On Commerce-Predation Theory

On May 9, Professor Meir Kohn introduced his “Commerce-Predation Theory” to an audience of bright-eyed students and seasoned academics. 

The Theory

First, as to Kohn’s “Commerce-Predation Theory”: it differs from standard economics in method, as it is primarily derived from inductive epistemology as opposed to deductive. Instead of equations and mathematical models, Kohn roots his recent work in the economic and political history of pre-industrial Europe and pre-industrial China. He uses a large and diverse sample of both developing and stagnating economies over a large period of time. To Kohn, it is all about patterns and stories. In a time when normal people increasingly distrust academia, often because its data-driven approaches are incomprehensible and inapplicable to real-world problems, his methodology is a breath of fresh air. Not only were his empirical examples more tangible for the Silsby audience, but they are for anyone—including those with the power to reform our broken institutions—who takes the time to observe history. 

The story here is that economic activity consists of not only production, but also of commerce and predation. The interaction between commerce and production leads to “economic evolution,” which is a self-perpetuating process. In contrast, Kohn defines predation as the coercive extraction of resources from those who produce and trade. It actively short-circuits the process of development. Therefore, economic evolution is a spontaneous order that occurs when not impeded by predation. 

The Talk

The main source of predation? “Government!” Kohn, an unrelenting libertarian, declared without hesitation. Upon the advent of settled agriculture, there arrived those who sought to exploit producers who could no longer simply leave. Such was the foundation for the first states—fundamentally predatory, a stationary bandit. Government, however, is not irredeemable. The second form of government was formed in reaction, collectivizing the force of those who produce and trade in order to protect themselves from predation. In turn, commerce is not helpless. Kohn highlighted historical patterns in which commercial cities have established associational governments to protect themselves from predatory governments. Government is not one thing but two: predatory (top-down) or associational (bottom-up). 

Kohn went on to discuss another story, one in which economic evolution is a compound of interacting processes, including the division of labor and the adoption of technology. Within these processes, commerce serves the function of facilitating exchange. It does so in three main ways: first, through intermediaries such as Amazon and Walmart; second, through making direct exchange easier, à la the stock market, eBay, and Uber; and third, through commercial cities such as New York, London, and Hong Kong. Kohn used these examples to demonstrate that commerce is inherently entrepreneurial, seeking to lower the costs of trade and capital. 

The presentation quickly shifted to political evolution, and Kohn acknowledged that to make sense of government and its evolution, we need to understand it in terms of predation. Economic evolution, Kohn explained, always gives rise to new opportunities for predation, and, in turn, predation gives rise to the “predation-trap process.” This is the negative feedback loop engendered by economic evolution’s otherwise positive feedback loop. 

Kohn, noting the little time left, moved onto his final insights regarding development and implications for development policy. Again, he reiterated, “Economic progress is promoted by commerce and retarded by predation.” He cited the difference between growth and development then moved onto the commercial city, the center of economic evolution. Kohn contrasted (a) supply regions which experience the benefits of commercialization but lack the self-perpetuating process of economic evolution and (b) isolated regions that have no commercial city and no contact with commercial cities (North Korea and Cuba are good examples). Between commercial cities and isolated regions, he said, lies the middle-income trap: a developing country opens up and goes “gangbusters,” supplying other commercial regions, but then runs out of steam due to the lack of commercial development and innovation. This trap can be escaped by developing one’s own commercial cities—Seoul, S.K. a prime example. 

His general solution: more commerce, less predation. Commerce develops naturally as a part of economic evolution in Kohn’s eyes. If you don’t want to wait hundreds of years, import commerce and make it easier for foreign businesses to engage with the region. Addressing developed regions directly, Kohn explained that, to facilitate this process, they must remove the obstacles that they create: tariffs, primarily. Less predation means better government. Looking to failures in Afghanistan and Vietnam, he implored developed countries not to take an advisory role, proclaiming that “State capacity is a fad!” 

Kohn concluded his “Commerce-Predation Theory” lecture by noting the way in which democracy at-scale has hindered economic evolution. Before one stops reading, to qualify, Kohn grounded his argument in the Constitution and the political foundation upon which the U.S. was built—a republic. The problem in the 21st century, said Kohn, is that those who are elected to serve are no longer held accountable, with the benefits of lobbying being far higher than the costs of political malpractice on any one voter. He elicited some chuckles when he commented, “It is not working well now, in case you haven’t noticed.” 

Professor Kohn’s question-and-answer session consisted almost exclusively of his department colleagues asking questions that they could have done privately. The back-and-forth was more amusing than enlightening, with Kohn adding sharp-witted responses to seemingly redundant questions. The only noteworthy exchange was on the topic of imperialism, to which Kohn said “No! The reason the West is rich is not due to mercantilism and imperialism. I just don’t think so. On the whole, they lost money on the colonies.” Although we were initially skeptical, we have since learned that these claims check out, at least for some European powers. But this discussion was probably best suited for a separate lecture—or not. It’s a dangerous game!

Professor Kohn remains in a league of his own with the substance and delivery of his material, and we look forward to covering many more of his speeches.