Since Thomas Schelling’s death was announced I’ve been (re-)reading some of his work. Today it was one of my all-time favourite economics books, one I always recommend to students, Micromotives and Macrobehaviour. As the title suggsts, it’s all about how individuals’ behaviour aggregates, taking account of how social influence. The final chapter, Hockey helmets, daylight saving and other binary choices, starts with a discussion of why hockey players (I think it means ice hockey) won’t voluntarily wear helmets even when everyone knows it’s much safer to do so.

The answer is that each individual would like to be required to wear a helmet but won’t be the first to do so because it might give them a small disadvantage against others in play, and would also get them mocked by their opponents. The chapter goes on to argue that when there are any situations with a binary choice in the face of externalities, either the ‘rational’ behaviour needs to be mandated for a social optimum; or a tipping coalition needs to form, whereby a number of individuals will act together to bring about the better outcome, all the while cursing those who still hold out.

Once you read the book, it’s hard not to see everything through a Schelling lens. A friend of mine helps the Close The Door campaign. High street stores often leave their doors wide open in winter – even though they are burning energy wastefully and exposing themselves to more shoplifting. Why? Because they fear that if they close their doors, they will lose impulse shoppers to neighbouring stores that keep their doors open. I tried to get the Department for Business etc. (in one of its precursor variants) to see the logic and regulate to keep shop doors closed. The senior official – an economist I know and respect – said to me, “But what’s the market failure? The shops would all keep their doors closed if it were really in their interest.”

The answer is in Micromotives and Macrobehaviour Chapter 7. If only all economists would read it.

It’s always interesting to look back and see which posts resonated with readers of this blog. Here are the top 10 of 2016, most popular first.

(I have to apologize for the broken links in the earlier posts; the blog needed a tech revamp in the summer and I’ve not had time to go back and fix them. If anyone has a tech savvy teenager looking for a bit of work, I can offer them a task!)

1. What should the well-educated student read? Recommendations to educate economists of the future.

2 Forthcoming books in 2016  – part 1 and part 2

3. Markets in all their glory – review of Fisman and Sullivan’s The Inner Lives of Markets.

4. Commoditized services – one of a series of posts debating Branko Milanovic.

5. Longlist for The Enlightened Economist Prize for 2016.

6. Rescuing Macroeconomics – review of Roger Farmer’s Prosperity for All.

7. Better than Karl Polanyi – post on the social context of markets.

8. The trade-investment-service-intellectual property nexus – my review of Richard Baldwin’s book The Great Convergence.

9. Computing, the British way – review of Electronic Dreams: How 1980s Britain Learned to Love the Computer

10. A land built by economists – on infrastructure.

I’ve been dipping into Dark Ghettos: Injustice, Dissent and Reform by Tommie Shelby. It’s a philosophy text so I’m unlikely to read the whole book – the professional language of philosophy is hard work. However, the main argument seems well worth social scientists reflecting on. Shelby’s argument is that the debate about ghettos (and he’s writing about black urban ghettos in the US but it would apply to other communities segregated by low incomes, bad housing, inadequate services, ill health, cirme etc etc) is that it is an error to see them as ‘problems’ that need fixing. The ‘what works’ debate, what he refers to as the ‘medical model’, has serious limitations. “Policymakers working within the medical model treat the background structure of society as given and focus only on alleviating the burdens of the disadvantaged.” The aim is to fit the inhabitants for greater success within an existing social system (whether you diagnose the ‘problem’ either as specific external barriers or the attitudes and/or culture of the people themsevels). “Features of society that can and should be altered get little scrutiny.”

He adds that technocratic reasoning removes the political agency of the inhabitants – and indeed blinds policymakers to the possibility that what they see as social dysfunction is in fact rational resistance to injustice. The book must have been written long before the politcal shocks of this year, but that comment about the limits of technocracy certainly strikes a chord now. This perhaps isn’t a new tension, Daniel Bell having pointed it out a generation ago, but it has reached a critical point now.

I’ve just read Frtiz Machlup’s 1973 The Production and Distribution of Knowledge in the United States. It seems very prescient. For instance, “There is probably … validity in the hypothesis that the increase in the ration of knowledge-producing labor to physical labor is strongly associated with the increase in productivity and thus with the rate of economic growth,” (although he also notes that some argue the opposite, that there are diminishing returns to knowledge-production – see this for a recent update). And, “Much of the production of knowledge depends on governmental appropriations.”

My favourite: “The facts that the production of knowledge of several types is paid for by other than the users of the knowledge, and that these types of knowledge have no market prices, raise questions of their valuation for national income accounting as well as for welfare-economic considerations.” Yes indeedy.