Economists are not all the same

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Thanks to a long train journey, and despite the fact that one of them was packed with boozing and singing Newcastle United supporters, I finished two books: the 25th anniversary edition of The Economist’s View of the World and the Quest for Well-being by Steven Rhoads, and Brett Frischmann’s 2012 book Infrastructure: The Social Value of Shared Resources. This comment is about the first of these, a book I was surprised not to have heard of before: not only do I read a lot of books about economics, but it was also a best seller.

It’s easy to see why it did do well. It’s well-written, clear and jargon-free. It starts with basic concepts that become second nature to an economist but others find somewhat unnatural: opportunity cost, marginalism and the role of economic incentives. The book goes on to a section about government and markets, the economic concept of efficiency (ie. Pareto optimality and the welfare theorems) and then equity and externalities. It ends with a section on the ‘limits to economics’, namely well-being, non-fixed preferences and political economy. This is all key basic material and useful concepts to non-economics people taking public policy course.

Having said that, I didn’t much like the book because it equates ‘how economists think’ with ‘they think markets work best, governments fail except where there are specific externalities to fix’. I spent the first two parts of the book (not literally) shouting at it: no, that’s the Econ 101 version! That’s not how we *really* think (or at least not all of us). I liked the third part much better but would argue that economics has much to contribute beyond these specific ‘limits’.

To give a specific example, there’s a section in the first chapter, ‘Engineers versus Economists’ which argues that engineers, well, over-engineer big civil projects, whereas economists armed with cost-benefit analysis prevent this wasteful spending – or ought to if only political vanity didn’t get in the way. This is just too over-simplified to be useful to public policy students. First, for all the compelling evidence of over-budget and late big projects, infrastructure is necessary so just saying no to engineers is useless. Secondly, politics rather than engineering alone play a big part in building concreet white elephants. This is a subject one can’t discuss without political economy. I teach this each year and would ask my students to go out of their way not to read this section.

So all in all, some good things about the book but not one I’ll be using. Needless to say, I like my own text on this area (Markets, State and People) better 🙂

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The Free World, not in a nutshell

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I finally finished The Free World: Art and Thought in the Cold War by Louis Menand, all 700+ pages of it. I did enjoy reading it, an account of Cold War, mainly US with some French, intellectual and cultural history that is both panoramic and detailed. It ranges from philosophy, art and music to the 60s counterculture, tracing the way the domestic and international political context shaped some of the currents across the waterfront of ideas. Having said that, I find it hard to sum up the book and put this down to the fact that I had to read it in relatively short chunks over a long period because it’s just too big to carry around or even hold for long. I do think it would have benefited from some editing out of the detail. For example, every new character in some circle, from art criticism to linguistic philosophy is introduced with a biographical note – where they grew up, what their connections with to others in the circle, who slept with whom. We are treated to some snippets about their personality: Pollock always drank too much, Sartre “did a great Donald Duck impression.”

Having said that, the book certainly deserves the adjective magisterial. The famous cultural figures, from John Cage to the Beatles or Kerouac to Baldwin, are located in a milieu that helps explain their art and also somewhat downplays it. For it is evident that Sherwin Rosen’s superstar effect has long been in operation: people who are only slightly better than their rivals at whatever they do become the main focus of general attention and fame, for reasons of serendipity, or connections.

On reflection, perhaps the reason I’m left with quite a bitty impression is less to do with its length and my feeble biceps than with the inherent difficulty of the task Menand set himself. Maybe the 2nd half of the 20th century is just too close to our own lives for the focal length to be set in a way that gives a single coherent image rather than this impressionistic account. Maybe covering everything from A J Ayer’s philosophy to the success of the New Yorker is too large a territory. Having said this, perhaps it doesn’t matter either. It’s beautifully written and there are 700+ pages of fascinating detail.

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Taking people seriously (all of them)

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What a month. Hybrid life seems to be more than twice as busy as either Zoomland or life in the beforetimes. Still, a highlight was the Festival of Economics in Bristol at the end of last week. I chaired a panel on the economics of household labour with Sonia Oreffice, Sarah Smith, Mary Ann Sieghart and Andy Eyles, and so before heading there I read Mary Ann’s book The Authority Gap: Why women are still taken less seriously than men and what we can do about it. (Festival recordings will go online shortly.)

It’s an excellent, if enraging, read. There are jaw-dropping accounts from very senior women – presidents, CEOs – of the various put-downs and mansplaining they’ve endured (for example, from Pope John Paul II in the case of Mary McAleese, then President of Ireland. Or Roula Khalaf, now Editor of the FT, being told she was too soft spoken to get on, i.e. not a man). It’s rather depressing to read so many ever-so-familiar experiences of being patronised, ignored, insulted or belittled even by such eminent women. The book summarises a good deal of the academic literature documenting discrimination and its consequences (for pay, promotion, health, happiness), without hitting the reader with a sledgehammer.

But what to do about it, as the subtitle promises? The book argues that there is much we can do, and that if we do it will be good for men as well. And it offers 20 pages of suggestions – for us, for employers, for the media, for policymakers. Many of the lists in each category start with noticing: do we address the men first in meetings or call on them first? Do we think about the adjectives we use? Do male partners reading this take the initiative in organising household matters, rather than waiting to be asked or told (no matter how cheerfully compliant)? There are some excellent ideas here, although I did feel the book is a bit too optimistic about how much some employers/partners/media want to change. Still, there are many good ideas here, helpful to those willing to make the effort.

41jD9Gpi7-S._SX323_BO1,204,203,200_Apart from this, much of November has been taken up with reading Louis Menand’s The Free World: Art and Thought in the Cold War. I loved The Metaphysical Club so was keen to read this. I’ll give it its own post when I’ve finally finished, but will just moan here that it’s a 700 page hardback that can only be read propped up on two cushions, and can’t be popped into a bag to read on the train. The consequence is that I’ve found it hard to keep the arc of the argument in mind, reading it on just a couple of evenings a week at home. But more of that later. BTW, around page 500 out of 700, the book introduces a chapter on ‘Women’s Lib’, observing that it’s all been about men so far.

519Oe8aWOoS._SX323_BO1,204,203,200_And I read Abdulrazak’s Afterlives, which is wonderful.

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The future of – everything?

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I’ve polished off Ananyo Bhattacharya’s The Man From The Future: The Visionary Life of John Von Neumann in just a few sittings (a long train journey from Lancaster in torrential rain helped), and thoroughly enjoyed it. Parts of the tale were familiar from things I’ve read before, probably the many histories of computing. But much of it was new, and my goodness what an extraordinary person.

This biography is organised partly chronologically but also partly by chapters concerning each area of knowledge in which Von Neumann had a profound influence. And there are so many of them: pure mathematics, quantum physics, ballistics, the atomic bomb, computing, game theory, bringing expected utility theory back to life, cellular automata…  So he was a significant figure intellectually in maths, physics, economics, computer science, and even eventually biology. At the same time he was actively engaged in defence policy and busy with committees and meetings, zapping all around the country. He died rather young, and tragically knowing that his cancer was eating at his extraordinary mind. Highly recommended.

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Future uncertain

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I’m late to Radical Uncertainty by John Kay and Mervyn King, which was published last year. It took me a while to get into the book but I’ve enjoyed it and found much to agree with. The basic hypothesis is well known: that the kinds of models and methods useful for understanding what the authors call ‘small world’ or well defined problems are not useful for dealing with the contexts of many actual economic challenges. In these cases, from innovation or financial stability to climate change, ‘radical uncertainty’ demands a less narrowly formal approach. The term the book uses is that we should be asking ‘what is going on here?’ By radical uncertainty they go beyond Taleb’s famous black swans, or events in the fat tails of distributions. Rather, they mean there is no stable underlying probability distribution at all. This is the territory of unknowable futures. Is the Earth’s climate going to change irreversibly in the years ahead and if so how? There’s no probability to read off for this.

Some of the analysis is familiar. For instance the idea of reflexivity (from Popper via Soros among others) undermines the stationarity of probability distributions. In other words, one source of radical uncertainty is that we humans respond to events in ways that can be self-fulfilling or self-averting (see Chapter One of my Cogs and Monsters!) Kay and King also emphasise the important role of narratives, increasingly recognised (and btw we have a terrific Bennett Institute event on this coming up). I strongly agree with their scepticism about the scope for replacing humans with machine learning systems to get ‘better’ outcomes – as they put it, justice should be admininstered in an individual, not a statistical, manner. Otherwise we’re in the nightmare world of Minority Report. Human intelligence is accumulated collective intelligence, and co-ordination and institutions are all-important.

The book is full of examples of where policies go wrong by assuming a small world problem in a context of radical uncertainty. The UK pensions regime for example, applying technical valuations of the worth of pensions schemes which assume a stationary distribution of future returns – something belied by the evidence. Future risk can’t be eliminated so what’s needed is a future risk-sharing mechanism, rather than raising contributions now to unaffordable and unnecessary levels. (See for instance this excellent article about the UK’s USS scheme.)

As you would expect given the authors, the book is wide-ranging and beautifully written. There’s a tacit acknowledgement that these two eminent economists have changed their minds about the applicability of much of mainstream economics, for Mervyn King at least held an important role at the heart of mainstream policy. Good for them, though – so have I. As well as reading Radical Uncertainty on its own merits, it offers an interesting insight into the tides of change within economics, about which I’ve also written.

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