There are some chances in the next few days to hear Avner De-Shalit, co-author of [amazon_link id=”069115144X” target=”_blank” ]The Spirit of Cities[/amazon_link], speaking in the UK – on Monday 20th February and Tuesday 21st in London and on the Tuesday evening in Bristol. It’s a lovely book and I’m sure it will be worth getting to one of the talks if you can. I can’t but had chance to put a few questions to Avner.

[amazon_image id=”069115144X” link=”true” target=”_blank” size=”medium” ]The Spirit of Cities: Why the Identity of a City Matters in a Global Age[/amazon_image]

Which are your favourite books about cities by other authors, and why?

If it’s a sociology of cities I like coming back to [amazon_link id=”8871444426″ target=”_blank” ]Georg Simmel’s classic book[/amazon_link], but it’s because I think the opposite — he thought it was impossible to
create a sense of community in the city and I think it’s the only place where
a genuine community can rise. But my best cities book is [amazon_link id=”1878818198″ target=”_blank” ]Yehuda Amichai’s poems book on Jerusalem.[/amazon_link] I wish I could do the same: squeeze the entire city
into two to three sentences.

Of all the cities you’ve visited which are the most interesting to walk
around?

Well, I am biased. I am just in love with Jerusalem, and it’s such a lunatic
city. Half of its inhabitants believe they have a direct line to God. But
outside my city, I think Berlin is the most exciting city today. One can see
that the city simply changes every day, and that people are excited about it.
The combination of ultra modern architecture with the remains of the Communist
architecture, and the abundance of sites of collective memory — this is just
amazing. Not very easy for somebody Jewish like me, but still, terribly
interesting.

Your book advocates walking to imbibe the spirit of cities. Which group is winning the battle for control of urban space – people or vehicles? Are many cities becoming unwalkable?

Well, now that Time Square NYC is walkable, there is hope. In the US there is
a list of the 50 most walkable cities and the 50 which are most friendly to
cyclists. While cars still dominate today’s cities, at least planners and
mayors are well aware of the need to think differently.

If you had to choose another city to live in, which would it be?

Oxford, Oxford, Oxford. When I studied there one of my professors heard me
saying I liked it a lot, and he said: But you know it’s not a real place. Now
I know he was wrong. Oxford is a city which is full of life and energy and
creativity. Only one has to get away from the colleges, to walk in the
neighbourhoods. You can see artists, novelists, poets, and people who want to
be artists, novelists and poets.

Avner De-Shalit

By the by, I noticed that Ed Glaeser’s [amazon_link id=”0330458078″ target=”_blank” ]The Triumph of the City[/amazon_link], another terrific read for lovers of the urban, is out in paperback. Worth a read if you haven’t so far.

[amazon_image id=”0330458078″ link=”true” target=”_blank” size=”medium” ]Triumph of the City: How Our Greatest Invention Made us Richer, Smarter, Greener, Healthier and Happier[/amazon_image]

My current reading matter, [amazon_link id=”0691138494″ target=”_blank” ]Do Economists Make Markets[/amazon_link], edited by Donald MacKenzie and others, opens with a chapter describing the construction of a market for strawberries in the Sologne region of France. Construction physically – a new building – and intangibly – the creation of trading rules of engagement and a regulatory framework. The author, Marie-France Garcia-Parpet, describes the social process whereby the market was brought into being, which included the advice of an economist who aimed to design a perfectly competitive market, but also debates among farmers and existing institutions, the co-operatives and regulators. Many of the outcomes were favourable, including transparency and standardisation, and the region became a more important one for the production of strawberries. But some people, including shippers who had benefited under the previous system of personal relationships with individual producers, were not happy.

[amazon_image id=”0691138494″ link=”true” target=”_blank” size=”medium” ]Do Economists Make Markets?: On the Performativity of Economics[/amazon_image]

Sociological analyses of markets are fascinating, and quite rare. I was reminded by a comment on my previous post about John McMillan’s [amazon_link id=”0393323714″ target=”_blank” ]Reinventing the Bazaar: A Natural History of Markets[/amazon_link], one brilliant study of the institutional details of markets. Donald MacKenzie and some co-authors have a brilliant new paper Drilling Through the Allegheny Mountains: Liquidity, Materiality and High-Frequency Trading, (pdf) on high frequency trading in the financial markets, where the speeds are such (the speed of light) that the location of servers has become a competitive issue. The development of high frequency trading has even involved some tunnelling through the Allegheny Mountains to reduce the distance the signals need to travel down fibre optic cables.

[amazon_image id=”0393323714″ link=”true” target=”_blank” size=”medium” ]Reinventing the Bazaar: A Natural History of Markets[/amazon_image]

Any applied micro-economists – working on competition cases, as I used to, or in a regulatory body or business – understands that the models we learn as students are abstractions, intellectual devices. Real markets are idiosyncratic, and the institutional detail matters.

The area of market design makes a virtue of the fact that the specifics matter. Spectrum auctions, kidney exchanges, carbon trading are all examples of markets created by economists from paper plans – deliberately performative, to use the sociologists’ term. (Al Roth’s website has some great introductory material.) Some of these work brilliantly. The human and social benefits of the kidney exchange or job matching markets, for example, are pretty clear. Others don’t function so well – the carbon market is an example. And we might all prefer it if the Black-Scholes equation had not given birth to the options markets. The point, though, is that it isn’t necessarily a bad thing if economic theory changes reality by creating markets where none existed. I’m very much looking forward to reading Michael Sandel’s forthcoming book, [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_link]. But I suspect he will argue that the scope of markets has grown too large and needs rolling back, whereas I think it’s much more complicated.

[amazon_image id=”184614471X” link=”true” target=”_blank” size=”medium” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_image]

Inspired by the recent 70th anniversary of Desert Island Discs, and by finishing Susan Hill’s delightful [amazon_link id=”1846682665″ target=”_blank” ]Howards End is on the Landing[/amazon_link], with a list of her 40 top desert island books, on this morning’s run with the dog I fell to reflecting about my Desert Island economics books. Difficult. Do you choose books that will take ages to read, to keep you going, or ones that bear re-reading, or classics, or books that cover a wide spread of material? Anyway, to kick of the parlour game, here are my eight choices. Hope everyone enjoys drawing up their own list!

1 [amazon_link id=”0198751729″ target=”_blank” ]A Treatise of Human Nature[/amazon_link] by David Hume. My founding text. Understanding the social choices we make by understanding our place in the natural and physical world.

[amazon_image id=”0140432442″ link=”true” target=”_blank” size=”medium” ]A Treatise of Human Nature: Being an Attempt to Introduce the Experimental Method of Reasoning into Moral Subjects (Penguin Classics)[/amazon_image]

2 [amazon_link id=”0691152640″ target=”_blank” ]This Time is Different[/amazon_link] by Carmen Reinhart and Ken Rogoff. A history of debt crises, an instant classic and still relevant for our times (although not perhaps on an island cut off from the financial markets).

3 There has to be a good, chunky economic history but which one? Greg Clark’s [amazon_link id=”0691141282″ target=”_blank” ]A Farewell to Alms[/amazon_link]? Jared Diamond’s [amazon_link id=”0099302780″ target=”_blank” ]Guns, Germs and Steel[/amazon_link]? Joel Mokyr’s [amazon_link id=”0691120137″ target=”_blank” ]Gifts of Athena[/amazon_link]? [amazon_link id=”0691090106″ target=”_blank” ]The Great Divergence[/amazon_link] by Kenneth Pomeranz? Or [amazon_link id=”0349111669″ target=”_blank” ]The Wealth and Poverty of Nations[/amazon_link] by David Landes? I’ll choose later.

4 A biography of Keynes. Either Roy Harrod’s [amazon_link id=”B006KKQ7HO” target=”_blank” ]Life of John Maynard Keynes[/amazon_link] or the recent [amazon_link id=”0674057759″ target=”_blank” ]Capitalist Revolutionary[/amazon_link] by Roger Backhouse and Bradley Bateman. Hmm, another difficult choice.

[amazon_image id=”0674057759″ link=”true” target=”_blank” size=”medium” ]Capitalist Revolutionary: John Maynard Keynes[/amazon_image]

5 [amazon_link id=”1846141478″ target=”_blank” ]The Idea of Justice[/amazon_link] by Amartya Sen. Michael Sandel’s forthcoming book about the limits of markets, [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy[/amazon_link], might challenge it – we’ll see.

6 What to choose from the huge field of development economics? This field is moving rapidly but at present it would have to be Banerjee and Duflo’s [amazon_link id=”1586487981″ target=”_blank” ]Poor Economics[/amazon_link].

7 [amazon_link id=”0262012766″ target=”_blank” ]Lives of the Laureates[/amazon_link]. In which winners of the Nobel memorial prize explain their work and their motivations – there are several volumes, so maybe I can count them all as one book. Or [amazon_link id=”0691148422″ target=”_blank” ]Economics Evolving[/amazon_link] by Agnar Sandmo, a terrific history of economic thought. Another late packing choice to be made.

8. There’s a vast array of books on institutions and technology and growth. I’ll tentatively pick Oliver Williamson’s [amazon_link id=”068486374X” target=”_blank” ]The Economic Institutions of Capitalism[/amazon_link] for a thorough grounding.

I’ve had to omit all the terrific financial crisis books – maybe I can slip my old friend Andrew Lo’s fascinating and useful review (pdf) of 21 of these titles into my suitcase.

A few days ago, John Kay wrote a characteristically brilliant column about money, Money, like hat wearing, depends on convention, not laws.  It was about the acceptance of Scottish bank notes – in Scotland, and in some places in London, but not elsewhere. He wrote:

“There is a widespread reluctance to accept that behaviour is governed by social norms rather than legal rules or abstract principles. I wear a tie today not because I want to, or because anyone requires me to, or because I think that it is right that I should do so, but because of a shared convention that I will. …

I tip in restaurants or cabs, but not post offices or doctor’s surgeries. Often there is some underlying reason for these practices, although I cannot think of one that applies to the habit of tie-wearing. But in any event it is custom, not reason, that leads me to do it. The Scottish pound is accepted where it is accepted, and not where it is not. There is really no more to it than that.”

As it happened, I was reading at the same time John Searle’s [amazon_link id=”0199576912″ target=”_blank” ]Making the Social World: The Structure of Human Civilization[/amazon_link], which is about exactly the same point.

[amazon_image id=”0199576912″ link=”true” target=”_blank” size=”medium” ]Making the Social World: The Structure of Human Civilization[/amazon_image]

Searle makes the even stronger claim that all human institutions are created and sustained in existence by “collective recognition”, which is dependent ultimately on communication. He sees all institutions as general examples of Austin’s “performative utterances”, which “make something the case by declaring it to be the case.” (p69)

There are many examples, of which money is one. So are political institutions and roles: the prime minister is the leader of the party that wins the most seats in a general election because we agreed that it is so. Another example I’ve been pondering is property: intellectual property is clearly an abstraction dependent on social convention, but physical property is too. When I buy a meal in a restaurant, convention tells me I have bought the food, and can take home what I don’t finish, but I can’t tuck the plate into my bag to take away when I’m done.

There’s an even more interesting question arising from this issue of performativity in the economy: what is the effect of the new forms and scope of communication on economic and political institutions? Intellectual property is on the front line of the struggle between old institutions and new ones shaped by the new technologies.  Facebook and Twitter and the like offer completely new opportunities for performative declaration. Many other struggles will follow.

100 Scottish pounds

An interesting report in this morning’s Financial Times says North American book retailers are refusing to stock Amazon-published titles (such as a forthcoming self-help book by Deepak Chopra) because Amazon is pushing authors to sign exclusive deals that prevent other retailers from selling digital versions of their books. The report comments: “Amazon Publishing is a more direct threat to publishers and agents, but their position is complicated by their reliance on its website to sell books.” ‘Complicated’ is a polite way to express their lack of market power.

This is fascinating stuff for a competition anorak like me. Amazon is doing the classic giant corporation thing of trying to leverage a strong market position in one market into neighbouring markets, and to control as much as possible of the entire vertical supply chain. The competition authorities should be keeping a watchful eye on this already.See Timothy Wu’s brilliant book [amazon_link id=”1848879865″ target=”_blank” ]The Master Switch[/amazon_link] for past examples of concentration in these network markets.

Having said that, publishing is not short of massive corporations itself, and the big ones can probably look after themselves. Meanwhile, plenty of smaller publishers seem to be doing rather well, innovating to serve readers and authors better using the new technologies.

Then, while these two sets of titans – Amazon and the big publishers – slug it out, the retailers on whom they have all depended are struggling, facing a real margin squeeze. Readers are benefiting from variety and innovation but not from reduced prices – so there is successful exploitation of market power somewhere back up the supply chain. And the authors? A few superstars benefit from network dynamics and the rest are in the same weak position as ever, albeit with some new opportunities to self-publish and self-market.

I should add that all the links on this blog go to Amazon’s UK site, only because the associates programme allows me to make enough to offer vouchers to the occasional guest reviewer. If Abe Books or another online retailer were to launch a similar programme, I’d happily switch.

As another aside, I’m a fan of real books rather than e-readers, and definitely hate the Kindle specifically for its ugly greyness and small screen. Last night I was reading a delightful book by Susan Hill, [amazon_link id=”1846682665″ target=”_blank” ]Howards End is on the Landing[/amazon_link], and found she agrees: “No one will sign an electronic book, no one can annotate in the margin, no-one can leave a love letter casually between the leaves.”

[amazon_image id=”1846682665″ link=”true” target=”_blank” size=”medium” ]Howards End is on the Landing: A year of reading from home[/amazon_image]

I use postcards and concert tickets as bookmarks – it’s always a pleasure to pick up a book again and see what drifts out from between the pages. Yesterday it was a postcard from Balthazar’s on Spring Street in New York, a memory of brunch with dear friends.

Balthazar's