Streetwise Professor

I watched a three part BBC show about Julius Caesar with low expectations. Give credit to the BBC–they not only met but exceeded them!

I figured that it would use Caesar’s story to give Big Lessons about the dangers of populism in the West, and in particular about the mortal threat to “democracy” posed by Trump. Call me Carnac the Magnificent.

Most of the talking heads (not all) repeatedly intoned that Caesar demonstrates the dangers populism poses to democracy. The irony about all this pontificating and chin pulling in the telling of a historical story was its utterly ahistorical content.

Yes, of course Caesar applied a death blow to the Roman Republic. But to take up the story in the 50s-40s BC and insinuate that Caesar was a sui generis destroyer is a complete distortion of history. Caesar just delivered the coup de grâce to a dying republic. He was far more of a symptom of its terminal decay than its cause.

The Republic had been disintegrating for at least 100 years. The Gracchi brothers–the proto-populists in Roman history–were completely unmentioned in the BBC program, as was their fate. The supposedly virtuous Senate was so threatened by Tiberius Grachhus’ attempts to empower the great unwashed populace that they beat him to death with chair legs and stones. His brother was also assassinated by the Senatorial elite some years later when he attempted the same.

And even if you say, well, Tiberius flouted Roman political norms (e.g., by attempting to stand for re-election as a Tribune in order to circumvent Senatorial attempts to stymie his legislation), that only shows that these norms were cracking long before Caesar arrived on the scene.

Also completely missing from the narrative was Sulla. Sulla who had become dictator decades before Caesar. Sulla who had marched on Rome, not just once, but twice. Sulla who had killed thousands of political enemies in his Proscriptions. (Caesar’s main criticism of Sulla is that he gave up the dictatorship. Notably Caesar did not engage in such bloodletting when he became dictator, though after his assassination Marc Antony and Octavian did).

Particularly ironic is that Sulla engaged in these autocratic acts to empower the Optimates faction that the BBC talking heads adore, and to crush the Populares that Caesar represented and the talking heads deplore. (Caesar had been on Sulla’s proscription list, but was spared after appeals by family and friends).

The omission of the Gracchi and Sulla is particularly stunning given the talking heads’ frequent paeans to “democracy.” Uhm, Republican Rome was hardly democratic. Indeed, the Senatorial elite was extremely hostile–literally murderously hostile, as the Gracchi would tell you–to democracy, and to giving greater political power to the non-elite. The whole idea of an Optimates party was that the better thans should rule (hence the name), and that the people were a mob who needed to shut up and be ruled by their betters. The Gracchi attempted to give more power to the people, and were killed. The whole thrust of Sulla’s “reforms” were to reduce the political influence of the people, e.g., by sharply reducing the power of the Tribunate (which was intended to be the representative of the people). Meaning that if you favor the Republic of the Optimates, you are necessarily anti-democratic.

This entire context that is vital to understanding Caesar, populism in Rome in the mid-first century BC, and the civil war in which Caesar eventually prevailed. Caesar was popular among the masses precisely because Rome was profoundly undemocratic, ruled by an oligarchic elite that was hell-bent on maintaining its power (in large part due to its belief in its own superior virtue and intellect) and depriving the people of power. And the people resented this.

So you can make arguments for and against Caesar, but one thing one cannot do and retain a shred of intellectual credibility is to assert that Caesar’s enemies–Cato and the Optimates–were the defenders of democracy, and that Caesar was the enemy thereof. Caesar was a threat to a self-styled republic that limited power to a highly narrow oligarchic elite convinced of its own superiority, and which disdained the hoi polloi. Yes, Caesar was probably cynical in his appeal to the masses, but in doing so he was not destroying democracy. He was destroying an oligarchy.

And that’s no doubt why the talking heads and those who take them seriously are so threatened by Trump and other “populists.” For the talking heads and their confreres are part of an oligarchic elite convinced of its own superiority, and which disdains the hoi polloi. And which is tremendously insecure in the face of broad popular discontent–which is itself the product of the manifest failures of an “elite.”

Once one understands this, one can also understand the what has to be the deliberately de-contextualized, ahistorical telling of the Caesar story. Because a full and honest telling would hit far too close to home.

So what is instructive for modern politics in this program is not the lesson the talking heads attempt to impart; it is that they are so keen to try to impart it. The late Republic rhymes with current western politics (far more than the late Empire does), but not for the reason that the BBC et al express, namely that Caesar is an avatar for Trump, but because the first century BC Optimates are avatars for a failed and flailing 21st century elite.

It’s hard to say which of the talking heads is most annoying, but my choice would be British politician Rory Stewart. If he had a time machine, he’d use it to go back to 50 BC so he could get a room with Cato. (I made that as clean as I could!) But he is merely the most condescendingly clueless of a group so lacking in self-awareness that they don’t realize that a more accurate telling of the history that they presume to relate would condemn them as much or more than they condemn their bêtes noires Julius Caesar and Donald Trump.

You may recall my earlier post on likely Civil War ancestor (direct) Patrick Martin. A Memorial Day update is in order.

I ordered from the National Archives the service records of Patrick Martin, Co. H, 1st New York Infantry. Imagine my surprise when the records of “Patrick Martin #1” came back. Not only the “#1” but the fact that this Patrick Martin was not a deserter, but was mustered out with the regiment in June, 1863 threw me for a loop.

A little more digging disclosed that there were indeed 2 Patrick Martins. In Company H. Of the 1st New York. Who enlisted on consecutive days–7 and 8 May, 1861.

Moreover, their listed ages are almost identical: 30 for #1 and 29 for #2. #2 is the deserter–at least in the NY Adjutant General’s records. Only 1 Patrick Martin appears in the Co. H 1st NY muster roll (hence my subsequent surprise).

What are the odds?

Now, based on the 1860 Census my ancestor Patrick Martin would have been 29 in May, 1861: he is listed as 28 in the Census taken in July, 1860. So #2 is the most likely, but given the vagaries of record keeping, it’s not impossible that his age was recorded as 30 by the mustering officer. For example, if he’d been born in December, 1831 and the person enrolling him asked “what year were you born?”, upon hearing “1831” the mustering officer may well have written down “30” as his age.

So he’s most likely the deserter, but that’s not certain.

I tried to find him in the 1870 Census, and originally had no luck. I figured that as a deserter, maybe he took a powder, or laid low when the government came knocking on his door. But my inability to find him was because the census taker apparently had a hot date, or something. I eventually found a Martin Patr and a Kerr Cath in the 1870 Census. (His wife’s name in the 1860 Census was Catharine Carr, as was my great-grandfather’s mother’s name in the 1880 Census). My great-grandfather, recorded in beautiful cursive as “Francis L.” in the 1880 Census, was denoted merely as “F” in 1870. The names of Patrick’s other children were also abbreviated, but at least with more than one letter.

Gee thanks, buddy. Hope you had a good time. You wasted some of mine.

The 1870 Census states that Patrick was a “firefighter.” In 1860 he was a stage driver.

This all makes me wonder what efforts the military went to to track down deserters. Was it easy for one to get lost in the teeming tenements of New York City? The post-March 1863 draft dragnet, which hit New York particularly intensely (as evidenced by the July 1863 draft riots, and the high numbers of draftees in 1864-5 New York regiments) would suggest otherwise.

There was one more candidate Patrick Martin, a 30 year old August 1861 enlistee in the 37th New York (ironically in the same brigade as the 1st). But that Patrick applied for a pension in 1905, and the 1880 Census lists Catharine Kerr as a widow. So scratch him.

Perhaps some additional information will arrive with Patrick Martin #2’s service record from the National Archives. I wait with bated breath, and will report accordingly.

Today is Memorial Day. It is also the 160th anniversary of the grievous wounding of my maternal great-grandmother’s uncle, Eli Hatfield. Hatfield’s 46th Ohio Veteran Volunteer Infantry was advancing as part of the 4th Division, XV Corps, Army of the Tennessee outside Dallas, Georgia when attacked by dismounted Confederate cavalry. (On this day the 46th was attached to the third brigade of that division, though it was part of the second brigade). Fighting without earthworks* the 46th suffered 1 killed and 10 wounded, including Eli.

The main Battle of Dallas occurred the next day. The 46th suffered heavier casualties repelling the assault of Bate’s division, including regimental commander Henry Giesy.

Eli’s wound was a bad one–a minie ball to the left arm just below the shoulder joint. Too close to the torso for amputation, the 46th’s surgeon resected the shattered bone, leaving Eli’s arm dangling at his side for the remainder of his life. (My great-grandmother said he was “Uncle Eli with the dead arm.”)

The survival rate from this surgery was very low, about 10 percent. In contrast, the survival rate from amputation was around 75 percent.

This wound was the culmination of a series of misfortunes. Eli did not have a good war. He was captured at Shiloh (where the 46th held the very right flank of the Federal army–not quite the 20th Maine at Gettysburg, but their stand was crucial). He spent several months in Cahaba (Alabama) Prison, which was not quite Andersonville but wasn’t Club Reb either. Paroled and exchanged, he returned home to Ohio but did not return to his unit, claiming that his imprisonment had rendered him unfit for service. Despite notes from his doctor (seriously–they are in his service file) the army disagreed, and Eli reported to the 46th in time to participate in the assault on Tunnel Hill at the Battle of Chattanooga. He survived the grueling (but unnecessary) march through appalling weather of the XV Corps to relieve Burnside at Knoxville, and a winter in camp at Chattanooga. He fought with the 46th at Resaca and during other skirmishes in the Atlanta Campaign, before his rendezvous with a bullet at Dallas 160 years ago today.

Eli returned to Ohio after a period of convalescence in Nashville. (Just imagine the agony of the jolting wagon or ambulance ride over rough Georgia roads to the Western and Atlantic Railway, and the subsequent train rides north over rickety rails to Nashville, and then home). He lived a long and productive life. He fathered four children (one born in November, 1865, a mere 18 months after his wounding), and died in 1899.

The 1880 Census lists his occupation as “engineer.” Of what I am trying to figure out. On a railroad? For a coal mine (one of his brothers and two of his nephews worked in the mines)? Given his rural upbringing, and the fact that virtually all his family were farmers or laborers, his profession is something of a surprise, and I am curious to learn how that came about.

He is buried in a small cemetery just east of Columbus:

Eli’s brother John also served in the 46th. John’s military records state that he was 18 when he enlisted. However, he was only 16. He enlisted a month after Eli, which combined with lying about his age suggests some parental resistance to his serving.

Unlike his brother John survived 4 years of war without a scratch, and apparently without serious illness: he is recorded as present every month for these four years–his service file is quite boring compared to Eli’s. Quite remarkable considering that his service included Shiloh, the Siege of Vicksburg (where disease was as deadly as bullets), the Second Battle of Jackson, Chattanooga, Resaca, Dallas, Noonday Creek, the assault on Kennesaw Mountain, the Battle of Atlanta (22 July), Ezra Church, Griswoldsville, the March to the Sea, the March Through the Carolinas, and Bentonville, as well as nearly continuous skirmishing during the Atlanta Campaign.

After muster out, life in Ohio was apparently unappealing to John, so he settled on a farm in Valley Falls, KS, where he died in 1915. He also fathered four children. His obituary in the Valley Falls New Era read:

Comrade Hatfield was well known in this community, took an active interest in church and G. A. R. Circles, liked to hear the bugle call and to the last enjoyed the camp fire stories, at all their gatherings and has a large circle of relatives and friends who will morn his departure. The G. A. R. Post took charge of the services at the grave.

Quoted in Find a Grave.

An old soldier who faded away, and who like many others considered his military service the high point of his life.** Eli’s feelings are unrecorded, or at least I have not found any record. Objectively it was the low point. But he survived and carried on with life.

Theirs are just two Civil War stories. I am glad to know them, and to be able to tell them.

*The report of the commander of the 46th records that the regiment dug shallow entrenchments after repelling this Confederate assault.

**A paternal ancestor corresponded nostalgically with comrades from the Bavarian Army (he was from the Palatinate, which was part of Bavaria at the time) long after he had emigrated to Chicago.

A weird and disturbing story out of Carthage, North Carolina. A Chechen, living in Chicago (but an illegal immigrant–go figure!) was shot dead by a Delta Force colonel on the colonel’s property. (NB: there are very few colonels in Delta Force. In fact, there may only be one: 1st SFOD-D (D for Delta) commander is a colonel’s billet. So this may have been the commander of Delta Force).

The narrative–pushed by the dead guy’s family and various anti-American sources–is that the deceased Mr. Daraev was but a Dreamer, trying to start a new life in America, innocently and diligently doing his work, gunned down by a trigger happy American special operator.

To start with, yes, if a Delta Force guy pulls the trigger on you, you will almost certainly be dead. But they aren’t trigger happy. In fact, they are the most disciplined soldiers on the planet. If they pull the trigger on you it is because you need to be dead. Stat. Fuck around with them and find out. In the worst way possible.

There are so many absurdities in Dreamer Daraev’s cover story. He supposedly worked for a contractor for a utility company, and was photographing to document work he had completed on a power line adjacent to the DF guy’s property.

But:

Daraev did not have any utility equipment, utility clothing or identification during the time of the shooting. 

Moreover, the company he allegedly worked for was formed only in December, 2023. It is foreign-owned, but operates out of New Jersey. What North Carolina utility would hire a new company from out of state to bring down an illegal immigrant all the way from Chicago to work on its lines? Is this just another job Americans won’t do?  

But it gets better! The company is owned by a Moldovan (!) whose previous occupations include dishwasher, and a business that sold ice. In Alaska. (Whether to Eskimos the news reports don’t say).

Yeah. That’s who I’d turn to to work on my power lines in the southern pines.

Chechnya. Moldova. Is your Spider Sense tingling?

Journalists (including Jen Griffin at Fox) have contacted the company repeatedly, and I’m sure you’ll be shocked–shocked!–to learn that it didn’t answer the phone or respond to email.  Probably because Mr. Moldova ain’t around to answer it anymore. 

Uhm, has anybody contacted the utility to see whether it actually hired an out-of-state fly by night company to work for it?  With all the concerns about infrastructure security–including from Russian threats–it would be gob smacking if it did. Hell, it takes more than five months for companies to approve new contractors at all.  

Have no fear though! The government is on it:

The incident has been reported to the U.S. Department of Labor as well as the Occupational Safety and Health Administration.

This follows other incidents, including an attempt by two Jordanian illegal immigrants to access the Marine base at Quantico–something that the military tried to cover up–as well as numerous other attempted incursions on CONUS bases by Chinese nationals.

Chechens working for an almost certain Russian cutout stalking American special operators on American soil is extremely disturbing. Even more disturbing is the cone of silence over this event. It almost seems like the administration doesn’t want you to notice!

And you know it doesn’t because it signals a complete breakdown in security facilitated by a complete collapse of the national borders.

At least this story has a happy ending. The next one may not.

This Brokers, Bagmen, and Moles podcast really took me back. It tells the complex and convoluted tale of the FBI sting operation on the floors of the CBOT and CME, and the trials that followed in the 1987-1990 period.

I worked for an FCM (located in the CME building at 30 S. Wacker) during one year that the sting occurred. Leo Melamed appears prominently in the podcast (and not in a good way, I might add): I frequently saw him in the elevator there. I had just started teaching at Michigan in January 1989 when the Chicago Tribune (to the fury of the FBI and DOJ) broke the story of the investigation. In something of a Walter Block moment, I wrote a paper (not published, nor even submitted) explaining, and to some extent justifying, the conduct that put some traders in jail (though not the right ones, from the perspective of podcast producer Anjay Nagpal).

I hadn’t thought about that paper in a long time, but the podcast resurrected it from the recesses of my memory. In a nutshell, as described in the podcast, a major aspect of the allegedly fraudulent conduct engaged in by floor brokers and locals revolved around the issue of “out trades.”

Out trades were an inherent feature of floor trading. Out trades were mistakes. Two traders could trade, and agree that they traded with one another, but disagree on the price. Those were relatively easy to resolve. Bigger problems occurred when, say, ABC said he sold to XYZ and XYZ said he didn’t buy from ABC. Or when ABC said he sold to XYZ and XYZ said he sold ABC.

These types of errors were endemic in the bustle and commotion of the pits. And they were often material. In essence, if an out trade occurred when a broker traded for a customer, and the error was detrimental to the customer, the broker had to make up the loss. In the case of ABC being a broker, and the price moved down subsequent to the time the trade should have occurred, and the broker corrected the error by selling for the customer at the lower price, ABC had to pay the customer the difference. If the error worked in the customer’s favor, he got to keep the benefit.

Especially in volatile markets and for big orders, six figure errors were not unheard of, and five figure errors were pretty common.

In essence, brokers were short a random number of options (the randomness being due to the unpredictable nature of out trades). This was a cost of doing brokerage business, and could be an appreciable cost.

And this was the hook for my paper. The bulk of the allegations against the traders was that in the aftermath of an out trade, a broker would make a trade with a local (i.e., an independent floor trader) that was profitable to the broker, but unprofitable to the local. This local was called the “bagman,” hence the middle word in the title of the podcast (and a book). The broker would later pay back the local by making off-market trades that cost customers money but were profitable for the local. For example, selling to the local at a price below the best bid in the pit.

When I first read the allegations, this struck me as an insurance arrangement, and hence the paper was titled (if I recall correctly–I’m looking for an old copy) “Broker Fraud as Out Trade Insurance.” In essence, the losses from out trades were spread out among all (or least many) of the broker’s customers. The bagmen were like insurance companies: eating a loss was a claim. The profits from off-market trades were the premiums. The customers paid the premiums in the form of unfavorable trading prices. (I also argued that broker associations, also controversial, were in large part an insurance arrangement).

My argument was that this was plausibly an efficient arrangement, as it led to a more efficient sharing of out trade risk, where out trade risk is inherent to open outrcry trading, just as fire risk is inherent to owning a house or accident risk is inherent to driving.

So were customers hurt? Well, if these practices were indeed insurance, customers actually benefited. A more efficient sharing of out trade risk reduced the cost of supplying brokerage services. With a highly competitive market for brokerage services, this lower cost would be passed on in the form of lower commissions, or better service, or more perks (like picking up bar tabs or losing more to the customer on the links).

Of course, it was almost certain that some of this type of trading was not undertaken to insure out trade risk. Some brokers no doubt took advantage of the widespread nature of the practice (where its ubiquity was driven by its putative efficiency) to rip off customers on some trades. However, as I argued in the paper, the ultimate effect of that kind of behavior on customers was mitigated by competition among brokers. The ability to harvest those kinds of illicit profits reduced the reservation commission that brokers charged.

(In making this argument, I riffed on an example from (then) Donald McCloskey’s price theory/micro text. He argued that the practice whereby shipyard labor cutting wood on sailing ships pocketed and sold shavings from the wood they cut had little impact on the cost of building or repairing ships, because labor market competition reduced wages by an amount commensurate with the value of the wood thus taken. McCloskey used this to illustrate the idea–originating with Adam Smith–of compensating wage differentials).

So the argument was basically not only was this not worth a federal case (or what was at the time the most expensive FBI investigation in history), it was arguably efficient, or at most a victimless crime (in equilibrium, anyways).

Other allegations included things like trading after the close. Again, in many cases this could be viewed as efficient, and beneficial to customers: trading at the close was often insanely chaotic, making it impossible to execute all orders before the bell rang.

Labor unions know that one of the most effective ways of disrupting a production process is to “work to rule”, i.e., adhere strictly to every agreed upon rule. In any tightly coupled system (e.g., an assembly line, an airline operating on a schedule, or a trading floor), allowing for some play in the joints–some departures from strict adherence to the rules–can allow it to operate more efficiently. Strict adherence to the rules would likely have interfered substantially with the efficiency of the floor trading process.

Or think of the mess that an NBA game would be if refs called every foul. “No harm no foul” is a reasonable way to call a game.

To the outrage of other defendants–who claimed that nothing untoward happened on the floor–the lawyer for two defendants (a guy named David Durkin, interviewed in the last episode of the podcast) argued that yeah, this stuff happened all the time, and it wasn’t fraud. He didn’t make exactly the same argument as I did, but his argument rhymed with mine. That is, the intent of these violations of the rules was not to defraud, which would be necessary to achieve a criminal conviction. (The argument was not tested at trial. For perfectly understandable reasons, guys facing RICO charges and 20 years in Club Fed took a deal and pled out for terms of 8-10 months. One could argue that the relatively big delta between the deal and the penalty if they had lost reflected the government’s assessment that the argument could have indeed been persuasive to a jury.).

Take it as you will. All I can say is that nothing in the podcast made me change my mind from what I came to believe 35 years ago. (Time flies!)

The podcast delves deeply into the genesis of the investigation. This material was pretty new to me. I had heard nothing previously to challenge the public explanation that ADM’s Dwayne Andreas was ticked off (no pun intended) at being ripped off by the floor, and sicced the FBI on the exchanges. But after listening to the podcast, like Nagpal I find it unpersuasive. Would that really be sufficient motivation for the DOJ and FBI to launch such an ambitious investigation? (Perhaps they didn’t realize how hard it would be, and doubled down once they got in–the sunk cost fallacy at work.). Was it really aimed at the exchanges themselves, or the bigwigs there? Was it really launched to investigate mob money laundering? After all these years, these remain open questions, despite Nagpal’s dogged efforts to answer them.

The podcast also featured extensive interviews with various traders–some convicted, some not, and some not even charged. Those brought back memories of the floor in all its glory, color, character, and characters. And the accents! Having been away for years, the distinctive Chicago accents were truly noticeable and entertaining: at the time, as a fish in those waters, they would have seemed to be normal.

My only criticism of the podcast is in its attempt to draw Big Lessons. Nagpal’s big lessons were: (a) this conduct was rife; (b) it was fraudulent and harmed customers; (c) it was so rife that bigwigs–notably Leo Melamed–participated in it; (d) the fact that the bigwigs skated was a travesty of justice; and (e) the episode demonstrates the fundamental flaws in exchange self-regulation.

Here Nagpal gets preachy. Though in the last episode (in which Durkin plays a prominent role) he does start to wonder whether the bad stuff really wasn’t so bad after all, and that some of the bad guys really weren’t that bad.

As someone who wrote a lot about self-regulation in the 90s in particular (in large part due to the experience of dealing with it in the aftermath of the Ferruzzi episode), I am surely not in the self-regulation hallelujah chorus. However, I vigorously disagree with Nagpal’s contention that putting the futures exchanges under the aegis of the SEC would represent an improvement (not least because stock exchanges regulated by the SEC are also self-regulatory organizations). In the case of the investigation of the floor, the assumption that self-regulation failed presumes that the conduct was truly predominately fraudulent: as argued above, that’s debatable.

And yes, exchange governance is political–as discussed in detail in my 1995 and 2000 JLE articles. But government regulation is politicized too.

Overall, though, those are quibbles. In laying out in detail the complex facts, and letting the principals speak at length, Brokers, Bagmen, and Moles sheds considerable light on a long forgotten but epochal moment in the history of Chicago’s exchanges. It’s a kind of unvarnished history and I hope that others make similar contributions before the old floor traders, like old soldiers, just fade away like the sound in the pit after the closing bell.

Outside of relatively specialized Civil War publications (which are shrinking in number), one seldom sees reference to Major General Gouverneur K. Warren. Hence it was a pleasant surprise to see a rather lengthy article about him in The Epoch Times of all places.

G. K. Warren

The article ends with a discussion of Warren’s “Unjust Fall” during the Battle of Five Forks in April, 1865, when a furious Philip Sheridan unceremoniously relieved Warren of command of the V Corps, believing that Warren was too slow in attacking.

Warren’s relief–and particularly Sheridan’s refusal to reverse it, or apologize for it after the heat of battle had passed even though his victory was complete–was indeed unjust. The part of the V Corps under Warren’s direct observation advanced into a vacuum, rather than attacking Pickett’s Confederates directly as Sheridan wanted, because of the fog of war, and in particular unfamiliarity with the Confederate dispositions due in large part to the heavily wooded terrain. It was the kind of thing that happened numerous times during the war, and which happens in every war.

But although Warren’s fate was decided on in the smoky Virginia woods on 1 April 1865, it was written long before, and was in many ways emblematic of the history and culture of the Army of the Potomac and the clash between that culture and U.S. Grant and his coterie–which prominently included Phil Sheridan.

Philip Sheridan

Warren was an engineer by training. Indeed, his greatest service in the war was his direction of two brigades to the vacant Little Round Top at Gettysburg while serving as the AoP’s Chief Engineer. After Gettysburg, he became a corps commander, first in temporary command of II Corps after W. S. Hancock’s wounding at Gettysburg, then in permanent command (until Five Forks) of the V Corps. Warren brought an engineer’s mindset–precise, deliberate, and cautious–to corps command. This drew the ire of Grant and his circle, who during the Overland Campaign and the Petersburg Campaign were repeatedly frustrated by what they perceived as Warren’s lack of aggressive spirit.

In his defense, one could say that based on experience, especially at the Wilderness and after, caution in attack was prudent, and aggressiveness foolhardy. But Grant was not alone in his frustration with Warren. Even before Grant’s arrival in Virginia, AoP Commander George Gordon Meade had been furious with Warren for failing to attack as ordered at Mine Run (in November, 1863). Meade was also harshly critical of Warren’s caution at the Wilderness on 5-7 May 1864, and tension between Warren and Meade, not to mention Warren and Grant, was pronounced throughout the balance of 1864 and into 1865.

Warren also had a touchy personality, resented criticism, and argued with his superiors constantly–Meade in particular. The intense mental and psychological stress of the brutal Overland Campaign only aggravated Warren’s (and Meade’s) tempers and mutual dislike.

Thus, Warren was skating on very thin ice when Grant’s grand offensive against Lee commenced in March, 1865. His assignment to cooperate with and support Phil Sheridan made falling through it almost inevitable.

Sheridan was everything Warren was not, and vice versa. The former was blunt and hyper-aggressive, the later high strung and sensitive, and as noted above cautious rather than offensive-minded, especially after the 11 shattering months of combat in Virginia in 1864-5. Sheridan had come originally from the western theater (brought by Grant to command, though he had not served extensively with him and had not commanded large cavalry units), and from the start clashed with the AoP establishment which he found lacking in the will to do what was necessary to win the war. (Note his confrontation with Meade in over how to deploy the cavalry the immediate aftermath of the Wilderness, which led to Grant turning him loose to raid Richmond, resulting in the death of Jeb Stuart and little else).

Whereas Warren was something of an intellectual, by army standards (the engineers were, in general), Sheridan was anything but. He finished 34th (out of 55) in his West Point class: Warren was second in his. Sheridan had been suspended for a year for threatening to bayonet an upperclassman. Warren’s conduct record was exemplary.

Sheridan had won smashing victories in the Shenandoah Valley in September-October 1864, and had wreaked destruction in the Valley afterwards–a “hard war” policy that the AoP had shrunk from since its formation. Sheridan was viewed by the AoP as something of a barbarian.

Thus, Warren represented everything that Sheridan despised, and epitomized everything Sheridan found wrong with the AoP. Sheridan was looking for a chance to get rid of him, specifically asked Grant for the permission to do so (before Five Forks), and did it at the first opportunity on a flimsy pretext–even after Warren had extricated Sheridan and his cavalry from a difficult situation at Dinwiddie Court House on 31 March.

In the box of 1 April 1865, Sheridan was clearly in the wrong. But in the large, he was in the right. Men like Gouverneur Warren were not going to win the Civil War. Hard men, relentless men–men like Sheridan, Sherman, and Grant–were, and did.

Warren was thus a tragic figure, in a war chock full of them. He was a good man, but in the wrong position. You would almost certainly find Warren to be much preferable as a companion to the brusque, relentless, and blunt (“the only good Indian I ever saw was dead”) Sheridan, and you can genuinely pity his fate. But good companions are typically not cut out to be good commanders, especially in total wars. The sons of bitches are. And Phil Sheridan was one of the Civil War’s leading sons of bitches.

I’m back. A little play. A lot of work.

What to start back with? Russia, I guess.

The war in Ukraine grinds on. The supposed big news is Russia launching attacks near Kharkiv/Kharkov. Many interpret this as a sign of Ukraine’s impending doom. I disagree.

Yes, Russia did make some initial gains. There is some controversy regarding why. Initial reports were that Ukraine had not built fixed defenses in a 10 km wide region near the border with the Belgorod Oblast because engineers would have been too vulnerable to Russian artillery fire while attempting to perform the work. More recently, however, it has been claimed that defenses were planned–and paid for–but little or no work was done.

These explanatons are not mutually exclusive, of course: maybe the work was not completed due to the perceived vulnerability. However, a sadly realistic alternative explanation is that Ukraine’s endemic corruption is to blame, and that the contractors pocketed the money and did no work.

Whatever the reason for the relatively undefended border, Russia has still incurred heavy casualties to take a few slivers of territory, and their advances have slowed to a crawl after the initial gains.

Moreover, the threat from this attack to Kharkiv, let alone to Ukraine’s overall position, is limited. For one thing, the total Russian forces involved–an estimated 50,000 (including tail as well as tooth)–is hardly big enough to take a city as large as Kharkiv, especially if it is being attrited at the rate of 1,000 plus per day.

For another–and more importantly–as is occurring virtually everywhere else on the frontline, Russia is mounting infantry assaults, in company-size packets. Armor is used mainly to ferry troops from the rear and drop them off, before scurrying away. Or trying to scurry away: even then drones are inflicting substantial vehicle losses on the Russians both coming and going.

The infantry attacks are basically bum rushes offering no prospect for breakthrough and exploitation. As has been seen elsewhere on the front, at heavy cost they permit shoving back the front for a few kilometers at most, take considerable time to do even that, and culminate relatively quickly.

Moreover, with the prospect of receiving more artillery ammunition, Ukraine will be able to inflict even more devastation on these attacks without risking its own (scarce) infantry.

So why are the Russians doing this? Perhaps as an economy of force move to draw Ukrainian troops away from other locations. Perhaps in the thought that more progress is achievable here than where the main efforts have ground on for weeks. 10 kilometers here rather than 5 kilometers to the south.

Elsewhere on the front, for weeks Russia has been aiming at Chasiv Yar as a follow on for their glorious victory in Avdiivka. Putin had reportedly ordered Chasiv Yar to be taken by 9 May, Victory Day in Russia.

Well, it wasn’t. And even if it had been, it just shows what a simulacrum of military greatness Putin’s Russia represents. Whereas 9 May 1945 represented the conquest of Berlin–a massive city defended by a greatly diminished but still formidable opponent–a victory at Chasiv Yar on 9 May 2024 would have represented the taking of an obscure, modest town from a scraped together (but scrappy) military lacking pretty much everything.

Despite the absence of a crowning victory at Chasiv Yar (which even then would have only been a way station in a long campaign to come, rather than a war ending event like the taking of Berlin), the Victory Day Parade went on in Moscow nonetheless. But it was a shadow of its former self, with basically only Putin’s praetorian guard and a single tank–a WWII T-34 no les–showcasing military might (or lack thereof).

Sad.

The other big news has been Shoigu’s defenestration as defense minister, and his replacement by technocrat Andrei Belousov. Not just a technocrat, but an economist no less.

This is also being reported breathlessly. Yes, it may indeed represent a strong reflection of Putin’s intentions. Namely, that he is girding for a long war, which will require a substantial reinvigoration of Russia’s defense production. (Note that most of Shoigu’s recent public appearances were at defense plants, where he exhorted the employees about the need for greater efforts.) That is, that Belousov is intended to be a modern day Lloyd George, who drastically reformed Britain’s munitions manufacture in 1915-1916 by taking control away from a bureaucratic and overly traditional War Office.

Yet, intentions and results are worlds apart, and there is substantial reason to believe that Belousov faces a hopeless task.

Russian defense production and procurement is rife with corruption. Even if Belousov is not corrupt (and it is hard to believe that anyone who became a deputy prime minister in Russia is not corrupt), that doesn’t mean that he has the ability to root out the pervasive corruption that is present at every level of the Russian military establishment. Moreover, he is an outsider, and the Russian military does not respect outsiders, and is indeed deeply resentful of their interference.

In the coverage of Belousov’s appointment, I have not seen anyone mention Anatoly Serdyukov’s ill-starred tenure as Defense Minister. (Shoigu replaced Serdyukov 10 years ago.)

Like Belousov, Serdyukov was an economic official (Tax Minister) whom Putin appointed–wait for it–with “the main task of fighting corruption and inefficiency in the Russian armed forces” (in the words of Wikipedia, which are accurate). (Sound familiar?) Due to his former career as manager of a furniture manufacturer and merchandiser he was sneeringly referred to as the “furniture dealer” throughout the military, who fought him hammer and tong. After several years of conflict, he was eventually brought down by an allegation of corruption (for which Putin eventually granted amnesty).

Although Serdyukov achieved some reforms, they were superficial–as the experience of the war in Ukraine demonstrates. I do not expect Belousov will fare any better. This is a case of meet the new boss, same as the old old boss.

Moreover, Belousov faces structural problems that would greatly complicate his challenge even absent corruption and internal opposition. Labor shortages are acute. There is a fundamental tension between finding enough men to feed into the meat grinder and finding enough men to make the weapons they carry or ride into the meat grinder. And although sanctions have not been crippling, they have substantially impeded Russian weapons production, especially of more advanced equipment. The impending resupply of ammunition, anti-aircraft missiles, and the like to Ukraine will also increase the losses that the Russian factories have to make good.

There is also the question of the impact of this on Russian military command. Belousov is obviously not going to have a clue about operational matters. So does this mean that Putin will exercise even more control? Or will this give a freer hand to Gerasimov and the other generals, who have proven to be incompetent, callous bumblers? Regardless, there is certain to be a disconnect between the Defense Ministry and military operations.

One last note. The Defense Ministry reshuffle is not the only change at the top. Somewhat surprisingly, Nikolai Petrushev, former FSB head, Secretary of the Security Council of Russia, and all around dark dude suspected by some to be the real power behind the throne in Russia, was also removed from his post and designated for assignment–and days later the assignment has not been announced.

This is surprising, to me anyways. Petrushev’s son (sometimes mentioned as an eventual Putin successor) did receive a promotion from Agriculture Minister to Deputy Prime Minister, which suggests that Petrushev is not totally on the outs and destined for an accidental fall from a window. But this is Russia, so who knows?

In sum, all the “changes” of the past days–a new offensive, ministry shakeups–are highly unlikely to herald a major shift in the dreary drama playing out in Ukraine. A mini-offensive here, a cabinet reshuffle there, won’t alter the fundamental realities of the military situation. Yes, they signal that Putin is doubling down, but they don’t improve his hand in the slightest.

Well, the FTC done gone ahead and done it, implementing a broad prohibition on “no compete” clauses in contracts. As with most recent FTC rules and court cases, it brings to mind Coase’s observation to the effect that some people see a market practice they don’t understand, their immediate conclusion is that it is some sort of nefarious exercise of market power.

The FTC’s main bugaboo is that non-competes create lopsided bargaining power in favor of firms. Such bargaining power per se should not give rise to antitrust concerns. And indeed, lopsided bargaining power may be an efficiency enhancing feature that makes both firms (the supposed beneficiaries) and employees (the alleged victims) better off.

One needs to remember that there are at least two stages here. Ex ante, when the employer and employee agree on terms to a contract, which may or may not include the non-compete clause (and the employee can reject an offer that includes one), and ex post, when the employee has found a potentially superior outside opportunity and would like to get out of the restriction. The bargaining power under non-competes is unbalanced in the ex post stage.

A threshold issue is why would the employer and employee agree ex ante to an arrangement that is inefficient, i.e. reduces their joint wealth? If the benefit of the restriction to the employer is smaller than the cost to the employee, there would be a bargain without the non-compete that would make both parties better off. Crucially, this is true regardless of the distribution of bargaining power. Thus, it is highly likely that the mutual agreement to employment contracts including non-competes indicates that they are efficiency enhancing.

This then raises the question: what is the source of efficiency at the ex ante stage that induces the parties to enter into an arrangement that ties the employee’s hands and limits his/her bargaining power ex post?

Property rights economics provides an answer. In a zero transactions cost world, who owns assets is irrelevant. (The Coase Theorem.) However, if certain things are non-contractible (because, for instance, they cannot be verified by 3rd parties like courts), transactions cost are positive and the distribution of asset ownership matters, and can impact efficiency. It matters precisely because it can affect bargaining power ex post.

The owner of assets has bargaining power over non-owners with whom he contracts: he can withhold the employee’s access to the asset, thus depriving him/her from any benefits from it.

This can affect efficiency because it affects incentives to invest ex ante. The party with the bargaining power (the asset owner) extracts most of the rents from the relationship between the two parties. That affects that party’s incentive to make (non-contractible) investments that increase the amount of ex post rents to be split between employer and employee because he gets the lion’s share of these gains.

Placing the bargaining power in the hands of the party who is best able to make rent-increasing investments therefore leads to better investment decisions, and to greater surplus to be divided between the parties.

Designing contracts that allocate ex post bargaining power unevenly can therefore improve incentives ex ante, and crucially, make both sides better off–including the putatively disadvantaged party. Disadvantaged ex post, anyways.

Non-compete clauses, by the FTC’s own admission–hell, lament–allocate bargaining power. Property rights economics suggests that is likely a feature, not a bug. Crucially, it can explain why these clauses come into existence in the first place.

Firms can make non-contractible investments in their employees’ general human capital. Moreover, apropos my recent post on learning by doing, firms can increase knowledge and information by increasing their output or scale. If employees can walk across the street and sell that knowledge and information to others the firm’s incentive to invest in employees’ human capital or engage in actions that lead to employee learning by doing is reduced. However, with non-competes firms have the bargaining power that allows them to extract those ex post rents, which preserves their incentives to make non-contractible investments in generalized employee human capital, including human capital generated as the result of experience/learning by doing..

The real conundrum with non-competes is the one common to all arrangements relating to the production and dissemination of information. There are static losses if information already in existence is sold at a price above its marginal cost–effectively zero–or not sold/transferred at all. However, if information is transferred at a zero price, but is costly to produce, too little is produced. This is effectively a dynamic effect.

The same tension/trade-off exists with patents and copyrights. The ex post trade in costless information is restricted in order provide incentives to create it in the first place. Non-compete clauses that allow firms to extract most of the rents associated with knowledge production in their employees provides similar incentives.

I would also note again (as I have in earlier posts) that non-competes don’t create bargaining power ex ante, and restricting them will therefore not affect the distribution of gains at the contract formation stage. However, the magnitude of the gains to be split will be smaller in the absence of non-competes if they have the incentive effects discussed above.

Non-competes are a form of vertical restriction. Such restrictions often–and I would say typically–have efficiency rationales. Indeed, these rationales often relate to attempting to restrict free riding on information. Think of Lester Telser’s argument about resale price maintenance, or research on things like exclusive dealing and exclusive territories. Non-competes clearly relate to property rights in information, and therefore eliminating them will have baleful consequences.

But the Lina Khan FTC only has a market power hammer in its tool box, and is therefore bashing away at what is likely an efficiency enhancing contract feature that has nothing at all to do with the exercise of market power qua market power.