Monthly Archives: October 2013

The science of political economy

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My thanks to Professor Ian Preston of University College London for the earliest definition (in England) of the subject of economics – it’s from the 1827  Statement by the Council of the University of London Explanatory of the Nature and Objects of the Institution:

The object of the science of Political Economy is to ascertain the laws which regulate the production, distribution and consumption of wealth, or the outward things obtained by labour, and needed or desired by man. It is now too justly valued to require any other remark, than the occasional difficulty of applying its principles, and the differences of opinion to which that difficulty has given rise, form new reasons for the diligent cultivation of a science which is so indispensable to the well-being of communities, and of which, as it depends wholly on facts, all the perplexities must finally be removed by accurate observation and precise language.

The wonderfully Victorian optimism contrasts with Nassim Taleb’s disdain for economists, which bellows from every other page of [amazon_link id=”0141038225″ target=”_blank” ]Antifragile[/amazon_link]. I’m rather enjoying it so far, but he has a very low opinion of economists, especially those of us who are Harvard-trained (he always refers to it as ‘Stalin-Harvard’). He has it in for nail polish too, and as I occasionally wear it, that’s another strike against me. However, he does like Ariel Rubinstein’s [amazon_link id=”1906924775″ target=”_blank” ]Economic Fables[/amazon_link], an excellent book (and winner of the 2012 Enlightened Economist Prize).

[amazon_image id=”0141038225″ link=”true” target=”_blank” size=”medium” ]Antifragile: Things that Gain from Disorder[/amazon_image]

I met Taleb once –  it was in late 2001 at the launch in London of my book [amazon_link id=”1587991454″ target=”_blank” ]Paradoxes of Prosperity,[/amazon_link] around the same time as [amazon_link id=”0141031484″ target=”_blank” ]Fooled by Randomness[/amazon_link] was published and about to make him massively famous. He had shaved his beard and was travelling as ‘Nicholas’ not ‘Nassim’ at the time, I recall him telling me. He was charming and polite, far from the aggressive and slightly deranged – although hugely interesting – persona that comes across in his books. [amazon_link id=”0141034599″ target=”_blank” ]The Black Swan[/amazon_link] and [amazon_link id=”0141031484″ target=”_blank” ]Fooled by Randomness[/amazon_link] are both great reads containing much sense, so I’m looking forward to the rest of [amazon_link id=”0141038225″ target=”_blank” ]Antifragile[/amazon_link]. And I don’t believe economics to be wholly incompatible with Taleb’s worldview – just look at that 1827 definition.

Saturday round-up

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It’s a mistake to read the review sections of the weekend papers, as there are always more new books that I want to read than time available to read them. My in-pile is already teetering.

Teetering

Still, several reviews today have aroused my interest, albeit none directly about economics and business. The FT reviews Margaret Macmillan’s new history of the First World War, [amazon_link id=”184668272X” target=”_blank” ]The War That Ended Peace[/amazon_link], which might be the only one of the torrent of books published for the next four years of anniversaries that I want to read. Otherwise, I might rest on having read  Alan Moorehead on [amazon_link id=”0060937084″ target=”_blank” ]Gallipoli[/amazon_link], Paul Fussell’s [amazon_link id=”0195133323″ target=”_blank” ]The Great War and Modern Memory[/amazon_link], and Pat Barker’s [amazon_link id=”0141030933″ target=”_blank” ]Regeneration[/amazon_link] trilogy (her latest, Toby’s Room, is good but not classic).

[amazon_image id=”184668272X” link=”true” target=”_blank” size=”medium” ]The War that Ended Peace: How Europe abandoned peace for the First World War[/amazon_image]

Robert Harris has a new novel out on the fantastically important and interesting Dreyfus Affair, [amazon_link id=”0091944554″ target=”_blank” ]An Officer and a Spy[/amazon_link]. And I’d quite like to read Jonathan Franzen’s [amazon_link id=”0007517432″ target=”_blank” ]The Kraus Project[/amazon_link]. Most of what I know of Kraus comes from having read Clive James’s superb [amazon_link id=”0330418866″ target=”_blank” ]Cultural Amnesia[/amazon_link]. And The Economist reviewed very favourably David Runciman’s [amazon_link id=”0691148686″ target=”_blank” ]The Confidence Trap[/amazon_link].

[amazon_image id=”0691148686″ link=”true” target=”_blank” size=”medium” ]The Confidence Trap: A History of Democracy in Crisis from World War I to the Present[/amazon_image]

The Enlightened Economist Prize – 2013 Winner

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A couple of weeks ago I posted the shortlist for the Enlightened Economist prize this year. The time has come to announce the winner – with the reminder that the rules are wholly idiosyncratic: the candidates are books I happen to have read this year, regardless of publication date; the choice is entirely down to me; and the prize (apart from the honour) is that I will take the author for a fine dinner should we find ourselves in the same city.

It has been a tough choice. In fact, so close that I want to announce two runners-up as well. They are [amazon_link id=”0691156840″ target=”_blank” ]The Bankers’ New Clothes[/amazon_link] by Anat Admati and Martin Hellwig and [amazon_link id=”0300197195″ target=”_blank” ]The Carbon Crunch[/amazon_link] by Dieter Helm.

[amazon_link id=”0691156840″ target=”_blank” ]The Bankers’ New Clothes[/amazon_link] makes a simple, powerful argument: that banks need to raise more capital. It is entirely persuasive that the extent of their leverage makes the financial system fragile, and it clearly and patiently demolishes all the counter-arguments made by the banks and their lobbyists. Why should banks, so central to the economy and in the business of risk, be allowed to get away with so much less capital versus debt than any other kind of business? Here is my original review.

[amazon_image id=”0691156840″ link=”true” target=”_blank” size=”medium” ]The Bankers’ New Clothes: Whats Wrong with Banking and What to Do about It[/amazon_image]

[amazon_link id=”0300197195″ target=”_blank” ]The Carbon Crunch[/amazon_link] is a wonderfully clear-eyed assessment of energy policy in the light of climate change, and in its respect for facts over myths could annoy environmentalists and climate change sceptics equally. It is a model of how applied economics should engage with policy questions, with recommendations that lie in the realm of everyday politics. It is also extremely well-written – everybody should at least read the chapter on wind power. My review here.

[amazon_image id=”0300197195″ link=”true” target=”_blank” size=”medium” ]The Carbon Crunch: How We’re Getting Climate Change Wrong – and How to Fix it[/amazon_image]

However, the winner is Jeremy Adelman’s [amazon_link id=”0691155674″ target=”_blank” ]The Worldly Philosopher[/amazon_link], a biography of Albert Hirschman. Hirschman’s life story is extraordinary, and his early years make for a gripping tale. What I particularly enjoyed, though, was the portrait of an economist whose economics had a context in the realities of the countries Hirschman studied, their history and politics and culture, and in his wide reading in philosophy and other subjects. As I noted in my review and an FT Alphachat podcast discussion with Tyler Cowen, Hirschman was out of touch with the direction economics took during his lifetime, but the subject is now turning away from abstraction and back (I think and hope) towards its roots as ‘worldly philosophy’.

[amazon_image id=”0691155674″ link=”true” target=”_blank” size=”medium” ]Worldly Philosopher: The Odyssey of Albert O. Hirschman[/amazon_image]

A worthy winner – congratulations to Professor Adelman!

Walls, visible and invisible

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[amazon_link id=”1908526335″ target=”_blank” ]Walls: Travels along the barricades[/amazon_link] by Canadian writer Marcello Di Cintio is an excellent work of reportage from several of the world’s most intrusive physical barricades. His travels took him from Belfast to the West Bank, the US-Mexico border to that between Bangladesh and India, and others too – Cyprus, the Western Sahara, Ceuta and Melilla. It is very well written and like any good reporting, takes the reader to unknown places and makes them real.

The common theme is the walls or fences proclaimed as security measures in fact create and deepen divisions between the people on either side. The walls once built create the need to maintain them as distrust grows, inevitably, because social contacts between the people on either side are severed. It is hard to draw any conclusion other than that they should never go up in the first place.

[amazon_image id=”1908526335″ link=”true” target=”_blank” size=”medium” ]Walls: Travels Along the Barricades[/amazon_image]

These barricaded borders are an extreme example of the social and economic effects of any border. Economic activity is reduced around any line on the map. I’ve always been fascinated by the invisible borders that characterise every city. There is no built structure separating Tower Hamlets from the City of London but there could hardly be a sharper or less permeable division between two social groups than between the global elite working in the finance sector and the inhabitants of one of London’s and the UK’s poorest boroughs. And of the cities I know, London is one of the least geographically segregated.

Getting people to meet and spend time with people who are different – in all kinds of ways but including in the amount of money they have – is the only way any walls, visible of invisible, will ever come down. Reading about them is a start, I suppose, taking that first step of sympathetic imagination.

Top economists and Bob Dylan

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This week I had a couple of days at the Global Economic Symposium in Kiel. It always has a very distinguished group of participants & at these events I always like to note what books people cite in their talks. Bill Janeway did a presentation on his own book [amazon_link id=”1107031257″ target=”_blank” ]Doing Capitalism in the Innovation Economy[/amazon_link], which doesn’t count.

[amazon_image id=”1107031257″ link=”true” target=”_blank” size=”medium” ]Doing Capitalism in the Innovation Economy: Markets, Speculation and the State[/amazon_image]

The others I heard mentioned were Isaiah Berlin’s Liberty[amazon_link id=”019924989X” target=”_blank” ]Liberty[/amazon_link], Wendell Berry’s [amazon_link id=”1582434875″ target=”_blank” ]What Are People For[/amazon_link], and Paul Seabright’s [amazon_link id=”0691146462″ target=”_blank” ]Company of Strangers[/amazon_link].

Wonderfully, too, Robert Johnson of INET quoted Bob Dylan in Love Minus Zero, No Limit:

In the dime stores and bus stations
People talk of situations
Read books, repeat quotations
Draw conclusions on the wall
Some speak of the future
My love she speaks softly
She knows there’s no success like failure
And that failure’s no success at all