Poverty, money and emotion

Poverty Safari by Darren McGarvey is written by someone who grew up in a dysfunctional family in a very poor estate near Glasgow. It’s a first person window on the harshness of life in places where many people with tragic inevitability visit the poverty and powerlessness on themselves through alcoholism, addiction and violence. The state is – at best – uncaring. Professional do-gooders can’t help demonstrating their lack of awareness of the experience and culture of those they genuinely want to help, and come to be regarded with suspicion, perhaps as careerists in it for themselves. (I don’t like the title, but it refers to the perspective of outsiders surveying an alien population from the safety of their tour bus.)

For all the grimness of the old tenements, McGarvey sees the removal of poor families to the new high rise estates, combined with deindustrialisation and loss of working class jobs, as the trigger for the social catastrophe described here. “Thousands of families, already struggling to make ends meet, were placed under so much strain that it altered them physically, psychologically and emotionally.” Relief is sought in fast food, alcohol and drugs, bingo and betting, embedding social and public health problems.

Community attempts to improve things face almost insuperable hurdles. To get any government or charitable funding requires groups to have boards, constitutions and bank accounts. Such groups then have to do the funders’ bidding – which might be ok, but removes agency from the community. The political voice of local people – here, in the face of a plan to build a motorway cutting off the area from neighbouring parkland – is minuscule.

The book emphasizes the emotional impact of poverty and strain. “The experience of emotional stress, how it affects us and what we do to manage it through our lives, is one of the most overlooked aspects of the poverty experience,” McGarvey writes. This is consonant with the work of Sendil Mullanaithan and Eldar Shafir on the physical and psychological effects of poverty, reported in their book, Scarcity. I’d add that we need to take account of the emotional response of those with money and power to poverty – namely fear, as Julia Unwin underlined in her book Why Fight Poverty?

The bottom line for society, and policy, is how serious we are about tackling poverty and addressing the embedded social challenges it has caused, two generations after the waves of deindustrialisation began. It will take money. The book quotes a local organiser: “There is a discrepancy at government level between the desires for the kind of society we want to live in and the resources that are allocated to help this happen and where they are directed.” Yep. There won’t be any quick solutions, but there won’t be any at all without putting money and energy into it. And especially money. The energy ultimately has to come from people themselves, with agency over their own lives.

[amazon_link asins=’1912147033′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’7c83d817-f3a8-11e7-9a1e-25a146650f8b’]

Epidemics vs information cascades

As I was looking at publishers’ websites for my New Year round up of forthcoming books, I noticed OUP billing Paul Geroski’s The Evolution of New Markets as due out in January 2018. This is odd as it was published in 2003, and Paul died in 2005; it isn’t obvious why there’s a reprint now. He was Deputy Chairman and then Chairman of the Competition Commission during my years there, and was a brilliant economist as well as a wonderful person. I learnt an amazing amount from being a member of his inquiry team.

Anyway, the catalogue entry for the reprint sent me back to my copy of the book, along with Fast Second, which Paul co-authored with Constantinos Markides. Fast Second challenges the received wisdom of first mover advantage: Amazon was not the first online books retailer, Charles Schwab not the first online brokerage, and so on. The opportunity lies in between being early in a radical new market and being late because a dominant design and business model have already emerged. The Fast Second business competes for dominance – and supposed first mover advantages are usually fast second advantages.

Paul’s book The Evolution of New Markets – in which I found a handwritten note he’d sent me with it, which made for an emotional moment – does what it says, and explores models of innovation diffusion – so in other words, models of S-curves. His view was that the epidemic model of S-curves, which seems to be the standard one, was a misleading metaphor. He argued that information cascades best fit the observed reality. The epidemic model assumes that a new technology is adopted as information about it is diffused. Each user passes on the info to the next user. However, as the book points out, information diffuses far faster than use. Users need to be persuaded rather than just informed.

More appropriate is a model whereby new technologies arrive in a number of variants at slightly different times, making adoption risky and costly – especially when there are network externalities or when people realize there is going to be a standards battle. Most new products fail, after all. But once one variant starts to dominate, the cost and risk decline and adoption will occur much faster.

It’s a persuasive argument, and a very readable book. Although the list price is surprisingly high for a short paperback, one can be confident second hand copies are just as good.

[amazon_link asins=’B00JMCZKOI’ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’01c24051-f0af-11e7-8ae2-8523a12ffe45′]  [amazon_link asins=’B000PY4A52′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’07102152-f0af-11e7-9367-6b18dc756ddf’]

 

A look ahead to 2018 economics books

It’s time for a look ahead to the spring catalogues. As ever, this is slightly random so I’ll be happy to add anything I’ve missed that authors or publishers think would be of interest.

From Princeton University Press, I already reviewed Jerry Muller’s The Tyranny or Metrics, out in a couple of weeks.

[amazon_link asins=’B076ZWW2MN’ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’6c922b1c-d140-11e7-aea4-415f3a3046ff’]

Radical Markets by Eric Posner & Glen Weyl looks intriguing – the argument is that inequality can be diminished and growth enhanced by a radical extension of the scope of markets. Talk about contrarian, in the current climate.

[amazon_link asins=’B0773X7RKB’ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’75aa32e9-d140-11e7-b12b-71bb8987b2e1′]

Daniel Cohen’s The Infinite Desire for Growth is out in English, looking at what growth has been about historically and what future progress will look like.

[amazon_link asins=’0691172536′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’850552e9-d140-11e7-9377-5f61ef5e34fa’]

I’m super-eager to read Michael Best’s How Growth Really Happens, as a huge fan of his The New Competitive Advantage.

[amazon_link asins=’0691179255′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’98a4d229-d140-11e7-94f2-89fba0e4dba3′] [amazon_link asins=’0198297459′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’fc679c0c-d140-11e7-978b-e5ad5c149b44′]

Paul Tucker, formerly of the Bank of England and now at the Harvard Kennedy School, has written Unelected Power, about the role of central bankers and other technocrats in modern economic government.

[amazon_link asins=’0691176736′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’b477ed90-d140-11e7-bedc-ed2d66478678′]

And there’s The Republic of Beliefs by Kaushik Basu.

[amazon_link asins=’0691177686′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’c3100a93-d140-11e7-bf85-cf06acb85a3a’]

MIT Press up next, with an emphasis on tech. They have Terrence Sejnowski’s The Deep Learning Revolution; Meredith’s Broussard’s Artificial Unintelligence; John Kelleher and Brendan Tierney on Data Science; and an essay collection featuring the likes of David Autor, Lynda Gratton and Joshua Gans, What The Digital Future Holds. Also Big Is Beautiful: Debunking the Myth of Small Business by Robert Atkinson and Michael Lind.

[amazon_link asins=’026203803X’ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’eb13494d-ee55-11e7-b11e-473828d8a560′] [amazon_link asins=’0262534991′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’213419c5-ee56-11e7-ac4b-b9ec7155918c’]

From Yale University Press, I like the look of Pascal Boyer’s Minds Make Societies and Tarleton Gillespie’s Custodians of the Internet. Scott Shane has written Is Entrepreneurship Dead? The Truth About Startups in America. This next one also looks enticing: Trading in War London’s Maritime World in the Age of Cook and Nelson by Margarette Lincoln. Anne-Marie Slaughter’s The Chessboard and The Web could be interesting.

[amazon_link asins=’0300227485′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’3eaf4039-ee56-11e7-bc40-bb20d1121af9′] [amazon_link asins=’0300223455′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’5553c274-ee56-11e7-bc4b-c168c2de25c6′]

In its Piketty tradition, Harvard University Press will bring us Thomas Piketty’s Top incomes in France in the 20th Century and also the 2018 World Inequality Report. David Engerman has The Price of Aid: The Economic Cold War in India. I am very much looking forward to reading Cognitive Gadgets: The Cultural Evolution of Thinking by Cecilia Heyes and also William Deringer’s Calculated Values: Finance, Politics and the Quantitative Age.

[amazon_link asins=’0674980158′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’72331d9b-ee56-11e7-9f06-6b3b008f5da7′] [amazon_link asins=’0674971876′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’88bc7681-ee56-11e7-8ffd-9773af377c66′]

Also in the catalog: Privacy’s Blueprint: The Battle to Control the Design of New technologies by Woodrow Harzog; A Business of State by Rupali Mishra about the East India Company; The Right of Publicity: Privacy Reimagined for a Public World by Jennifer Rothman.

Harvard Business Review Press is publishing Prediction Machines: The Simple Economcis of Artificial Intelligence by Ajay Agrawal, Joshua Gans and Avi Goldfarb in April.

[amazon_link asins=’1633695670′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’9b4e21a9-ef15-11e7-90ea-89d236139fc9′]

Other university presses. Cambridge has The Fed and Lehman Brothers by Lawrence Ball due out in June; Prioritizing Development: A Cost-Benefit Analysis of the UN’s Sustainable Development Goals by Bjorn Lomborg in May; Patrick Kabanda’s The Creative Wealth of Nations about the arts and economic growth, also in May; and Richard Nelson et al with an overview of Modern Evolutionary Economics.

[amazon_link asins=’1108423574′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’ba89a41f-ee56-11e7-a5af-cf263d6813ce’]

OUP: Cash and Dash: How ATMs and Computers Changed Banking by Bernardo Bátiz-Lazo; Inequality and Inclusive Growth in Rich Economies by Brian Nolan; The Wealth of a Nation: A History of Trade Politics in America by Donald Johnson; David Allen Green’s Brexit: What Everyone Needs to Know; and Ian Goldin’s Development in the ‘very short introduction’ series.

[amazon_link asins=’0198799438′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’cac67059-ee56-11e7-8698-05251901f1dc’] [amazon_link asins=’0190865911′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’d4b18064-ee56-11e7-b080-670319006ed8′] [amazon_link asins=’B077TNZM12′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’b27de57b-ee57-11e7-b01e-39cbd7a77a25′]

From the various Penguin Imprints we’ll be getting Steven Pinker’s Enlightenment Now; Mariana Mazzucato’s The Value of Everything; David Graeber’s Bullshit Jobs; Linda Yueh’s The Great Economists; Nassim Taleb’s Skin in the Game; Sheela Kolhatkar’s Black Edge; Kishore Mahbubani’s Has The West Lost It?; and later in the year Paul Collier’s How to Save Capitalism from Itself.
[amazon_link asins=’0241188814′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’e4868a2d-ee56-11e7-9d04-a31c7282a49f’]  [amazon_link asins=’0241312868′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’f24c15a0-ee56-11e7-a365-e7736cd5d875′]
Little Brown publishes Dambisa Moyo’s Edge of Chaos in April; and China’s Great Wall of Debt by Dinny McMahon.
[amazon_link asins=’1408710897′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’fef4981b-ee56-11e7-9b62-6fcd0550a544′] [amazon_link asins=’1328846016′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’09e111c0-ee57-11e7-9841-f5aa3478aa9e’]
Profile is publishing David Runciman’s eagerly-awaited How Democracy Ends in May (he has a podcast lecture on the theme online); and Jagjit Chada’s Once in a Lifetime: Rebooting Britain Beyond Brexit in March.
[amazon_link asins=’1781259747′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’1eb1e5cb-ee57-11e7-882d-016f53bb0e26′]
No doubt there are some exciting forthcoming books I’ve missed – happy to update this post.

Most popular posts of 2017

The insight from this year’s ‘most popular’ reckoning is …. that people love lists. The first four places in fact go to lists. Here’s the full top ten:

  1. The year ahead in economics books – or at least my gleanings from the spring catalogues
  2. The Enlightened Economist Prize longlist
  3. The Enlightened Economist Prize winner
  4. A look ahead from the autumn publishers’ catalogues
  5. My review of Jean Tirole’s Economics for the Common Good
  6. An appreciation of Will Baumol
  7. My review of a new biography of Edith Penrose
  8. My review of Dani Rodrik’s Straight Talk on Trade
  9. A trailer for Dani Rodrik’s Straight Talk on Trade
  10. A review of Howard Wainer’s Truth and Truthiness

If it was only about traffic, I’d stick to lists, Jean Tirole and Dani Rodrik in 2018.

[amazon_link asins=’0691177848′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’0f159c34-ebb2-11e7-ad13-0feed2858fb9′] [amazon_link asins=’0691175160′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’1584cbec-ebb2-11e7-b5f0-5330ef62e8a6′] [amazon_link asins=’0198753942′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’20a57674-ebb2-11e7-b847-b9e9efb1d326′] [amazon_link asins=’1107130573′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’299ed2fc-ebb2-11e7-93e5-b35d6a37c173′]

 

 

 

No escape from the target setting arms race?

Among my holiday reads has been Jerry Muller’s The Tyranny of Metrics, published in the UK in a couple of weeks (can be pre-ordered now). The broad thesis of the book, which is a lively read, will be familiar to readers of the literature on the gaming of public service targets. This short book is stuffed with examples of the counter-productive results of insistence on numerical targets.

There is an interesting chapter on the origins of metric-fixation (at least in capitalist economies – the Soviet Union was always rather keen on it), which starts: “The demand for measured accountability and transparency waxes as trust wanes.” Social change following the explosion of protest against authority in the 1960s and the erosion of the post-war class certainties contributed to this process. So did the evident failures in public services and nationalised industries by the 1970s. But as the book goes on to note – and has been explored in the academic literature – public services are not like businesses, having a larger, complex set of aims and depending fundamentally on intrinsic motivation. A thriving public sector is important to the health of the wider economy: “A capitalist society depends for its flourishing on a variety of institutions that provide a counterweight to the market with its focus on monetary gain.”

The book goes on to give a range of examples of targets turned counter-productive in arenas from higher education to medicine and policing to business. Yes, business too. For here targets are linked to remuneration. Yet, as the book notes, economic theory (Holmstrom and Milgrom, as I describe here) and evidence point firmly away from rewarding the attainment of targets whenever individual effort is un-monitorable. Not that this has prevented to spread of performance pay or bonuses, Muller observes: “Although there is a large body of scholarship in the fields of psychology and economics that call into question the premises and effectiveness of pay for measured performance, that literature seems to have done little to halt the spread of metric fixation.” The book ends with a section describing how to use targets intelligently – think about what you’re trying to measure, why and for what purpose. Above all, think. The frustration is that it offers no thoughts about how to roll back the vast swathes of counter-prouctive targetry already afflicting us. Just imagine the outcry if any politician promises a ‘bonfire of the targets’ or less transparency. On the contrary, the arms race seems as intense as ever – when the pitfalls of one type of target are recognized, the solution is more complicated metrics. But dearmament is what we need.[amazon_link asins=’0691174954′ template=’ProductAd’ store=’enlighteconom-21′ marketplace=’UK’ link_id=’77f90151-ea50-11e7-b438-4348033ba2bc’]