A guest review by Phil Thornton (Clarity Economics) of 30 Second Economics ed. Donald Marron

Every
cloud has a silver lining and one positive offshoot from the tornado that was
the financial crisis has been a spurt of books aiming to explain economics to
non-economists. As
its title sets out, this latest entry, 30 Second Economics edited by Donald Marron, aims to explain the 50 most
thought-provoking economic theories in just half a minute.

It
joins What you
need to know about economics and Economics:
making sense of the modern economy, both reviewed here on The Enlightened Economist, as well
as other recent offerings such as 50 economics
ideas you really need to know.

Publishers
clearly have a firm idea of what the public wants: 50 ideas; each one easily and quickly digestible; and illustrated with snappy quotes, graphs and potted
biographies. 30 Second brings some new elements: a “3-second crash”
that explains each idea in around 20 words (or around a Twitter-length 140 characters)
and a “3-minute boom” for those who want to delve deeper.

The
50 ideas are categorised within eight groups (schools of thought, economic
systems, economic cycles, growth, global trade, choice, tax and spend, and
markets), which makes it easier for the reader to navigate. Each
entry has a double-page spread with text on one side that also includes related
theories and key thinkers, and an imaginative infographic to hammer home the
point on the facing page.

While
this makes the book a little formulaic, it makes it easier to read than other
similar books that have more varied structure but which take longer to cover a
given subject. You pays your money…

Its
choice of potted biographies is similar to that of other books in the same genre (von
Hayek, Friedman, Keynes, Malthus, Ricardo, Becker, Marshall and Smith). However, the
writers (there are four –  see below) display a sense of humour that some other
books in the same vein often lack. In
the biography of Malthus, for example, the book notes that while history has
been harsh on his theories on population, the current emphasis of economic
sustainability means the “bad boy of economics may yet have the last laugh.”

Given
that there are more than 50 economic ideas to choose from, the biggest challenge for any book
of this nature is deciding which concepts to exclude. 30 Second includes the “impossible trinity” or trilemma
that governments face is being unable to control exchange rates, capital flows
and monetary policy simultaneously that others have not selected. On
the other hand it does not include discussion of
trickle-down economics that is becoming a key part of the debate as
economies recover.

But
these are minor quibbles. The book is clearly written and presented and
includes the main concepts that non-economists need to know in the current environment.

On
a presentational note, I am not sure this is a book that needed to come out in
hardback. It is most a likely a book that users will want to keep in their
briefcase, by their laptop or even in their coat pocket so paperback would seem
the better medium.

I
also feel that the writers – the people who actually did the tight writing
needed for this book – should have received more credit. So for the record, the
contributors (who all hail from Sussex University) are Adam Fishwick,
Christakis Georgiou, Katie Huston and Aurélie Maréchal.

The revival of this genre of easy-to-read books
on economics is welcome. On the other hand, perhaps when new volumes are no
longer entering the market, it will be a sign that the recovery is well
established.

Tim Wu's book, The Master Switch, was favourably reviewed here by Rory Cellan-Jones (my husband, & the BBC's technology correspondent). I read it myself over the Easter weekend and agree with Rory's view that it's a superbly well-told history of the information industries in the US. 

As a former competition regulator, however, it was the competition analysis of these industries that jumped out at me – with their economies of scale, network effects, tendency to vertical integration and two-sided markets. Although he describes the recurrent Schumpeterian cycle of technological disruption, Wu's prescription is strict anti-trust enforcement against both horizontal and vertical combinations, and this is the perspective he brings to the current net neutrality debate. I think he understates the complexities of applying competition policy in these industries, but that's fair enough because there isn't a settled body of economic theory and evidence anyway.

Also interesting, however, is the link Wu draws between competition and free speech, or rather the diversity of perspectives and debate essential for civic engagement in a healthy democracy, and for artistic creativity in a modern economy. A 'discriminatory' network, he notes, can profoundly alter political debate, and he gives examples from each of his historical cycles. A concentrated media industry narrows the national conversation (p183). He argues for the concept of 'common carriage' as the information industries' counterpart to the 1st Amendment guarantee of free speech. (p57)

Finally, almost en passant, Wu takes a swipe at the extreme version of copyright protection some in the 'content' industries now advocate. “In an age that has radically commoditized content, it is as well to remember that Homer had no expectation of royalties.” (p37)

So it's certainly a thought-provoking book – some people will dispute his arguments. But whatever your perspective, an important book and a must-read for all interested in the content industries, net neutrality and all that jazz.

Here are some other reviews: BoingBoing; The Guardian; New York Times; Huffington Post.

PS Apologies for the brief disruption to this blog over the holiday weekend. Fingers crossed, the problem is fixed.

New books investigating the causes and consequences of the financial crisis continue to flow. Today's Financial Times has a review (reg. or £ required) of Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide by Roddy Boyd.

A comment in the broadly positive review that caught my eye was this:

Western decline is a bit of a theme in publishing at present. There's Ian Morris's terrific Why the West Rules For Now. Dambisa Moyo wrote How the West Was Lost, which I haven't read (& hasn't been well reviewed). And there are plenty of titles which make it implicit by their focus on the rise of China.

David Marquand's The End of the West has a particular angle revealed by the subtitle: The Once and Future Europe. The European Union and its workings have a special ability to seem unbelievably dull, rather like trade negotiations, even if you think the subject is profoundly important. (The one time I ever laughed at a book about the EU was the Very Short Introduction to it, which revealed the existence of a sub-committee called the 'horizontal working party on drugs'.) So it is a measure of success that David Marquand's book is interesting and highly readable.

That's because it's about the politics, not the institutional mechanics, of the EU. It starts with the post-war political context, and it is always good to be reminded that the directives of today have their origin in the determination of some visionary politicians to ensure there never could be another murderous civil war between Europeans – and the threat to this vision of knitting peace into the fabric of the continent was why the Bosnian war was such a test of EU politicians in the 1990s. Marquand points out that the EU's founders were not visionary dreamers but practical men. But he adds:

“They had an exceptional capacity to see beyond their noses: to imagine a different future and a path toward it.” (p25)

(Readers of my book will know that achieving a long term focus in practical decisions is a current obsession of mine.) Their tactic was to achieve the vision precisely through knitting, stitch by stitch, a practical, sturdy, institutional structure. But Marquand's argument is that this tactic has reached its limit. The EU has become submerged in technocratic practicalities and now the high politics needs to come to the fore. He spends some time describing the disconnect between the elite project of the EU and the imperatives of popular democracy. This disconnect is most apparent in the European Parliament (of which he was once a member), which claims popular legitimacy because there are elections, but in reality turnout is low, popular indifference high, and MEPs are sitting in the First Class carriages of the gravy train.

I don't agree with some of Marquand's specific points but do agree that the questions he raises must be addressed if the massive success of the EU is to be sustained. These include – all too obviously – the mismatch between a single monetary policy, separate fiscal policies and an ill-regulated banking system; the role of religion in the European ideal; the boundaries of Europe, especially in the present 'Arab spring'. Not small questions, then. This book is a good place to start thinking about them without getting bogged down in the acronyms and dull detail of so much that is written about the most important political structure shaping the lives of 300m Europeans.

The Master Switch by Tim Wu

Guest Review by Rory Cellan-Jones (@ruskin147)

I have a confession to make: I wasn't really
looking forward to reading The Master Switch. From what I'd heard about this
important book, I had imagined a worthy but dull treatise
on net neutrality, an issue which has excited fierce passions in the US, but
has, until recently at least, left the UK cold. But I was completely wrong.
Until the very end, The Master Switch is not really about the principles
governing the internet –  rather, it's a rip-roaring saga about the
communications and media industries, peppered with extraordinary incidents and
with a cast of larger than life characters.

So we have Alexander Graham Bell and his battle
with telegraph monopolist Western Union over the telephone – “a match to
the death”, as Timothy Wu puts it. We see the Jewish immigrants Adolph Zukor and Carl
Laemmle taking on the New York-based Edison Trust which held absolute sway over
the infant movie industry – then, with other independents, moving to Los
Angeles and creating the Hollywood studio system, with an even more ferocious
grip on moviemaking and distribution. 

We track the rise of radio and television, each
beginning with idealistic independent-minded pioneers, and quickly captured by
what Wu calls information empires – RCA in radio, NBC and CBS in television.

We see smart inventors broken by the power of these
empires. In 1934 Edwin Armstrong comes up with something he calls
“frequency modulation” radio, or FM.  But RCA, fearing the
innovation would mean more radio stations and so dilute its monopoly power, responds
first by belittling Armstrong's invention, then effectively stealing it and
waiting for him to sue. Eventually, twenty years after inventing FM, he throws
himself out of his New York apartment.

We meet Henry Tuttle and Leo Beranek, who invent a
bizarre device called the Hush-a-Phone to allow confidential telephone calls, and
find themselves in an endless legal battle with the telephone monopoly
AT&T, which prohibits “foreign attachments”. Eventually AT&T
is defeated, too late for Tuttle to market his product, but the ruling
foreshadows the eventual break-up of the monopoly.

Wu's thesis, inspired by Joseph Schumpeter's
theories on creative destruction, is that each information industry goes through
a cycle of life and death, with the new destroying the old, as the telephone
killed the telegraph. But he sees each new industry becoming dominated by
powerful corporations, allied with the law and government, seeking to slow the
pace of innovation in order to maximise their profits and put off their own
destruction.

Until, that is the arrival of the internet. In this
case, he's more optimistic about the technology's innate ability to route
around monopoly power, detailing with glee the story of how the AOL Time Warner
merger unravelled. The internet, he says, “defies every expectation one
has developed from experience of other media industries, which are predicated
on control of the customer…. the internet abdicates control to the
individual; that is its special allure, its power to be endlessly surprising,
as well as its founding principle.”

But the author does fear a new battle for the soul
of the internet between open and closed systems, represented by Google in the
open corner and Apple, maker of beautiful but locked-down devices.  He
ends with a battle-cry for what he describes as a “separations
principle”, calling on regulators to keep content creators, network
operators and device makers apart. The aim is to ensure that the vertically
integrated monopolies that ran the telephone, broadcasting and movie industries
in the 20th century are not replicated on the internet in the 21st.

So there is an ample supply of economics in The
Master Switch to satisfy anyone with an interest in how innovation ebbs and
flows through the information industries. But luckily for those of us whose
heads begin to hurt after too much theory, there's enough plot and vivid characters
to make a gripping Hollywood blockbuster.