Even with some success in mitigating crises since deposit insurance was introduced in 1933, the U.S. has still experienced two bona fide crises in the 87 years since (1990, 2008).

Most Americans would gladly trade their current banking system’s track record for one that produces just one crisis every 129 years.

But the most pivotal aspect of the 1797 suspension is that it wasn’t even induced by free banking at all but once again by an overt government intervention.

Here's how the story unfolded.

France declared war on Great Britain in 1793 and again in 1797 in what became the Napoleonic Wars, a lengthy series of expensive conflicts that would last until 1815.

Alarmed by a French landing in Wales and runs on several private English banks, Parliament suspended the gold standard and granted the Bank of England and Bank of Ireland the right to refuse gold payment. However this Restriction Act of 1797 did not apply to Scotland.

Perhaps readers can already see the impossible situation this was destined to create. Scotland and England were joined in a pound-standard currency union and banknotes from each country circulated freely within the other. Private Scottish banknotes circulated in England, particularly in the north, and some Bank of England notes circulated in Scotland.

When the Bank of England hoarded gold as was so common at the outbreak of war, it called in every Scottish banknote it could find, draining gold reserves from the Scottish system.

Normally this would not be problematic since Scottish banks were likewise redeeming Bank of England notes for gold leading to offsetting claims and relatively small net gold transfers.

But now with a government intervention annulling the Bank of England’s contractual obligations, redemption became an asymmetric affair. Gold flowed out of Scottish banks rapidly, but Parliament forbade it from flowing back in.

Under this arrangement the Scottish banks would be bankrupted in a matter of months, weeks perhaps.

Imagine if you will Chase bank collecting on deposited checks drawn upon Citibank, but Citibank being restricted by law from collecting on checks drawn upon Chase. Precious reserves would flow unidirectionally, with a constant reserve drain on Citi which would soon be ruined.

Now divide the United States in half down the Mississippi River and apply the same principle: Eastern banks required to make good on their promises and pay up, but Western banks granted the privilege to refuse. Eastern U.S. banks would quickly be bankrupted and a major crisis would ensue in that half of the country—all brought about by a sudden government-bestowed annulment of contracts.

Critics argue Scottish banks could have simply refused to accept Bank of England notes for deposit, but that would not have stopped the redemption of their own notes in the south and they would still have failed—although refusing English notes may have curbed their own customers’ account balances, slowed the pace of local redemption, and at best postponed the inevitable.


Despite being figuratively placed in a Parliamentary straitjacket and thrown into the water, the Scottish system still managed a heroic holdout. In his 1802 classic "An Enquiry Into the Nature and Effects of the Paper Credit of Great Britain," English monetary theorist Henry Thornton records that:

"...the fear of an invasion took place, and it led to the sudden failure of some country banks in the north of England. Other parts felt the influence of the alarm, those in Scotland, in a great measure, excepted, where, through long use, the confidence of the people, even in paper money of a guinea value, is so great (a circumstance to which the peculiar respectability of the Scotch banks has contributed), that the distress for gold was little felt in that part of the island."

Remarkably, Scotland's own citizens didn't feel compelled to withdraw gold coin even under such onerous circumstances.

Nevertheless the English suspension would ultimately persist for twenty-four years and Scottish banks could only brave through the southward gold drain for so long. Eventually the industry appealed to local leaders and the Scottish public for the right to suspend payment themselves, at least until Parliament’s one-sided restrictions were lifted. 

Ironically most everyday Scots supported their own banks’ restriction and were relieved that the entire Scottish banking system would not be brought to ruin by London’s capriciousness. In fact there is no record of a single attempt by any private Scot to sue a Scottish bank for gold payment even as such suits were filed in English courts.

Parliament finally lifted the 1797 Restriction Act in 1821, six years after Napoleon’s final defeat at Waterloo.

So the suspension lasted a very long time—over two decades. Business carried on normally throughout and, unlike in England, without a systemic crisis or wave of failures, but bank customers’ contractual rights to banknote convertibility were undoubtedly violated. To this day it is still not referred to as a systemic crisis or panic by the large consensus of financial historians.

But it can’t be overemphasized that the Scottish suspension did not betray some flaw in the free banking system itself, for its cause was British Parliament’s intervention. Far from what big government academics like to call “market failure,” the 1797 suspension instead serves as yet another indictment of bad bank regulations.

Thursday, April 8, 2021

Left Coast Correspondent: Conservative Boycotts of Delta, Coke and MLB Begin Just as Shapiro Predicted

Click here to read the original Cautious Optimism Facebook post with comments

The Cautious Optimism Correspondent for Left Coast Affairs and Other Inexplicable Phenomena heard a headline on CNBC today that Georgia companies are now reeling from boycotts “coming from both sides.” (the political Left and Right).

Fearful of boycotts by fulltime liberal activists, Georgia-based companies like Delta and Coca-Cola last week took pre-emptive action and loudly slammed the new Georgia voting law. 

The Correspondent suspects many of those corporate executives privately supported the law, but calculated that making brave liberal-friendly noises would appease bloodthirsty activists enough to limit the business backlash and assumed talking a good virtue-signaling facade wouldn’t cost anything.

Of course they’re now finding out they miscalculated on the cost side. By once again volunteering to woke themselves into politics they triggered counterboycotts from conservatives. Now some executives are probably second-guessing themselves and considering maybe it would have just been cheaper to stay quiet.

(sample article here about Republicans targeting Coke and MLB)

The unfolding of this script reminded the Correspondent of prescient comments last summer from Ben Shapiro on the subject of leftist boycotts:

SHAPIRO: “The best case scenario is everybody leaves everybody alone, but that’s not happening.”

“They [corporations] are just going to cave to the Left. Because they always understand the Right is going to be good and they’re not going to provide any sort of real ramification for the corporation swinging Left.”

“But the Left will boycott. The Left will be loud. So as a matter of due course they [corporations] will move in that direction.”

Shapiro continues: 

“The second worst-case scenario is [conservatives also] boycott everybody because, with the possibility that with mutual assured destruction, corporations either learn that these boycotts are ineffective or corporations cave to everybody and we have left and right-wing corporations… …Complete fragmentation of our culture due to corporate cowardice.”

“I’m not sure it’s avoidable. It’s sad. It shouldn’t be like this… …I guess that’s the way we’re going as a country.”

The fragmentation scenario may not be a fait accompli just yet, but Shapiro was dead-on right that sooner or later the Left was going to trigger a boycott backlash from conservatives who for years have grown sick of playing nice while corporations cave to every leftist demand and give the squeaky, coercive, militant wheel the oil... every... single... time....

So just as the monolithic liberal media pushed their one-sided power too far for decades and triggered the creation of Fox News and conservative radio/Internet (which liberals complain about as if they just materialized in a vacuum), so too now has the Left pushed the edge of the boycott envelope too far, creating a new boycott adversary and an even more divided society.

Sunday, April 4, 2021

Free vs Regulated Banking: Scotland’s Free Banking Era (Part 3 of 4)

Click here to read the original Cautious Optimism Facebook post with comments

6 MIN READ - After being temporarily preoccupied with the Biden $1.9 trillion Covid stimulus package and $270,000-a-year government janitors in soon-to-be-bailed-out California, the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff returns to the history of free market banking in Scotland with the series’ third and penultimate column.

Demonstrators protest the U.K. Treasury
2008 bailout of the Royal Bank of Scotland

Up until now we’ve discussed the origins of the Scottish free banking system, its propensity for financial innovation, contribution to economic development, and most of all its remarkable stability especially compared to England. 

Given Scottish free banking’s remarkable performance, readers might pose two logical questions:

1. Were there literally zero bank regulations all that time?

2. Did Scottish free banking end? If so how, and what became of the industry?

We’ll cover these questions in this week’s column.


It’s important to note that no serious student of the free banking era claims it was 100% free of all and any government control, although it was the closest to a laissez-faire banking system the post-Renaissance world has witnessed. 

The Economics Correspondent has only found three interventions (excluding the 1797 Suspension—to be covered last) in the entire 129 year period.

First, as noted in a previous column, British Parliament in 1765 outlawed use of the “option clause” that banks wrote onto their notes to delay specie redemption for up to six months paying interest to noteholders for their inconvenience.

Second, as part of the same 1765 act, the private issuance of banknote denominations under one pound was outlawed throughout all of Great Britain, a regulation intended to protect the poor and prevent the tiniest ventures from entering the bank of issue market. It was also likely a rare act of cronyism for the benefit of established banks across all of England, Wales, Ireland, and Scotland.

Third and lastly, of the 50+ banks operating in Scotland by the end of its free banking era, three were granted limited liability protection via state charter. The remainder operated under full liability until British Parliament made incorporated limited liability the law of the land in 1855. 

However, by 1855 Scotland’s free banking era had already been overturned de jure for a decade so universal limited liability never existed during the unregulated era. 

None of these three, relatively small regulations can be viewed as indispensable safeguards that shielded the industry from some otherwise certain crisis. Nevertheless their existence inclines Scottish banking expert Professor Lawrence H. White to describe the system as “very lightly regulated” while the Correspondent considers even White’s characterization an understatement.

Also no reader of Scottish free banking would venture to argue that it was a panacea or completely free of failures.

Banks did fail in Scotland from time to time, virtually always badly managed ones.

But substandard bank failures are a salutary event. Present day critics of bank bailouts rightly object that bad banks should be allowed to fail and well managed banks to replace them. Champions of statist control in banking counter that large failures can’t be permitted else a major crisis will ensue.

Well imprudent banks were allowed to fail in Scotland, and the result was no systemic crisis ever took place while the system was made better off for shedding poorly managed institutions.

In fact there was one large Scottish joint-stock bank that failed spectacularly in 1772: the Douglas Heron & Company, better known as the Ayr Bank (pronounced “air” bank). 

The Ayr Bank was reckless and overextended with bad loans, yet it limped along surviving for a few years on just-in-time revolving credit from the Neal, James, Fordyce and Down Bank in London.

But when the Crisis of 1772 struck England the Neal, James, Fordyce and Down Bank failed. With its London lifeline cut off the Ayr Bank quickly collapsed, which is precisely what should have happened. Savings and capital were shifted away from a wasteful institution that was channeling funds to value-destroying enterprises and redirected to more productive investments. 

After all, the replacement of failing firms with efficient ones is a fundamental tenet of progress under capitalism, and it’s precisely how the market disposed of the Ayr Bank.

Today the Ayr Bank would be deemed “too big to fail” and rescued by government regulators. Yet even with its spectacular collapse, the Ayr Bank produced little fallout and no systemic crisis ensued.

The private clearinghouse system had largely prepaid the Ayr Bank’s obligations to the joint-stock banks thus limiting contagion to a handful of smaller nonissuing private houses. And the Ayr Bank’s depositing customers were all paid 240 pennies on the pound with any shortfalls covered by the personal assets of the bank’s owners.

Furthermore the Ayr Bank’s failure served as a warning to other large Scottish banks that mismanagement would not be rewarded by government rescue. Its collapse taught other bankers a valuable lesson in accountability, and it’s no coincidence that no large joint-stock bank failed again for the 83-year remainder of Scotland’s free banking era.


Eventually free banking ended in Scotland.

The English Peel Act of 1844 was extended to Scotland in 1845 and Scottish banks were placed under the veritable domination of the Bank of England.

No new banks of issue were allowed to open, private banknote circulation was limited to that of May 1, 1845 (£3 million, an insignificant amount today but raised steadily over time), and the Bank of England obtained a monopoly on all remaining banknote issues outside of the Bank of Scotland, Royal Bank of Scotland, and Clydesdale Bank's limit.

In 1914 all of Great Britain went off the domestic gold standard and the Bank of England stopped gold payment to foreign central banks in 1931. 

Ironically once Scottish banking was placed under the Bank of England’s note monopoly, Scottish banks not only lost their resilience to panics but in a dramatic reversal they themselves became instigators of British crises—notably when the Western Bank of Scotland and City Bank of Glasgow failed, setting off the Crises of 1857 and 1878 respectively. 

Once the Bank of England adopted Bagehot’s Rule British banking under the gold standard generally stabilized, but by the late 20th century the United Kingdom had transitioned to a total fiat standard and its banks were highly regulated. 

Deposit insurance, introduced by the British government in 1979, encouraged moral hazard with both bankers and customers who were no longer as concerned with their banks’ financial soundness. And political interest groups had begun affecting lending policies although not nearly to the same degree as in the United States.

As the Bank of England coordinated a real negative interest rate policy with the world’s central banks in the early 2000’s, they collectively inflated dangerous housing bubbles in at least 32 countries—including the U.K.—which burst in 2006-07. 

When the global financial crisis of 2008 struck, the Bank of Scotland and Royal Bank of Scotland were no longer the solid, financially sound exemplars of the 19th century free banking era. Both were large U.K. market mortgage players. Both had also expanded into overseas mortgage markets—the Bank of Scotland primarily in Ireland, Australia, and continental Europe, the Royal Bank in the U.S. subprime securitization market. 

Loaded to the hilt with bad loans and holding lousy British, Australian, European, and particularly American mortgages the two venerable firms posted huge losses and quickly became insolvent.

These storied institutions, two of the world’s oldest banks with proud heritages of soundness and innovation, were forced to seek massive rescue packages from the British government. In an AIG-like bailout, the British Treasury bought 43% and 80% stakes in the Bank of Scotland and Royal Bank of Scotland. 

Five years later the Treasury sold its Bank of Scotland stake for a tiny £65 million profit. However twelve years after rescuing the Royal Bank of Scotland the British Treasury still sits on losses in the tens of billions of pounds.

Yet there is no shortage of critics on both sides of the Atlantic who continue to blame the Scottish banks’ failures on “deregulation,” “free market dogma,” and “unfettered capitalism.”

The Bank of Scotland and Royal Bank of Scotland names live on, the former as a unit of the Lloyds Banking Group. 

The Royal Bank of Scotland's name is now more hated in the U.K. than AIG, Goldman Sachs, and Lehman Brothers combined in the USA. Thus in 2020 RBS Group holding company rebranded itself as NatWest Banking Group (the Scottish banking unit remains RBS) which, despite an English title, remains an Edinburgh-headquartered enterprise. 

However NatWest is effectively government owned, the lingering aftermath of its Treasury equity investment, and the British government has no plans to divest its share ownership to private hands until at least 2025.

Thursday, April 1, 2021

Capital Theory: Productivity of the Ever Given vs 16th Century England's Merchant Fleet

Click here to read the original Cautious Optimism Facebook post with comments

1 MIN READ - Cautious Rockers who monitored the temporary closure of the Suez Canal may have seen images of the Ever Given’s enormous stack of shipping containers. Imagining the sheer quantity of goods transported on that single vessel prompted the Cautious Optimism Correspondent for Economic Affairs and Other Egghead Stuff to dig up this impressive tidbit from economic history:

“Progress factoid: One modern container ship holds 3 times the cargo of the entire 16th century English merchant fleet and uses less than 1% of the crew.”

(H/T to George Mason University’s Lawrence H. White for posting this excerpt from the Financial Times)

The Economics Correspondent would also wager that container ship amenities for today’s crew of 22 are multitudes better than those of 16th century England's 16,000 merchant sailors—with ample food, climate control, laundry facilities, exercise, recreational, and medical facilities, private quarters, personal bath, television, computers/wi-fi, and more.

Container ship crew members also engage in far less strenuous physical labor, perform more interesting and safer work, probably work shorter hours, and enjoy standards of living at least a hundred times higher than their 16th century counterparts.

The Correspondent hopes to post a series of articles in the future on the subject of capital theory: a fancy way of describing “labor saving capital tools and machines that increase worker productivity and raise material living standards,” or the same economic force that makes the 21st century merchant crew’s life incalculably easier, safer, and wealthier than it was just fifty years ago let alone five hundred.

While the concept of capital machinery making life easier may seem childishly simple, closer study can reveal valuable truths about the nature of saving, investment, the investment and entrepreneur class, Marxism, labor unions, child labor, consumer costs, inflation, immigration, and even the boom/bust business cycle.

Given the list of subjects remaining on the Correspondent’s to-do list, capital theory may have to wait a while. In the meantime, the Ever Given and modern day container ships serve as just one illustrative example among history's tens of thousands that have delivered mankind from the caves into the ways of modern industry.