No review from me today, but here's a link to a London Review of Books essay by James Harkin, reviewing – from a somewhat sceptical perspective – three books on cyber-democracy:

• Death to the Dictator!: Witnessing Iran’s Election and the
  Crippling of the Islamic Republic by Afsaneh Moqadam
  Bodley Head, 134 pp, £10.99, May 2010, ISBN 978 1 84792 146 8
• The Net
  Delusion: The Dark Side of Internet Freedom by Evgeny Morozov
  Allen Lane, 408 pp, £14.99, January 2011, ISBN 978 1 84614 353 3
• Blogistan:
  The Internet and Politics in Iran by Annabelle Sreberny and
  Gholam Khiabany
  I.B. Tauris, 240 pp, £14.99, September 2010, ISBN 978 1 84511 607 1

Harkin argues that social networking is political activity, with all the pitfalls and dangers that implies. And certainly not a panacea for the absence of democracy.

The review in today's Financial Times of Enough is Enough: How to Build a New Republic by Fintan O'Toole was intriguing. The review (by David Gardner) makes it clear that the book, by a leading critic and columnist, sees the whole Celtic Tiger phenomenon as a political reaction to the country's modernisation – a “substitute identity” in place of the reactionary, theological Ireland of much of the 20th century. As the publisher's blurb puts it: “The political system is dysfunctional and is one of the main causes of
the debacle we have just experienced.”

This sent me back to a book I co-edited a few years ago about Scotland, New Wealth for Old Nations. We commissioned eminent Irish economist John Bradley to consider the lessons of Ireland's economic success for Scottish policy makers. John's essay, which majors on the role of the EU in making modernisation of the Irish economy possible, on investment in education, and on the role of policy makers in creating a focal point to co-ordinate individual economic activity, still reads well. There has just been a dramatic speculative boom overlaid on some very sensible policies.

Which takes me on to the thought that economists have ignored and are still overlooking the politics of the crisis. In all the worst-affected countries, not just Ireland, Portugal and Greece, but also Spain, the US and UK, there is a nexus of finance, construction and politics at the heart of the problem. Some authors have started to touch on this, such as Simon Johnson and James Kwak in their 13 Bankers, and Raghuram Rajan in Fault Lines. But issues of power and governance remain under-investigated. A spotlight needs to be shone on the extent of the greed and undemocratic exercise of power that have got us into this mess. Fintan O'Toole's book looks a good contribution to this scrutiny.

The papers have started their lists of recommended books of 2010. Not to be outdone, here are my top tens, one on economics, one on other books. They're all titles I read this year, but some were published earlier. And of course there's nothing systematic or scientific about this selection.

Economics and its hinterland:

1. The Enlightened Economy by Joel Mokyr – authoritative account of why Britain rather than another country was the cradle of the Industrial Revolution.

2. Whoops! by John Lanchester – a novelist's brilliant analysis of the financial crisis.

3. Lords of Finance by Liaquat Ahmed – international monetary policy and banking in the inter-war period, with scary echoes for today

4. This Time Is Different by Carmen Reinhardt and Kenneth Rogoff – meticulous history of financial crises and why they always end in defaults.

5. Taking Economics Seriously by Dean Baker – and why current policies don't, in some surprising areas such as pharmaceutical industry regulation

6. Fault Lines by Raghuram Rajan – the deep political roots of the financial crisis.

7. Adam Smith: An Enlightened Life by Nicholas Phillipson – a new biography which focuses on the Smith of The Moral Sentiments, and his intellectual milieu

8. Here Comes Everybody by Clay Shirky – full of guru-speak and only one idea, but a good read nevertheless

9. 13 Bankers by Simon Johnson and James Kwak – mild-mannered economics profs get rightly angry about the political power of the banking industry.

10. Ethiopia Since the Famine by Peter Gill – detailed reportage of Ethiopia and thoughtful assessment of the role of the aid business.

Non-economics:

The stand-out read of the year was Francis Spufford's Red Plenty. My other top reads were:

1. Hackney, That Rose Red Empire by Iain Sinclair
2. The Unofficial Countryside by Richard Mabey
3. Them and Us by Will Hutton (ok, this could have made it to the economics list)
4. Your Face Tomorrow by Javier Marias
5. My Paper Chase by Harold Evans
6. The Morbid Age by Richard Overy
7. Human Chain by Seamus Heaney
8. Zeitoun by Dave Eggers
9. Newton and the Counterfeiter by Thomas Levenson
10. The Glass Room by Simon Mawer

In the papers this weekend, I've read three roundups: The Guardian, The Financial Times, and The Sunday Telegraph. Other links and recommendations welcome!

(This post has been edited)

Books about management usually leave me cold: the ratio of blather to content has always seemed too high to bother. Thinking About Leadership by Nannerl Keohane is better than many I've dipped into. It's sensible, and short, and captures two aspects of leadership that seem pretty fundamental.

The first is its definition of leadership. She puts it this way: leadership is about “providing solutions to common problems or offering ideas about how to accomplish collective purposes, or mobilizing the energies of others to follow these courses of action.” I'd describe this as creating the focal point for an organization in a multiple equilibrium game. Others might reach for the word “vision”, although so many visions have proven mirages that one is suspicious of the word.

The second is her emphasis on the importance of judgment. This isn't the same as intellect of course, nor of decisiveness. (As Nancy Reagan is reported to have said about Ronald, “He doesn't make snap decisions, but he doesn't over-think either.”) Experience, empathy with others, analytical understanding and innate wisdom all go into the mix to make good judgment.

Keohane is also an advocate of the Team of Rivals approach (Doris Kearns Goodwin's book is lots of politicians' favourite work on leadership), whereby opponents are brought in-house, although with reservations about the day-to-day difficulty of managing conflicts and personality clashes.

The book is best on the role of leadership in a democracy, and in particular the ethics of exercising power and the interaction of pricate and public morality. With politicians in so many democracies held in great disrespect by their voters – not least because of some catastrophic failures of leadership all too apparent – this is an important subject. Is Lord Acton still the final, pessimistic word on this issue? “Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men.”

Having said this, I still feel that there are too many words written on the whole subject. Leadership is like dieting: it's easy to write down the principles, much harder to put into practice. Here, for what they're worth, are my five principles of leadership:

1. Stay focussed on the purpose of your organisation. What's it for? This will generate visions, aims, values etc, and ensure everyone knows the common focus.

2. Say what needs saying even if it's going to make you unpopular. This is harder than it sounds. I think most people have a tendency to pull their punches for the sake of social harmony, which combined with the natural tendency of others to hear only what they want, makes it hard to convey clear messages. Wildly popular leaders usually prove disastrous long term.

3. Understand what it is that you don't understand. Get advice from those who do understand or have relevant expertise.

4. Permit the people around you to disagree with you. No, go further, and invite disagreement to test your decisions.

5. Be courteous and respectful to everyone, even the most junior person. You earn back the respect you pay to others, with interest.

Those are mine – I'd love to hear other suggestions.

It isn't often that I'm driven to shout at the radio in the mornings, but today was an exception. The Prime Minister is to announce today that the government will start collecting statistics on national well-being. There's one way to do this which is necessary and welcome; but the happiness gurus have latched onto the imbecilic way to approach it, and they were the people who grabbed the airwaves.

It ought to be obvious that measuring 'Gross National Happiness' is a bad idea simply from the fact that its advocates hold up Bhutan as a model. Bhutan? It's one of the poorest countries in the world, with low life expectancy, poor literacy levels and scant political freedom. I don't care how 'happy' its not-very-free people claim to be when they're asked in a survey.

Direct survey measures of happiness have grabbed attention because of the 'Easterlin Paradox': within any country, richer people claim to be happier than do poorer people, on a scale of 1 to 3 or 1 to 5. But the average level of happiness does not rise in proportion with GDP per capita after a level of around $17,000 a year has been reached, either comparing countries at any point in time, or in one country over time. This has been translated into the received wisdom that higher GDP doesn't make us happier. Our prominent advocate of this view is of course Professor Richard Layard, who was one of the first to write about the need for the government to force us all out of the rat race in his book Happiness.

But this supposed fact rests on a statistical error. Measured happiness can never go above 3 – and it's at about 2.6 now in the UK. That's because it comes from a survey – and anyway, happiness isn't a boundless concept: how could we go beyond euphoria? GDP is a statistical construction that can rise without limit (it's a non-stationary time series). To expect happiness to go up at the same pace as GDP is like expecting height to rise in line with economic growth. There is a link – people are taller in richer countries. But not 8 metres tall. A growing number of economists have pointed out this error – for example Helen Johns and Paul Ormerod in their book Happiness, Economics and Public Policy; and recently Betsey Stevenson and Justin Wolfers in a recent paper Economic Growth and Subjective Well-being. When you take the logarithm of GDP to deal correctly with the nature of the data, there's a strong positive link.

Having ranted about the imbecilic version of the happiness agenda, however, and insisted on the importance of continuing economic growth for our well-being (or why would be be bothered about a recession?), it is important to introduce new measures about the state of the economy. There are three kinds of statistics we need.

One is an array of indicators of what people tell the ONS matters to them, on the model of the dashboard of statistics published regularly in Measures of Australia's Progress. This approach is the one recommended recently by Amartya Sen and Joseph Stiglitz in a report for President Sarkozy.

A second is a measure of the nation's comprehensive wealth, including financial and infrastructure assets, and also natural assets and human capital. This is a huge exercise which economists including Ken Arrow and Partha Dasgupta have begun to calculate. Measuring a nation's assets, broadly defined, is an essential step towards taking proper account of the legacy we leave for future generations, and therefore for achieving sustainability meaningfully.

The third is a systematic set of generational accounts so we know what obligations past and present government decisions about pensions and welfare imply for future taxpayers. Without this, we'll never understand the sustainability of government finances and the structure of the state.

It's a huge agenda for statistical offices. Let's hope they're not diverted by nonsense about 'happiness'. For anyone interested in these issues, it's a theme of my forthcoming book,  The Economics of Enough: How to Run the Economy as if the Future Matters (already available for pre-order from Amazon and elsewhere!)