Enlightened liberalism: a reckoning

I’ve torn myself away from Twitter, horrified by the disintegration of the United States, the end point of its years of institutional racism and grotesque inequality, fuelled by Trump. George Packer’s brilliant article in The Atlantic a few weeks ago captured it: “We are Living in a Failed State.”

How did this come about? Well, The Light that Failed: A Reckoning by Ivan Krastev and Stephen Holmes seems like a pretty good diagnosis of how modern democratic liberalism has come to an end since 1989. The book starts with Eastern Europe, and moves on to Russia, China and finally the US. It uses the device of imitation: the post-Communist countries of eastern and central Europe wanted to be like the West in its idealised, peak-End of History image. They wanted to modernise, ‘normalise’, and become just like the countries of the EU. Yet the 1989 revolutions imitating liberalism have ended up in illiberal counter-revolutions, for there was a chasm between the ideal and the reality. “If we examine the gap between Western expectations and Eastern realities after Communism, we can discover an important source of the mental stress created in Central and Eastern Europe by a revolution aimed at importing ot imitating a foreign version of normailty.” I take this to allude to the importation of western economic and political institutions without consideration of local history and realities. Much has been written about the naive and ultimately counterproductive economic ‘shock therapies’ of the early 1990s.

Moving on to Russia, the authors argue that Putin’s imitation of the west has taken an aggressive, sarcastic turn – “ironic mimicry and reverse engineering of American hypocrisy.” His aim in interfering in elections and setting bots and trolls to run amok on social media is to dishearten and confuse, sow discord. “The West has started to resemble Putin’s Russia more than we are ready to acknowledge,” they write.

As for Trump, they argue that the irreversible damage he has caused to American democracy has involved deploying a populist gambit, corroding trust “not by lying but by telling truths selectively, especially half truths with which liberals are inclined to agree – globalization has only served the financial elite, US troops should not be entangled in Syria or Afghanistan, ‘the system’ is unfair. “The Trump movement fits into a global culture of grievance and victimhood,” the same culture exploited by Orban in Hungary, or indeed the authoritarian populists of western Europe such as Le Pen or Farage.

This an essential and sobering read. This is far from my expertise, but it seems to me to capture something essential about the political psychology about the past 30 years. The book ends by presenting today’s situation as a fork in the road: tragedy or hope. Is there hope for a chastened liberalism? It’s certainly worth working for it, and in a different frame of mind one can certainly see this book as a polemic that ignores countervailing forces. But today’s images and headlines, in the context of a global health emergency and economic catastrophe, make it hard to feel optimistic.

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Top down *and* bottom up

Charles Stafford’s plea in Economic Life in the Real World: Logic, Emotion and Ethics, is for his fellow anthropologists to take more seriously the methodologies of two other disciplines, economics and psychology. I learned a lot about anthropology from this book, including how much anthropologists disdain economics (I fear we return indifference, on the whole).

Stafford’s argument, in a very interesting and readable book, is that the approaches are complementary: anthropologists focus on the most micro of details, while both economics and psychology are interested in generalisation about human behaviour. Intriguing to see these two bracketed together when psychology has – during the behavioural rvolution – been portrayed as a more realistic version of choice than that (assumed to be) assumed by economists – of course economists have always known that the rational choice version is not ‘realistic’.

He writes: “As a matter of routine, anthropologists accuse economists of being obsessed with ‘individual rational choosers’, but it is surely anthropolgists who are obsessed with detail.” There’s a bit of a paradox here: economics does apply methodological individualism on the whole, and easily overlooks social influences (though not entirely). Yet our concern is with outcomes at aggregate as well as individual levels. Economics is certainly universalist. It was interesting to see psychology being put in the same camp, as a universalist approach.

The plea is therefore for anthropologists to recognise that human psychology is at the heart of economic agency – it isn’t all about historical and cultural context. There is a nice chapter analysing the pros and cons of Robert Lucas’s approach to human capital and economic development, confrinted with the way people in a Taiwanese village think about the education of their children. The book ends too by pointing out that while anthropology resists quantification at all costs, the people whom the author had spent time with during his fieldwork considered numeracy and quantification to be important, not least for their economic lives.

There is surely an interaction between general human characteristics and cultural specificities. Both approaches are needed for a rounded understanding of society. I am particularly interested in the possibility for qualitative methods to inform causal inference, given that empirical identification of statistical relationships in complex systems of economic interactions is pretty much impossible. Identification needs to come from outside the model, rather than by torturing statistical correlations with dubious ‘instruments’.

Anyway, I enjoyed reading this book and welcome the anthropo-econo debate.

51Mcz+Z4MHL._SY344_BO1,204,203,200_I’ve also nearly finished Jeanette Winterson’s Frankisstein, which is terrific.

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Wolves on the trading floor

My lockdown days have become filled with Zoom meetings at the expense of reading on tubes and trains. I’m definitely going to try to cut down on the online calls, which are exhausting (& I hope tech-land is working out why, and trying to fix it).

Meanwhile, I read a very good biography of Walter Gropius by Fiona MacCarthy, another of the wonderful Maigret novels, and also The Hour Between Dog and Wolf: risk taking, gut feelings, and the biology of boom and bust by John Coates.

It’s a really interesting book about the role biological/neurological responses in decision-making, applied to the financial market context. It will surprise nobody to learn that testosterone is one of the key players, generating bull markets (hah!) and excess risk-taking. “Traders are walking time bombs, and banks invariably light the fuse, dangling before them huge risk limits and bonus payments.” There seem some obvious regulatory interventions in the financial context eg ban bonus structures and mandate 50% female employees on trading floors. The book points out that at most 5% of traders are women, even though they outperform men over the long term.

The book braids together sections on the biology and sections tracking the various hormones and nervous impulses in a financial market boom. It’s a terrific read and super-clear. The author is a financial markets guy turned research scientist and having both sets of insights is illuminating.

The part that most interested me though – and that put me on to the book via an FT article about the impact of uncertainty on our health – was pondering what it means for a computer to think and make decisions when human decision-making is so firmly embodied, driven by our physical features, the way the chemicals in the blood stream and the nervous signals shape perception and emotion. The book I’ve now started (Economic Life in the Real World by Charles Stafford ) cites Antonio Damasio’s work in Descartes’ Error: people whose emotions are affected by brain injury are worse at making ‘rational’ decisions. Reason and emotion – involving biochemical and neurological phenomena – go hand in hand. Meanwhile, we are building AIs according to an idea of ‘reason’ modelled on homo economicus.

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Frank Ramsey

Cheryl Misak’s biography Frank Ramsey: A Sheer Excess of Powers is terrific. It’s the first full biography of the lost genius of economics, philosophy and maths – he died at the age of just 26 having already made fundamental contributions in each field, each of which has its Ramsey rule or principle. There’s also the ‘Ramsey effect’ of having a brilliant idea only to discover that Frank Ramsey had it first. There is an earlier biography of him by Karl Sabbagh, Shooting Star, which is also well worth a read but it doesn’t have the scale or ambition of this new one.

Misak takes us to the intellectual environment of the 1920s, Moore and also Russell ascendant in Cambridge philosophy, Keynes in economics, logical positivism and the Vienna circle getting into gear. The personal story – growing up in Cambridge as one of four children of a not particularly inspired and narrowly religious mathematics don – is threaded alongside the intellectual journey. Ramsey was sent to Winchester, which sounds hellish, then did the maths Tripos at Trinity College – his entire life centred on Cambridge.

As a teenage undergraduate student he was identified as the right person to translate Wittgenstein’s Tractatus – the only person who might understand it. Wittgenstein – what an absolutely dreadful man. I for one have also always found both early and late Wittgenstein totally unintelligible, although accepting there does seem to be a consensus that he was a genius. Ramsey seems to have thought so, while disagreeing with key arguments in the Tractatus; they continued their conversation until Ramsey’s death, albeit with Wittgenstein having a big sulk of several years in the middle, refusing to correspond with him.

Anyway, on graduation Ramsey was snapped up by Kings as a Fellow (at 21), and embarked on foundational work in mathematics with massively influential sidelines in Philosophy and economics. (The biography has useful boxes written by distinguished scholars explaining Ramsey’s main contributions in each field.) Economists such as Keynes and Pigou used him to check their maths, and he also reviewed submissions to the Economic Journal for Keynes. Sraffa was a friend. There are intriguing signs in his last paper that Ramsey would have taken forward the pragmatism of C.S.Peirce (another pretty unintelligible writer – or maybe it’s me and philosophy…). Who knows what other contributions he would have made in economics.

But Ramsey was no narrow, dull academic. He socialised with the Bloomsbury set, advocated free love, went to Vienna to be psychoanalysed, joined societies, played tennis, and like everyone at the time wrote countless letters – Misak has clearly spent vast amounts of itme in the archives.

A sheer excess of powers. A shooting star. Both seem apt descriptions. In just a few years he had published a dozen or so transformational papers spanning three fields. It must be Ramsey’s tragic early death that explains why he isn’t more widely known. This biography is my book of the year so far.

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Increasing returns in time and space

I’ve been mulling over increasing returns for a while (it will feature in my next book, Cogs and Monsters, in 2021) and returned to the question this morning as I prepare to write something on agglomeration economics for my colleagues Michael Kenny, Anna Alexandrova and Cleo Chassonnery-Zaigouche, for their research project Expertise Under Pressure. The essay question is pretty broad, concerning the influence economics has had on policy debates about cities. The key concept is that of agglomeration economies.

Going to the bookshelves – in imagination to the ones quarantined in my office and grabbing the ones at home off the shelves – I started on the agglomeration journey first with Paul Krugman’s 1991 Geography and Trade: “I have spent my whole professional life as an international economist thinking and writing about economic geography without being aware of it.” My copy is the 1995 paperback edition. The new economic geography was later crystallised in the textbook The Spatial Economy by Fujita, Krugman and Venables.

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At about the same time, already intrigued by technology, I discovered Brian Arthur through Increasing Returns and Path Dependence in the Economy. To my mind the rebirth of economic geography – and economic history – is clearly linked to the spread of digital technologies, a link made so clear by Ed Glaeser in Triumph of the City and in terrific papers such as Non-Market Interactions, Information Technology and the Future of Cities, and Reinventing Boston.

Now for a weekend re-reading some of this good stuff.

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