Yesterday evening I took part in a discussion at Policy Exchange with Professor Avner Offer about treating the future with due respect (the video will be up later today) – my comments linked of course to The Economics of Enough. The new campaign group Action for Happiness provided me with my topical intro, as it launched yesterday.

The group has touched a nerve, or a need, clearly – its website has been overwhelmed by traffic. Without at all meaning to downplay the extent of many people's anxieties, or of depression and other illnesses, I've posted here before about the economic nonsense being spouted by 'happiness' campaigners, so won't repeat it. A lot of what they say is in fact perfectly sensible, drawing on lessons from the positive psychology movement. The group's website has a lot of good advice for people who seek to improve their own well-being. My problem is with happiness as a government policy, and it's twofold.

First, it is simply not correct to say that because there's no link between measured happiness (on a scale of 1 to 3 or 1 to 5) and measured GDP (on a scale of zero to anything), governments should stop bothering about economic growth. GDP is a vital (although flawed) indicator of welfare, as it captures the innovations and increased opportunities that are how market capitalism increases welfare.

Secondly, measured happiness changes little over time, given its construction, and we're pretty happy in the UK (2.6 out of 3). So no matter what else happens in the economy the government will claim all is ok because we're happy. The focus on happiness is a perversely debilitating force in any effort to reduce poverty or improve the quality of life. (For a contrary view, see the blog post by Matthew Taylor of the RSA.)

The 'happiness' movement seems to be one in a succession of romantic nihilist movements that have co-existed with capitalism. John Ruskin, a better art critic than an economist, was an early founder. In Unto This Last he wrote:

Wealth, therefore, is 'The possession of the valuable by the valiant';
and in considering it as a power existing in a nation, the two elements,
the value of the thing, and the valour of its possessor, must be
estimated together. Whence it appears that many of the persons commonly
considered wealthy, are in reality no more wealthy than the locks of
their own strong boxes are, they being inherently and eternally
incapable of wealth; and operating for the nation, in an economical
point of view, either as pools of dead water, and eddies in a stream
(which, so long as the stream flows, are useless, or serve only to drown
people, but may become of importance in a state of stagnation should
the stream dry); or else, as dams in a river, of which the ultimate
service depends not on the dam, but the miller; or else, as mere
accidental stays and impediments, acting not as wealth, but (for we
ought to have a correspondent term) as 'illth', causing various
devastation and trouble around them in all directions; or lastly, act
not at all, but are merely animated conditions of delay, (no use being
possible of anything they have until they are dead,) in which last
condition they are nevertheless often useful as delays, and
'impedimenta.'

(Don't you love the Victorian skill with the semi-colon?)

Another classic example is Karl Polanyi's 1944 book The Great Transformation, with its aching nostalgia for pre-capitalist forms of production in the household and barter exchange. Like Ruskin, Polanyi's vision of the past managed to overlook its poverty, squalor and rigid social hierarchies. Richard Layard's fond memories of a boyhood of cold water and no central heating, recounted in his Happiness: Lessons from a New Science lie firmly in this romantic tradition.

It has no appeal for me, having also grown up with no central heating, and having to chip ice off the inside of my bedroom window in the winter. My happiness is my business, not the government's. They can stick with delivering stable GDP growth, encouraging innovation and creating jobs, thanks.

Next month I'm appearing with Mark Stevenson at the Bristol Festival of Ideas, and I just finished his book An Optimist's Tour of the Future. This is great fun, a conversational guide to some key areas of technological innovation, with the conversationalist a stand-up comedian (although – sorry, Mark – some of the one liners are truly groan-worthy).

One of the things I really like about the book is that it covers several strands of technology – life sciences, robotics, energy and climate change, as well as computers. In my talks, one of the standard slides is headed 'It's more than just computers' – people who dismiss the social and economic impacts of technology always focus only on ICTs, or even just the internet, and claim that it's only making people waste their time playing Angry Birds. There are even some omitted from this book: mobiles and advanced materials come to mind. The tech revolution has many facets.

My favourite chapters were the one on private sector space exploration – it had never crossed my mind that getting into space could be done cheaply – and on agriculture in Australia. The latter has the fascinating revelation that improved management of grazing alone can keep the land fertile during long droughts and trap CO2 in the soil in vast quantities. There's also a discussion near the end of the book with John Seely Brown about the interaction between social structures and the adoption and impact of technologies. I'm a long-time fan of JSB's writings, particularly The Social Life of Information.

All in all, this is an entertaining tour of radical technical change. I don't know if it will convert pessimists to optimists, though. Maybe we'll find out in Bristol on 20th May.

There's an interesting interview with James Gleick (by John Naughton, @jjn1) in today's Observer. It's about Gleick's new book, The Information: A History, A Theory, A Flood. (John has also added a blog post following up the article.) He describes Gleick's book like this: “It's a learned, discursive, sometimes wayward exploration of a very
complicated subject.”

I can hardly wait to read it. Information has fascinated me since I started to write about the economics of information and communications technologies, back in the mid-1990s. There are surprisingly few accessible books on the subject, however, and as I'm no information scientist I need the pop approach. Besides, Gleick is the author of one of my favourite pop science books of all time, Chaos: Making A New Science (1987). This is from the intro:

“[I]n the 1970s a few scientists in the United States and Europe
began to find a way through disorder. They were mathematicians,
physicists,
biologists, chemists, all seeking connections between different
kinds of
irregularity. Physiologists found a surprising order in the chaos
that develops
in the human heart, the prime cause of sudden, unexplained death.
Ecologists
explored the rise and fall of gypsy moth populations. Economists
dug out
old stock price data and tried a new kind of analysis. The
insights that
emerged led directly into the natural world—the shapes of
clouds, the paths
of lightning, the microscopic intertwining of blood vessels, the
galactic
clustering of stars.

“Now that science is looking, chaos seems to be everywhere.”

In fact, I should have added it to yesterday's post on complexity and chaos in economics. That John Naughton should have reminded me of it this morning is one of those lovely bits of life's serendipity.

The marvellous thing about picking an old book off the shelf is that when you track it down, its neighbour says, 'Me too!' So it was that today I started leafing through Paul Krugman's 1996 book The Self-Organizing Economy. I'd forgotten what a superb introduction it is to the application of the non-linear dynamics of emergent order. The book applies the concept of self-organizing systems to urban economies and to business cycles, delivered with his usual clarity.

Having read this when it was published, and Thomas Schelling's Micromotives and Macrobehavior, and Paul Ormerod's 1998 Butterfly Economics, and  Barabasi's (2002) Linked on network theory, the more recent and fashionable literature borrowing from similar models in evolutionary biology and physics have all seemed pretty familiar.

Most economists I know are intrigued and excited about these related non-linear models, but remain unsure about their practical utility, so what's actually needed now are some more applications to actual economic phenomena. Here, though, is one online demonstration of Schelling's segregation model, which is as real life as can be.

I'm looking forward to being able to post a guest review soon of Timothy Wu's acclaimed new book about prospects for a free internet, The Master Switch. His argument is that with previous generations of new communications technologies, big business sews up the market after a period of tremendous competition and innovation. (There was a very informative review in The Guardian last weekend by John Naughton.) I'm also looking forward to reading it myself, market structure being one of my favourite subjects.

Meanwhile, I pulled off the shelf a past (2003) classic on this subject, The Evolution of New Markets by the late Paul Geroski. Paul was chairman of the Competition Commission when I was a member of it, and was one of the most brilliant applied economists it has ever been my privilege to work with. (His friend and colleague Saul Estrin wrote this obituary in The Independent.)

The Evolution of New Markets covers in 200 pages all of the basic economics of dynamic new technology markets with large economies of scale, network effects, disruptive innovations, lock-in etc etc. His conclusions don't conflict with what I understand Wu to be arguing – big corporations always do what big corporations do – but Geroski is an optimist about the scope for disruptive new technologies to overturn incumbents time and time again.

The other classic is Varian and Shapiro's Information Rules, well over a decade old (1998) and still highly relevant.

Competition economics still has a long way to go in understanding the dynamics of technology markets – what does effective competition mean in two-sided markets with network effects? If disruptive entry is so important, what are the important barriers to entry, including regulatory barriers? How should consumer welfare be assessed in a dynamic way, and what's the relevant time horizon? Fascinating stuff. It's what I would be studying if I had my student days over again.