In the fairly random way that sometimes happens – with serendipity, to use the word once voted the nation's favourite by Radio 4 listeners – I recently picked off my shelf the 1994 book by Scott Lash and John Urry, Economies of Signs and Space. The authors are sociologists and this book is about the sociology of the changes technology was bringing about in the advanced economies – I read it and cited it in my first book The Weightless World (1996, downloadable here as a pdf). Looking back over it, the book strikes me as a more analytical and economically-literate version of the much-hyped Manuel Castell's Information Age trilogy, albeit written in the same overblown jargon of sociology with its bows to 'critical theory' and the more impenetrable French philosophers. But let me not get distracted again by how badly sociologists write compared to us economists…

Lash and Urry are particularly good on two aspects of the changes information technology has been bringing about – their impact on cities and the increasing power of agglomeration economies; and the rising value of intangible activities (which was of course my focus in The Weightless World). It's interesting that so much of what is currently happening was predicted by many authors a decade and a half ago – far longer, actually, if one includes Daniel Bell's The Coming of Post Industrial Society in the list. For example, Lash and Urry describe the “erosion of the symbolic boundaries between what was work and what was play, what was work time and what was non-work time.” The smartphone, iPad generation would relate to that!

I also liked this comment on electronic finance: “Money has become a kind of free-floating signifier detached from the real processes to which it once referred …. What is traded in no sense exists. Money is thus an exceptionally important sign interconnecting with countless other signs removed from real or material processes.” (p292)

So it might well be worthwhile going back to other texts from 10 or 20 years ago to ponder the business of identifying key long-term trends in the economy and society. Because the lesson I draw from this book, as well as others I read at the time and the one I wrote in the mid-1990s, much of the transformation we've been experiencing actually was both predictable and predicted.

I haven't read the new book by Howard Davies and David Green, Banking on the Future, but it is positively reviewed in today's Financial Times (bizarrely doesn't seem to be online) and recently in Management Today.

In response to my query in yesterday's post about more economic research looking at the impact of the media, Bill Easterly (who co-authors the Aid Watchers blog) kindly pointed me towards the work of the World Bank's Roumeen Islam. Her latest book is a 2008 edited collection, Information and Public Choice: From Media Markets to Policy Making. This follows a 2002 book, The Right to Tell: The Role of Mass Media in Economic Development.

Anya Schiffrin at Columbia University's School of International and Public Affairs is launching a course on the media and development in the Fall of 2010.

But it still strikes me that we need more research on this subject.

This morning's papers bring an interesting review by Alex Renton of the new book by Paul Collier, The Plundered Planet. It's clear Renton finds strengths and weaknesses in the book. In principle he likes Collier's call for an 'ethics of custody' which makes decisions take account of the interests of all current and future citizens, but comments:

The problem with this idea, of course, is that it is dependent on good
governance and accountable government, and those are rarely notable
features of resource-rich under-developed countries.

Renton's conclusion, as a distinguished journalist, is that more attention needs to be paid to the scarce resource of accurate information. I agree. It's an oddly under-investigated subject. Amartya Sen famously established that a free press provides a safeguard against famine, in his Democracy as Freedom. Tim Besley at the LSE has done some research in this area. Charles Kenny has a forthcoming book which includes material on the impact of TV on development. But I can never find as much as I want to read about this subject. Any suggestions?

Notice comes of a new book, How the Economy Works, by Roger Farmer. The publisher's blurb says it's “a jargon-free exploration of the current crisis, offering a powerful
argument for how economics must change to get us out of it.” The subtitle is more revealing: Confidence, Crashes and Self-Fulfilling Prophecies.

Prof Farmer's most influential book is The Macroeconomics of Self-fulfilling Prophecies, published in 1993. The idea has spread widely in the subsequent years. I'm looking forward to reading how the financial crisis fits in with his thesis that the macroeconomy can be seen through the lens of undesirable equilibria.

Saving Capitalism from the Capitalists by Raghuman Rajan and Luigi Zingales is one I didn't manage to read when it was first published in 2003. In a rather random way, I picked it up recently and found it interesting to read through the prism of the financial crash. For the book passionately advocates the importance of financial capitalism for economic development and widely shared prosperity. The main problem faced by poor people, it argues, is too little capitalism, not too much, and specifically too little access to finance.

Now of course, access to basic means of saving and transacting, not to mention the much-praised growth of the micro-credit industry, is very different from the baroque toxic instruments created on Wall Street and in the City. I'm certain that if this book had been written in 2008 rather than before 2003 its tone would have been very different – even though, as the title indicates, its authors were already alert to the dangers of all of finance being tainted by the excesses of the markets. They did have the warning of the 2001 tech crash fresh in their minds, not to mention LTCM and the Asian crisis. What's more Raghuram Rajan is famously one of the economists (and there are more of them than popularly believed) who warned in advance about the dangers of about the present crash.

Having said that, the book is still a useful reminder that finance is an essential tool for people who want to better their lot in life. This is especially true for those who are very poor indeed.  A book I've raved about before, Portfolios of the Poor, spells out in great detail how poor people are hampered by not being able to save and spend money in safe and convenient ways. The success of MPesa, the mobile transactions scheme, in Kenya, and other mobile phone-based schemes, demonstrates the untapped demand (see this blog post by Tom Noyes, as well as our 2007 Vodafone report on m-transactions available from the Enlightenment Economics website). So does the growth of microcredit and online lending schemes such as Kiva.

This book's central argument is that it's a constant battle to make capitalism work for everyone because it is so often distorted by powerful interests to work for them – hence the need to save it from these 'capitalists'. Enforcing competition is a fundamentally important task, and one which often fails, especially in financial markets. But, as the authors acknowledge, it's difficult to sell the public interest argument for financial capitalism. A crisis causes public revulsion. And as they warn about the 1930s:

“The changed attitude to markets provided a convenient cover for the resurgence of private interests against markets and competition. While the proximate cause of the reversal might have been public disaffection with markets, the forms government intervention took and its duration are better explained by the machinations of the incumbents. It took over half a century to undo the constraints imposed on markets during those few years.”

Read now, the book is an argument for political support for markets against the power of vested interests. Is that what the outcome of the reaction to this crash will be? Or will powerful financial sector interests stack the operation of the markets in their own interests once again? Judging from how effectively they've got taxpayers to bail out their recent mistakes, I'm not optimistic about the prospects for a revival of effective competition in banking. We'll have to wait and see.