My in-pile is looking uncomfortably small – I get a bit antsy when there are so few books in it (the left hand side consists of non-economics books).

Part of the reason is that I’ve just sent out a batch of interesting books for review by other people for the next edition of The Business Economist. Of course, I can tackle the non-economics books too, and indeed am part way through Jann Parry’s brilliant biography of Kenneth Macmillan, [amazon_link id=”0571243037″ target=”_blank” ]Different Drummer[/amazon_link]. And there are some obvious treats in this pile, including Robert Franks’ forthcoming [amazon_link id=”B005DI9RH6″ target=”_blank” ]The Darwin Economy[/amazon_link].

[amazon_image id=”B005DI9RH6″ link=”true” target=”_blank” size=”medium” ]The Darwin Economy: Liberty, Competition, and the Common Good[/amazon_image]

But with two long flights coming up, I need to add to the ‘work’ pile urgently.So – recommendations please!

In one of those holiday discussions, over a glass of wine or two in the evening, I learned that neither my 20-year old son nor his girlfriend have read Simone De Beauvoir’s [amazon_link id=”0140034633″ target=”_blank” ]The Second Sex.[/amazon_link] Perhaps not surprising, as it was first published in 1949, and I read it in 1979. More alarmingly, they had never heard of Simone De Beauvoir (although the name Jean Paul Sartre rang a bell), nor could they bring to mind any books which a young woman today would regard as an inspirational feminist text. I did a bit of searching on Amazon and found few recent feminist titles, and those there were did not seem to have made an impact. (If anyone knows of counter-examples, do let me know!) What a contrast to my late teens and early 20s when we had classics such as Germaine Greer’s [amazon_link id=”0007205015″ target=”_blank” ]The Female Eunuch[/amazon_link] (1970), Kate Millett’s [amazon_link id=”0252068890″ target=”_blank” ]Sexual Politics [/amazon_link](1970) and Marylin French’s [amazon_link id=”1860492827″ target=”_blank” ]The Women’s Room[/amazon_link] (1977) fairly recently off the presses.

This came to mind reading reviews in The Guardian – and an unsympathetic interview by Zoe Williams in the magazine  –  and also the FT today of a new book, [amazon_link id=”1846144191″ target=”_blank” ]Honey Money: The Power of Erotic Capital[/amazon_link], by LSE sociologist Catherine Hakim. As far as I can gather from the reviews, she adds to Bourdieu’s list of types of capital the idea of ‘erotic capital’ and argues that women should enhance their erotic capital by wearing nice clothes and staying slim. OK, I exaggerate a bit, but it doesn’t seem promising. On the one hand, it’s almost banal to say paying attention to how you present to other people will affect your success in employment. On the other, it’s depressing that the latest career advice for women seems to be about making sure to be attractive to men.

Any women reading who are seeking advice, I’d commend heartily instead [amazon_link id=”069108940X” target=”_blank” ]Women Don’t Ask[/amazon_link] by Linda Babcock and Sarah Laschever, who document the fact that the pay gap between male and female executives is largely attributable to the failure of women to ask for salary increases. (This is not to overlook the empirical evidence that there is also a big earnings penalty attached to career breaks in order to have children.) Also look at this fantastic post in the FT’s Women at the Top blog this week. It sums up a book I haven’t read, [amazon_link id=”111806254X” target=”_blank” ]Break Your Own Rules: How to Change the Patterns of Thinking That Block Women’s Paths to Power[/amazon_link] by Jill Flynn and others.

And meanwhile, consider Simone De Beauvoir’s warning:

“In so far as a woman wishes to be a woman, her independent status gives rise to an inferiority complex. … In consequence of this defeatism, woman is easily reconciled to moderate success; she does not dare aim too high.”

Consider it, and ask which needs more attention – female ambition, or female appearance? If we all pick the same answer, perhaps it’s time to revive feminism.

[amazon_image id=”0140034633″ link=”true” target=”_blank” size=”medium” ]The Second Sex (Penguin Modern Classics)[/amazon_image]

Update: Since writing this yesterday, I came across a review by Jessa Crispin (of bookslut.com) of a book called [amazon_link id=”074564757X” target=”_blank” ]The Future of Feminism[/amazon_link] by Sylvia Walby. The review doesn’t make it sound a rip-roaring read but, hey, it’s there and full of economics. I will have to take a look.

A further update: A friend has just pointed out to me this recent review of a new translation of [amazon_link id=”0307265560″ target=”_blank” ]The Second Sex[/amazon_link].

Fintan O’Toole’s [amazon_link id=”0571270093″ target=”_blank” ]Enough is Enough[/amazon_link] was one of the books in my poolside pile on holiday, and a very enjoyable rant it was. The book, a bestseller in its own country for obvious reasons,  does for Ireland’s elite what Matt Taibbi’s brilliantly splenetic [amazon_link id=”0385529953″ target=”_blank” ]Griftopia [/amazon_link]does for the same class in the United States. And right at the start, O’Toole puts his finger on the problem. Why are things not getting better? “There never was much chance that the elite that created the catastrophe would be able to resolve it.” (p7)

As it happens, the recent news on the Irish economy has been slightly better. Exports are up and, thanks to emigration, unemployment is not as high as it might have been. But this does not feel like economic success to the nation’s inhabitants, whose living standards are down, wealth collapsed, and public services axed. Enough is Enough makes two big points. One is that the sources of the economic catastrophe are political. O’Toole is scathing about the Irish political system, painting it as pure clientilism – heavily influenced still by the Catholic church – rather than anything resembling true democratic scrutiny in the public interest. I know too little about it to judge how exaggerated this is, but certainly politics has been entwined with economics as not only Griftopia but books like Raghuram Rajan’s [amazon_link id=”0691146837″ target=”_blank” ]Fault Lines[/amazon_link] and Simon Johnson & James Kwak’s [amazon_link id=”0307379051″ target=”_blank” ]13 Bankers[/amazon_link] make clear.

The second big theme in the book is that Ireland was never the miracle economy it was made out to be in the Celtic Tiger era. O’Toole writes: “[The] private sector productive capital stock grew by just 16% in eight years, a miserable figure for an economy in the midst of the greatest boom in its history.” (p115) Most of the nation’s investment went into property and retail. And he goes on to analyse a number of deep-seated structural problems such as the inefficiency of the healthcare system and education system.

The book is more than just a torrent of negative analysis. O’Toole offers many policy prescriptions to help the country dig out of trouble. Would they work? He seems to doubt whether there will even be scope to try after the implementation of spending cuts under the current bailout package: “The judgment is that all this can be done [ie the cuts] and that at the distant end of the process there will still be a funcitoning democratic society in Ireland, there will still be an ‘us’ that includes both those who ran up the debts and those who have to pay them off.” (p13)

I don’t know how pessimistic to feel about the likely social and political fallout from the continuing Great Financial Crisis. But I do agree with O’Toole – and many other commentators on our current situation – on the need for the elites that got us in to this mess to acknowledge that things have got to change fundamentally. Many are still in denial about the fact that economic recovery will depend on political reform and changes in the structure of power and the distribution of income in our societies.

[amazon_image id=”0571270093″ link=”true” target=”_blank” size=”medium” ]Enough is Enough: How to Build a New Republic[/amazon_image]

It must be a sign of the times that one of the central themes to emerge from a discussion I chaired yesterday evening was the urgent need for more effective corporate governance. The participants in the debate, organised by think-tank Demos and the Open Society Foundation, were ‘Blue Labour‘ thinker Lord Maurice Glasman, economist John Kay, and Dan Leighton of Demos. The essay question was whether free market ideology was compatible with an open society.

I had expected there to be quite a lot of disagreement between John Kay and the other speakers. John is a brilliant economist – both analytically rigorous and at the same time evidence-driven, with a wide knowledge of how business and finance work in practice and widely read in history and other social sciences. However, he is an economist, and our methodological perspective is distinctive and frequently disliked by non-economists – especially those on the left-of-centre.

Surprisingly, there was an unexpected and interesting consensus in the discussion. It was that policy and research alike have overlooked the importance of the institutional layer that is neither state nor ‘market’ (ie impersonal monetary transactions). A wide range of institutions and relationships shape economic outcomes. Much of the discussion focussed on financial markets and banks, and my goodness there is much unfinished business there. But other kinds of business corporations constitute an important element – and here is where the corporate governance angle came in. Lord Glasman diagnosed a need for a balance of power between owners, managers and workers. The few economists present saw a related need to reduce market concentration and reinvigorate what John described as the ‘disciplined pluralism’ of the competitive market economy – takeovers and concentration of market (and political) power being an aspect of executive rent-seeking. So the meeting agreed, to paraphrase the chant from demonstrations of old: “What do we want? Better corporate governance  – now!”

We were told by staff at the venue, 61 Whitehall, that the room in which the meeting was held had been Henry VIII’s bedroom, with separate doors for his wife and his mistress. I’m not sure whether that contributed to the atmosphere. Having ended up with a cosy agreement, the books by Maurice Glasman – [amazon_link id=”185984071X” target=”_blank” ]Unnecessary Suffering[/amazon_link] – and John Kay – [amazon_link id=”0140296727″ target=”_blank” ]The Truth About Markets[/amazon_link] – set out some intellectual disagreements. Both well worth a read.

[amazon_image id=”185984071X” link=”true” target=”_blank” size=”medium” ]Unnecessary Suffering: Management, Markets and the Liquidation of Solidarity[/amazon_image]

[amazon_image id=”0140296727″ link=”true” target=”_blank” size=”medium” ]The Truth About Markets : Why Some Countries are Rich and Others Remain Poor[/amazon_image]

A guest review by Ian Bright

[amazon_link id=”0230299857″ target=”_blank” ]Minding the Markets: An Emotional Finance View of Financial Instability[/amazon_link] by David Tuckett

Emotions affect how people behave. People do not necessarily behave rationally as basic economic models suggest. As a result, individual transactions may not maximise utility and markets may not move towards or reach equilibrium. These statements are not controversial. Behavioural economics has been studying these effects and challenging standard economic theory for at least the past two decades.

David Tuckett argues this challenge does not go enough. He asserts (pages 12 and 13) that behavioural economics is limited. It “wants to improve the field of economics on its own terms, modifying one or two assumptions that are not central”. He argues: “A purpose of this book is to show that once uncertainty is properly included, just about everything changes.” Tuckett, a Professor of Psychoanalysis at UCL, argues: “Behavioural economists do not take anything from real life psychology and neurobiology that is relevant to the task of considering the impact on human agents, working in social groups, making decisions under uncertainty.” He focuses on financial markets, partly due to personal experience and topicality, and also because these markets are supposedly seen by economists as more rational than other markets  – or at least that irrationality here can be exploited creating “a role for professional investors”.

So far, so good. But skip to page 184:

“The central implication of emotional finance is that, if the future is taken as inherently uncertain, conventional equilibrium modelling isn’t a useful way to start and, especially as far as understanding instability, isn’t helpful. Nonetheless, there may be possible ways to widen the framework of analysis to take account of my findings while still achieving a more general analytical framework. One potentially useful innovation in this area is agent-based modelling, derived from the attempts of physicists to predict the behaviour of very complex systems.”

This comes after extensive analysis of interviews with 52 international fund managers during the first eight months of 2007. Concepts such as groupfeel rather than groupthink are introduced. People and institutions are described as being in divided states, apparently as a way they try to rationalise what is actually happening with what they think should be happening. People develop stories to simplify complex decisions and cope with uncertainty. Furthermore, financial contracts have special emotional effects because they are intangible and can become ‘phantastic’ objects.

I am at a loss as to what is added by these observations. They appear to be essentially the same as well-known ideas such as herd behaviour, decision making by rules of thumb, and confirmation bias (seeking data that supports your ‘story’ and ignoring contrary evidence). And then after 180 pages, I’m anyway told that perhaps I should be reading about agent-based modelling, another familiar idea already used by a (small) number of economists.

I feel conned. Several aspects of the research approach and the argument make me uncomfortable.

Interviews can be difficult to interpret but I supposed the professor has an advantage given his professional training. Still, I was surprised to read (page 72) that only the last eight interviews were adjusted to take direct account of remuneration and performance assessment: “Because my main focus in the interviews was on describing decision making, at first I did not realise what I was seeing.” Apart from being concerned about the consistency of the “data gathering” associated with an interview technique when the questions can appear to change, I was surprised that pay was not central from the beginning.

The concept of ‘phantastic’ objects is also unconvincing. Financial products may be intangible and volatile but they are not the only objects that experience rapid price increases and declines – “bubbles” if you must. Physical items such as housing, wine, stamps and tulip bulbs have all experienced “bubbles”.

I am also concerned that Tuckett has inadvertently interviewed the wrong group of people. Fund managers were pawns in the latest financial crisis. I suspect they will be in the next as well. A more appropriate group would have been risk managers in banks and insurance companies who didn’t recognise the risks they were running, the financial engineers, derivatives traders and salespeople who made, traded and sold the complex products and the regulators and central bankers who dropped the ball. Now, there is a group for psychoanalysis.

For those who would like to hear more, the Institute for New Economic Thinking has a 15 minute video interview in which Professor Tuckett explains his ideas. It covers the main aspects of his book adequately.

Ian Bright

I am writing in a personal capacity

[amazon_image id=”0230299857″ link=”true” target=”_blank” size=”medium” ]Minding the Markets: An Emotional Finance View of Financial Instability[/amazon_image]