Monthly Archives: September 2018

Enlightened Economist 2018 Prize – longlist

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It’s the time of year when I look back over the past 12 months of my reading and draw up a list of the 10 or so best from which to select the ultimate winner of the 2018 Enlightened Economist Prize. The rules are: any non-technical or accessible econ/business/tech book I read is eligible (it doesn’t have to have been published during the 12 months); my decision is final. The prize is the offer of an excellent celebratory lunch, for a living author, should the winner and I find ourselves in the same place.

This year’s longlist is long – I’ve read some wonderful books. In no particular order:

Exact Thinking in Demented Times – Karl Sigmund (my review here)

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The Attention Merchants – Tim Wu (my review here)

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No Ordinary Woman – Angela Penrose (my review here)

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Twitter and Tear Gas – Zeynep Tufekci (my review here)

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A University Education – David Willetts (my review here)

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Black Edge – Sheila Kolkhatar (my review here)

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How Growth Really Happens – Michael Best (this is sitting on my desk waiting for me to write it up)

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The Marshall Plan – Benn Steil (my review here)

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Republic of Beliefs – Kaushik Basu (my review here)

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Behemoth – Joshua Freeman (my review here)

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Factfulness – Hans Rosling (my review here)

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Unelected Power – Paul Tucker (my review here)

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The National Debt – Martin Slater (my review here)

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Deep Thinking – Gary Kasparov (my review here)

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Scale – Geoffrey West (I didn’t write on – it’s excellent pop science with a final chapter on cities)

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Cognitive Gadgets – Cecelia Heyes (my review here)

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Ingenious Pursuits – Lisa Jardine (I didn’t review this either – innovation in history, Mokyr-ish)

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The Book of Why – Judea Pearl (I haven’t yet written about it, am mulling it over as he’s very down on causal inference methods used in economics)

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The Rise and Fall of the British Nation – David Edgerton (my review here)

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The Community of Advantage – Robert Sugden (my review here)

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Accounting for Slavery – Caitlin Rosenthal (my review here)

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Cost benefit analysis – don’t get over-excited

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Cass Sunstein’s new book, The Cost Benefit Revolution, almost managed to achieve the opposite of its aim, which is to persuade me of the merits of ubiquitous use of this tool for assessing social welfare so beloved by economists. I’m an economist so I think CBA is pretty useful but the book’s just so Panglossian about its ability to apply objective reason to regulatory decision making. “In a nutshell, quantitative cost benefit analysis is the best available method for assessing the effects of regulation on social welfare,” he writes (his italics). Except it doesn’t. He isn’t alone in thinking this. I once said to a Very Distinguished British economist that economics needed to take social welfare far more seriously. “Oh but it already does,” he replied. “We use CBA all the time.”

But the point is – as Sunstein does sort of concede in accepting that there are what he calls Hard Cases – it ignores (and the Pareto criterion ignores too) one of the key points about social welfare, namely distribution. Whose costs and whose benefits? It also – as has always been known in the literature, reiterated recently, and always ignored in practice – is a linear approximation suitable for use to assess the net effects of small changes. It furthermore has no validity in assessing any intervention that might change the path of growth or productivity or have any non-marginal effect.

Economists do think of CBA as one of the practical contributions of the field to policy, and I’m in favour of doing the CBA exercise as a source of information about decisions. In practice, for big decisions, that’s exactly what happens. Politics takes over, not least for the distributional reasons. After all, if CBA had been in use in the 19th century, Bazalgette would never have built London 150 years worth of sewerage capacity, and we would lack the magnificent town halls of cities like Manchester and Leeds.

Elsewhere in the book, in the excellent historical sections describing the (non-partisan) spread of CBA in US government, Sunstein gives some persuasive examples of how to use CBA well. (One of the poignant sections describes how an analysis changed Ronald Reagan’s mind – a Republican president open to reason.) There are nice, classroom friendly, examples of using CBA in different domains of policy and is actually more nuanced than the general enthusiasm would suggest about how to use CBA in the context of environmental science, especially when risk attitudes and discount rates differ greatly between groups of voters. All in all, it’s worth the read for anyone interested in the role of reason in policy making. Just don’t drink the same Kool Aid.

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PS Tim Harford reviewed the book today and is a bit more enthusiastic.

More classics (and other novels) for economists

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Yesterday I reposted my 2013 list of classic novels for economists. Commenters on the post and many people on Twitter offered other suggestions. Here they are. First, classic novels:

Balzac – Alexandre Delaigue & others mentioned Le Père Goriot (cited by Thomas Piketty) and Eugenie Grandet was recommended by Rebecca Spang (about greed, speculation and coins).

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Mary Shelley’s Frankenstein (of course! how could I have omitted it. Thanks Stephen Kinsella.

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From Laurent Franckx, The Count of Monte Cristo by Alexandre Dumas.

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Merjin Knibbe & others pointed to Dostoyevsky’s Crime & Punishment and The Gambler, and Gogol’s Dead Souls. Also Hemingway’s The Old Man and the Sea.

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On the Gogol, “The plot of this hilarious satire revolves over an attempt by the protagonist to acquire fictious collateral (dead serfs) for which money could be borrowed from the Russian state bank (in early 19th century)”, writes Juha Tarkka.

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Merjin also suggested some others I hadn’t even heard of: by Heijermans, Kamertjeszonde (no translation?!). Multatuli’s Max Havelaar. Fukazawa’s The ballad of Narayama, Malot’s Sans Familie.

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Matt Clancy suggested The Grapes of Wrath. Of course! Another one I should have thought of, were it not for the A Level aversion therapy: hated it when forced to read it.

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Nick Isles proposed Jude the Obscure. (I hate Hardy’s novels; I always want the characters to just pull themselves together.)

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Zola was popular:  The Ladies’ Paradise, L’Argent. Anything by Zola is magnificent.

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Trollope’s The Way We Live Now was a popular one, and again a glaring omission from the original list.

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Robbie Mochrie, impressively, suggested a Jane Austen work I’ve never heard of, about “the ways in which economic activity was shifting from land use to provision of goods and services early in the industrial revolution,” Sanditon.

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Cyril Ritter points to Carlo Levi’s Christ Stopped at Eboli, 1945, “For its depiction of a system that exploits poor people and keeps them poor and uninformed.”

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Then there were some non-classic suggestions, which was against the rules but there were some great ideas.

I thoroughly agree with all those recommending Francis Spufford’s Red Plenty, which in effect makes the point about the formal identity under ideal conditions of decentralised general equilibrium and the centrally planned economy. But more than that it’s a cracking good read. Also Spufford’s Golden Hill and The Backroom Boys. He’s a wonderful writer.

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Jacques Crémer recommended The Godfather, Mario Puzo, on game theory.

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Others in this category:

China Miéville, Embassytown

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Michael Crichton’s Rising Sun (international capital flows)

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Asimov’s Foundation series

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Dune

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Bonfire of the Vanities, Tom Wolfe

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David Lodge’s Nice Work

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Classics for Economists

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Courtesy of Elizabeth Baldwin at Oxford, I was reminded of a list of classic novels economists should read, something I posted here a few years ago. I had forgotten about it, and must immodestly say it’s a great list. Here it is again, below.

However, it could be better. Even in my own cultural tradition, I haven’t read the great Russian authors on the whole. Which of those are particularly economics-relevant? I hate Henry James and Dickens (school aversion therapy) but accept novels like Little Dorrit could count. What about African, Indian, Chinese classics? Should modern classics be added, Vonnegut’s Player Piano, say? Suggestions please.

The 2013 list:

Nostromo, Joseph Conrad: the heart of colonialism

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Germinal, Emile Zola: the fuel of the Industrial Revolution – coal and human life

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North and South or Mary Barton, Mrs Gaskell: the social effects of industrialisation with a special eye on women. Mary Barton is set in my home city, Manchester.

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The Master and Margarita, Mikhail Bulgakov: the murderous insanity of Soviet dictatorship – Professor Woland, Game Theorist? I’ve only just read this, having seen the truly, madly, deeply brilliant Theatre de Complicite staging earlier this year.

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The Charterhouse of Palma, Stendhal: pre-unification Italy and European politics

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The Leopard, Giuseppe de Lampedusa: The Risorgimento, and modernity.

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The Whirlpool, George Gissing: in fact anything by Gissing – as he summed it up, “Not enough money,” in Britain’s newly industrialising cities

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Middlemarch, George Eliot (or again, pretty much anything by her): astute political and psychological analysis of 19th century social change. Bonnets and frocks without the saccharine.

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Roxana, Daniel Defoe: the economic status of women, by one of the unsung feminist heroes, who was also a famous economic journalist in his day.

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We, Yevgeny Zamyatin: collectivism, conformity – the dark side of the early 20th century. Another recent discovery, courtesy of Nick Reynolds.

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Les Miserables, Victor Hugo: need I say anything? I even loved the recent musical movie version

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My Antonia and O Pioneers, Willa Cather: the harsh life of the American frontier, and the strength of women.

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The Great Gatsby, F Scott Fitzgerald: the Roaring 20s in a glamorous nutshell. I haven’t yet seen the new Baz Luhrmann movie version.

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The Ragged Trousered Philanthropists, Robert Tressel: not the greatest literature but a novel that still speaks to working people struggling for money.

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Castle Rackrent, Maria Edgeworth: She was contemporary with Jane Austen, but lived a lot longer.

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