Monthly Archives: November 2023

Enlightened Economist Prize Longlist 2023

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It’s the time of year when I look back over 12 months of reading and select a top 10. This time I have two top 10s, one for the usual economics and business books – the prize contenders – and another 10 I liked a lot as a bonus for readers. The prize is a free lunch when the winner and I happen to be in the same place, and anything I read is eligible even if it was published earlier than 2023.

OK, here’s the longlist, alphabetically:

Power and Progress by Daron Acemoglu and Simon Johnson – my review

Our Lives in their Portfolios by Brett Christophers – my review

Permacrisis by Gordon Brown, Mohamed El Erian and Mike Spence

Material World by Ed Conway – my review

Ravenous by Henry Dimbleby – my review

Pricing the Priceless by Paula DiPerna – my review

How Big Things Get Done by Bent Flvbjerg and Dan Gardner – my review

Seven Crashes by Harold James – my review

Follow the Money by Paul Johnson – my review

The Lazarus Heist by Geoff White – my review

And here’s the bonus list, which I’m going to label ‘These times’ – mainly technology and history, includes some fiction:

The Garden of the Finzi-Continis by Giorgio Bassani

Journey to the Edge of Reason by Stephen Budiansky – my review

Reality+ by David Chalmers – my review

Parfit by David Edmonds – my review

Hitler, Stalin, Mum and Dad by Daniel Finkelstein

Homelands by Timothy Garton Ash

The MANIAC by Benjamin Labatut – my review

The Last Colony by Philippe Sands

Cahokia Jazz by Francis Spufford

The Philosopher of Palo Alto by John Tinnell – my review

Finally, I have to recommend as a seasonal gift for yourself or someone else my dear husdand Rory Cellan-Jones’s memoir Ruskin Park. I’m biased but it’s had rave reviews. It’s about him growing up with his single mum in a South London council flat and his amazing family story, about his mother’s love story and the barriers talented and ambitious women like her faced in the 1950s through the 70s, and about the BBC.

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Institutions, finance – and war

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Perhaps it was because I read the book in several stages, but I found it hard to take away a single line of argument from Geoffrey Hodgson’s The Wealth of a Nation: Institutional Foundations of English Capitalism. There is plenty of interest in the book but the chapters seem unconnected. One of the comments on the back, from my former colleague Sheilagh Ogilvie, makes a virtue of this, praising it for steering clear of monocausal explanations, which is true. But the book is also making an argument about the mode of economic analysis as well as about causes of the Industrial Revolution.

Anyway, here is what I took from my read:

  1. Other accounts of the origins of the Industrial Revolution and capitalism in England get something wrong: Marx, McCloskey, Mokyr, Allen, Weber, Uncle Tom Cobbley and all.
  2. This is because they do not employ the framework of evolutionary economics.
  3. Economics goes wrong big time in mixing up capital as in physical capital goods and capital as financial capital, starting with Adam Smith.
  4. Economic development is a process of the creation and changing of both technical and institutional rules.
  5. The distinctiveness of capitalism lies in the development of financial instruments and markets, especially mortgages lent against collateral: “Developed financial institutions make capitalism historically specific.”
  6. The Industrial Revolution was due to institutional evolution – mostly gradual but with some big moments of dramatic change such as the deal that brought about the 1688 accession of William and Mary.
  7. But the impact of external shocks – especially war – in bringing about economic development is under-appreciated.

I liked this observation about institutions: “They function as information registries of what is produced and owned, and of rules governing their use and allocation.” Hodgson cites Shannon and Weaver’s definition of information – something whose receipt can cause an action. This metaphor of units of information underlies the evolutionary approach, as I understood this chapter. Hodgson here and elsewhere has strongly argued the case for a paradigm shift in economics away from its still-extant physical production function framework to the evolutionary framework. (I do see the crumbling of the old paradigm in some respects but we’re far from a new one taking its place.)

The book ends, to my surprise, with a chapter about Japan’s economic development. I think the point here is that: “Major institutional changes in the fundamental areas that matter for economic development typically depend on exogenous shocks.” For Japan these were the Meiji restoration, then loss and occupation in 1945/6.

All in all, an interesting read, but it made me think I’d get more from reading one of Prof Hodgson’s earlier books on evolutionary economics.

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Pricing the priceless

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Paula DiPerna’s Pricing the Priceless is an excellent general introduction to the questions of measuring the value of nature, and the use of economic instruments to improve the sustainability of economic activity. The author has been involved in environmental campaigning ‘at the forefront of finance and climate policy’, as the blurb puts it.This included a pioneering privately-created carbon market in the US. Her aim is to persuade those concerned about the environment – and I take this as her target audience – that better outcomes will result from pricing nature, even accepting its intrinsic value.

The first chapter covers the flaws in the use of GDP as the metric of economic success – familiar territory. It’s somewhat unfairly dismissive of the efforts that have gone into the Sytem of Environmental Economic Accounting, that will bear fruit in the 2025 revision of the way GDP statistics are defined and measured. But as the chapter points out, the efforts to measure digital intangibles have helped parallel efforts to measure nature and ecosystem services.

Subsequent chapters take specific contexts and types of instrument – carbon markets, water markets, rhino bonds, carbon offsets and so on. They make for interesting reading. The chapter on China’s interest in carbon markets was particularly interesting. I hadn’t realised that it measures carbon intensity (per unit of eocnomic output) rather than the aboslute amount of CO2-equivalent.

For people who are already persuaded of the need for tools such as markets and payments for ecosystem services to improve the chances of a sustainable path to prosperity, the attraction of the book is in the vivid detail. The author has quite a florid writing style, but has a lot of insights and interesting detail, and it’s quite fun to read about her audience with the Pope (who was converted to the carbon markets idea). For the unpersuaded, the ecologists and environmentalists who find this approach repugnant (in the sense of Roth’s repugnant markets as well as the normal sense), I don’t know if the book will change their minds. I hope so.

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Politics and economics

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There’s a sentence I underlined twice in Ben Ansell’s Why Politics Fails: “Politics makes growth.” This is my main takeaway from editing a series of policy essays from my colleagues in the Productivity Institute, which will be out at the end of November for National Productivity Week. If you ask people what are the two main causes of the UK’s dismal productivity in recent times they will pick what’s close to their own interests – various skills policies (the madness of the student loan system, the dreadful FE system, the madness of tearing up painstakingly-agreed T-levels for a new system…), R&D policies and the lack of institutions to enable the commercialisation of innovations, low investment levels because of a gazillion tax changes and low saving. But every essay circles back to politics: the politics of ‘announceables’, of over-centralisation, of silos, and so on.

Anyway, Why Politics Fails is an excellent introduction that does what it says in the title: it analyses political failures through the lens of five traps or, more accurately, trade-offs. The first chapter is about the tension in democracy between honouring majority preferences and protecting minorities. The equality trap is the trade-off between equal rights and equal outcomes. The third chapter is about solidarity, manifested only in situations of individual need. The security trap is the  balance between (too much) anarchy and (too much) order. And the prosperity trap concerns the short-run economic (and electoral) gains looking more attractive than long-run decision-making that will enable prosperity over time.

The book has lots of examples, contemporary and historical. It would make an excellent additional read for students, as well as being accessible to the general readership (and Reith Lectures audience). I liked its emphasis on the delicate role played by a country’s institutions – for example, the book suggests an argument against UBI is its institutional fragility, compared to making improvements in existing, well-established welfare states. And the prosperity chapter rightly points to the importance of institutions as bulwarks against short-termism. It occupied me for a trans-atlantic flight & I enjoyed reading it.

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