Author Archives: Diane Coyle

Leo Hurwicz

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Leonid Hurwicz: Intelligent Designer is a very enjoyable biography of one of the winners of the economics Nobel for his work on mechanism design (along with Eric Maskin and Roger Myerson). It’s written by his son Michael Hurwicz, and is therefore a genuine labour of love. It’s clear a lot of work has gone into assembling and recounting this tale of an extraordinary life, from his birth to Polish Jewish refugee parents in revolutionary Russia in 1917, via a childhood in Warsaw after the first World War, through being a near-penniless refugee away from his family during the second World War, to his academic career in the US, mostly at the University of Minnesota. His parents and brother survived the war (albeit his father ending up in a Soviet gulag for some time) and also moved to the US.

The book has very little of the economics, and is interesting as biographies generally are for tracing the intellectual history of their subject. Hurwicz’s family put much emphasis on their sons’ education – as the author writes, “Over the centuries, education had functioned as a uniquely portable form of wealth,” for people whose ancestors had often been forced to move. Hurwicz had been taught by or worked for people ranging from Hayek to Samuelson, Oskar Lange to (at the Cowles Commission) Jacob Marschak. He also sounds a delightful person. One of his characteristics – a love of learning many languages – reminded me of my beloved late tutor Peter Sinclair.

I read the book in two sittings. One reflection it prompted was on the unanticipated consequences of total war: their shaping of the character and ideas of a generation of great postwar economists – as the book’s second subtitle puts it, “How War and the Great Depression Inspired a Nobel Economist”; and on the huge stock of human wisdom the US gained by opening its borders, albeit with reluctance, to European refugees.

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Private government?

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I’d previously read about Elizabeth Anderson’s Private Government, but hadn’t actually read it until this weekend. The book consists of her two 2014 Tanner Lectures and the four responses, so is quite old. The lectures draw an analogy between public government – “the people free under the state” – and the private government workers experience when their bosses boss them in unaccountable ways. In other words, the state’s exercise of power in a democracy is justified whereas employer’s exercise of power is not. Along the way, the lectures trace the evolution of the idea of a free market as a means of exercising freedom (in the 17th century with the Levellers and the 18th with Adam Smith) to the 21st century ideology of ‘free markets’ as essentially a means of exercising corporate power.

As respondent Niko Kolodny asks, though, what’s wrong with being governed, even at work? And Tyler Cowen argues that the costs of exiting a job are relatively low – Anderson compares leaving a job as a path to freedom is like saying Italians under Mussolini were free because they could leave the country (until they couldn’t, of course). This is surely hyperbole. There are without question abusive employers of marginalised workers and it behoves those of us with good jobs to appreciate this. But an argument about employer abuses is an argument about the need for the state (public government) to do a better job with legal protections and their enforcement. For instance, governments (and the legal profession) are finally bearing down on the extensive use of NDAs; good. It is harder than it was even 10 years ago to fire an employee over their sexual preferences. People can be fired for expressing some views on social media – when these are illegal or just vile and damaging to their employer’s reputation, also good.

Anderson – whose Value in Ethics and Economics is a terrific book* – doesn’t bring in to the argument two issues that seem relevant. One is the Hirschman triptych of exit, voice and loyalty, which is a useful way of thinking about power in economic relationships and could have shed light on this context. The other is Elinor Ostrom,** whose private governance model by definition takes a form that is not arbitrary and abusive but consensual – it would have been interesting to see her design principles discussed in the context of the worker-employer relationship. The master key to governance design seems to be information asymmetries and the possibility of monitoring – I think this is why in the context of modern digital technologies we see on the one hand increased surveillance of workers in some jobs and firms, and on the other hand increased autonomy in decision-making for workers in different jobs and firms. The latter are high-trust and more productive organisations.

So I have every sympathy with Anderson’s criticism of bad workplace relationships, and the value of worker autonomy. But the lectures aren’t all that persuasive.

*I have an old copy – not sure why it’s so expensive even 2nd hand now.

**Also weirdly priced at £226.84 for the paperback on Amazon today – maybe the algorithm doesn’t like the heat?

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So you want to be an economist?

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I’m late to writing about How to Be a Successful Economist by Vicky Pryce, Andy Ross, Alvin Birdi and Ian Harwood (in the order of the names on the cover). Three things dispose me kindly toward the book before even reading it. First, it’s dedicated to my much-loved, late undergraduate tutor in economics, Peter Sinclair. He’s the reason I’m where I am now. He was dedicated to the formation of future generations of economists and the potential of economics to do good in the world. Second and third, the authors interviewed me, among many others, in their research, and also cite many of the essays in an early book I edited, What’s The Use of Economics.

Having got the disclaimer done, this book, authored by distinguished academics and practitioners, is packed with useful tips and insights (including from the many interviewees)  for anybody from GCSE stage to those just graduating about why they might choose to study economics, the pros and cons, the evolution and limitations of how it’s taught; what jobs are open to economists, what specific and general skills are needed, how to communicate well, and why it matters – and much more. There is also a chapter reflecting on the many critiques of economics and why heterodox approaches are interesting and valuable.

So if you are, or know, a student (in the UK) pondering whether economics is the right thing to do, or having made that choice what they might do next, this is a thoughtful and incredibly useful book.

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The material roots of the weightless

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I was lucky enough to get to read Ed Conway’s Material World, out on 15 June, in an advance proof copy.  It’s an absolutely terrific book. There are six parts, covering six substances fundamental to the economy and modern life: sand, salt, iron, copper, oil and lithium. The component chapters cover the mining/making, the chemical processes, the experience of working to produce these fundamental materials, and the supply chains of which they form the anchors. And the book covers not only the economic issues but also the increasingly important geopolitical ones. It must have been hugely interesting to write, involving travel around the world, from deep, dark mines to chip fabs in Taiwan. (The author photo is very cool too – Ed in front of a giant digger at a mine.)

As someone whose first book was called The Weightless World, about the increasing intangibility of value added, I’m the first to agree about the importance of the material basis of society. While we might value more the ideas and services (the weightless parts), such that the ratio of GDP to the weight or mass of the economy has been increasing for some decades, the material is nevertheless fundamental.

Indeed, increasingly so. In the second half of the 20th century, natural and mineral resources seemed boundless, while produced capital and human capital (or ideas) were the binding constraints on economic growth. In the first half of the 21st century, that has flipped. Computation is all but free, whereas nature – including minerals – sets the binding constraints.

Anyway, Material World is highly recommended.

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Inflation, past and present

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I was in my teens, growing up in a Lancashire mill town, the last time stubbornly high inflation was a thing. It was a scarring experience. My parents’ wages certainly did not keep up. Rocketing food prices gave my mum sleepless nights, so she stocked up whenever something like sugar or tea bags was on special offer. We all became obsessed with switching off lights and turning down heating. Our kind of family was significantly affected – small savings in the bank, no labour market power.

So Stephen King’s We Need To Talk About Inflation: 14 Urgent Lessons From the Last 2,000 Years spoke to me. It also proved prescient, having been written before it was apparent how stubborn the current bout of inflation is proving to be – one of the messages of the book is how hard it is to squeeze inflation out of the macroeconomy. The book takes the historical (and broadly chronological) perspective that will be familiar to readers of Stephen’s previous books, and is a pleasure to read. Not surprisingly, the 1970s chapter was particularly interesting to me. As he comments at the end of this chapter, “Inflation ultimately undermines the fabric of society.” It is profoundly unfair. Yet policymakers persist in trying to tell people who can’t afford food and heat to show wage restraint – they did it then and have tried again now.

There’s also an excellent chapter on what works and what doesn’t in terms of policy responses, given how hard the task is. Price and wage controls generally don’t, albeit with exceptions to address egregious unfairness, although they are easy for policymakers to propose. A clear monetary policy framework with rules that are visibly followed does work, and in particular monetary financing of budget deficits must be ruled out. The takeaway message is that some nasty medicine is unavoidable, but it can work – if somebody will administer it. While Milton Friedman insisted inflation was a monetary phenomenon, this book concludes that it’s ultimately a political one: who will bear how much economic pain and when?

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