One of the constant pleasures of my morning ritual is sitting down with the Financial Times (paper version) and coffee after an early run with the dog.

The dog eager for early morning run

It’s always a stimulating read, but this morning my attention was particularly caught in an article entitled ‘The 2012 rivals can be named: Hayek v Keynes’ by the following quotation:

‘“I love von Mises,” Michele Bachmann told one interviewer. “When I go on vacation and I lay on the beach, I bring von Mises.”’

Now, I have never read anything by von Mises, and it is not part of my self-image that I’m less well-read than Michele Bachmann, so I scurried to my bookshelves. None of my standards helped – he’s not mentioned in Mark Blaug’s [amazon_link id=”0521577012″ target=”_blank” ]Economic Theory in Retrospect[/amazon_link], nor in Eric Roll’s [amazon_link id=”0571165532″ target=”_blank” ]History of Economic Thought[/amazon_link].

Next I went to the internet to download some books by the man himself, and started on his 1951 lectures, ‘The Free Market and Its Enemies’ (pdf). The first three of these are about economic methodology. The first essay, Economics and Its Opponents, I struggle to sum up, but it ends by asking why Marxists think about the philosophical basis of society while defenders of capitalism don’t bother. I think this is perhaps the same issue raised by a number of historians such as Mark Mazower and David Runciman. The second essay, Pseudo-Science and Historical Understanding, argues (I think) that the study of economics must be essentially an application of historical method, that it is not amenable to the methods of the natural sciences. The third, Acting Man and Economics, says: “The way in which economic knowledge, economic theory, and so on relate to economic history and everyday life is the same as the relation of logic and mathematics to our grasp of the natural sciences.” In other words, economics is an a priori body of knowledge.

At this point, struggling with the dense prose and lack of clarity, I gave up. The negative contemporary reviews quoted in Wikipedia were beginning to make sense. Whittaker Chambers, for example, apparently said von Mises epitomized “know-nothing conservatism” at its “know-nothingest.”

I’m left with a question. It’s hard to believe that Michele Bachmann has really spent lots of hours on the beach or at a desk carefully studying the many writings of von Mises. So what exactly do she and other Tea Party-goers think he says (in fact, what does he say?), and what is their source material?

I’ve just written a review (for the next issue of The Business Economist) of Robert Frank’s new book, [amazon_link id=”0691153191″ target=”_blank” ]The Darwin Economy: Liberty, Competition and the Common Good[/amazon_link]. Much of its argument concerns the role of government in managing markets when positional goods play an important part in the economy. These are goods whose utility to the individual depends on their relative, rather than their absolute, scarcity. I want a fancy house in Mayfair, or a designer handbag, mainly because to have them will display my high status. So their consumption imposes an externality – you are worse off if I buy such an item, because you will want one too even if your own preferences would lead you to spend your money on other things, or even not make so much money in the first place.

The term positional goods is from Fred Hirsch’s [amazon_link id=”1583485996″ target=”_blank” ]Social Limits to Growth[/amazon_link], although the concept dates back at least as far as Veblen’s ‘conspicuous consumption’ in [amazon_link id=”0199552584″ target=”_blank” ]The Theory of the Leisure Class[/amazon_link], and beyond. There are more of them that you’d first imagine. For example, a degree has some intrinsic value for people who love to learn, and who are made more productive by their studies, but part of the value also lies in the fact that a degree is a signal to distinguish its holder from other people competing for jobs.

Professor Frank has wanted to stop conspicuous consumption for a while – his earlier book [amazon_link id=”0691146934″ target=”_blank” ]Luxury Fever[/amazon_link] was on the same topic. The new book sets the issues in the context of the Tea Party movement and rampant libertarianism in the US – he hopes to win the argument for having a government that taxes and spends, and sets out the case eloquently. You’d have thought the Tea Party’s supporters would like the idea of nature red in tooth and claw, at least in its Social Darwinist guise. Hard, though –  given their bizarre issue with natural selection (but why not plate tectonics, as someone asked this weekend) – to see many Tea Party-ites picking up, still less being persuaded, by any book that has ‘Darwin’ in the title.

[amazon_image id=”0691153191″ link=”true” target=”_blank” size=”medium” ]The Darwin Economy: Liberty, Competition, and the Common Good[/amazon_image]

The excellent Gilliant Tett uses her Financial Times column today to review a new book by an anthropologist about debt. It’s David Graeber’s [amazon_link id=”B00513DGIO” target=”_blank” ]Debt: The First Five Thousand Years[/amazon_link], and one of the reasons it sounds so enticing is that Gillian – an anthropologist by training – cites some of my favourite authors on money.

One of them is Keith Hart, whose 1999 book [amazon_link id=”1861972083″ target=”_blank” ]The Memory Bank: Money in an Unequal World[/amazon_link] is a brilliant sociological perspective on the interaction between money, technology and power. He is the originator of the concept of the informal economy, dating from his early fieldwork in Africa. I loved The Memory Bank so much when I first read it that I got in touch with Keith, who like me hails from Manchester although he lives now in Paris, and we have met from time to time – most recently at Dave Birch’s annual and unmissable Digital Money Forum.

Another sociologist Gillian mentions is Marcel Mauss, whose interesting work is on gift exchange. His classic, [amazon_link id=”0415267498″ target=”_blank” ]The Gift[/amazon_link], also concerns the links between exchange and power – every gift brings its corresponding debt –  although I have to confess that I found it heavy going and I love him more for his name than for his writing style. (My husband had hysterics when I mentioned on holiday this year that Marcel Mauss was one of my favourite economic sociologists.)

Finally, Gillian cites Karl Polanyi. I didn’t like his famous [amazon_link id=”0807056790″ target=”_blank” ]The Great Transformation[/amazon_link], which falls into the romantic trap of rose-tinted nostalgia about pre-capitalist society, and is convoluted and pompous compared to Ruskin’s brilliant rant [amazon_link id=”1599868059″ target=”_blank” ]Unto This Last[/amazon_link].

The point is that at this time of crisis, the normally submerged but fundamental links between the financial system and the power structure of society has been brutally exposed. Brutal because it is not pretty. We’ve had a generation of rapacious exploitation of the many by the moneyed elite. It’s revealed in the unsustainable inequality of incomes in countries like the UK and US, as Raghuram Rajan spelled out in [amazon_link id=”0691146837″ target=”_blank” ]Fault Lines[/amazon_link], and in the many monopoly markets which enable the very wealthy to extract vast economic rents, whether they are East European oligarchs, Premier League footballers, holders of long-lived patents or ludicrously extended copyright terms, or investment bankers.

As for David Graeber, I think this sounds a must-read. It seems to chime with the argument I make in [amazon_link id=”0691145180″ target=”_blank” ]The Economics of Enough[/amazon_link] that the social underpinning of the economy is currently unsustainable. Gillian’s review concludes that the west must now start thinking about widespread debt forgiveness – wiping the slate clean, as literally occurred in ancient Mesopotamia. She writes: “Those debts keep piling up in the west, creating social strains – and there is no real solution in sight. Looking back to the future – even 5,000 years – may not be as crazy as it seems. Not least because it reminds us that debt is fundamentally a social construct, not a cold number; even when it relates to your post-holiday credit card bill.”

[amazon_image id=”B00513DGIO” link=”true” target=”_blank” size=”medium” ]Debt: The First 5,000 Years[/amazon_image]

A new book on house prices has reached my desk, [amazon_link id=”1907994017″ target=”_blank” ]Safe as Houses: A Historical Analysis of Property Prices[/amazon_link] by Neil Monnery. It looks worth having for this chart alone (with apologies for the wonky scan but it is Friday afternoon):

UK real house prices since 1900

Obviously, the striking thing about this is the discontinuity of the historical experience since 1980. The book argues that, looking around the world over many years, real house price growth is typically around 1%. Certainly, one would not expect it to exceed the real growth rate of the economy for long periods, at least in a country like the UK with essentially a fixed supply of land and tight planning restrictions. However, the real growth rate in the UK has been 5% a year since 1995 even with the recent dip. If that trend were to continue, the average age of a first time buyer would rise from 37 now (it was 27 in 1995) to over 50 by 2025.

What are the implications? I’ll have to read the whole book to find out, but a period of zero to negative real house price growth seems very likely, with significant effects on home-owners’ wealth and on wealth transfers between generations. What’s more, in the UK mortgage debt is about 100% of GDP; have our banks really considered the risks attached to their mortgage portfolio? Given the events of recent years, it seems unlikely that the banks have been all that prescient.

Anyway, there is loads more interesting data in the book, including several countries and long time series.

[amazon_image id=”1907994017″ link=”true” target=”_blank” size=”medium” ]Safe As Houses? A Historical Analysis of Property Prices[/amazon_image]

This has been a hectic ‘back to school’ week, with many people wanting to hold the first meetings since before the summer holidays. It’s an evocative season anyway. With them mental imprint so many years as a student behind me, nervously buying crisp new notebooks and sharpening pencils, not to mention the autumnal weather here in London, no wonder I’ve been feeling rather reflective. And of course the 10th anniversary of the New York terror attacks makes this a poignant anniversary year as well.

Much has been published on the lasting effects of 9/11, and on the Middle East more widely, to coincide with the anniversary. Jason Burke’s [amazon_link id=”1846142741″ target=”_blank” ]The 9/11 Wars[/amazon_link] has been particularly well reviewed. There have also been favourable reviews of Johnny West’s [amazon_link id=”0857389947″ target=”_blank” ]Karama! Journeys Through the Arab Spring[/amazon_link] (not to mention an excellent BBC programme on this subject by Mishal Husain). There were round-ups last weekend (eg in The Guardian) and no doubt more to come this weekend. Much more tangentially, I just happened to be reading a recent book of essays by Alberto Manguel, [amazon_link id=”0300172087″ target=”_blank” ]A Reader on Reading[/amazon_link]. One of the essays, The Perseverance of Truth, is about the ultimate inability of terror to silence truth.

The essay – which takes as its staring point the 2007 murder by an extremist nationalist of Turkish-Armenian journalist Hrant Dink in Istanbul – discusses the ‘perseverance of memory’, a psychological phenomenon whereby the force of hearing certain information is so strong that we continue to believe it even when confronted with evidence that it is untrue. It sounds like the concept of ‘false consciousness’, a collective phenomenon. The psychology of terrorists must involve some similar inability to see the world from a different perspective. Conrad’s [amazon_link id=”019953635X” target=”_blank” ]The Secret Agent [/amazon_link] surely remains the best exploration of the way an individual becomes trapped in a particular, deformed world-view.

However, Manguel argues that every person has a responsibility to truth:

“Every decision we make, every opinion we give as private citizens, has political consequences. Politics is, by definition, a political activity in which a few occupy the seats of power and the rest of us the remaining myriad roles. No citizen is dispensable, no voice useless, in the continuing struggle to render our societies less false in their pretences and more true to themselves.”

So he concludes that what he calls the ‘perseverance of truth’ is equally powerful. Although at great cost – often death – to some individuals, Manguel writes: “Even though the seeker of truth may be silenced, his sincerity (from the Latin sincerus meaning ‘clean’ or ‘pure’) will eventually do away with the lie.”

The more troubled the times – whether the geopolitics or the economic situation – the greater the onus on each of us to reflect on the true state of the world. And this is certainly the week for doing it.

[amazon_image id=”0300172087″ link=”true” target=”_blank” size=”medium” ]A Reader on Reading[/amazon_image]