I’ve been mulling over the Malcolm Gladwell comment mentioned in my previous post – “Poverty is not deprivation; it is isolation.”

Much of my consultancy work during the past eight years has concerned the social and economic impact of mobile phones in low-income countries. The first report I did for Vodafone (on the impact of mobiles in Africa, in 2005, Paper 2 in this series) included a now-famous piece of econometrics by Len Waverman and co-authors estimating that an additional 10 mobile phones per 100 people (from 1995 to 2003) had raised a country’s per capita GDP growth 0.6%. Although this was large, an estimate we thought was probably biased upward a bit by simultaneity despite the team’s best efforts to take this into account, it made sense that the impact could be large when looking at earlier research on the effects of fixed line telephony in the US.

One comparison Len made always stuck in my mind: at that time mobile penetration rates in a country like Kenya were similar to fixed-line penetration rates in a country like France in the early 1970s. When I grew up in northern England in the 1960s and 70s, few of us had phones at home – we had to walk about 10 minutes to the nearest call box. My parents got a phone in the late 1970s, and shared the line with another house even then. Within the past generation, communication has changed the way all of us on Earth engage in everyday economic (and social) activities like shopping or finding work.

[amazon_image id=”B004SHO570″ link=”true” target=”_blank” size=”medium” ]Linked: The New Science Of Networks Science Of Networks[/amazon_image]

I looked back at the first book I read about networks, Albert-Lásló Barabási’s [amazon_link id=”B004SHO570″ target=”_blank” ]Linked: The New Science of Networks[/amazon_link]. He points out that the structure of the economy or its sub-components like industries or firms is a tree. Poor countries, or people are at the outmost branches, with the fewest opportunities. Unhealthy, uncompetitive industries have too few over-large trees whose shade destroys the vigorous undergrowth.

Andy Haldane at the Bank of England has spoken of the need to apply network thinking to the banking industry, and the risk of systemic failure. Mainstream economists actually need to consider much more carefully how network models might apply across the board, as a few pioneers such as [amazon_link id=”0415594243″ target=”_blank” ]Alan Kirman[/amazon_link] and [amazon_link id=”0571197264″ target=”_blank” ]Paul Ormerod[/amazon_link] have long argued.

Thinking about networks is natural in the field of telecoms, but the connection between the physical networks that fundamentally underpin the economy and the mental models we use to analyse the economy hasn’t been fully made. The economy has been rewired since around 1980 but economics hasn’t yet.

The internet tree

On the Tube in the past couple of days, I’ve spotted an intriguing mix of books being read by fellow passengers (real books, that is):

[amazon_link id=”0521007771″ target=”_blank” ]The Cambridge Companion to Merleau-Ponty[/amazon_link]

[amazon_link id=”0091867770″ target=”_blank” ]Round Ireland with a Fridge[/amazon_link] by Tony Hawks

[amazon_link id=”074758589X” target=”_blank” ]A Thousand Splendid Suns[/amazon_link] by Khaled Hosseini

[amazon_link id=”0099502232″ target=”_blank” ]The Associate[/amazon_link] by John Grisham

[amazon_link id=”B005MJFA2W” target=”_blank” ]Thinking Fast and Slow[/amazon_link] by Daniel Kahneman

I’m still reading [amazon_link id=”1594482675″ target=”_blank” ]The New Kings of Nonfiction[/amazon_link] edited by Ira Glass. There’s a classic Malcolm Gladwell essay about the six degrees of separation and Granovetter’s strength of weak links idea. It contains the line: “Poverty is not deprivation; it is isolation,” which must be true.

There were of course lots of kindle etc readers on the Tube so I couldn’t see what they were reading, but as it turns out that e-readers explain the success of the smutty ‘Fifty Shades of Grey’ series, that’s what I’m going to assume was keeping them all occupied on their commute, rather than the philosophy of Merleau-Ponty.

[amazon_image id=”0521007771″ link=”true” target=”_blank” size=”medium” ]The Cambridge Companion to Merleau-Ponty (Cambridge Companions to Philosophy)[/amazon_image]

It’s one of those weeks, wall-to-wall meetings, all on different subjects so I’m reading the papers on the train on the way there to get my head around things. So for a bit of mental relaxation I’ve been reading a wonderful book recommended to me by Tim Harford. That’s [amazon_link id=”1594482675″ target=”_blank” ]The New Kings of Nonfiction[/amazon_link], edited by Ira Glass , producer of the utterly brilliant This American Life.

As the title suggests, this is a collection of long non-fiction essays. They amount almost to a new genre, one greatly encouraged by the web for reasons I’m not sure I understand. After all, the conventional wisdom is that people only read short items online. Maybe it’s because the scope of the addressable market for this work is so much increased. Maybe it’s the arrival of iPads and other tablets, and this kind of short long-form work is perfect for commuting. The revival of long essays and short books these days is a very welcome phenomenon.

The style is distinctive too. Reportage meets the techniques of good fiction, so the stories are gripping. Anyway, highly commended. And proceeds from the book’s sales go to a Chicago literacy programme.

[amazon_image id=”1594482675″ link=”true” target=”_blank” size=”medium” ]The New Kings of Nonfiction[/amazon_image]

I took part in a very stimulating debate on BBC Radio4’s Start The Week with Michael Sandel, author of [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy[/amazon_link], and Grigory Yavlinsky, author of [amazon_link id=”0300159102″ target=”_blank” ]realeconomik[/amazon_link]. The podcast is available on the Start the Week website. Here are the two authors just before we went into the studio.

Michael Sandel

Grigory Yavlinsky

I’ve finished reading Grigory Yavlinsky’s [amazon_link id=”0300159102″ target=”_blank” ]realekonomik: The Hidden Cause of the Great Recession (And How to Avert the Next One)[/amazon_link]. This was a prelude to discussing with him and with Michael Sandel (whose new book is [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy: The Moral Limits of Markets[/amazon_link]) the issue of markets and morality on BBC Radio 4’s Start the Week.

Yavlinsky’s argument is one that will strike a chord with many people, post-Crash, namely that the main problem is that the financial markets in particular, but markets in general, are not so much amoral as immoral. He has good reason to be pessimistic about markets given his experience with Russia’s transition away from a planned economy – Yavlinsky’s own ‘500 Days’ plan was usurped by ‘shock therapy’ and the disorderly privatizations that accompanied it. He has since seen the rise of Russia’s oligarchs at the expense of living standards and even life expectancy for the great majority of ordinary people. It is not surprising that he sees parallels between that oligarchy and the western financial services oligarchy. realeconomik (the title is of course a play on realpolitik) has an excellent chapter on Russia, and is also convincing on the way structures such as intellectual property rights make it hard for developing countries to benefit from globalisation. Although I think it essential for this group of countries to participate in global production chains, it has always been clear that the TRIPS is a dreadful regime.

Yavlinksy concludes, pessimistically, in this book, that nothing has changed in the power of the financial oligarchs since the Crash: “Calls have gone unheard for a far-reaching change in moral attitudes and for deep and meaningful reform of modern capitalism.”

He’s right. It is pretty clear to me that the financial elite became disconnected from any normal notion of appropriate moral behaviour at some stage during the 90s or noughties, and are still on the whole inhabiting a different moral universe from the rest of us. That will have to change, although – despite the subtitle – Yavlinsky does not offer much guidance on how to bring about that change.

However, I differ from both him and Sandel in thinking the issue is more one of social norms than ‘markets’ in the abstract – because markets are not abstract, they are themselves a form of institution embedded in society and can operate in either moral or immoral ways. Indeed, you have to get beyond inveighing in general, abstract terms about ‘markets’ to be able to come up with specific proposals for change. It will take realism to overcome realeconomik.

I reviewed Sandel’s book recently for The Independent. My Tanner Lectures on these issues will be available shortly on the Brasenose College website.

[amazon_image id=”0300159102″ link=”true” target=”_blank” size=”medium” ]Realeconomik: The Hidden Cause of the Great Recession (and How to Avert the Next One)[/amazon_image]