Dostoyevsky and the utilitarian calculus

I’ve just finished Robert Harris’s brilliant novel about the Dreyfus Affair, [amazon_link id=”0091944554″ target=”_blank” ]An Officer and A Spy.[/amazon_link]

[amazon_image id=”0091944554″ link=”true” target=”_blank” size=”medium” ]An Officer and a Spy[/amazon_image]

His hero, Colonel Picquart, quotes Dostoyevsky’s [amazon_link id=”048627053X” target=”_blank” ]Notes from Underground[/amazon_link], a quotation that sent me scurrying to the book.

“And why are you so firmly, so triumphantly, convinced that only the normal and the positive–in other words, only what is conducive to welfare–is for the advantage of man? Is not reason in error as regards advantage? Does not man, perhaps, love something besides well-being? Perhaps he is just as fond of suffering? Perhaps suffering is just as great a benefit to him as well-being? Man is sometimes extraordinarily, passionately, in love with suffering, and that is a fact. There is no need to appeal to universal history to prove that; only ask yourself, if you are a man and have lived at all. As far as my personal opinion is concerned, to care only for well-being seems to me positively ill-bred. Whether it’s good or bad, it is sometimes very pleasant, too, to smash things. I hold no brief for suffering nor for well-being either. I am standing for … my caprice, and for its being guaranteed to me when necessary.”

[amazon_image id=”048627053X” link=”true” target=”_blank” size=”medium” ]Notes from the Underground (Dover Thrift)[/amazon_image]

Indeed, the whole book is a spirited rant against rational economic man, and the ‘palace of crystal’ constructed by scientific rationalism. I don’t agree, but equally counting utils isn’t the answer to everything.

It’s outside the remit of this blog, but if you want a cracking page turner of a novel that is also illuminating about modern European history and some current issues about surveillance, I can’t recommend the Robert Harris book too highly. Fabulous.

Macroeconomic regimes

As regular readers of this blog will know, macroeconomics isn’t my thing. Although unimpressed by the state of knowledge in macro, I’m even less impressed by my own expertise in it, and so avoid commenting on it.

Still, I try to keep up with the debates, and was reading the recent posts by Simon Wren-Lewis and follow-up by Paul Krugman on exactly this question of the state of macroeconomics and the various divisions. Broadly speaking, the former argues that looking to base macroeconomics on micro-foundations is an essential research strategy, while the latter says that insisting on microfoundations (“the insistence that everything involve intertemporal optimization”) excludes useful approaches to thinking about economic policy on the grounds that they are ‘ad hoc’.

With great diffidence, it seems to me that what you might or might not build micro-foundations for matters more. Whenever I think about the macroeconomy I turn back to a small book I read as an undergraduate, rarely cited these days, Edmond Malinvaud’s [amazon_link id=”063117690X” target=”_blank” ]Theory of Unemployment Reconsidered[/amazon_link].

[amazon_image id=”063117690X” link=”true” target=”_blank” size=”medium” ]Theory of Unemployment Reconsidered: Lectures[/amazon_image]

He begins by pointing out that the classical theory of unemployment (and its descendants) make the mistake of looking at each market as a partial equilibrium – so the labour market would clear, and unemployment would fall, if only the real wage fell. For macroeconomics, though, general equilibrium analysis is needed. That was the important step contributed by Keynes in [amazon_link id=”9650060251″ target=”_blank” ]The General Theory[/amazon_link]. Rationing in the labour market is closely linked to rationing in the goods market.

Malinvaud goes on to describe different ‘regimes’, depending on whether rationing prevails on the buy-side or sell-side of the labour and goods market at any moment – he labels them classical unemployment, Keynesian unemployment and repressed inflation. One would now surely add financial markets too, and a ‘debt hangover’, credit rationed state of the world. Policy prescriptions vary a good deal depending on which regime applies.

That’s as far as I’m going, the conclusion that the connections between markets can tip the economy into different rationed equilibria. When those connections and dynamics are clear, we could worry about how well microfounded the model is. Malinvaud also echoes another of my views: “The level of aggregation may hide some important complications.” Yup. This boils down to saying macroeconomics is fiendishly complicated, and after this brief excursion, I’m going back to avoiding it.

A dangerous obsession?

A theme of quite a few recent book arrivals here at Enlightenment Towers has been the relative position of the US and China.

A hive of activity at Enlightenment Towers (Image from Wellcome Library, London)

These have included Eswar Prasad’s [amazon_link id=”0691161127″ target=”_blank” ]The Dollar Trap [/amazon_link](global turmoil paradoxically strengthens the status of the US currency, and the renminbi isn’t going to take over as global reserve currency) – it’s just been reviewed in the New York Times as well as here.  Charles Kenny’s [amazon_link id=”0465064736″ target=”_blank” ]The Upside of Down [/amazon_link]argued that a thriving China is good for the US. Josef Joffe’s [amazon_link id=”0871404494″ target=”_blank” ]The Myth of America’s Decline[/amazon_link] says China isn’t after all poised to overtake the US as global hegemon, so enough with the declinism.

This weekend, [amazon_link id=”0300187173″ target=”_blank” ]Unbalanced: The Co-Dependency of America and China[/amazon_link] by Stephen Roach has entered the US-China debate. I guess the subtitle sums up the argument – this is co-dependency in the damaging but addictive relationship sense. He seems to end up saying both countries are experiencing an identity crisis and must reform themselves so they can move away from (on the one hand) financial engineering and (on the other) unbalanced hyper-growth. This doesn’t sound like it will end up well.

Stephen Roach is always interesting, so I’m sure it will repay reading. But perhaps the US-China relationship is becoming a dangerous obsession?

[amazon_image id=”0300187173″ link=”true” target=”_blank” size=”medium” ]Unbalanced: The Co-Dependency of America and China[/amazon_image]

The invisible industry

I’m not the only person fascinated by shipping containers.

Bill Gates named Marc Levinson’s [amazon_link id=”0691136408″ target=”_blank” ]The Box[/amazon_link] as one of the best books he read last year.

[amazon_image id=”0691136408″ link=”true” target=”_blank” size=”medium” ]The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger[/amazon_image]

Another such person is my correspondent Thomas Marnane, for the understandable reason that he worked in the industry, for Matson Navigation, for many years.

Capt. Marnane just wrote to me about Rose George’s book [amazon_link id=”1846272637″ target=”_blank” ]Inside Shipping, the Invisible Industry that brings you Ninety Percent of Everything[/amazon_link], which he says is, “A very readable and enjoyable book with a different and thoughtful slant.”

[amazon_image id=”1846272637″ link=”true” target=”_blank” size=”medium” ]Deep Sea and Foreign Going: Inside Shipping, the Invisible Industry That Brings You 90% of Everything[/amazon_image]

“I enjoyed Ms George”s insights on her time on a container ship–especially the crew relationships (or lack thereof)–a very different experience from any of my times on Navy and commercial ships (several countries).  I think without the camaraderie, sharing of diverse and common interests and card and game playing etc. that I enjoyed I would not have liked sea duty–and I did–even submerged.  Our Matson ships of today are a pleasure to be on–albeit all US crews.  Ms George provides good observations of ship operations as well and justifiably laments the good old days when port stops were longer (but turnaround longer and productivity less also).

“I felt that the sort of “environmentally indefensible” overtones were more for book selling rather than enlightening or compelling and were overdone–especially in the publicity for the book.  I admit to a bias toward ships and the people who own and sail them but my overall experience has been that sailors for the most work to take care of the sea, their ships, their public and their customers.  They work to improve productivity by reducing waste and pollution (nobody likes anything but an “economy haze” in the exhaust from their drive engines).  To paint the maritime industry as contaminating our waters, our air and our sound signatures has merit but only in the sense that any human activity such as driving cars, flying, etc. has– on a per ton miles moved and service to the world you can’t beat it.  She acknowledges this briefly later on in her book and notes the efficient energy expended to weight carried ratio enjoyed by ship transportation.  I think a survey of the large shipping lines will demonstrate a continual bias toward the environment and productivity (which in my mind are synonymous) and I am proud of the industry for that.”

He adds:

“I have just embarked on a new reading adventure [amazon_link id=”1782393552″ target=”_blank” ]The Sea and Civilization, a Maritime History of the World [/amazon_link]by Lincoln Paine.  At over 700 pages and relatively small print it is an adventure which I may not complete before the book has to be returned to the library  ……   I am afraid that for “containerization” aficionados you will have to wait until page 582 for gratification.  The book is actually very well done and for a naval architect and sailor it is quite absorbing and very readable.”

[amazon_image id=”1782393552″ link=”true” target=”_blank” size=”medium” ]The Sea and Civilization: A Maritime History of the World[/amazon_image]

Increase GDP now

… by buying my new book, [amazon_link id=”0691156794″ target=”_blank” ]GDP: A Brief But Affectionate History[/amazon_link]. The ‘official’ publication date is a couple of weeks away still, but Amazon has decided to start shipping. Order now and you can get it today!

[amazon_image id=”0691156794″ link=”true” target=”_blank” size=”medium” ]GDP: A Brief but Affectionate History: A Brief Affectionate History[/amazon_image]

If you want to sample it before buying, Princeton University Press has made the introduction available online. In Aeon magazine this week I have an article, Growing Pains, about one of the themes.

I’m doing a few talks about it too – starting with the Warwick Economic Summit this evening. There’s an evening discussion for the Society of Business Economists on 13th February round table at the CSFI in London on 4th March.