On my shelf is a collection of essays published in 1947 in memory of Keynes, who had died the previous year. The book, [amazon_link id=”B000UWHGDM” target=”_blank” ]The New Economics: Keynes’ Influence on Theory and Public Policy[/amazon_link], edited by Seymour Harris, is fascinating for many reasons. Among them, the reverence for Keynes, but also the kind of discussion that took place between economists to determine what ‘Keynesian’ thought was, exactly.

[amazon_image id=”B000UWHGDM” link=”true” target=”_blank” size=”medium” ]The New Economics : Keynes Influence on Theory and Public Policy / Edited, with Introductions by Seymour E. Harris[/amazon_image]

The affectionate and respectful chapter written by Joseph Schumpeter also makes some interesting sociological points about ‘Keynesianism’. He writes:

“Many of the men who entered the field of teaching or research in the 20s and 30s had renounced allegiance to the bourgeois scheme of life, the bourgeois scheme of values. Many of them sneered at the profit motive and at the element of personal performance in the capitalist process.”

But they did not want to pronounce themselves socialists, either. So Keynes gave them a ‘respectable’ alternative, a theory that made the personal accumulation of wealth bad for the economy and, as Schumpeter paraphrases [amazon_link id=”1467934925″ target=”_blank” ]The General Theory[/amazon_link], “the unequal distribution of income is the ultimate cause of unemployment.”

[amazon_image id=”1467934925″ link=”true” target=”_blank” size=”medium” ]The General Theory of Employment, Interest, and Money[/amazon_image]

This, Schumpeter concludes, “Is what the Keynesian revolution amounts to.”

It’s quite interesting to reflect in this vein on the sociology of the opposing camps of macroeconomists today, with the New Neo-Keynesians, like Schumpeter’s young economists of the 1930s, similarly crafting a non-socialist but anti-capitalist identity. Scary how many echoes of the 30s there seem to be….

Meanwhile, the opposing shouty camps in macroeconomics are giving the whole subject a wholly undeserved bad name, as Chris Dillow accurately but plaintively points out in an excellent Stumbling and Mumbling post.

Last night I attended the recording of the first of this year’s BBC Reith Lectures, historian Niall Ferguson giving the first of four on the subject of ‘The Rule of Law and its Enemies.’ Prof Ferguson tends to arouse strong feelings – I’m a fan – but whether you love or hate him, he’s certainly a lively and provocative lecturer. The big lecture theatre at the LSE was packed.

His theme in the first lecture was the breakdown in the social contract between the generations, citing, as one would expect from a conservative historian, Edmund Burke (from [amazon_link id=”0199539022″ target=”_blank” ]Reflections on the Revolution in France[/amazon_link]):

“Society is indeed a contract. It is a partnership in all science; a partnership in all art; a partnership in every virtue, and in all perfection. As the ends of such a partnership cannot be obtained in many generations, it becomes a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born.”

[amazon_image id=”0199539022″ link=”true” target=”_blank” size=”medium” ]Reflections on the Revolution in France (Oxford World’s Classics)[/amazon_image]

This took him into the current financial crisis and the question of debt, a subject on which Prof Ferguson has famously clashed with Paul Krugman over the latter’s insistence on fiscal stimulus to pep up growth now (an argument on which Prof Krugman’s got a new book out, [amazon_link id=”0393088774″ target=”_blank” ]End This Depression Now![/amazon_link] – I’ve not yet read it.)

[amazon_image id=”0393088774″ link=”true” target=”_blank” size=”medium” ]End This Depression Now![/amazon_image]

Prof Ferguson made the case for proper generational accounting and a national balance sheet – readers of [amazon_link id=”0691156298″ target=”_blank” ]The Economics of Enough[/amazon_link] will know I’m an ardent advocate of these measures. Anyway, the lecture will be broadcast on BBC Radio 4 and The World Service on 19 June, with a repeat and a podcast to follow, then the other three in the following weeks.They’re going to be a must-listen for me.

The point of this post was to highlight some of the many books cited in last night’s lecture. They included (as well as Burke) Daron Acemoglu and James Robinson’s [amazon_link id=”1846684293″ target=”_blank” ]Why Nation’s Fail [/amazon_link](reviewed here), Timur Kuran’s [amazon_link id=”0691147566″ target=”_blank” ]The Long Divergence[/amazon_link] (reviewed here), Carmen Reinhardt and Kenneth Rogoff’s [amazon_link id=”0691142165″ target=”_blank” ]This Time is Different[/amazon_link], along with Mandeville’s [amazon_link id=”0140445412″ target=”_blank” ]Fable of the Bees[/amazon_link] and Adam Smith’s [amazon_link id=”0140432086″ target=”_blank” ]The Wealth of Nations[/amazon_link].

[amazon_image id=”0691156298″ link=”true” target=”_blank” size=”medium” ]The Economics of Enough: How to Run the Economy as If the Future Matters[/amazon_image]

In preparation for a lecture, I’ve been mulling over some books and papers on co-operation in human societies. One of my favourites is Paul Seabright’s [amazon_link id=”0691146462″ target=”_blank” ]The Company of Strangers[/amazon_link]. Another is [amazon_link id=”0691151253″ target=”_blank” ]A Co-operative Species: Human Reciprocity and its Evolution[/amazon_link] by Samuel Bowles and Herbert Gintis. This latter book, published last year combines evolutionary theory and game theory to analyse reciprocity. As the authors point out, it is easy to see the benefits of co-operation among groups of humans, in our early history as now – but not so easy to see how co-operation evolved or is sustained, as the costs of reciprocity fall relatively heavily on individuals while the benefits are shared among the whole group.

The question of sustaining co-operation becomes all the more pressing. The problems we face are complicated and global, and will not be tackled without co-operation. Think about climate change, or the continuing economic crisis. The social and economic structures we have built depend on sustaining an almost miraculous level of co-operation – think about the global supply chains for many of the products we have come to depend on, or the fact that more than half of us now live in close contact in massive, cosmopolitan cities. Can the mutual trust and co-operation that has got us here be sustained?

Bowles and Gintis see this as a question about the “distinctive human capacity for institution-building and cultural transmission of learned behaviour.” (p197) They reference Elinor Ostrom’s work on the role of incentives and sanctions in a specific institutional framework in supporting contemporary co-operation. The authors conclude with a reasonable degree of optimism that the forces that made altruism and co-operation a competitive advantage in pre-historic times continue to operate – we are simply better off by co-operating. But, as they conclude, neither private market contracts nor government fiat have ever shaped the actual forms of co-operative economic activity. In a minor way, this was brought to mind by our Jubilee street party on Monday, an entirely self-organised phenomenon, repeated many times over, all around the country.

Diamond Jubilee street party

This kind of co-operation is a question of culture and institutions, which need to develop continually as our economies and societies change. To continue yesterday’s theme, what kind of culture and institutions will support a complex globalized economy facing multiple crises?

[amazon_image id=”0691151253″ link=”true” target=”_blank” size=”medium” ]A Cooperative Species: Human Reciprocity and Its Evolution[/amazon_image]

At the fabulous Trento Festival of Economics I picked up a copy of Dani Rodrik’s talk from last year, which sent me to his terrific book, [amazon_link id=”0199603332″ target=”_blank” ]The Globalization Paradox[/amazon_link]. The challenge he sets out is that we have a combination of economic globalization and national politics, and it’s difficult to see a way out of the mismatch because political legitimacy is created at the level of the nation state. To call for ‘global governance’ is unrealistic – and clearly all the more so now the Eurozone is wholly unable to deliver zone-wide political responses to the economic crisis. The global institutions that we have, like the WTO, lack legitimacy.

[amazon_image id=”0199603332″ link=”true” target=”_blank” size=”medium” ]The Globalization Paradox: Why Global Markets, States, and Democracy Can’t Coexist[/amazon_image]

So Rodrik draws three conclusions:

“Markets need to be deeply embedded in systems of governance to work well.”

“These institutions of governance…. are organized largely within nation states and they are likely to remain so.”

There is no single way to design institutions and governance. “The institutional designs that underpin market economies will differ according to the democratic preferences of different jurisdictions.”

This makes it pretty scary that the economy has become as globalized as it is in a world of firmly national politics that seem to be getting more nationalistic by the day. Richard Baldwin’s recent work on the ‘two unbundlings’ – the separation of production from consumption and then of steps in the production chain from each other – indicates that reversing globalization would be catastrophic economically. But how are world markets to be governed when these supply chains link separate nation state institutional frameworks?

I don’t have an answer but do think one path forward will involve using the structure of supply chains themselves to govern economic activity. There are many industries where standards bodies and trade bodies are reasonably effective, where export credits work very well, where large companies at the head of the supply chain provide leadership. These are not state bodies, but they are collective institutions – maybe part of the answer to Rodrik’s paradox will lie in expanding the domain of these institutions and not expecting the state to solve everything. Especially given the dysfunctionality of politics and lack of trust in politicians everywhere.

Fabulous Trento

The way technology is changing the economics of publishing, both demand and supply sides, is fascinating. Here’s a round-up of some recent articles and posts – not systematic, just the ones I’ve come across.

David Gauntlett on the LSE Review of Books blog, about academic e-publishing. This was a reply to an earlier post by Patrick Dunleavy.

The Guardian on Amazon’s dominance in the e-book market – and what its downfall might be.

Marketwatch on the impact of e-books on publishing.

An anti-Amazon slideshow on The Nation.

A literary agent’s thoughts on the changes in the industry – Ed Victor in the Daily Telegraph.

The publishers’ reaction to the DoJ anti-trust suit.

Latest e-book market data from Publishers Weekly.

A handy guide (via CNET) to how to publish your own e-book.

And from NPR, libraries’ struggle with e-books.