Tag Archives: economics

Pursuits, grand and lesser

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Sylvia Nasar’s [amazon_link id=”1841154563″ target=”_blank” ]Grand Pursuit: The Story of the People who Made Modern Economics[/amazon_link] was published in 2011, but I only picked up the paperback in the holidays and have just finished. It’s a rattling good read, as you would expect from the author of [amazon_link id=”0571212921″ target=”_blank” ]A Beautiful Mind[/amazon_link], and also very thoroughly researched. But I was disappointed, perhaps due to overly-high expectations. Some of the chapters are simply excellent, but the book doesn’t add up quite to the sum of its parts.

[amazon_image id=”1841154563″ link=”true” target=”_blank” size=”medium” ]Grand Pursuit: The Story of the People Who Made Modern Economics: A Story of Economic Genius[/amazon_image]

I did pick up lots of delightful new facts, always a pleasure to my magpie mind:

– Alfred Marshall was a feminist, to the extent that he financed an essay competition for female students and contributed a significant sum of £60 to the construction of Newnham, one of the first women’s colleges in Cambridge;

– Beatrice Webb influenced Winston Churchill to say at one stage (1906): “I should like to see the State embark on various novel and adventuresome experiments,” and went on to advocate nationalisation of the railways, a job guarantee and a minimum standard of living;

– a visit to a Carnegie Steel plant persuaded Beatrice Webb that technology would replace human labour;

– Keynes did not like the Webbs, especially in their pro-Soviet phase. On being asked to contribute an essay celebrating Beatrice’s 80th birthday, he said: “The only sentence that came to my mind spontaneously was that, ‘Mrs Webb, not being a Soviet politician, has managed to survive to the age of 80.'”

– Joan Robinson does not emerge as a likeable character either, but this comment of hers is amusing: “We cannot be recommended to overthrow anything merely because economists have talked nonsense about it.”

– the number of economists working in Washington rose from 100 in 1930 to 5,000 in 1938;

– Isaiah Berlin was in the British Embassy in Washington during World War 2, writing dispatches on the various activities of Keynes, on the one hand, and Milton Friedman, on the other. One of Friedman’s policy innovations was introducing the withholding of income tax at source by employers. It was, wrote home Berlin, “A tax bill of unprecedented dimensions.”

There is a lot of interesting material here. I think the problem for me is that it doesn’t hang together to tell the story of modern economics as promised. This is partly due to the selection of characters: was it really for reasons of gender balance that Beatrice Webb and Joan Robinson feature so prominently? But the others are obvious – Marx, Marshall, Hayek and Schumpeter, Keynes and Samuelson. I think Mill and other Victorians are a big omission – the book leaps straight to Marshall.

There is also so much good storytelling about the individuals that the big picture on the ideas front is lost in detail. It never quite emerges as either a linear history of thought or a clash of ideas (which [amazon_link id=”0393343634″ target=”_blank” ]Keynes-Hayek: The Clash That Defined Modern Economics [/amazon_link]did very effectively). Nor do you get the sense of a whole intellectual milieu, as in the brilliant [amazon_link id=”0571216102″ target=”_blank” ]The Lunar Men[/amazon_link] by Jenny Uglow (one of my all-time favourite books); the individuals are too prominent. Nasar has much more on the historical context of the ideas than does Heilbroner’s [amazon_link id=”0140290060″ target=”_blank” ]Worldly Philosophers[/amazon_link] but the links between the personal experiences of her subjects and their work don’t quite come off.

This is picky because it’s a good read and would be informative for students or newcomers to the history of economics. Looking back at a few reviews, it was obviously very well received when first published. I was just hoping for something better than [amazon_link id=”068486214X” target=”_blank” ]The Worldly Philosophers[/amazon_link], and it doesn’t live up to my hopes. [amazon_link id=”0691148422″ target=”_blank” ]Economics Evolving[/amazon_link] by Agnar Sandmo is the best recent book I’ve read on the history of economics, a really excellent account but perhaps too hard for newbies. Put it down to Seasonal Affective Disorder.

 

Back to the future in economics

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As I was clearing out some stuff, I came across a January 1991 special centenary edition of the Economic Journal. The editors invited 22 distinguished economists to speculate about the next 100 years of their discipline.

It’s fascinating to see the similarity of the points made about the changes under way, or needing to get under way, in economics then and now. Will Baumol warns that there is too much mathematics for its own sake in economics. He welcomes the new research in behavioural economics but says it is disappointing to see how slowly it is being incorporated into economists’ everyday work – he suggests this is because behavioural economists have spent too little time researching when people (or animals) act rationally and when instead their behavioural biases take over. Andrew Oswald was encouraged by the growing use of microeconomic data sets to do empirical work. Frank Hahn predicts that evolutionary theory will contribute more to economics, and Charles Plott says that in general economics will move closer to the life sciences, with particular focus on how people’s preferences are formed. Richard Schmalensee says economists will have to pay more attention to the effects of technology in service industries, and the importance of R&D and intellectual property.

So you could end up feeling pessimistic that the debate – and the subject – has moved on little since 1991. Or optimistic that the encouraging current trends to use maths more sparingly and psychology more often, to look at evolutionary models, or big questions like technology and jobs have such long and deep roots among economists – perhaps economics will actually develop in this way.

The one constant that is truly depressing is the low proportion of women included in this high-profile special issue – zero. But I fear that the same exercise now would result in only 1 or 2 women being invited to contribute. The problem isn’t that there are not enough good female economists, for there are plenty. It’s in the social construction of careers in economics and the definition of what makes an economist ‘good’.

Economics and public policy

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I was mulling over the exchange at the Festival of Economics described in yesterday’s post, between those saying economics had little to contribute to the debate about public services because it is simplistic and reductionist, and the economists pointing out that economics as applied to this area actually addresses the critics’ claims. Needless to say, I’m on the side of the economists, and indeed wrote a whole book ([amazon_link id=”0691143161″ target=”_blank” ]The Soulful Science[/amazon_link]) pointing out all the richness and sophistication of modern applied economics.

To check my views, I looked through Lee Friedman’s [amazon_link id=”0691089345″ target=”_blank” ]The Microeconomics of Public Policy Analysis[/amazon_link], a recent textbook in this field. The issue of equity is brought in by Chapter 3 (after an introductory/overview chapter and one on cost-benefit principles). Distributional issues feature strongly throughout. Profit versus non-profit behaviour is discussed at length. The interaction of markets and policy is thoroughly covered and a whole section discusses the pervasive problems of asymmetric information and externalities. The book is full of examples (all American) illustrating the unavoidable trade-offs in policy decisions.

[amazon_image id=”0691089345″ link=”true” target=”_blank” size=”medium” ]The Microeconomics of Public Policy Analysis[/amazon_image]

Yet of course the critics have a point. Because although economists are doing all this subtle work, the policy debate still draws on the caricature version of the economic debate, the ‘markets good, government bad’ or vice versa. This is partly the usual problem of the people in charge having learned their economics a long time ago. It’s also clear that economists should redouble their efforts to communicate their work. But I wonder if there are other barriers to the policy world embracing the subtler and evidence-based work that is taking place now in economic research into public services?

Celebrating economics

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The 2nd Festival of Economics in Bristol, which took place over Thursday to Saturday, was a great success. There were many more people attending than in the 1st year, and the quality of speakers, questions and debate was fantastic. The aim of the Festival is to get economists and members of the public in discussion about profoundly important trends and policy questions – obviously, the appetite to do so is quite large.

The Arnolfini Bookshop serves the Festival with an outpost selling books by various speakers. We also launched the Perspectives series there this time, with two of the first group of authors, Julia Unwin and Bridget Rosewell in attendance.

Arnolfini economics

One of the liveliest parts of the day was a vigorous debate between David Walker (a sociologist by training, @Exauditor77 on Twitter) and economists Paul Johnson of the IFS and Sarah Smith of Bristol University’s CMPO. It even got the audience heckling, on both sides. The debate is on Twitter under #economicsfest. Briefly, Walker said economics has nothing to offer the debate on public service reform because of information asymmetry and spillovers. Sarah Smith pointed out that the economics of public services recognises exactly those features, but agreed that economics needs to pay more attention to the transactions costs and monitoring of outsourcing. Paul Johnson argued that the policy debate relies too much on a simplistic Econ 101 version of economics, and all the economists concluded that people need to learn much more economics…

diane1859
Do we economists really make tendentious a priori assumptions about health competition? @Exauditor77 makes the accusation… #economicsfest
23/11/2013 10:42

Point, counterpoint

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I’ve been travelling a lot this week and have read quite a lot of [amazon_link id=”0691159904″ target=”_blank” ]The Essential Hirschman[/amazon_link], a collection of Albert Hirschman’s essays – no doubt the success of Jeremy Adelman’s terrific biography, [amazon_link id=”0691155674″ target=”_blank” ]Worldly Philosopher,[/amazon_link] has stimulated interest in his work.

[amazon_image id=”0691159904″ link=”true” target=”_blank” size=”medium” ]The Essential Hirschman[/amazon_image]

I’ll review it soon, but meanwhile was amused to find this observation in an essay on Arthur Lewis:

“Whereas in the natural or medical sciences Nobel prizes are often shared by two persons who have collaborated in or deserve joint credit for a given scientific advance, in economics the prize is often split between one person who has helped develop a certain thesis and another who has laboured mightily to prove it wrong.”

This week’s Nobel for Fama, Shiller and Hansen actually doesn’t fall into this category as the citation makes clear (and also this excellent Crooked Timber post http://crookedtimber.org/2013/10/15/sveriges-riksbank-prize-actually-blah-blah-blah/) – it is for the empirical of studying asset prices. Still, the efficient versus irrational markets notion has taken hold and would fit Hirschman’s observation.