Author Archives: Diane Coyle

The economics of poverty

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I’ve been looking through the new [amazon_link id=”0195393783″ target=”_blank” ]Oxford Handbook of the Economics of Poverty[/amazon_link], edited by Philip Jefferson. It isn’t a book to read from cover to cover and review, as a handbook, and I’ve only read two of the chapters. Still, this looks like a useful resource for economists interested in two fields, development economics and income dynamics. In fact, this is something I particularly like about the book, that it includes some research on developing countries alongside the US (although a shortcoming is that its developed world focus is very US-centric). Surely, to the extent that we think economics should aspire to any universality, the economics of poverty must have some application to poverty in any country? So there are chapters by Martin Ravallion (about global patterns) and by Gary Fields (about low earnings in the developing world – he wrote the excellent [amazon_link id=”0199794642″ target=”_blank” ]Working Hard, Working Poor[/amazon_link], which I reviewed here) and by Juliet Elu & Gregory Price about gender inequality in sub-Saharan Africa.

The overlap between development economics and the economics of poverty in western societies is surely fruitful territory. One of my favourite books is [amazon_link id=”0691148198″ target=”_blank” ]Portfolios of the Poor[/amazon_link], a sort of ethnographic, diary-based study of how poor people in India and South Africa actually handle money. A study of this kind would be most helpful in assessing concerns about payday lending in the UK; these short-term lenders are clearly satisfying an otherwise unmet demand. What financial needs of people on low incomes, exactly, are conventional financial services unable to address and is there really a policy or regulatory gap, or is payday lending actually a market solution?

The Handbook also has some cross-cutting chapters that look interesting, on subjects like obesity, healthcare, housing and place-based policies. I read and liked the chapter on the need to get the best from both economics (analytical & empirical rigour) and sociology (illuminating detail and understanding of social networks/capital) in studying poverty.

[amazon_image id=”0195393783″ link=”true” target=”_blank” size=”medium” ]The Oxford Handbook of the Economics of Poverty (Oxford Handbooks in Economics)[/amazon_image]

Best business books and the nature of ‘business’

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Andrew Hill has a nice feature in the weekend FT about the secret of writing a successful business book. It’s a trailer for what must be the upcoming decision on the FT’s Business Book of the Year. The shortlisted titles are:

[amazon_link id=”0007413513″ target=”_blank” ]The Hour Between Dog and Wolf[/amazon_link] by John Coates

[amazon_link id=”1846146593″ target=”_blank” ]Private Empire[/amazon_link] by Steve Coll

[amazon_link id=”1408703742″ target=”_blank” ]Steve Jobs[/amazon_link] by Walter Isaacson

[amazon_link id=”1608190706″ target=”_blank” ]Volcker[/amazon_link] by William Silber

[amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy[/amazon_link] by Michael Sandel. (I reviewed it here.)

[amazon_link id=”1846684293″ target=”_blank” ]Why Nations Fail[/amazon_link] by Daron Acemoglu and James Robinson. (And I reviewed this one here.)

The shortlist makes it plain that the definition of business book is capacious as there are economics books and biographies here. I suspect the ranks of ‘self help’ business books that fill the relevant bookshop sections will rarely if ever make it onto the FT’s shortlist. The correct definition for eligible books is probably ‘thoughtful books about business in its broadest sense – history, philosophy, psychology, society – but not about how to run a business’.

That’s fine – the aim of contests like these is to get people reading serious books, which must be a good thing. The shortlist gives me an appealing reading list. Of the two of the above list I have read already, I think Sandel should not win it, as my review will explain.

Of course, the Enlightened Economist book of the year winner has already been announced – it was Ariel Rubinstein’s [amazon_link id=”1906924775″ target=”_blank” ]Economic Fables[/amazon_link].

[amazon_image id=”1906924775″ link=”true” target=”_blank” size=”medium” ]Economic Fables[/amazon_image]

Here is my review of the book. And here was my shortlist.

Making things

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Yesterday I had a brilliant visit to the Rolls Royce aero engines plant in Derby. Factory visits are always fascinating, and this was particularly so. It’s of course a superb company, and its qualities manifested themselves in all kinds of ways: the focus of the conversations on the long term, on 2020 and 2025; the superb apprenticeship and management training programmes, now being provided for companies in the supply chain as well as Rolls Royce itself; the fact that everyone I spoke to from apprentices to top execs talked about their bit of the business in a way that was consistent and fitted into the same overall strategic picture. Above all, of course, the engines. Amazing technology, so complex, highly dependent on research, long-term investment, IP and skilled people. It was interesting to hear the emphasis on ideas and skills, and on services provided with the product, in a manufacturing company.

A Rolls Royce engine – one of the big ones

There have been a couple of excellent books recently on the areas of strength in UK manufacturing – [amazon_link id=”0349123780″ target=”_blank” ]Made in Britain[/amazon_link] by Evan Davis and [amazon_link id=”0300117779″ target=”_blank” ]The New Industrial Revolution[/amazon_link] by Peter Marsh (the latter is speaking at the Festival of Economics in Bristol on 24 November). (See also the excellent TV programmes by Evan D, Built in Britain, which turned to infrastructure.) Given that I also recently heard about the potential for a significant revival of the Lancashire textiles industry (to which I have an emotional attachment), I do tend to agree with these two authors in believing that our manufacturing industry still has areas of strength.

[amazon_image id=”0300117779″ link=”true” target=”_blank” size=”medium” ]The New Industrial Revolution: Consumers, Globalization and the End of Mass Production[/amazon_image]

However, I think there are two big worries. One is about investment in skills: we have had far too few industrial apprenticeships for too long, and although this is improving slowly, it will take many years to rebuild a sufficiently large skill base. There is also still too much of a presumption that university is better than an apprenticeship – I would disagree with this priority on academic or cognitive skills.

The second is the gap between the superb big companies like Rolls Royce and small, albeit vigorous, manufacturers. The UK needs the middle rank of companies that can feasibly supply the biggest ones – the small ones just can’t deliver on an appropriate scale, can’t afford to invest either in basic R&D or even product development, can’t take on more than one or two apprentices. A lasting manufacturing revival will need to look again at the long-standing barriers that are stopping successful small companies from growing above a certain size.

Real life freakonomics?

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I’m very pleased to receive a book that’s just been delivered (apologies to the courier Cabbage just barked at fiercely). It’s [amazon_link id=”0674047486″ target=”_blank” ]Freaks of Fortune: The Emerging World of Capitalism and Risk in America[/amazon_link] by Jonathan Levy. It’s about the developing concept of risk in 19th century America, and the development of risk-management institutions.

[amazon_image id=”0674047486″ link=”true” target=”_blank” size=”medium” ]Freaks of Fortune[/amazon_image]

The blurb makes it sound fascinating – the argument seems to be that personal freedom meant assuming personal risk – and then offloading it to an insurance company or futures market. So this sounds highly relevant to the post-crisis debate. It also reminded me of course of the magnificent [amazon_link id=”0471295639″ target=”_blank” ]Against The Gods: The Remarkable Story of Risk[/amazon_link] by Peter Bernstein. Risk is such an important concept, and one our brains find it so hard to think about, as Daniel Kahneman spelled out in [amazon_link id=”0141033576″ target=”_blank” ]Thinking, Fast and Slow[/amazon_link]. Slow, probablility-calculating thinking takes a lot of effort and energy. Time for some chocolate….

[amazon_image id=”0471295639″ link=”true” target=”_blank” size=”medium” ]Against the Gods: The Remarkable Story of Risk[/amazon_image]

I’ll write about Freaks of Fortune when I’ve had chance to read it – meanwhile, here is a taster by Jonathan Levy from the Chronicle of Higher Education.

First movers and fast second

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I was reading my dear husband’s blog post about the new iPad mini and the Microsoft Surface, the latest entrants to the tablet market. It reminded me about a terrific book co-authored by one of my mentors, the late Paul Geroski. The book is [amazon_link id=”0787971545″ target=”_blank” ]Fast Second[/amazon_link], written with Constantinos Markides, written int 2005 so it pre-dates tablets. But the hypothesis may apply.

Their argument is that in a radically new technology, the supposed first mover advantage may be ephemeral: “The firms that end up capturing the new market are those firms that time their entry so they appear just as the dominant design is about to emerge…. For big, established firms contemplating entry into a new radical market, this is the best strategy to follow.” This is what they mean by fast second – neither first mover, nor second-mover i.e. waiting for a clearly dominant design and standards, and offering a cheaper me-too product.

The examples in the book include IBM in mainframes, GE in CT scanners, Canon in cameras, Sharp in faxes. I don’t know whether the iPad challenger tablets would count in Paul’s view, or whether the iPad mini will fend off fast seconds, but it’s worth pondering.

[amazon_image id=”0787971545″ link=”true” target=”_blank” size=”medium” ]Fast Second: How Smart Companies Bypass Radical Innovation to Enter and Dominate New Markets (J-B US non-Franchise Leadership)[/amazon_image]