Author Archives: Diane Coyle

A dangerous obsession?

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A theme of quite a few recent book arrivals here at Enlightenment Towers has been the relative position of the US and China.

A hive of activity at Enlightenment Towers (Image from Wellcome Library, London)

These have included Eswar Prasad’s [amazon_link id=”0691161127″ target=”_blank” ]The Dollar Trap [/amazon_link](global turmoil paradoxically strengthens the status of the US currency, and the renminbi isn’t going to take over as global reserve currency) – it’s just been reviewed in the New York Times as well as here.  Charles Kenny’s [amazon_link id=”0465064736″ target=”_blank” ]The Upside of Down [/amazon_link]argued that a thriving China is good for the US. Josef Joffe’s [amazon_link id=”0871404494″ target=”_blank” ]The Myth of America’s Decline[/amazon_link] says China isn’t after all poised to overtake the US as global hegemon, so enough with the declinism.

This weekend, [amazon_link id=”0300187173″ target=”_blank” ]Unbalanced: The Co-Dependency of America and China[/amazon_link] by Stephen Roach has entered the US-China debate. I guess the subtitle sums up the argument – this is co-dependency in the damaging but addictive relationship sense. He seems to end up saying both countries are experiencing an identity crisis and must reform themselves so they can move away from (on the one hand) financial engineering and (on the other) unbalanced hyper-growth. This doesn’t sound like it will end up well.

Stephen Roach is always interesting, so I’m sure it will repay reading. But perhaps the US-China relationship is becoming a dangerous obsession?

[amazon_image id=”0300187173″ link=”true” target=”_blank” size=”medium” ]Unbalanced: The Co-Dependency of America and China[/amazon_image]

The invisible industry

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I’m not the only person fascinated by shipping containers.

Bill Gates named Marc Levinson’s [amazon_link id=”0691136408″ target=”_blank” ]The Box[/amazon_link] as one of the best books he read last year.

[amazon_image id=”0691136408″ link=”true” target=”_blank” size=”medium” ]The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger[/amazon_image]

Another such person is my correspondent Thomas Marnane, for the understandable reason that he worked in the industry, for Matson Navigation, for many years.

Capt. Marnane just wrote to me about Rose George’s book [amazon_link id=”1846272637″ target=”_blank” ]Inside Shipping, the Invisible Industry that brings you Ninety Percent of Everything[/amazon_link], which he says is, “A very readable and enjoyable book with a different and thoughtful slant.”

[amazon_image id=”1846272637″ link=”true” target=”_blank” size=”medium” ]Deep Sea and Foreign Going: Inside Shipping, the Invisible Industry That Brings You 90% of Everything[/amazon_image]

“I enjoyed Ms George”s insights on her time on a container ship–especially the crew relationships (or lack thereof)–a very different experience from any of my times on Navy and commercial ships (several countries).  I think without the camaraderie, sharing of diverse and common interests and card and game playing etc. that I enjoyed I would not have liked sea duty–and I did–even submerged.  Our Matson ships of today are a pleasure to be on–albeit all US crews.  Ms George provides good observations of ship operations as well and justifiably laments the good old days when port stops were longer (but turnaround longer and productivity less also).

“I felt that the sort of “environmentally indefensible” overtones were more for book selling rather than enlightening or compelling and were overdone–especially in the publicity for the book.  I admit to a bias toward ships and the people who own and sail them but my overall experience has been that sailors for the most work to take care of the sea, their ships, their public and their customers.  They work to improve productivity by reducing waste and pollution (nobody likes anything but an “economy haze” in the exhaust from their drive engines).  To paint the maritime industry as contaminating our waters, our air and our sound signatures has merit but only in the sense that any human activity such as driving cars, flying, etc. has– on a per ton miles moved and service to the world you can’t beat it.  She acknowledges this briefly later on in her book and notes the efficient energy expended to weight carried ratio enjoyed by ship transportation.  I think a survey of the large shipping lines will demonstrate a continual bias toward the environment and productivity (which in my mind are synonymous) and I am proud of the industry for that.”

He adds:

“I have just embarked on a new reading adventure [amazon_link id=”1782393552″ target=”_blank” ]The Sea and Civilization, a Maritime History of the World [/amazon_link]by Lincoln Paine.  At over 700 pages and relatively small print it is an adventure which I may not complete before the book has to be returned to the library  ……   I am afraid that for “containerization” aficionados you will have to wait until page 582 for gratification.  The book is actually very well done and for a naval architect and sailor it is quite absorbing and very readable.”

[amazon_image id=”1782393552″ link=”true” target=”_blank” size=”medium” ]The Sea and Civilization: A Maritime History of the World[/amazon_image]

Increase GDP now

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… by buying my new book, [amazon_link id=”0691156794″ target=”_blank” ]GDP: A Brief But Affectionate History[/amazon_link]. The ‘official’ publication date is a couple of weeks away still, but Amazon has decided to start shipping. Order now and you can get it today!

[amazon_image id=”0691156794″ link=”true” target=”_blank” size=”medium” ]GDP: A Brief but Affectionate History: A Brief Affectionate History[/amazon_image]

If you want to sample it before buying, Princeton University Press has made the introduction available online. In Aeon magazine this week I have an article, Growing Pains, about one of the themes.

I’m doing a few talks about it too – starting with the Warwick Economic Summit this evening. There’s an evening discussion for the Society of Business Economists on 13th February round table at the CSFI in London on 4th March.

A fine innovation economist

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A few days ago Suzanne Scotchmer died. There have been a couple of warm appreciations of her and her work on innovation economics from Joshua Gans and Joel West. Her particular contribution was the argument, well supported by evidence, that the patent system does not incentivise cumulative innovation at all well because it does not share the returns to innovation between the first step and subsequent steps in the cumulative process. In a growing number of instances, such as biotech or digital technologies, successful innovation takes exactly this cumulative form.

I knew Suzanne when I was a graduate student at Harvard in the early 1980s and she was a young assistant professor. Then, as now, economics was very male-dominated and it was unspeakably encouraging to have a female role model who was highly supportive of students – and a normal human being too, warm, funny, with outside interests. (Juliet Schor was another who was at around the same time. Maybe it’s a lapse of my memory but I can’t remember any other women professors in the department at the time.) I last saw Suzanne at the 2009 Global Economic Symposium, when we shared a panel.

Shame on me, I’ve not read her 2004 book [amazon_link id=”0262693437″ target=”_blank” ]Innovation and Incentives[/amazon_link].

[amazon_image id=”0262693437″ link=”true” target=”_blank” size=”medium” ]Innovation and Incentives[/amazon_image]

Her 1991 Journal of Economic Perspectives paper, Standing on the Shoulders of Giants: Cumulative Research and the Patent Law (1991:1, pp 29-41), is well worth reading – it’s a free download. She notes that if the second inventor has some market power, prior agreements to share revenues can overcome the drawback of patent-based incentives. Defining patents quite narrowly can also help. However, she also argues that the problem supports the case for government funding of basic research made freely available to subsequent innovators, without patenting. Here is the conclusion:

“Patent policy is a very blunt instrument trying to solve a very delicate problem. Its bluntness derives largely from the narrowness of what patent breadth can depend on, namely the realized values of the technologies. As a consequence, the prospects for fine-tuning the patent system seem limited, which may be an argument for more public sponsorship of basic research.”

Suzanne’s death is a sad loss.

Global governance by stealth

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Last night I attended the Dimbleby Lecture given by IMF Managing Director Christine Lagarde – it will be broadcast tonight on BBC1. Her theme was reinventing multilateralism for the 21st century. What global governance structures will ensure the international system delivers mutually beneficial co-operation rather than zero-sum competition, in the face of technologies that are creating an ever-denser web of decentralised connections, significant demographic change and long-term and other environmental challenges? She also underlined the serious challenge to stability posed by the current degree of income inequality. I think all reasonable people would agree with that, but how interesting to hear the head of the International Monetary Fund speak about it in such strong terms:

“Let me be frank: in the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality. Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential.”

Her focus on reform of global governance is understandable when the US Congress recently made America pretty much the only country in the world that has failed to ratify a first step IMF funding proposal. As Mohamed El-Erian wrote for Project Syndicate:

“This is an unfortunate and regrettable outcome for both the IMF and the international community as a whole. Congressional obstinacy is forcing the Fund to miss out on an opportunity to strengthen its finances at a time when most other countries have already approved the initiative. It is also being held back from addressing, albeit modestly, governance and representation deficits that have steadily eroded the integrity, credibility, and effectiveness of this important multilateral institution.”
Nobody I know of believes global institutions do not need reform. Apart from the challenges described by Mme Lagarde, the large, growing economies – the BRICs and then the MINTs – urgently need to have a voice that reflects the weight they already have in the world economy, as Jim O’Neill has argued in his book The [amazon_link id=”1907994130″ target=”_blank” ]BRIC Road to Growth[/amazon_link]. A forthcoming (May)  book by Ian Goldin, [amazon_link id=”0691154708″ target=”_blank” ]The Butterfly Defect[/amazon_link], looks specifically at how to manage the serious new systemic risks posed by global interconnectedness, such as pandemics or new financial catastrophes. These are just two of a whole sub-genre.
[amazon_image id=”0691154708″ link=”true” target=”_blank” size=”medium” ]The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It: How Globalization Creates Systemic Risks, and What ot Do about it[/amazon_image]
So the need is clear. But how to get from here to there? I’ve not yet heard or read about the specifics. My hunch is that if the minor reform of existing institutions is impossible, given the almost-everywhere increasingly dysfunctional politics of different nation states, we need to look at building new institutions that can perhaps start under the radar. It could be global governance reform by stealth or not at all.