George Orwell’s essays are always worth revisiting. As he says in [amazon_link id=”0141036613″ target=”_blank” ]Books v Cigarettes[/amazon_link], there are “books that become part of the furniture of one’s mind and alter one’s whole attitude to life.” Certainly some of his, including [amazon_link id=”0141185295″ target=”_blank” ]The Road to Wigan Pier[/amazon_link] and [amazon_link id=”0141184388″ target=”_blank” ]Down and Out in Paris and London[/amazon_link], which I first devoured as an idealistic teenager and have returned to over the years, fall into that category. But this morning it was the essays collected in Books v Cigarettes that I turned to, prompted by a feature about the demise of Borders in the face of rivalry from Amazon. And not just Amazon as a retailer of physical books at cut prices, but Amazon as purveyor of e-books. This week the Association of American Publishers reported that e-book sales were up 160% in the first half of 2011, while sales of physical books had slumped.

The title essay of the Orwell, noting that factory workers regard book-reading as an expensive hobby not for the likes of them, compares the cost of reading favourably with the cost of other forms of entertainment. As Orwell puts it, they wouldn’t spend twelve and sixpence on a hardback that might take a whole day to read, but thought nothing of spending several pounds on a day out at Blackpool. But, he adds, “It is difficult to establish any relationship between the price of books and the value one gets out of them.” There are several complicating factors.

First, books are an experience good. You have to read them to know what they’re worth to you, and so evaluate the price with little information about quality. This is why reviews matter, why authors deliver series of books, and why Sherwin Rosen’s ‘superstar’ or winner-takes-all economics apply in publishing.

Secondly, books are a good example of consumption of goods as a signal. Millions of people bought Stephen Hawkings [amazon_link id=”0553175211″ target=”_blank” ]A Brief History of Time[/amazon_link], but only a tiny fraction of them read it. It was probably, like making coffee in a cafetiere, a signal of being middle class and cultured. Coffee table books are all signals, as are fashionable recipe books, and – in their own way – old paperbacks of George Orwell’s work scattered around the house.

Thirdly, books have a new social value. They bring people together in book groups. They are gifts in the gift economy of book swaps – we have one at the local station. They are useful small presents when wine or chocolates won’t do.

None of which is relevant to the brutal competitive struggle in book retailing, where Amazon is coming to have a dominant position. Publishers share some of the blame, as they all let Amazon have discounts which enable it to undercut bricks and mortar booksellers, especially independents. The short term lucre blinded the publishing industry to the longer-term strategic issues. There are two areas for competition authorities to look, I think. One is whether the barriers to entry to online bookselling have become insurmountable, with any book needing to be on Amazon to sell – or whether, on the other hand, the technologies which enable on-demand printing and online access to customers make it possible for a book to by-pass Amazon. The other is the retailing of e-books, where the pricing – just below hardback price – is clearly not reflective of either marginal or average cost and could only be justified as the recovery of capital investment. Even so, if e-book prices are cross-subsidising the prices of particular e-book devices, that would be a cause for concern too. These are empirical questions and I hope competition bodies are checking it out.

I’m sad about Borders. Their range had narrowed and dumbed down in recent years, but the stores have always been pleasant enough places to hang out. Still, as Orwell wrote in Bookshop Memories, “In a town like London there are always plenty of not quite certifiable lunatics walking the streets, and they tend to gravitate towards bookshops, because a bookshop is one of the few places where you can hang about for a long time without spending any money.” That was Borders’ problem – extracting the money. You can hang about in a cinema all afternoon, of course, but only after handing over the £15 for the 3D experience.

[amazon_image id=”0141036613″ link=”true” target=”_blank” size=”medium” ]Books v. Cigarettes (Penguin Great Ideas)[/amazon_image]

In the rogues’ gallery of disastrous economic policies, the protectionism of the United States in the Great Depression, codified in the notorious Smoot-Hawley tariffs, has pride of place. A new book by Douglas Irwin, [amazon_link id=”069115032X” target=”_blank” ]Peddling Protectionism: Smoot-Hawley and the Great Depression[/amazon_link], examines the effect the legislation had: did it, as believed, play a central role in bringing about a collapse in global trade and seriously exacerbating the depression? Irwin concludes that the Act was based on no economic logic, and was a blatant example of pork-barrel politics. Even so, it played a subsidiary role to demand shocks (especially monetary ones) in prolonging and deepening the weakness of the economy. The book is very informative on the Congressional politics of the time, and the current role of Congress in setting trade policy. There is nobody to match Irwin on this subject, and it’s a short and accessible book. It is a great introduction for students as well as general readers.

However, the status of the Smoot-Hawley tariff as a bogey man has proven useful ever since, Irwin suggests. The great inertia of the American political system means that the post-war openness to trade is actually hard to overturn in practice. The experience of the post-crisis policy reaction is certainly encouraging in this respect, although I’m not sure I’m as relaxed about the dangers as the book suggests I ought to be. Still, fears of a return to Great Depression style protectionism have not entirely come to life, although there is evidence of a pick-up recently in protectionism. The excellent CEPR Global Trade Alert reports on this document policy reactions in some detail. The book concludes that the far greater openness of the US (and other economies) now than in the 1930s make protectionism a less likely policy reaction; but equally, if governments ever do reach for those trade policies, the disruption will be far greater.

[amazon_image id=”069115032X” link=”true” target=”_blank” size=”medium” ]Peddling Protectionism: Smoot-Hawley and the Great Depression[/amazon_image]

[amazon_image id=”1907142193″ link=”true” target=”_blank” size=”medium” ]Tensions Contained… for Now: The 8th GTA Report (Global Trade Alert)[/amazon_image]

I’m part way through William Rosen’s [amazon_link id=”1845951352″ target=”_blank” ]The Most Powerful idea in the World: A Story of Steam, Industry and Invention[/amazon_link]. It’s an enjoyable read, although I’m not learning anything new, as someone who has already read plenty about the Industrial Revolution. The book covers the same terrain as classics of economic history such as Joel Mokyr’s [amazon_link id=”0691120137″ target=”_blank” ]The Gifts of Athena[/amazon_link] and more recent [amazon_link id=”0140278176″ target=”_blank” ]The Enlightened Economy[/amazon_link], and Greg Clark’s [amazon_link id=”0691141282″ target=”_blank” ]A Farewell to Alms[/amazon_link].

However, one novelty is the claim made in a footnote that “a number of international economists” use the production of sulphuric acid as a proxy for the level of development. I’m familiar with the use of electricity consumption as a measure of economic activity – Friedrich Schneider and Dominik Este use it as one approach in their estimates of the scale of the underground economy. A bit of searching this morning has found the claim about sulphuric acid made in one commodities market blog post endlessly copied around the internet, and the following New Scientist article from 1988 attributing the claim to a classic chemicals textbook (Industrial Chemicals by Faith, Keyes and Clark) but noting that the relationship between economic output and sulphuric acid production had broken around 1983 in Britain. Intriguingly, this is the time when UK GDP decoupled from the material weight of the economy in general, as noted in my 1996 book, [amazon_link id=”0262032597″ target=”_blank” ]The Weightless World[/amazon_link].

[amazon_image id=”1845951352″ link=”true” target=”_blank” size=”medium” ]The Most Powerful Idea in the World: A Story of Steam, Industry and Invention[/amazon_image]

Quotation of the day comes from Robert Solow, in his introduction to the forthcoming new edition of [amazon_link id=”0230575978″ target=”_blank” ]Manias, Panics and Crashes: A History of Financial Crises[/amazon_link] by Charles Kindleberger and Robert Aliber. He writes: “Large quantities of liquid capital sloshing around the world should raise the possibility that they will overflow the container.” A thumbnail diagnosis of the recent Great Financial Crisis.

[amazon_image id=”0230575978″ link=”true” target=”_blank” size=”medium” ]Manias, Panics and Crashes: A History of Financial Crises[/amazon_image]

A while ago I posted about a 1956 book by sociologist C Wright Mills, [amazon_link id=”0195133544″ target=”_blank” ]The Power Elite[/amazon_link]. It was the persistence of unearned banking bonuses that made it seem so relevant at the time, but recent events in the UK are a reminder that the media are – and always have been – in the nexus of power in every country.

An article by John Nichols in the current issue of The Nation considers the market power of News International in the United States, bringing to mind Timothy Wu’s excellent recent book on concentration in media markets, [amazon_link id=”B004DUMW4A” target=”_blank” ]The Master Switch[/amazon_link]. It would be interesting, too, to go back to some of the classics looking at the elite – in the UK, it would be Anthony Sampson’s [amazon_link id=”0719565669″ target=”_blank” ]Who Run’s This Place: An Anatomy of Britain in the 21st Century[/amazon_link], and Robert Peston’s [amazon_link id=”B002V0921A” target=”_blank” ]Who Runs Britain?[/amazon_link], which focuses on the financial sector.

All in all, with both the big banks and a major international media company in turmoil, not to mention the travails of Silvio Berlusconi in Italy, bringing together political and media power in his own person and now at the latest epicentre of the financial crisis, it’s a fascinating time for social scientists to ponder questions of power. (I write this as both a social scientist and a minor member myself of Britain’s power elite.)

[amazon_image id=”0195133544″ link=”true” target=”_blank” size=”medium” ]The Power Elite[/amazon_image]