Books, books, books

The Publishers Association just published its 2016 figures for the UK book trade, so it’s time for my annual post about (a) how well the publishing industry has innovated its way through the wave of digital disruption compared with the music industry and (b) it isn’t always obvious which goods and services are susbstitutes and which are complements.

From the figures, it looks like digital is becoming steadily a platform for academic and professional texts, and those formats where it is inherently part of the product (audio) – consumer ebook sales have peaked and are declining. This is the substitutes-complements point: it’s always wrong to assume that a new technology will completely replace an old technology, and hard to tell a priori which will settle down to be the majority version in use. It is particularly the case that communications technologies tend to complement each other: on the whole people want more of all, although some do become redundant (telex).

Interestingly, sales of fiction have declined substantially in recent years, while children’s books and non-fiction have increased. This supports my theory about the demand for understanding in uncertain times, although probably it will turn out the growth was mainly stars’ memoirs and recipes….

As for the innovation, there has been experimentation with formats – for example, the popularity of short books (such as the excellent Perspectives series 🙂 – a new one, Before Babylon, Beyond Bitcoin by Dave Birch, will be out soon. Click here to pre-order for a signed copy at a discounted price!). But a key one has been to focus on the inherent distinctiveness of books: their physical bookness. The design and quality of books has improved enormously, in my view.

Of special interest to the academic world, academic and professional sales were up by 10% to £2.4bn. The sales of books rose 9% to £1.1bn,  total income from journals rose 10% to £1.2bn, and the share of journal income from subscriptions fell 1 percentage point to 79% of the total while income from Open Access article processing charges increased by 46% to £81m. For the time being (until government policy irrevocably damages one of the UK’s most successful sectors through a deranged approach to overseas students, and the impact of Brexit on employment and research funding), the UK accounts for 10% of journal article downloads and 12% of citations, and produces 16% of the world’s most‑cited journal articles. Only the US does better, the Yearbook says.


Contradictions of capital

Below is my review of After Piketty edited by Boushey, Delong and Steinbaum, just posted in the Chronicle Review. (The entire Spring Books issue is well worth a look.)

I also recently received another collection, The Contradictions of Capital in the 21st Century: The Piketty Opportunity, edited by Pat Hudson and Keith Tribe. It includes essays by Ravi Kanbur, Joseph Stiglitz, Avner Offer, among others. I haven’t yet read this one, although its take is more clearly historical and global, whereas After Piketty‘s is more inter-disciplinary.41YEl+rJjaL








Review of After Piketty: The Agenda for Economics and Inequality edited by Heather Boushey, J Bradford Delong and Marshall Steinbaum

The Chronicle Review

Contradictions of Capital: Taking on Thomas Piketty

By Diane Coyle

For all the influence economics is supposed to have on policy and the character of our societies, not many economics professors make any impression on public consciousness. Fewer still attain Thomas Piketty’s rock star status (well, minor rock star at any rate) following the publication in English of his Capital in the 21st Century[i] in 2014. Piketty captured and gave authoritative confirmation of something many people believed to be the case, given their own experience and observation: that inequality in western economies had increased to a great degree.

Many economists see Piketty’s dedicated effort – with colleagues Emmanuel Saez and the late Tony Atkinson – to put together the data on income and wealth over a long period of time as the main merit of his work. While there is some debate about the figures, this effort is a titanic contribution to knowledge, making possible further study of the trends and causes of inequality.

The essays in After Piketty have a different focus, however: an assessment of Piketty’s arguments about the dynamics of capitalist economies that generate the observed patterns of income and wealth inequality. Some of these perspectives concern the economics, others the links between economic and social or political forces.

Piketty’s empirical observation is that inequality in the western economies declined through the entire middle part of the 20th century, but from around 1980 it had started to increase again, to return to the levels of the Gilded Age. His theoretical argument is that there is an inherent dynamic in the process of economic growth tending to increase inequality, a dynamic halted and reversed in the 20th century by the two cataclysmic world wars, by the post-war welfare state and social market economies (especially in Europe) and by rapid post-war growth. The key point he makes is that when the growth rate slows, the rate of return on capital falls more slowly, increasing the ratio of capital to income and further widening the gap. This is the r>g formula fashionably adorning some t-shirts for a while.

For economists, there is nothing inexorable about this. As Paul Krugman points out in his essay in After Piketty, the theoretical argument depends (among other things) on it being easy enough to substitute machines for workers, and there is no definitive empirical evidence this is so. Devesh Raval points out a number of other problems. Among them, Piketty uses the term ‘capital’ as an abstraction, but the empirical claim that r>g elides physical capital used in production, housing capital, and the human capital resulting in high earnings for some people. Indeed, the share of top incomes coming from earnings (rather than rents and dividends) is a great contrast with the inequality of the early 20th century. Suresh Naidu underlines this point, calling Piketty’s argument “institution and politics free”: “When wealth is understood as police-backed paper claims over resources, rather than the resources themselves, the undemocratic nature of wealth inequality becomes much clearer.” A number of other essays in the volume round out the economists’ (sympathetic) critique of Piketty’s book.

The two subsequent sections cover extensions of Piketty. His collaborator Emmanuel Saez argues for continuing and extending the data collection effort. This is a significant point: phenomena for which the data are not readily available are invisible in political and policy discourse. In many ways Capital in the 21st Century was published much too late. The political consequences of great inequality were already playing out in the anger and division so visible now in politics in the United States and across Europe. Saez makes the point that although there has been significant data collection since the 1960s and 70s on individual incomes, largely through surveys, this statistical approach severs the connection between income distribution and macroeconomic outcomes. Economists in the late 20th century thinking about the economy in the aggregate largely stopped noticing the macro-level inequality trends. There is little reliable data on wealth (as opposed to incomes) at all, and research into wealth distribution and its evolution is correspondingly sparse (as Mariacristina de Nardi and her co-authors point out in their essay).

Filling some of the other research and policy gaps will be crucial for anyone who considers the extent of modern inequality to be problematic. One made visible by the British EU referendum and the US Presidential election is the spatial dimension. Economies have a geography, something economists have until recently been prone to overlook; financial capital is highly mobile geographically and – as Gareth Jones points out here, has also created ‘extra legal’ zones in tax havens where it can safely land. (In a fascinating book, Capital Without BordersHeather Boushey explores in After Piketty the implications for women’s economic and political autonomy of ‘patrimonial capitalism’, particularly given the gender bias of inheritance.

The book ends with some reflections from Piketty himself. He is disarmingly open to critiques of his work: “I would like to see Capital in the 21st Century as a work-in-progress of social science rather than a treatise about history or economics,” he writes. As he argues here, all the social science disciplines are needed for a complete picture. However, the critiques matter, at least to the extent that one thinks the current degree of inequality is unsustainable. Two other recent books point to contrasting possible futures. In his The Great Leveler[iii], Walter Scheidel paints a picture not unlike Piketty’s of an inexorable internal dynamic whereby societies become progressively more unequal, until this provokes a reset through war or revolution. In complete contrast, Tony Atkinson’s Inequality[iv], published the year before his death, presents a wholly pragmatic 15-point list of policy measures to limit and reduce inequality. Taking these together, it is hard to avoid the conclusion that if you do not adopt the Atkinson approach you get the Scheidel outcome. This was exactly the realization that led to the creation of the post-war social contract in the late 1940s.

The editors’ introduction in After Piketty zeros in on this contradiction at the heart of Piketty’s work and its reception: are there fundamental, intractable laws of capitalist dynamics, making garden-variety policy analysis of inequality ultimately futile? Or rather are there, “historically contingent and institutionally prescribed processes that shape growth and distribution?” Capital in the 21st Century does not resolve this; neither do the essays in After Piketty. Perhaps it is a purely academic question, but to the extent that any of us troubled by the new Gilded Age, we have to act as if the second is true regardless.

Diane Coyle is Professor of Economics at the University of Manchester & Co-Director of Policy@Manchester.

[i] Thomas Piketty, Capital in the 21st Century, Belknap Press, Harvard, Cambridge MA, 2014.

[ii] Brooke Harrington, Capital Without Borders: Wealth Managers and the One Percent, Harvard University Press, Cambridge MA, 2016.

[iii] Walter Scheidel, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century, Princeton University Press, Princeton NJ, 2017.

[iv] Anthony Atkinson, Inequality: What Can Be Done?, Harvard University Press, Cambridge MA, 2015.



How do the French think?

Well, we will find out tonight I suppose, with the exit polls from the first stage of the French presidential election. After Brexit and Trump, I’m bracing myself. It seemed a good week to read Sudhir Hazareesingh’s How The French Think, out now in paperback, and I’ve greatly enjoyed it. I was a teenage existentialist (just like Sarah Bakewell), deeply influenced by Simone de Beauvoir’s The Second Sex, and a Francophile since primary school. Who knows why? It might just have been the most exotic place I could imagine growing up in a small Lancashire mill town. So How The French Think has been just the ticket for my reading pleasure. The book has all kinds of nice details (like the fact that hedonist thinker Julien Offray de la Mettrie died form over-indulgent consumption of pheasant and truffle pate. Or that Jules Verne had an early work (not published until 1994, as his publisher turned it down), Paris au XXe Siecle, a grim dystopia dominanced by Finance and Machinery and featuring a Demon of Electricity.

One of the great puzzles about France for an economist, however, is how it combines being uniquely resistant to economic logic with being a rather successful economy. This

combination doesn’t always pay off. As Jean Tirole points out in his Economie du Bien Commun (out in English later this year), the absence of economic analysis as applied to the labour market explains the high unemployment rate, particularly for young people. However, the average level of productivity is higher than in the UK, there are many successful multinationals, and the quality of life (if you have a job) remains high. This doesn’t stop the French being consistently pessimistic – among the (self-reported) unhappiest in the world given their average level of income. And as the electoral polls – and no doubt results – will show, a large proportion of voters are attracted to candidates promising to defy conventional economic wisdom (not to mention economic reality) with greater protectionism and far less of the market.

The book concludes: “It would be wrong to give the impression that xenophobia and intellectual closure have become the exclusive traits of the French today ot that they will be dominant forever.” But …. there are immense contradictions. Strong believers in the State in the abstract, but now firmly of the belief that it is too distant from the citizens. Against the ‘Elite’ but still profoundly elitist by instinct, “decisive architects of an economically liberal Europe” and yet “profoundly contemptuous of capitalism”. No wonder this election feels so uncertain.



Basic income in a just society

I contributed to a Boston Review Forum on Work, Inequality and Basic Income, and the whole volume arrived today. There are some very interesting essays, including the lead one by Brishen Rogers, ‘Basic income in a Just Society’. Rogers argues that Basic Income is not enough – he’s in favour but says much more of a policy response will be needed in our automated future. Some of the other contributors, such as Philippe van Parijs, are even keener advocates of the proposal, while Juliana Bidadanure argues for a trans-national version. The range of perspectives from a group of authors who are broadly in favour of Basic Income is fascinating in fact. There is a lot here that’s new to me, including for instance an account (by David Stein) of Coretta Scott King’s campaigning for a job guarantee.

I’m a basic income sceptic, probably the outlier in this volume, although happy to see various experiments that will provide evidence, even if it proves me wrong. I think spending money on high quality public services for all is a far more important priority – more important for civic cohesion and individual agency, more likely to be acceptable to a lot of voters, and more likely to enable economic growth. My essay in this volume is about Basic Income being a solution to a problem we don’t have (mass unemployment). Maybe this will happen; again, I’ll be willing to change my mind in that case. For now, my prediction is what’s ahead will be like other waves of automation, and although the policy response then was wholly inadequate, the idea of a robot apocalypse requiring the state to make pensioners of us all is over the top.41ByFTLrTSL


The dialectic of fraud

Not only is it a holiday weekend, but our broadband has been down most of the time, so it’s been epic for reading. I polished off Fraud: An American History from Barnum to Madoff by Edward Balleisen.

This is a scoot through some of the more colourful chapters of US financial history, constructed around the line of argument that there has been a steady swing of the pendulum when it comes to official responses to fraud, or a kind of dialectic. A riproaring era of innovation – when inherent asymmetries of information are made greater by the newness of what the market has to offer – is characterised by a ‘caveat emptor’ approach. If it looks too good to be true, it is – and anyway, is a product that doesn’t work fraudulent or its era’s equivalent of vapourware? There’s a fuzzy boundary, an enduring “dilemma of how to distinguish unacceptable deception from the pardonable exaggerations and enthusiastic dissembling that so often characterized efforts by new firms to establish a commercial foothold.” Perhaps, if it succeeds, it’s enthusiasm, but if it fails, then it’s fraud. No innovation would get off the ground without potentially delusional belief in its prospects. Some people intend to be fraudsters, others have it thrust upon them by over-optimism and failure.

But as the scandals pile up, and particularly when great numbers of ordinary consumers or savers are affected, officialdom intervenes in some way. This can be government intervention, as in the US Post Office’s crackdown on mail fraud – which nearly strangled the famous Sears, Roebuck mail order catalogue in its infancy (purveying, as it did, quack medicines and dodgy ‘free gifts’  – or civil society as in the business-backed Better Business Bureaux.

The book ends by observing that the pendulum may be about to swing back to cracking down, as the multiple bedraggled chickens of the freewheeling global financial era flutter home; but who can say for sure, looking at the evergreen inclination to fleece retail savers and investors. For finance, of course, is the most fertile territory for fraud. The pickings are rich, the asymmetries of information are gargantuan, and the innovation is still plentiful. This is a story with many volumes still to come.61K5fXe2TML