Monthly Archives: February 2015

Moral cultures of capitalism

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Smitten over the past week by a winter bug that has kept me tucked up on the sofa like a delicate Victorian lady, I’ve been reading Tony Judt’s [amazon_link id=”0434023086″ target=”_blank” ]When the Facts Change[/amazon_link]. This posthumously published collection of essays he wrote over 25 years has been edited by his wife Jennifer Homans, author herself of the terrific ballet history, [amazon_link id=”1862079501″ target=”_blank” ]Apollo’s Angels[/amazon_link]. I’ve long been a Judt admirer and this collection – only a few of which I’d read before – lives up to expectations. (And anyway, essays are about the right length for a convalescent.) An untimely and unimaginable death anyway (he suffered from Lou Gehrig’s Disease), the current state of Europe particularly makes one wish such a thoughtful historian of the continent were still alive to comment on Greece and the EU, on the long term effects of the financial crisis on the European ‘project’, on Russia and Ukraine.

[amazon_image id=”0434023086″ link=”true” target=”_blank” size=”medium” ]When the Facts Change: Essays 1995 – 2010[/amazon_image]

Judt’s perspective was political rather than economic but his observations on the economy are always interesting. I liked this observation about globalization triumphalism, written in 2002:

“It is a cardinal tenet of the prophets of globalization that the logic of economic efficiency must sweep all before it (a characteristics 19th century fallacy they share with Marxists). But that was how it seemed at the peak of the last great era of globalization, on the eve of World War I, when many observers likewise foresaw the decline of the nation-state and a coming age of international economic integration.

” What happened, of course, was something rather different.”

He continued:

“The contingencies of domestic politics trumped the ‘laws’ of international economic behaviour, and they may do so again. Capitalism is indeed global in its reach, but its local forms have always been richly variable and they still are. This is because economic practices shape national institutions and legal norms and are shaped by them in their turn; they are deeply embedded in very different national and moral cultures.”

It has taken the centre of gravity in the economics profession a decade to get to the same perspective, and many economists are naturally prone to economic determinism.

Tea, tears and TV

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Joe Moran’s [amazon_link id=”1846683920″ target=”_blank” ]Armchair Nation: An intimate history of Britain in front of the TV[/amazon_link] is a fantastic read in two ways: as a history of TV and as a social history of post-war Britain. I have a special interest in broadcasting but think this has much wider appeal. It’s very well-written, often funny, a terrific read.

[amazon_image id=”1846683920″ link=”true” target=”_blank” size=”medium” ]Armchair Nation: An intimate history of Britain in front of the TV[/amazon_image]

I learned all sorts of wonderful factoids. Serendipitously, given that the late Colleen McCullough has been in the news recently, one was that the ending of the [amazon_link id=”B001KRSYP0″ target=”_blank” ]Thorn Birds[/amazon_link] in 1984 brought a rise of 2200 megawatts in electricity demand, the biggest in the history of the National Grid as the tearful nation went to make a nice cup of tea – until the 2800 megawatt surge at the end of the penalty shoot-out between England and Germany in 1990, when a stunned 8 minutes after Chris Waddle missed the goal a further reviving cuppa was required.

[amazon_image id=”B001KRSYP0″ link=”true” target=”_blank” size=”medium” ]The Thorn Birds[/amazon_image]

Or that the 1990 edition of [amazon_link id=”0563370645″ target=”_blank” ]Delia Smith’s Christmas[/amazon_link], showing a recipe for chocolate torte requiring liquid glucose, led to stocks not only in the UK but in the whole of Europe selling out. Which was as nothing compared to the Great Cranberry Shortage of 1995 – a time when cranberry juice could still be prescribed on the NHS as a treatment for cystitis.

[amazon_image id=”0563360488″ link=”true” target=”_blank” size=”medium” ]Delia Smith’s Christmas[/amazon_image]

But as well as all the delicious facts, much thoughtful reflection on the shaping of the country in the latter half of the 20th century, the relationship between the regions and London, changing social mores (remember the effect of seeing David Bowie as [amazon_link id=”B007OTZ654″ target=”_blank” ]Ziggy Stardust[/amazon_link], anyone?), the shifting quicksands of class in Britain, and much more. Highly recommended.

[amazon_image id=”B007OTZ654″ link=”true” target=”_blank” size=”medium” ]The Rise And Fall Of Ziggy Stardust And The Spiders From Mars: 40th Anniversary Edition[/amazon_image]

The puzzle of profit sharing (not)

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After I posted recently about the new book, [amazon_link id=”0691159475″ target=”_blank” ]Climate Shock[/amazon_link], by Gernot Wagner and Martin Weitzman, Frank Koller (author of the excellent book [amazon_link id=”1610390539″ target=”_blank” ]Spark: How Old-Fashioned Values Drive a 21st Century Corporation[/amazon_link] about Lincoln Electric) alerted me to an earlier (1986) book by Martin Weitzman, [amazon_link id=”B000YB7SP0″ target=”_blank” ]The Share Economy[/amazon_link]. This argues for linking wages to the success of the business – profit sharing. Frank wrote to me that recovering from prolonged slow growth: “[I]s only possible in an environment where employees can trust that over the long term, as they share with management in the firm’s ups and downs, everyone will bear the risk and rewards equally. That kind of trust is pretty rare, of course. It’s at the heart of the system I explored in my book about Lincoln Electric and others with no layoff policies.”

[amazon_image id=”0691159475″ link=”true” target=”_blank” size=”medium” ]Climate Shock: The Economic Consequences of a Hotter Planet[/amazon_image]  [amazon_image id=”1610390539″ link=”true” target=”_blank” size=”medium” ]Spark: How Old-Fashioned Values Drive a Twenty-First-Century Corporation: Lessons from Lincoln Electric’s U[/amazon_image]  [amazon_image id=”B000YB7SP0″ link=”true” target=”_blank” size=”medium” ]The Share Economy : Conquering Stagflation / Martin L. Weitzman[/amazon_image]

Many others have noted that this was of course Henry Ford’s great insight when he doubled the pay of (some of) his workforce – although he had to battle a lawsuit from his minority shareholder Dodge, as they argued it was damaging to shareholders’ interests to pay workers more and invest more in the business. (Ford lost the case, but bought them out.)

It’s interesting in political economy terms that profit sharing is so rare, despite the reasonable amount of economic evidence that it does increase productivity and profitability. The one UK example always given is John Lewis, a hugely successful business, but I can’t think of any others of large scale. Does anybody have an explanation other than short-sighted greed?

Rewriting the economics textbooks

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This week I received a notification of a new economics textbook, [amazon_link id=”0765639238″ target=”_blank” ]What Every Economics Student Needs to Know (and doesn’t get in the usual principles text)[/amazon_link] by John Komlos. There’s no table of contents available online but the website lists topics such as behavioural economics, signaling, regulatory capture. All good stuff, although plenty of the material on the list is available in other textbooks.

[amazon_image id=”0765639238″ link=”true” target=”_blank” size=”medium” ]What Every Economics Student Needs to Know and Doesn’t Get in the Usual Principles Text[/amazon_image]

Clearly the timetable of the academic writing and publishing world is delivering a batch of post-crisis texts. Recently I reviewed here [amazon_link id=”0199655790″ target=”_blank” ]Macroeconomics: Institutions, Instability and the Financial System[/amazon_link] by Wendy Carlin and David Soskice. Wendy is also the co-ordinator of the free online textbook from the CORE project. I have also looked at the two very good texts from Peter Dorman, [amazon_link id=”3642374409″ target=”_blank” ]Macroeconomics[/amazon_link] and [amazon_link id=”3642374336″ target=”_blank” ]Microeconomics[/amazon_link].

[amazon_image id=”0199655790″ link=”true” target=”_blank” size=”medium” ]Macroeconomics: Institutions, Instability, and the Financial System[/amazon_image]  [amazon_image id=”3642374409″ link=”true” target=”_blank” size=”medium” ]Macroeconomics: A Fresh Start (Springer Texts in Business and Economics)[/amazon_image]  [amazon_image id=”3642374336″ link=”true” target=”_blank” size=”medium” ]Microeconomics: A Fresh Start (Springer Texts in Business and Economics)[/amazon_image]

No doubt there will be more soon as this is a good market to have a share in. I do note that while most of the Amazon reviews of John Komlos’s new book are five star, one points out that the standard [amazon_link id=”140801842X” target=”_blank” ]Mankiw textbook[/amazon_link] covers all the same ground but in a less tendentious tone (albeit at a steep £50 for the new edition).

Coincidentally, this morning I saw someone on the Tube utterly absorbed in the standard text [amazon_link id=”B00C6OM0RO” target=”_blank” ]Economics[/amazon_link] by John Sloman and Alison Wride.

[amazon_image id=”0273763121″ link=”true” target=”_blank” size=”medium” ]Economics[/amazon_image]  [amazon_image id=”1844801330″ link=”true” target=”_blank” size=”medium” ]Economics[/amazon_image]

Shock tactics

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[amazon_link id=”0691159475″ target=”_blank” ]Climate Shock: the economic consequences of a hotter planet [/amazon_link]by Gernot Wagner and Martin Weitzman is an impressive (and concise) book. It recognises that it’s a minority view that governments need to take significant steps now to reduce GHG emissions, as even people who are not climate change denialists would rather not have to bother with doing all that much about it. So the book aims to do two things: explain clearly the risks of the economic (and social) impacts if climate change is as bad as all the scientists expect; and persuade people that insurance against those risks is quite a good idea.

[amazon_image id=”0691159475″ link=”true” target=”_blank” size=”medium” ]Climate Shock: The Economic Consequences of a Hotter Planet[/amazon_image]

It’s actually a very sobering read. A one in ten chance of “catastrophic” sea level rise, anyone. And as the authors point out, “What we know is bad, what we don’t know is worse.” Having said that, the book tries to end on an upbeat note. We can make personal changes such as cycling more or recycling more. Better still, we have power as consumers and citizens to get businesses to do an environmental audit of their supply chains and start to de-carbonise them, and to get governments to take bolder decisions: yes, the price of energy will have to rise, to incentivise “green” technological innovation. Those of us who live in democracies will get what we deserve, so if you care, campaign and debate, the book says. It sums up the advised actions as : scream, cope and profit. Make sure businesses you buy from and politicians you might vote for know your views. Don’t build your house on a flood plain or by the ocean. And invest in businesses and innovations tackling the problem because it will prove financially beneficial.

Chapters in the book look at economic aspects of the problem of reducing emissions, including free riding, and co-ordination issues. It discuses financial aspects of changing energy technologies, and prospects of innovations such as geoengineering. Above all, the book explains the risks and the range of potential impacts associated with them. It gives very clear explanations of the economic issues – very useful for students as well as general readers.

The sense of urgency is palpable in the writing: “The debate around whether to act should be over. To some extent even the debate around how to act is over. … The ultimate goal is clear: for governments to set a mandatory price on carbon pollution. … Dare we say that anyone who pretends otherwise is wilfully blind?” There are those wilfully blind people around, of course. And hence the book goes on to what the clearer-minded people can do about insuring against the consequences of the risks posed by climate change. So now you know.