Productivity everywhere

The best museum I’ve ever visited is the Stasi museum in Berlin. Mainly text and photos, it gives a compelling image of life under surveillance socialism. It even had its own technologies, from the steam iron (to steam open letters), to the pinhole cameras and disguises for agents in the field, to the unique rotating filing systems and square punch cards to record the masses of information. (And how the ratio of information to physical mass – although not energy use – has changed over the decades. Nordhaus’s well-known paper on the cost of computation tries to measure a related phenomenon.)

All this by way of prelude to recommending The Stasi Poetry Circle by Philip Oltermann. Although vaguely aware of the cultural dimension to the Cold War, it was still striking to learn that the East German regime had a poetry initiative among its elite Stasi regiment to try to win hearts and minds. It’s a marvellous book.

One nugget I particularly enjoyed was this: “Publishers, like their customers, had to adhere to the principles of a planned economy: in terms of books printed, the stated aim was a yearly increase in productivity of four to five percent. Between 1950 and 1989 both the number of books printed and the proportion of those that were fiction more than tripled.” It seems to have had some payoff: one international survey in the late 1980s found that East Germans had a higher reading comprehension age than their West German counterparts. This is the kind of productivity initiative I can get behind.

Another anecdote that leapt out: one Stasi guard to one of the poets who refused to join the Party’s youth wing on the grounds of preferring his own interior world: “If you are a decent human being, then there’s no world inside you other than the world you can see from the outside.” The concept was the gläserne mensch, transparent person.

Highly recommended book, and museum.

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An economist in the real world

I was a bit sceptical about John List’s The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale mainly because of its presentation as a how-to business book. This goes right through to the design, which would sit nicely in an airport bookstore (remember those?….) But my fears were groundless. It’s a terrific read, and despite the business gloss is full of good advice for all kinds of public and non-profit organisations too.

For those not familiar with his work, List runs field experiments and has done so across a huge range of organisations and contexts, testing behavioural hypotheses. He has also worked as chief economist for Uber and Lyft and so has hands-on experience of how businesses operate, a rare qualification among academic economists. The book clearly draws on this trove of experience, ranging from fishing villages in Brazil to primary schools in Chicago Heights to creating incentive programmes for Lyft drivers and riders. I don’t know Prof List but I admire any economist who has spent so much time out in the ‘real world’.

The book has two halves, the first covering five diagnostics to help assess whether an idea that works at small scale will scale up – whether that’s a policy to assist progress among toddlers in deprived areas to a new digital wellbeing app. The diagnostics boil down to some basic (but evidently challenging) statistical and economic analysis – for example, do you have a representative sample when you test an idea, can you identify false positive results, do you have economies of scale to capture or will costs go up with revenues? The second half is more general econ/business advice – sunk costs are sunk, risk compensation and other behavioural responses are a thing, focus on allocating marginal effort and identifying marginal revenues. I was particularly struck by the last point in the context of cost benefit analysis, List having also spent some time as an economist responsible for CBA in the George W Bush administration in 2002-3.

All in all, this doesn’t topple Shapiro and Varian’s Information Rules from my number 1 position as best ever business book (written by economists), or indeed Dixit and Nalebuff’s The Art of Strategy from number 2, but The Voltage Effect is definitely in the top handful and well worth a read by anbody who wants their organisation to succeed and grow.

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I try to be open-minded about WFH

I’ve been dipping into Julia Hobsbawm’s forthcoming book The Nowhere Office: Reinventing Work and the Workplace of the Future, which is a very nicely written and upbeat assessment of the shift in white collar working habits as a result of the lockdowns.The book sees the pandemic-wrought changes as an opportunity for a healthier model of office work.

I’m not an unbiased commentator, having (a) long been able to work a day or two a week at home and (b) absolutely *loathed* work-from-home rules. It has been bad for my mental health, bad for the generation of ideas and energy, and made running a research team, and teaching, far harder. So I’m emotionally disinclined to agree either with the prediction that WFH will be the new norm or with the assessment that this will be a good thing. To wrap some logic around it, the force of agglomeration economies in knowledge-based activities has not reduced.

Still, lots of very smart people disagree so I’m trying to keep an open mind. My Productivity Institute colleague Cary Cooper is one, and he and I have debated this (on Zoom….). Nick Bloom at Stanford is another, with some super-impressive research. And now Julia’s book. I don’t want her to be right, but perhaps she is, at least about office workers. After all,  many jobs have no WFH option.

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How to invent ideas

I found Zorina Khan’s Inventing Ideas: Patents, Prizes and the Knowledge Economy very interesting. It uses an impressive assembly of empirical evidence about inventors, patents, the administrators and recipients of innovation prizes and awards, and industrial exhibitions – largely in the US, UK and France – to support a specific analysis of what enabled the US to become the most innovative and richest industrial nation from the late 19th century on. As she points out, much of the literature asks why Britain was the first country to experience an industrial revolution, so the question itself is distinctive.

Her argument is that compared with Europe, there were “dramatic differences in the new approach to growth that were manifested in early US policies.” The key difference – supported by the mass of evidence – is a far greater emphasis in the US on patents (as a market-oriented innovation system) rather than prizes and awards (an administered system). A second and consequential difference is the preponderance of incremental and commercially successful innovations in the US. “Elites have always mistrusted markets: wealth and influence often lead to the convistion that the insights of the favored fiew can outperform spontaneous co-ordination,” Khan observes. The US was strongly anti-elitist (at least in that era), whereas “the most significant variable affecting whether or not a British inventor received a prize was elite education at Oxford or Cambridge,” neither university at the time focused on technical or scientific excellence.

Along the way to supporting its argument that the marketplace of ideas beats elite technocracy, the book demolishes quite persuasively the recent trend toward innovation prizes as an effective incentive mechanism. Less persuasive is the argument that patent trolling is no greater a problem than it ever was (although there clearly was a lot of litigation over patents in the 19th century).

It also makes the point that European and American patent systems operated differently. The specific institutional details mattered. So the conclusion one could draw is that the underlying elitism of European societies and egalitarianism of the US does more to account for latter’s emergence as technological leader. In which case, the longer term outlook for the US staying at the frontier may be less rosy. In any case, much food for thought in the book, and fascinating empirical and historical detail.

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Muddle, muddle, toil & trouble

It’s back to routine tomorrow, with too many (>0) Zooms in the schedule. Still, I’ve been making the most of the extra reading time since New Year, and have now polished off Duncan Weldon’s Two Hundred Years of Muddling Through. This is an aptly-titled economic history of Britain since the dawn of the Industrial Revolution, a story of accidental successes and forseeable failures, told with verve.

War features prominently in the story, as it would any industrialised nation’s economic history. Raising taxes to fight wars paved the way for the expansion of the franchise and growth of the state. And the legacy of war, either financial or physical, shaped much of the 20th century’s economic history. The distinctively British parts of the experience are the long shadow of the landowning aristocracy and our dysfunctional politics, giving us a uniquely warped political economy with a ruling class running the entire country as if it were a colony (See Tom McTague’s marvellous recent article in The Atlantic on this.)

I’ve grown interested in the role of the Treasury in this, having sort of read (only sort of because reading online) a fascinating Kings College London PhD thesis by Tom Kelsey, Picking Losers: Concorde, nuclear power, and their opponents in Britain, 1954-1995. His research established the effective internal Treasury opposition to these postwar efforts to stay on the frontier of technologies the US did not clearly dominate: what we got was a shadow of what ministers had planned. (Although of course the great counterfactual is what would Britain’s role in the computer industry have been were it not for the UK gestablishment insisting on secrecy postwar as the Americans did not, and were it not for their persecuting Alan Turing.) Anyway, I’d have liked a bit more about where the consensus around economic ideas in UK policy came from, as these shifted over time. (And is there a long-view history of the Treasury looking at how it has preserved a largely consistent culture and worldview over centuries? Today’s fiscal hair shirtism inside that building is wholly consistent with the decision to go back on the Gold Standard, for example.)

This is a terrific book to recommend to 6th formers and students who know little economic history. When I was a student there was a gap for just such a book – Sked & Cook’s Postwar Britain: A Political History came out during my undergraduate years. I had a 1958 book, British Economic Policy Since the War by Andrew Shonfeld. (Both hard to find now, but still on my shelves.) Robert Skidelsky’s magisterial biography of Keynes wasn’t published yet though I read the Roy Harrod one. We are now blessed with many histories particularly of the 20th century – David Edgerton, Correlli Barnett for instance – albeit with a more detailed focus. Two Hundred Years of Muddling Through is a lively, clear and balanced overview of British economic history, & I wouldn’t hesitate to recommend it.

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