Inventing the property market

Desmond Fitz-Gibbon’s Marketable Values: Inventing the Property Market in Modern Britain is an interesting history of exactly what the subtitle says: the institutions and practices that created the forerunner of today’s anonymous, professionalised property market out of the thickets of traditional social relations that still characterised property ownership at the end of the 18th century. It’s a very nice study of the development of an economic institution: the creation of physical marketplaces, the standardisation and publication of information flows, the development of relevant professions such as auctioneer, estate agent, surveyor, even the invention of suitable filing systems and procedures for enabling viewings of properties. This had to bring together the building of suitable premises for auction rooms or the purchase of estate agency offices, legal and governance practices, social norms, the creation of professional development pathways, and much more.

This all sounds a bit niche, perhaps, but I’m a sucker for the detail of markets as economic and social institutions (& never tire of recommending John McMillan’s Reinventing the Bazaar). This is a very nice study, and, importantly, ends with a chapter on the ‘Limits of Marketability’, looking at the battles to preserve open land and the struggle that led to the formation of the National Trust in 1970. The nascent property industry painted property markets as democratizing: “At present the land is held by the few but the day is coming when it will belong to the many,” said the Estates Chronicle in 1898. But land held by all is important too. To be read alongside Brett Christophers’ The New Enclosure (reviewed here).

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Where did economics go wrong

David Colander and Craig Freedman have an answer. ‘Where Economics Went Wrong‘, to give the title of their new book, is answered by the subtitle: ‘Chicago’s Abandonment of Classical Liberalism’. They have something very specific in mind by this, namely the move from widespread acceptance by economists that economic policy does not follow from economic theory, but rather is “a blend of engineering and judgement”, an art rather than a scientific endeavour. They continue: “Clearly one wants evidence-based, objective analysis of policy. An art and craft methodology uses theory and science whenever it can.” But policy is messy and requires a methodology recognising the unavoidable role of normative judgments.” This is what they mean by classical liberalism.

The Chicago School upended this, the book continues, by “removing the firewall between economic science and policy” from the 1930s on. It did so to further a laissez faire agenda, insisting that economic science justified the conclusion in real life policy that the market should be left to its own devices. It merged economic theory and science with economic policy advice. This agenda held sway for some decades, embedded in policy by politics and the electoral success of Reagan and Thatcher.

I must say I found this argument confusing  at first because of my own perspective that the problem for much of 20th century economics was the ‘separation protocol‘ between positive analysis and normative advice, expressed by Lionel Robbins and later by Milton Friedman. However, I think it’s a similar point in fact: the claim they made was that positive economic analysis was appropriate for policy, and value judgments could be coralled into the domain of political choice, about which economics has nothing to say.

Many economists probably still think this, but my sense is their number is diminishing. Colander and Freedman end the book with an overview of the work of six economists they perceive to be working in the ‘art and craft’ policy tradition: Dani Rodrik, Ed Leamer, Amartya Sen, Ariel Rubinstein (love his book Economic Fables), Alvin Roth, Paul Romer. A shame they’re all men but I for one approve of the selection, with that major caveat.

The book is an inside-the-beltway one, of interest mainly to history of thought folks I would guess. Having said that, it does highlight a key methodological issue of importance to all applied economists.

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The long run is now

Among my Christmas present books was Ta-Nehisi Coates’ We Were Eight Years in Power, a powerful read. This passage spoke to me:

“A nation outlives its generations. We were not there when Washington crossed the Delaware but Emmanuel Gottlieb Leutze’s rendering has meaning to us. We were not there when Woodrow Wilson took us into World War 1 but we are still paying out the pensions. … ”

The more I think about the broad sustainability issues I wrote about in the Economics of Enough, the more important I believe paying attention to the long run to be. Hence the new project we just launched at the Bennett Institute on improving measures of natural and social capital. My goodness, we – certainly all the western countries – have been destroying both, and it looks like the bills are starting to come due.

Another extraordinary essay in We Were Eight Years in Power is about the incarceration of African-American men: “The US now accounts for less than 5% of the world’s inhabitants – and about 25% of its incarcerated inhabitants.” The rise and fall of crime in the 20th century was a common, broad pattern to many countries. Only in the US did the rate  of imprisonment climb as crime fell – other countries saw their crime rate fall without creating a prison state.

The book is great – he’s an outstanding essayist.

 

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More palaces for the people, please

The titular Palaces for the People in Eric Klinenberg’s latest book are libraries, so described by Andrew Carnegie as he built 2,800 of them in a lasting act of philanthropy. The book is a hymn of praise to libraries in particular but also all the other components of ‘social infrastructure’, places where people meet face to face and form relationships that are the warp and weft of a resilient society. This includes school playgrounds, local sports pitches, some bookshops and cafes, parks – the locations of community. The book starts with Klinenberg’s earlier work, reported in the excellent Heatwave, which explored why certain apparently similar communities experienced very different ‘excess’ death rates in the 1995 Chicago heatwave.

Palaces for the People: How to Build a More Equal and United Society picks up from this, pointing out near the start that having strong social capital in the heatwave was equivalent, in terms of mortality outcomes, to having an airconditioner in every home. One of the aspects of the new book I like is its emphasis on the interactions between different kinds of wealth – not only social but also conventional ‘grey’ infrastructure and the natural too. It’s long been obvious to me that there is no point in investing in concrete if you don’t think about natural capital alongside it, flood defences being the canonical example: green infrastructure such as downstream wetlands can be far more effective. Klinenberg points out they can also be designed as social infrastructure – put a park there, make a feature of the green space for enjoyment and also people’s physical and mental health, and the benefit of community relations.

The book distinguishes the social infrastructure from the social capital it enables to be built on top of it, a distinction I haven’t thought about a lot. Another point is that this lens puts the focus on place-based policies, rather than on individuals. In the heatwave example, all the individual characteristics an economist would typically control for on the right hand side a regression would have led you to predict the same mortality outcomes in all the deprived areas of Chicago, whereas it was the place they lived rather than their level of education or criminal record that affected people’s probability of succumbing to the heat.

As the book concludes, there are two reasons to think seriously about reinvesting in social and natural as well as conventional infrastructure. Climate change is one reason – New York City is going to end up under the sea. Concrete alone won’t prevent that. When a crisis hits, the only thing left to help people cope – is other people. The other is the all-too-evident impact of deindustrialization. The chickens of the 1980s and 90s have come home to roost, and they turn out to be monsters. Yet governments on both sides of the Atlantic are still cutting the facilities that make it possible for people with not much money and little hope for the future to cope: parks, playing fields – and libraries. The book doesn’t actually answer the ‘how’ of it’s subtitle, but it’s well worth a read.

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Look ahead to books out in 2019

It’s time for what is always one of the most popular posts of the year, my somewhat random round-up of the economics books (and a few others of interest to me) due out in the first part of the year. The randomness is a mixture of the catalogues some publishers send me and my ferreting round publishers’ websites, and a few others drawn to my attention. As ever, I omit technical scholarly books with no appeal for general readers, and textbooks. Finally, this is obviously a partial list although I’m happy to update it if I’ve missed anything important. So here goes.

Starting as always with my own publisher, Princeton University Press, whose economics list is as ever completely tantalising. In no particular order

Not Working: Where Have All The Good Jobs Gone by David Blanchflower

Measuring Poverty Around the World by Anthony Atkinson (much missed – a posthumous publication)

Economics in Two Lessons by John Quiggin

The Technology Trap by Carl Benedikt Frey

Digital Cash by Finn Brunton

Darkness by Design: The Hidden Power of Global Capital Markets by Walter Mattli

Price: £22.95
Price: £20.63
Price: £22.93

From Yale University Press:

Money and Government: The Past and Future of Economics by Robert Skidelsky

Forecasting: An Essential Introduction by David Hendry, Michael Clements, and Jennifer Castle

Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy by Anders Åslund
The Essential Guide to Intellectual Property by Aram Sinnreich

Oxford University Press:

1931: Debt, Crisis and the Rise of Hitler by Tobias Straumann

Immiserising Growth: When Growth Fails the Poor by Paul Shaffer, Ravi Kanbur, Richard Sandbrook

Sense and Solidarity: Jholawala Economics for Everyone by Jean Drèze

Why Superman Doesn’t Take over the World: What Superheroes Can Tell Us About Economics by J. Brian O’Roark

  Brian O’Roark

 

 

Cambridge University Press

Replacing GDP by 2030 by Rutger Hoekstra

The Political Economy of Defence by Ron Matthews

The Wealth Effect: How the Great Expectations of the Middle Class Have Changed the Politics of Banking Crises by Jeffrey Chwieroth and Andrew Walter

Humanomics: Moral Sentiments and the Wealth of Nations for the 21st Century By Vernon Smith and Bart Wilson

Markets and Morals: Justifying Kidney Sales and Legalising Prostitution, by Yew-Kwang Ng

MIT Press:

How Change Happens by Cass Sunstein

Evolution or Revolution? Rethinking Macroeconomic Policy after the Great Recession ed Blanchard and Summers

How to Be Human in the Digital Economy by Nicholas Agar

Polity Press:

The Joy of Missing Out: The Art of Self-Restraint in an Age of Excess by Svend Brinkmann

The Sex Factor: How Women Made the WestRich by Victoria Bateman

Will the Gig Economy Prevail by Colin Crouch

The Metric Society: On the Quantification of the Social by Steffen Mau

The Case for People’s Quantitative Easing by Frances Coppola

Amartya Sen by Lawrence Hamilton

Harvard University Press:

The Antitrust Paradigm by Jonathan Baker

Open: The Progressive Case for Free Trade, Immigration and Global Capital by Kimberly Clausing

The Revolution that Wasn’t: How Digital Activism Favors Conservatives by Jen Schradie

Price: £21.42

From Penguin Press:

The Third Pillar: How Markets and the State Leave Community Behind by Raghuram Rajan

The Inner Level by Kate Pickett and Richard Wilkinson

Happy Ever After: Escaping the Myth of the Perfect Life by Paul Dolan

Genesis: The Deep Origin of Societies by E O Wilson

Upheaval: How Nations Cope With Crises (or Don’t) by Jared Diamond

Clear Bright Future by Paul Mason (I’m not recommending it btw…)

Licence to be Bad: How Economics Corrupted Us by Jonathan Aldred  (harrumph – nor this one)

Price: £14.00
Was: £20.00

Profile Books

Gresham’s Law:The Life and World of Queen Elizabeth I’s Banker by John Guy

The Future of Almost Everything by Patrick Dixon

Others:

The Globotics Upheaval by Richard Baldwin

Do let me know of upcoming titles I’ve missed!

Update:

I forgot The Human Network by Matthew Jackson (Atlantic Books):

And many thanks to Alice Evans for all of these tweeted suggestions, probably doubles the length of the list!

https://twitter.com/_alice_evans/status/1080370938988904448

 

 

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