It’s Autumn Statement day here in the UK, bringing bleak economic forecasts from the Office of Budget Responsibility to underline the bleak economic forecasts from the OECD yesterday, not to mention ever-more apocalyptic musings about 1930s-style political extremism from the normally calm Gideon Rachman in the FT. I wondered if that data bible of the current debt crisis, Reinhardt and Rogoff’s [amazon_link id=”0691142165″ target=”_blank” ]This Time Is Different: Eight Centuries of Financial Folly[/amazon_link], would offer any consoling reflections.

Nope. Resolution of debt crises, they say, depends on a no-holds-barred debt sustainability exercise. This includes:

1. Include all government debt including implicit and contingent liabilities such as future pension and welfare payments;

2. Be realistic about growth prospects – do not be tempted to assume you can grow out of the problem. The UK might have low government debt yields compared to the Eurozone, but the potential growth rate seems lower still, maybe sub-2%;

3. As (1) and (2) are usually too hard to deliver, the likelihood is that the government debt overhang will be inflated away.

(Summarised on p289, 1st edition hardback)

No wonder the National Savings index linked products got snapped up the minute they went on sale, with savers hedging their bets, just in case Mr Osborne does not succeed in his efforts to bring down the UK’s deficit and debt levels. I think I’ll turn next to my shelf of books on endogenous growth and see if there’s any optimism to be gleaned there (see for starters my column with Paola Subacchi in yesterday’s FT). Then I’ll turn for light relief to the magisterial [amazon_link id=”0099506165″ target=”_blank” ]Life and Fate[/amazon_link] by Vassily Grossman, a tale of the 1930s.

[amazon_image id=”0691142165″ link=”true” target=”_blank” size=”medium” ]This Time Is Different: Eight Centuries of Financial Folly[/amazon_image]

It’s the weekend when all the papers have run their pre-Christmas round-up of recommendations. Here are mine: all books I read and blogged about this year, although some were published in hardback earlier than I got to them. They are listed in order of reading through 2011, and all have been reviewed on this blog (although a few are buried so deep in an archive transferred from earlier software that I’ve not yet been able to excavate them):

[amazon_link id=”0385529961″ target=”_blank” ]Griftopia[/amazon_link] – Matt Taibbi (outstanding combination of analysis and anger, originator of the ‘great vampire squid’ metaphor)

[amazon_link id=”1594134618″ target=”_blank” ]The Big Short[/amazon_link] – Michael Lewis (A perspective on how the financial crisis happened from the point of view of the few who clearly saw it coming). Review

[amazon_link id=”1846681472″ target=”_blank” ]Why the West Rules for Now[/amazon_link] – Ian Morris (magisterial history of the world and the ebb and flow of economic might)

[amazon_link id=”B005PUWRM4″ target=”_blank” ]The Dragon’s Gift[/amazon_link] – Deborah Brautigam (a balanced and well-informed survey of China’s activities in Africa) Review

[amazon_link id=”1848879849″ target=”_blank” ]The Master Switch[/amazon_link] – Tim Wu (brilliant history and assessment of the competitive dynamics of communications industries) Review

[amazon_link id=”1586487981″ target=”_blank” ]Poor Economics[/amazon_link] – Abhijit Banerjee and Esther Duflo (what we know about tackling poverty and fostering economic development) Review

[amazon_link id=”0224089021″ target=”_blank” ]Edgelands[/amazon_link] – Paul Farley and Michael Symmons Roberts (a travelogue of Britain’s urban fringes, important spaces on this island) Review

[amazon_link id=”033044736X” target=”_blank” ]Factory Girls[/amazon_link] – Lesley Chang (fantastic insight into China’s industrial and social transformation, terrific reportage) Review

[amazon_link id=”1408703300″ target=”_blank” ]Made in Britain[/amazon_link] – Evan Davis (a highly readable portrait of the state of British manufacturing, and its strengths and weaknesses). Review

[amazon_link id=”1408701529″ target=”_blank” ]Adapt[/amazon_link] – Tim Harford (enjoyable advocacy of the benefits of experimentation and failure, a terrific read) Review

[amazon_link id=”0330458078″ target=”_blank” ]Triumph of the City[/amazon_link] – Ed Glaeser (a great urban economist sets out the benefits of cities, economic, social and environmental) Review

[amazon_link id=”0525952713″ target=”_blank” ]The Great Stagnation[/amazon_link] – Tyler Cowen (too slow technological gains are to blame for unemployment). Review. To be read along with

[amazon_link id=”B005WTR4ZI” target=”_blank” ]Race Against the Machine[/amazon_link] – Erik Brynjolfsson and Andrew McAfee (too fast technological gains are to blame for unemployment) Review

[amazon_link id=”0691148422″ target=”_blank” ]Economics Evolving[/amazon_link] – Agnar Sandmo (excellent history of economic thought) Review

[amazon_link id=”1933633867″ target=”_blank” ]Debt: The First 5000 Years[/amazon_link] – David Graeber (somewhat tendentious but thought-provoking history of credit, and reflection on today’s debt crises) Review

[amazon_link id=”0091936969″ target=”_blank” ]The Fear Index[/amazon_link] – Robert Harris (pacy thriller: what happens when financial market algorithms develop a mind of their own)

[amazon_link id=”0674057759″ target=”_blank” ]Capitalist Revolutionary[/amazon_link] – Roger Backhouse and Bradley Bateman (an illuminating short history of J.M.Keynes) Review

[amazon_link id=”1846140552″ target=”_blank” ]Thinking, Fast and Slow[/amazon_link] – Daniel Kahneman (a must-read summary of the state of our knowledge about how humans take decisions, especially in economic contexts) Review

But of course if you only read one book published in 2011, I have to recommend my own [amazon_link id=”0691145180″ target=”_blank” ]The Economics of Enough: How to Run the Economy as if the Future Matters[/amazon_link]!

[amazon_image id=”0691145180″ link=”true” target=”_blank” size=”medium” ]The Economics of Enough: How to Run the Economy as If the Future Matters[/amazon_image]

It’s a good thing I don’t have an over-active imagination, or reading Kevin Kelly’s [amazon_link id=”0143120174″ target=”_blank” ]What Technology Wants[/amazon_link] after [amazon_link id=”0091936969″ target=”_blank” ]The Fear Index[/amazon_link] by Robert Harris might be giving me nightmares. The Harris novel is a page-turning thriller based on the premise that an algorithm undertaking super-fast digital trading in financial markets develops a mind of its own and sets out to cause extreme real world events in order to profit from them. I won’t say any more in order not to spoil the book for those looking for a decent thriller for the Christmas holiday season.

In What Technology Wants, Kevin Kelly argues that technology – the bundle of all technologies, labelled ‘the technium’ – is a seventh kingdom of life, following on from animals, plants, fungi… He sees technological innovation as an inevitable dynamic process heading in specific directions determined by the same natural physical and chemical forces that underlie all of life. The book isn’t as weird as this summary might make it sound. Once consciousness in humans was conceived of as an emergent phenomenon from the masses of neuronal connections in the brain, it is perfectly logical to ask whether the internet could become conscious too. Ray Kurzweil famously did so. Kelly’s book veers too far into the mystical for my tastes – “The technium is the way the universe has engineered its own self-awareness” – but the questions it poses are perfectly valid and rather marvellously provocative.

There are signs of selective argumentation. At the end of an interesting discussion on the pervasiveness of multiple simultaneous invention (the calculus, agriculture, lightbulbs etc etc), Kelly suggests the deliberate attempt to accelerate innovation is a logical step. His example is Nathan Myhrvold’s Intellectual Ventures; but it’s not clear where patent trolling fits into this bright techno-teleology. Arguing for the inevitability of specific inventions once all the prior inventions and conditions are in place, Kelly says leapfrogging is not possible – and to the obvious counter-example of mobile phones in Africa not requiring a fixed-line network he says, ah, but the growth of mobiles meant the fixed network had to grow too. Errr? I think his section on the inevitability of laws such as Moore’s Law or similar trends in say air transport or disk drives is weak as it turns out the bizarrely regular trends apply not to a specific technology but to an outcome – travel, computation speed. There could well be a sort of reverse Goodhart’s Law in operation here, whereby what you are trying to control becomes measurable (G’s Law says that whatever you target becomes thereby uncontrollable).

However, all in all I think this is an entertaining book, ranging widely across the field of human knowledge and provoking many questions. It has loads of interesting facts, of the kind which prompt one to say: ‘Did you know…?’ (well, members of my family are well used to that phrase.) I do have a soft spot for Kelly, having spoken at a conference with him once in Aarhus in Denmark, and spent a long coffee break in its small airport discussing things of which he knew much and I knew little; he was very kind, he writes well, and actually I like his optimism especially in these gloomy times. I prefer his version of the technological future to Robert Harris’s.

[amazon_image id=”0143120174″ link=”true” target=”_blank” size=”medium” ]What Technology Wants[/amazon_image]

John Lanchester wrote one of the best books about the crisis, [amazon_link id=”014104571X” target=”_blank” ]Whoops!: Why everyone owes everyone and no one can pay[/amazon_link]! Michael Lewis wrote another, [amazon_link id=”0141043539″ target=”_blank” ]The Big Short: Inside the Doomsday Machine[/amazon_link]. In the current New York Review of Books the former has a characteristically wise and clear review of the latter’s new book, [amazon_link id=”1846144841″ target=”_blank” ]Boomerang: The Meltdown Tour[/amazon_link], which he praises. Lanchester makes this interesting point: that most of us, rightly, feel we have no economic agency in our own lives. There *is* nothing we can do individually, which perhaps explains the absence of a sense of responsibility. He writes:
The evidence is clear: it is easy to mislead people about money, and easy to lead members of the public astray both individually and en masse, because when it comes to money, most of us, most of the time, don’t know what we’re doing. The corollary is also clear: the whole Western world misled itself over debt, and the road back from where we are goes only uphill.

[amazon_image id=”B005PR44XC” link=”true” target=”_blank” size=”medium” ]Boomerang: The Meltdown Tour[/amazon_image]

The Institute for New Economic Thinking has an interesting post on the economics curriculum. They are sponsoring some thinking about how students are taught economics, and curriculum reform. The need for this has been clear to me since writing [amazon_link id=”0691143161″ target=”_blank” ]The Soulful Science[/amazon_link] a few years ago, as the work that the leading economists have been doing for some time is not reflected in the curriculum. The profession has shifted – as David Colander has also reported in his book, [amazon_link id=”0691138516″ target=”_blank” ]The Making of An Economist, Redux[/amazon_link] – but what the next generation is taught has not yet followed suit. I’ve been organising a conference on this issue, taking place at the Bank of England in February 2012, bringing together significant employers of graduate economists and academics to discuss what changes might be needed in UK universities.

Meanwhile, INET has started posting examples of courses academics are providing to show how they are innovating. One or two of them are simply ideological and while interesting would not serve students well for conventional jobs in consultancies or the government service. Susan Feiner’s ‘Critical Thinking about Economic Crises’ is one of these – great reading list, including Matt Taibbi’s excellent [amazon_link id=”0385529961″ target=”_blank” ]Griftopia[/amazon_link], but it isn’t going to move the mainstream of teaching. One of my former professors, Steve Marglin, opts for a few classics such as Schumpeter’s [amazon_link id=”189139651X” target=”_blank” ]Capitalism, Socialism and Democracy[/amazon_link] alongside [amazon_link id=”0538453699″ target=”_blank” ]Baumol and Blinder[/amazon_link] as a text book, his own [amazon_link id=”0674047222″ target=”_blank” ]The Dismal Science[/amazon_link], and a long list of articles on political issues of the day. The examples of the mainstream macro and micro courses largely stick to textbooks – one of those on the INET site has Greg Mankiw’s [amazon_link id=”0324203098″ target=”_blank” ]Principles[/amazon_link] as its textbook, despite the Harvard students’ objections to their prof, and David Colander’s [amazon_link id=”0070165580″ target=”_blank” ]Economics[/amazon_link] is popular too. Some familiar titles crop up as ‘fun’ reading – Heilbroner’s [amazon_link id=”0140290060″ target=”_blank” ]The Worldly Philosophers[/amazon_link], Tim Harford’s [amazon_link id=”0349119856″ target=”_blank” ]The Undercover Economist[/amazon_link].

However, these mainstream courses look pretty standard to me; not yet much evidence of decisive change. My hunch is that curriculum reform will be as much about the range of courses as the content of each, and that it will be easier to change microeconomics than macro teaching, but we’ll see what people say at the conference.