Monthly Archives: September 2015

Big blue plenty

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Courtesy of the terrific weekly newsletter from Benedict Evans, this link to a terrific article about Krushchev’s 1959 visit to IBM in what later became Silicon Valley. This is a good excuse to plug again one of my favourite books, [amazon_link id=”0571225241″ target=”_blank” ]Red Plenty[/amazon_link] by Francis Spufford. The book also has a supplementary website with some fascinating short essays by the author – like this one on ‘plenty’ or (lack of) [amazon_link id=”0691156298″ target=”_blank” ]enoughness[/amazon_link].

Among the many reasons I love [amazon_link id=”0571225233″ target=”_blank” ]Red Plenty[/amazon_link] is that it must be the first time a literary author has been able to describe the formal equivalence between a competitive general equilibrium and a centrally planned economy, as set out in the socialist calculation debate of the 1930s. Anyway, the book starts with Krushchev’s 1959 US visit, although not his admiration of the cornucopia of food and democratic access in the IBM cafeteria in San Jose. It is a gripping read, a true story told with the verve of a novel.

[amazon_image id=”0571225241″ link=”true” target=”_blank” size=”medium” ]Red Plenty[/amazon_image]

Not the end of history, again

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This morning I picked up Tony Judt’s brilliant 2005 book [amazon_link id=”009954203X” target=”_blank” ]Postwar, a history of Europe since 1945[/amazon_link]. He wrote in the Introduction:

“An era was over and a new Europe was being born. … What had once seemed permanent and somehow inevitable would take on a more transient air. … Europe’s future would look very different – and so too would its past.”

[amazon_image id=”009954203X” link=”true” target=”_blank” size=”medium” ]Postwar: A History of Europe Since 1945[/amazon_image]

Until re-reading this passage, I had forgotten that Austria did not join the EU until 1995, and that in 1999 Jorg Haider and his “Freedom Party” won 27 per cent of the vote.

Judt continues, explaining the roots of the 2nd World War in the 1st, “The little countries that emerged from the collapse of the old land empires in 1918 were poor, unstable, insecure – and resentful of their neighbours.” It is only 20 years since the last, dreadful & bitter, Balkans conflict.

I do hope that somewhere in Europe there are political leaders reflecting on this past rather than obsessing about what the latest opinion polling tells them about popular attitudes to migrants. Century-old resentments and suspicions are not far below the surface; keeping them in their place is an unfinished, probably permanent, task.

Investing in electric dreams

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I’ve got some way into Bernard Carlson’s book [amazon_link id=”0691165610″ target=”_blank” ]Tesla: Inventor of the Electrical Age, [/amazon_link]which is out in paperback now. It’s very interesting, although the physics washes over me. The difference between a rotor, a stator, a transformer and a conductor? It just doesn’t stick. It must be like this for non-economists reading about economics. Anyway, the terms make sense once if you concentrate really hard but then just evaporate from the mind.

[amazon_image id=”0691165610″ link=”true” target=”_blank” size=”medium” ]Tesla: Inventor of the Electrical Age[/amazon_image]

On the other hand, I’m finding the depiction of the early electrical industry in the US and Europe very interesting – the fierce competition, patenting of different approaches, seriously risky capital investment, the uncertainty over what would emerge as an industry standard, the dastardliness of some rich investors, the works.

One chapter describes Tesla’s early investors and how they got interested in electricity. One had started with a telegraph line between Washington DC and Chicago: “Peck discovered that there were banks and merchants who were interested in leasing dedicated wires in order to conduct their business securely.” So, as now, the finance industry was a big customer of the new technologies.

I also liked this parallel with modern times: Tesla persuaded his investors to provide more funds with a demo involving spinning an egg on its pointy end on a wooden table thanks to some electrical whatevs underneath. They loved it. “This episode taught Tesla that invention would require a degree of showmanship in order to create the right illusions about his creations. People do not invest in inventions built out of tin cans; they invest in projects that capture their imagination.”

And, to my delight in these early chapters, Tesla turns out to have got his start at the Ganz electrical works in Budapest. I visited the factory in early 1990, when it took immediate advantage of the collapse of communism to look for western investors, and hired a stockbroker from London who took some journalists (including me) on a trip. It was fascinating. The managing director’s secretary had the only key to the cupboard in which the toilet paper was kept so she knew exactly when everybody in the party had to go – clearly a powerful woman in the enterprise. The factory itself was ginormous and took in steel, ore and coal at one end and turned out trams and ligh bulbs at the other end. Spectacular. Monstroously inefficient.

I’m 4 chapters in. Have always loved this image of Tesla.

Nikola Tesla

Nikola Tesla

Inequality in 90 pages?

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A small book has just arrived, [amazon_link id=”0691167141″ target=”_blank” ]On Inequality[/amazon_link], by Harry G Frankfurt of On Bullshit fame. On first glance it looks like a provocative argument that inequality shouldn’t bother us, the moral challenge is the reduction of poverty. On a closer read, the essay argues: “Our basic focus should be on reducing both poverty and excessive affluence. But the reduction of inequality cannot itself be our most essential ambition.”

[amazon_image id=”0691167141″ link=”true” target=”_blank” size=”medium” ]On Inequality[/amazon_image]

Well, I agree, but think this takes the argument for “reducing inequality” too literally – surely most people use it as a short-hand for addressing the extremes of the distribution, poverty because a civilized society cares about its weakest members, wealth because its excess has anti-democratic political consequences and undermines cohesion. I think arguing for a stronger version of equalising than this is not so often advocated.

Meanwhile, the best arguments about why strong version equality of incomes is unattainable and undesirable remain Milton Friedman’s in chapter 10 of [amazon_link id=”0226264211″ target=”_blank” ]Capitalism and Freedom[/amazon_link].

Frankfurt concludes: “The pursuit of egalitarian goals often has very substantial utility in promoting a variety of compelling political and social ideals. But the widespread conviction that equality itself and as such has some basic value as an independently important moral ideal is not only mistaken; it is an impediment to the identification of what is truly of fundamental moral and social worth.” That thing being respect. Well yes, but the argument underplays our strong fairness instinct, perhaps.

I like the essay format, so although [amazon_link id=”B00WAM14MO” target=”_blank” ]On Inequality[/amazon_link] isn’t really as provocative a book as it seems, it’s a lively – and a short – read.

Weightlessness redux

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There is a wave of interest in dematerialization – I spotted it this past weekend thanks to Justin Fox, and his article has been picked up elsewhere. I therefore can’t resist bigging up my own book, The Weightless World (pdf), published in the UK in 1996 and US in 1997.

[amazon_image id=”0262531666″ link=”true” target=”_blank” size=”medium” ]The Weightless World: Strategies for Managing the Digital Economy (Obex Series)[/amazon_image]

Although it shows its age, it was (I’m pretty sure) one of the first to pick up on this physical manifestation of the structural and technological changes under way. (And I now regret that it didn’t consider energy use in the weightless economy.)

Here are the ONS charts that triggered the use of weightlessness as a prism for understanding the structural change in the economy. They show for the 1980s then the 1990s the level of real GDP and the material flows for the economy for the two decades. Around the mid or late 1980s, the link broke, and while real GDP continued to rise, the ‘weight’ of the economy stayed roughly level.

Real UK GDP and weight of economy, 1980s

Real UK GDP and weight of economy, 1980s

Real UK GDP and 'weight' of economy, 1990s

Real UK GDP and ‘weight’ of economy, 1990s

Update: Here is the latest ONS data, also based to 1990.

GDP vs 'weight' of economy up to 2011