“A recurring theme of this book is that it is unreasonable to expect markets to always deliver outcomes that are just, acceptable, or even efficient.” So write Abhijit Banerjee and Esther Duflo at the start of one chapter of their new book – fabulously timed to coincide with the Nobel they just shared with Michael Kremer – Good Economics for Hard Times: Better Answers to Our Biggest Problems. I really enjoyed reading the book but it left me with one nagging question, of which more later.

The Introduction is titled, ‘MEGA: Make Economics Great Again’, and sets out the framing of the rest of the book, which is to apply the methods of economic analysis to a range of big problems. Thus there are chapters on immigration and trade, technology, climate change, preferences and social choice, the welfre state. The model for each chapter is a beautifully clearly-written and quite balanced summary of the frontier of economic research and therefore of the conclusions economic expertise can justify when it comes to these major challenges. This makes it, by the way, an excellent teaching resource. There is relatively little about either the RCT methodology or behavioural economics for which the duo are famous, although these of course feature. A lot of the whole economic toolkit is covered.

For example, the chapter on immigration and its impact on the host country and its workers is a model of clarity in setting out why migrants may be complements rather than substitutes for native born workers, and what choices profit-maximizing employers might make. It gives the example of the 1964 expulsion of Mexican workers from California, on the grounds that they depressed local wages. “Their exit did nothing for the natives: wages and employment did not go up.” The reason was that farmers mechanized instead. For instance, adoption of tomato harvesting machines rose from zero in 1964 to 100% in 1967. The farmers also switched to crops for which harvesting machines were available, and for some time stopped growing others such as lettuce and strawberries.

The chapter on the likely impact of technology on jobs is similarly clear and yet also notes that there is scant consensus among economists on this. I thought this was the weakest chapter, but perhaps that’s because it’s my area and they try to cover a vast literature – taking in competition policy and inequality due to technology and positional goods and the nature of economic growth….. One could expend thousands of words on these. 🙂

The book is a bestseller and derservedly so. My big reservation about it is the way this demonstration of the analytical power of economic expertise lands in these ‘we’ve had enough of experts’ times. This is as much a matter of tone as content, but I found statements like this actually a bit uncomfortable: “This underscores the urgent need to set ideology aside and advocate for things most economists agree on, based on the recent research.” I have come to believe this deep urge among economists to separate the positive and normative – dating back to Lionel Robbins – is a mistake. Dani Rodrik’s Economics Rules, another excellent overview of ‘good economics’ is much more nuanced and less economics-imperialistic in this respect.

Economic analysis rocks, as does evidence, but we have to engage with the ideology too. Good economics is about more than technical expertise.

I thought Corinna Schlombs’ book Productivity Machines: German Appropriations of American Technology from Mass Production to Computer Automation looked like my kind of book, and I was right. This is a history of technology approach to the concept of productivity as it developed in the 20th century, in the frontier economy – the US – and as it transferred to Europe, especially Germany, and especially through Marshall Plan aid after the Second world War.

The book starts with the early steps taken by the Bureau of Labor Statistics to define productivity and measure it, work that ran alongside its other key activity of defining and measuring price indices. This early definition was clearly focused on technology adoption and use, although with an awareness that contextual factors (closeness to materials for example) would affect the measured production efficiency of bricks or shoes. The earliest work involved narrative accounts of production methods, with surveys and the development of an index, coming later.

In the same period, Henry Ford started to reshape the context for thinking about productivity with his famous $5 wage, enabling the workers who made cars to think about affording to buy them. This paved the way for a wider understanding of productivity in the US as involving the production system including methods of management and – by the postwar era – the American way of life with relatively egalitarian social relations and consumer affluence created demand and growing markets.

The 1920s saw many German visitors touring US plants to understand productivity and took away widely varying messages. Many industrialists concluded that the technology and organisation of the factory was the central issue, others argues workers should work harder and longer, while some – particularly unions – did appreciate the Ford message. Postwar, however, the influence of the US through its aid to Germany meant the introduction of a programme of visits by German workers and industrialists to the US intended to land the message about the importance of the social framework. The distinction between US and German approaches to productivity subsequently centred on the role of unions – local in the US, national collective bargaining for the whole industry in Germany.

The book ends with chapters on IBM (whose welfare capitalism fit well into teh German context) and US computer technology driving automation in the 1960s. Automation was seen differently on the two sides of the Atlantic – as a driver of productivty in the US and as a threat to employment and eater of scarce capital in Germany. By 1971 IBM was dominant in computer markets across Europe, except, at that stage, the UK.

The bottom line I take from the book is that ‘productivty’ is a socially-embedded construct whose meaning has changed over time – something to bear in mind as we fret now about low productivity. Schlombs ends with the question of whether its meaning will change again now – whether ‘productivity’ will be driven by quality improvements – even quality-of-life improvements – and not either working ever harder or consuming ever more. “Productivity Machines has shown that American expectations of economic growth and higher standards of living through increased productivity from technological improvements were unique to the American model and not inherent in capitalist economic relations.”

So, a very interesting read and useful contribution to the inter-economist debate raging about the OECD productviity slowdown.