Today's Financial Times has an interesting feature about the impact of e-books on publishing – the major publishers are complaining that Amazon is charging $9.99 for new titles, well under the cost of a new hardback. You have to register to read the whole article. The gist of it is that Hachette, the world's number 2 publishing company by turnover, thinks customers will not want to pay more than twice as much for hardbacks in future.

It's rather wonderful in a way to see yet another corporate titan follow the path already well-trodden by the big record companies. The market power of these giants has for years insulated them from any need to make their prices reflect marginal costs. Publishing is dominated by extremely large multinationals who are shocked – shocked! – that the technological innovations are undermining their market power in favour of consumers.

It is a manifestation of market power that price discrimination has for so long been so successful in publishing – the hardback, the trade paperback, the mass market paperback, the spoken word version, the 'adult' and 'child' covers, the reissue of parts of books, the different editions in different countries  – enormously successful at extracting the maximum possible consumer surplus in different markets. When I was on the Competition Commission inquiry into the merger of the Waterstones and Ottakars bookstore chains in the UK (we cleared the merger), it was fascinating to listen to the big publishers talk about their pricing and discounting policies. Cost didn't feature. The main factor was the bargaining power of the retailer. One publisher said, I seem to recall, that it had been a mistake to cut book prices at all because it made the product seem too cheap to consumers, who were getting a bit too demanding about what they would pay.

I'm very unconvinced that the technology for reading e-books is actually ready for mass market penetration – but then, I love books, the physical products. It is clear, though, that the e-readers are ripe enough to start undercutting the business model of the publishing giants, and eating into their margins. It is certainly encouraging publishing innovation – I've posted here before on one example, Open Book Publishing. Incidentally, I see they have forthcoming this autumn a collection of essays on the history of copyright, which might interest readers of this blog. Looking at the pricing of printing on demand, it seems pretty clear to me that hardback and trade paperback prices will have to fall. Good for readers – bad for Hachette and their ilk.

I've been browsing through an advance copy of Joel Mokyr's new book on the British Industrial Revolution (to be published in September by Yale University Press and Penguin), The Enlightened Economy: An Economic History of Britain, 1700-1850.

Although the themes won't come as a surprise to admirers of his earlier work – The Gifts of Athena stands out  – this new book is an absolute must for those with an interest either in the historical tale or in the process of growth in general. Mokyr emphasises the role of ideas and culture and intellectual innovation, and their interaction with institutions, with politics, and with what you might call the everyday economics of factor prices and productivity increases. There is one paragraph early in The Enlightened Economy which sums this up well:

A successful economy depends on good institutions to create the right incen-
tives for commerce, finance, and innovation. Yet there is no set of institutions
that we could design as universally “optimal.” As the circumstances change,
institutions need to adapt. What matters therefore is for institutions to have the
agility to change as circumstances change. It needs not only rules that determine
how the economic game is played, it needs rules to change the rules if necessary
in a way that is as costless as possible. In other words, it needs meta-institutions
that change the institutions, and whose changes will be accepted even by those
who stand to lose from these changes. Institutions did not change just because
it was efficient for them to do so. They changed because key people’s ideas and
beliefs that supported them changed (Greif, 2005; North 2005). Much as some
economists may be suspicious of cultural beliefs underpinning economic
change, we cannot avoid facing changing ideology and institutions when dis-
cussing the eighteenth century.

He goes on to discuss the role of science in sustaining the technological and economics advances of the 19th century. The Industrial Revolution could not have happened without the Enlightenment's search for understanding and development of scientific method. Individual chapters have a strong emphasis on technology, on institutions, and on specific sectors including agriculture and services – often ignored in histories of the period which tend to be preoccupied with new manufacturing technologies. There are also chapters on gender, demography and social norms. I particularly liked the latter, again a subject often overlooked in favour of discussions of easier-to-define institutions.

I haven't yet read the whole book – will have to buy a physical copy to be able to do so. But I've certainly read enough to know that this is an important contribution to our understanding of the subtle and difficult question of how we have ideas, turn them into practical applications, spread their use through society – in short, the fundamental question of economic development.

Amartya Sen's The Idea of Justice, reviewed recently here on this blog, places great emphasis on the need to include the procedures and processes through which social outcomes are achieved – as well as the final outcomes themselves – in order to achieve social justice. He emphasises the distinction between this approach and the modern-day utilitarianism of the 'happiness' movement led by economists like Richard Layard (Happiness) and Robert Franks (Luxury Fever – chapter One available here), whose emphasis is on the outcomes per se. This of course makes paternalism one of the downsides inherent in their approach. I am wholly persuaded that Sen is right in this. My own experience on the BBC Trust establishing and running the Public Value Tests, the formal regulatory procedure for new BBC public services, has convinced me that a concern with participatory process is not just legalistic. It is an essential dialogue between decision-makers and those affected by the decisions. (The BBC Trust will be publishing in the next month or so a book setting out our approach to public value.)

It was against this background of my earlier reading and thinking that Rahim Kanani of the Hauser Center for Nonprofit Organizations at Harvard's Kennedy School of Government brought my attention to a fascinating interview with Amaka Megwalu of Harvard Law School about an article she's written on participatory justice in Rwanda. It touches on both post-genocide justice and broader issues of social justice in development and the aid industry.

On the former, she discusses the need to include both local (for participation) and international (for objectivity) instutitions of justice for an effective reconciliation process. “Often, international justice mechanisms are better than local
initiatives at recognizing faults on both sides of a conflict. 
However, local initiatives are much better at encouraging public
participation and fostering reconciliation.  Combining both mechanisms
(and others where relevant) provides a powerful method of contributing
towards justice and reconciliation..” 

On the latter front, she makes some interesting points about the tensions inherent in the aid industry, in terms of its contribution to social justice. She concludes: “In my experience, the development industry is more successful where
there are fewer expatriate staff members and development agencies are
smaller and focused on one or two programs.  It is more successful
where national staff members are given more management responsibility
for development programs and expatriate staff members serve in more
support/advisory roles.”

Well worth reading the interview in full – I'll definitely look up the article.

Today was the day all A level candidates in the UK learned whether their grades were good enough to get into their chosen university. My son the genius did well enough and so has turned with enthusiasm to the reading list he was recently sent by his tutors at Jesus College, Oxford.

The economics section starts with the textbook, Begg, Fischer and Dornbusch. There are two alternative mathematics texts: Anthony and Biggs, Mathematics for Economics and Finance, and Jacques, Mathematics for Economics and Business. And two more general reads, Barber's History of Economic Thought and Chris Huhne's Real World Economics.

It set me thinking about whether there were other books on my shelves – or out there in the world – which would be good preparation. Aforementioned son has read Tim Harford's Undercover Economist and of course Freakonomics (although naturally turns his nose up at my Sex, Drugs and Economics and The Soulful Science). The Worldy Philosophers strikes me as a good alternative to Barber.

My own pre-Oxford reading list 30-ish years ago had Roy Harrod's biography  of Keynes – overtaken now by the Skidelsky Keynes, but we only have the 3 volume edition which will certainly put an 18 year old off. However, the one-volume version would surely be a good addition. I also incline towards adding some of Keynes's own essays to the pile, as innoculation against the dreary style in which many academics are forced to write now – Essays in Persuasion, maybe.

I will be careful not to overdo it. But what else would readers suggest to turn a newby who didn't study economics at high school into an enthusiast?

Amartya Sen’s The Idea of Justice will go straight on to the reading lists for all relevant courses on justice and ethics, but it deserves a much wider readership too. It sets out a persuasive and possibly even practical approach to questions of social justice, drawing on Sen’s previous work on both social welfare and capabilities, placed in the context of the past literature from Kant and Hobbes to Rawls and Nozick. It’s also accessibly written, for a serious philosophy book anyway. I certainly managed it on the beach (see below).

The key distinction Sen draws between types of theory of justice is the contrast between those which set out an ideally just set of social arrangements and those which are instead concerned with ways to compare one actual set of social outcomes with another. In the former category are Hobbes, Locke, Rousseau, Kant, John Rawls. In the latter Adam Smith, Condorcet, Mary Wollstonecraft, JS Mill, Marx. So rather than some of the conventional ways of categorizing theories, eg is it utilitarian or not, he asks whether or not a theory offers a means to assess reductions in injustice. The focus is on direction of travel rather than ideal end-states. I for one find this a much more compelling approach than the abtract debates about ideal outcomes which were the standard fare in my student days.

Sen’s approach leads on to a number of other appealing features in his approach to social justice. He argues that we must accept there will always be a plurality of views, given that we’re comparing different social welfare outcomes rather than trying to identify a single global maximum. He also insists that it is essential to include an assessment of how people actually behave in any institutional framework. The justness or otherwise of an outcome depends on the institutions but also actual behaviour, the procedures for bringing about different outcomes, and the final outcomes themselves. It is a sort of whole supply chain view of justice.

He argues furthermore that the measure of ‘success’ in societal outcomes should not be utilities but rather capabilities. This is a big divergence from the utilitarianism-inspired well-being agenda, and again I’m on Sen’s side of this debate. The capabilities approach ensures that freedom and agency are included in welfare assessments, and therefore avoids the very unappealing paternalism of many of the authors who leapt onto the happiness bandwagon.

Finally, he places a great deal of emphasis on the importance of reasoning in general and the importance of public reasoning in particular, for the removal of injustices. Moving towards a less unjust society will require a reasoned public debate. Sen uses the same device as Adam Smith, the idea of what an impartial spectator would think, as a tool for making assessments of the fairness of a set of outcomes. Justice requires the effort to be impartial – and that includes taking account of external perspectives, outside a particular society. This, Sen argues, is particularly important in thinking about justice in a globalized economy. To argue that global justice would require a new set of ideal global institutions is, he believes, a dead end.

The book left me with one question and one minor complaint. The question is the extent to which Sen’s approach does have practical bearing on policy. Take the debate about ‘free’ versus ‘fair’ trade, caricatured as it often is. Like many conventional economists, I’m highly sceptical about fair trade, suspecting that it might distort markets and counterproductively damage livelihoods by reducing trade. Taking Sen’s approach to justice would help me distinguish the rationale for my view from an idealist with a certain view about the shape of the world. But not, I think, from a fair trader with different views about what is and is not pragmatic and moving in the right direction in terms of social justice. The inevitable plurality Sen describes seems to imply this.

The minor complaint is that Sen spends more time than made for a smooth read on setting out in great detail his differences from John Rawls and The Theory of Justice. Rawls was so dominant in the field that it is helpful to understand the differences, but some of the detail could helpfully have been relegated to an appendix. Still, this is just a quibble about an important book.