Monthly Archives: September 2017

High hopes for growth

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I’ve been re-reading (after a long time) David Landes’ The Unbound Prometheus, having found a 2nd hand copy in a Sedbergh bookshop, Westwood Books, earlier this year. It’s an interesting read, albeit showing its age (I found a 1993 edition, but the first was 1969). I’d forgotten that he looked at post-2nd world war growth in the final chapter, which also concludes with some reflections about the links between technological innovation and economic growth.

“The effective utilization of scientific and technical knowledge requires a whole sequence of decisions and action in the world of production and distribution. Pioneering entrepreneurs and managers must be prepared to risk money on the translation of ideas into commercially feasible techniques; while others must be incited by the prosepct of gain, or the fear of loss, to follow suit.” He goes on to say that the quality of management, the skills of the workforce, consumer tastes must also fall into place. “Scientific creativity is by no means an assurance of growth.” Interesting to see Paul David’s argument in The Dynamo and the Computer prefigured here. Growth is “a marriage of knowledge and action”, not the outcome of the impersonal forces of supply and demand.

Above all, growth will vary according to the particular needs, opportunities and history of different economies. Even the role of government varies greatly, Landes argues. The common factor in the postwar period, however, was, “A revolution of expectations and values. The expectations were not new; they were a return to the high hopes of the dawn of industrialization, to the buoyant optimism of those first generations of English innovators. Yet never before had they been so widespread; and never before had they been so strikingly confirmed by the facts.”

The trentes glorieuses seem like prehistory in today’s unsettled world. I’m not a techno-pessimist, and disagree with Robert Gordon’s thesis. But vision (expectations, we might say in economese) is a constant that really matters. I’ve always liked Paul Krugman’s 1991 QJE paper, History versus Expectations, on the importance of people weighting the future as more important than the past, if an economy is to grow. No high hopes, no growth.

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True wealth

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Klaxon: this week sees the publication of National Wealth: What is Missing, Why It Matters, edited by Kirk Hamilton and Cameron Hepburn. The book is a collection based on the Wealth Project, itself a follow up to work by the World Bank on measurement for sustainability. As sustainability inevitably involves thinking about the future, there is a need to measure an economy’s stocks of different kinds of capital assets rather than current income or consumption flows (which is what our GDP lens does).

I have a chapter in the book about the political economy of moving to a new framework of economic indicators from the current system of national accounts. This is a shift analogous to changing a global technical standard, in which enough key participants have to make the move to tip everyone else into following suit. I conclude, though, that for this to come about there has to be enough consensus about what new standard to move to, which is still a work in progress. There’s a proliferation of dashboards and alternative indices. We need just one framework to get the shift.

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Best friends

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As re-entry reading for the onset of the Autumn semester, I indulged in The Infidel and the Professor: David Hume, Adam Smith and the Friendship That Shaped Modern Thought, by Dennis Rasmussen, on the way home this weekend. This is a chatty account of the friendship between David Hume and the 12-years younger Adam Smith, discussing the extent to which Smith’s thought was influenced by Hume (a lot, Rasmussen argues) and analysing the differences between them (he identifies four areas of disagreement: the nature of sympathy, the role of utility, the foundation of justice, and the effects of religion). As a total Hume fan, I enjoyed reading it, and it’s a well-written book. You don’t need to be an expert on either to enjoy it, and get some flavour of the milieu of the Scottish Enlightenment.

Judging from Jesse Norman’s review of the book in Prospect, it might help not to be an expert on either, as he concluded it has little to say about the influence the two had on modern thought. As he points out, the problem Rasmussen faced is that the correspondence between the two men on which he based so much is rather small, and that mainly letters from Hume. Rasmussen fills out more in an interview in 3am Magazine with the stellar Richard Marshall.

I warmed to one comment Rasmussen makes here – a point also covered in the book: “Just as Smith’s contributions to moral philosophy have been unduly neglected in favor of Hume’s, Hume’s contributions to political economy have been unduly neglected in favor of Smith’s. As an economist Hume has long been regarded as a minor predecessor of Smith, insofar as he’s taken notice of at all, but in fact he argued for free trade and stressed the moral, social, and political benefits of commerce several decades before The Wealth of Nations appeared. Hume’s essay “Of Luxury” (later retitled “Of Refinement in the Arts”) is one of the most forceful, comprehensive, yet succinct defenses of the modern, liberal, commercial order ever written.”

As he notes here, Smith was in his turn an ethicist and analyst of human nature. We do like to pigeon hole people, but one of the joyous aspects of the Enlightenment is not only that knowledge was expanding so quickly but that it touched on so many different areas. We lose so much that falls into the gaps between disciplinary boundaries.

The thing I took away from The Infidel and the Professor was quite how scandalised so many people were by Hume’s skepticism about religion. The book has quite an extensive discussion about the differences between Hume and Smith on religion, and reckons Smith was just as sceptical but keener to observe social convention, though the evidence for this seems rather speculative. But, if public opinion did find Hume as outrageous as Rasmussen says, who could blame Smith for keeping that much quieter about his views. And Smith did honour Hume after death by insisting, in a letter written for publication, that Hume had died in good spirits and completely untroubled by the prospect of nothingness. When so many people hoped the infidel Hume would repent on his deathbed and embrace god, out of fear if nothing else, to make it clear this had not occurred was an act of true respect and friendship.

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Origins, of different kinds

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I’ve read The North by Paul Morley on this trip. It’s a big book that has sat on the pile for a while, waiting for a suitable journey. Although Morley’s writing style is pretty florid, long lists a speciality, I enjoyed it. He grew up in a Manchester satellite – closer to the city than I did, a few years earlier – there’s enough familiarity in the description to make it grittily Proustian for me. Eccles cakes, not madeleines, naturally.

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Among other things, this quotation from Gertrude Himmelfarb (in Darwin and the Darwinian Revolution) leapt out:

“The theory of natural selection, it is said, could only have originated in England because only laissez-faire England provided the atomistic, egotistic mentality necessary to its conception. Only there could Darwin have blandly assumed that the basic unit was the individual, the basic instinct self-interest and the basic activity struggle. Spengler, describing the Origin as ‘the application of economics to biology’, said that it reeked of the atmosphere of the English factory. … Natural selection arose… in England because it was the perfect expression of the capitalist ethic and Manchester economics.”

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There’s nowt wrong with Manchester economics of course. I think this Spengler claim doesn’t stand up to a bit of thought. But the intereaction between biology and economics is interesting. Darwin was very interested in Malthus – Janet Browne discusses this in her wonderful Darwin biography. In turn, Marx was very influenced by Darwin, and the mutual influence has continued through game theory and beyond.

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As a by the by, someone on Twitter linked to this fabulous talk by Richard Hamming about how to do good work in science & I particularly loved this:

“Darwin writes in his autobiography that he found it necessary to write down every piece of evidence which appeared to contradict his beliefs because otherwise they would disappear from his mind”