More new titles for 2017

The inflow of catalogues for next spring continues. Today’s arrival is Polity Press. One will be a must-read for me, Lorenzo Fioramonti’s The World After GDP. Steve Keen has Can We Avoid Another Financial Crisis? (The blurb doesn’t tell me the answer.) There’s also The Ascendancy of FInance from Joseph Vogl, and Another Economy is Possible by Manuel Castells and others. I’m also quite taken by The Invention of Celebrity by Antoine Lilti – in the Enlightenment, apparently.

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It’s what happens after innovation that matters for productivity

Having been guiltily reading a thriller or two, as well as David Olusoga’s Black and British, this is a brief post about an economics paper I’ve read, Paul David on Zvi Griliches and the Economics of Technology Diffusion. (Zvi was one of my econometrics teachers at Harvard, a very nice man who was still so obviously brilliant that he was a bit scary. He would ask a question which might be completely straightforward but one would have to scrutinise it carefully before answering, just in case.) Anyway, the Paul David paper is a terrific synopsis of three areas of work which are implicitly linked: how technologies diffuse in use; lags in investment, as new technologies are embodied in capital equipment or production processes; and multifactor productivity growth.

As David writes here: “The political economy of growth policy has promoted excessive attention to innovation as a determinant of technological change and productivity growth, to the neglect of attention to the role of conditions affecting access to knowledge of innovations and their actual introduction into use. The theoretical framework of aggregate production function analysis, whether in its early formulation or in the more recent genre of endogenous growth models, has simply reinforced that tendency.” He of course has been digging away at the introduction into use of technologies since before his brilliant 1989  ‘The Dynamo and the Computer‘. Another important point he makes here is that there has been little attention paid to collecting the microdata that would permit deeper study of diffusion processes, not least because the incentives in academic economics do not reward the careful assembly of datasets.

By coincidence, the paper concludes with a description of a virtuous circle in innovation whereby positive feedback to revenues and profits from a successful innovation lead to both learning about what customers value and further investment in R&D. Here is the diagram from the paper.

diagThis was exactly the argument made yesterday at a Bank of England seminar I attended by Hal Varian (now chief economist at Google, known to all economics students as author of Microeconomic Analysis and Intermediate Microeconomics, and also with Carl Shapiro of Information Rules, still one of the best texts on digital economics). Varian argued there are three sources of positive feedback: demand side economies of scale (network effects), classic supply side economies of scale arising often from high fixed costs, and learning-by-doing. He wanted to make the case that there are no competition issues for Google, and so suggested that (a) search engines are not characterised by indirect network effects because search users don’t care how many advertisers are present; (b) fixed costs have vanished – even for Google-sized companies – because the cloud; (c) experience is a good thing, not a competitive barrier, and anyway becomes irrelevant when a technological jump causes an upset, as in Facebook toppling MySpace. I don’t think his audience shed its polite scepticism. Still, the learning-by-doing as a positive feedback mechanism argument is interesting.

Power, plenty – and Brexit

It seems a good time to take this wonderful book, Power and Plenty: Trade, War and the World Economy by Ronald Findlay Kevin O’Rourke, off the shelf again: “It would be foolish … to simply assume that the remarkable progress achieved by globalization in the last few decades will be sustained into the future.”

Although I agree with this VoxEU column that the gains are well worth defending, the global political context for continuing trade growth is depressing. And yet the UK government seems determined to get as bad a deal as possible in removing the country away from the most successful free trading area there has ever been. A bad move being made ever worse by its incompetent implementation.

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The merit of methodological individualism: individuals count

I’m reading David Olusoga’s Black and British: A Forgotten History, which accompanies the excellent BBC series (& is an amazing bargain at £6 for a big hardback on Amazon at the moment). Just a short way in, I’m delighted to find reference to the true origins of Thomas Carlyle’s description of economics as ‘the dismal science’. Carlyle was, as Olusoga notes, “an apologist for slavery.” He thought economics was dismal because prominent economists were in the abolition campaign, and thereby – in his view – undermining the sanctity of private property rights with their ‘expertise’. This was surely an occasion when the methodology of economics – based on identical, individual agents – was surely on the side of right. There is an excellent detailed essay on this in the Library of Economics and Liberty (in 2 parts).

Cotton Famine Road, above Norden

Cotton Famine Road, above Norden

Among the others on the right side at this time were those Lancashire mill workers who supported the Union blockade of the southern ports in the American Civil War, despite the great personal cost the Cotton famine imposed on them. I hadn’t heard of Cotton Famine Road, despite growing up nearby. Manchester still remembers the episode thanks to the donated statue of Abraham Lincoln. There was a super In Our Time about it a while ago.

Lincoln in Manchester

Lincoln in Manchester

I’ve also enjoyed the book’s demolition of the vile Enoch Powell, a pompous man who prided himself on historical knowledge, as completely unhistorical in his beliefs about the England of yore.

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New books, more to read

It’s always exciting getting the new catalogues and a couple of Spring 2017 ones have recently landed. There are quite a few enticing titles in the Princeton University Press one (my own dear publisher of course). Cass Sunstein has #republic, about democracy in the social media age, Jean Tirole’s Economics for the Common Good will be out in English, and Walter Scheidel’s The Great Leveler looks intriguing – it seems to take the Piketty-esque line that violent episodes are needed to equalise society, looking at the long sweep of history since the stone age. I also like the look of Erika Rappaport’s A Thirst for Empire: How Tea Shaped The Modern World (and I thought it was cotton…..)

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Speaking of Piketty, Harvard University Press has After Piketty edited by Heather Boushey, Brad DeLong and Marshall Steinbaum. Philosopher Pascal Bruckner has a book called The Wisdom of Money, somewhat contrarian in our anti-capitalist times. Mark Granovetter’s Society and Economy looks like a must-read. I’m intrigued by Barak Rishman’s Stateless Commerce: The Diamond Network and the Persistence of Relational Exchange – an exploration of a surviving ethnic trading network.

Meanwhile, I’m looking forward to the holidays to make a dent in the current towering pile of books….

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