Adventures in international finance

The Summit: The biggest battle of the Second World War by Ed Conway is a rattling good read. It is of course about the Bretton Woods conference in 1944, which laid the foundations for the post-war international economic arrangements, and the part they played in the stability and growth of that remarkable 30 years.

I picked it up expecting a book going over familiar territory. Only last year I read Benn Steil’s excellent  The Battle of Bretton Woods. However, The Summit is well worth a read even by Bretton Woods afficionados. It combines terrific storytelling with new archival material.

And what a story! You get a real sense of the physical location – the book starts and ends with the hotel – and the bustle of a huge international conference, meeting everywhere, people huddled in corners. Keynes called it a “monstrous monkeyhouse.” The hotel owner got so fed up with the delegates and the confusion that he threw everybody out before the treaty was entirely ready. Nobody had read every page and the stage was set for much further wrangling.

The characters are extraordinary, from Keynes (who comes across as more unlikeable the more one reads about him) to China’s H.H.Kung, the drunken Russians, the (probably) Soviet spy and chief American negotiator Harry Dexter White, and the obstreperous Indian delegation (some habits die hard…). The book quotes the then UK ambassador to the US commenting on Keynes’ manner: “He was really too offensive for words and I shall have to take measures.” Also amusing is the personality clash between Keynes and Lionel Robbins, another self-confident economist in the British delegation.

It’s always good to be reminded that alongside the debates about economic theory and practicalities, personalities, politics and the vagaries of history shape our institutions.

This would be a terrific introduction to international monetary matters for students, an enjoyable way to dip into some of the economic debate before getting started on it in earnest. And for everybody, it’s not only a good read but good background for reflecting on how international finance is ordered – or not – today, and what it took in 1944 to bring about a different kind of agreement.



Mission impossibility

I’m preparing my new course on Economics for Public Policy that I start teaching at the University of Manchester in a few weeks, and one of the things preoccupying me as I look over the specific material is the evaluation question. Of course impact assessments are a big deal now, and randomised control trials (disguised as ‘pilots’ in the developed world context) very fashionable. Looking at whether policy interventions actually achieve what they were meant to is of course important; and the answer is usually ‘no’ as a host of recent books (The Blunders of Our Governments by Anthony King and Ivor Crew, Why Government Fails So Often by Peter Schuck, Government Failure vs Market Failure by Clifford Winston, Wrong by Richard Grossman) amply testify. But I’ve been thinking more about what the policies are meant to achieve in the first place, the underlying social welfare justification. I started mulling this over when writing last year’s Pro Bono Economics Lecture, The Economist as Outsider, and the philosophical basis of the standard approach in economic policy – identify the market failure and the corresponding Pigouvian intervention – seems profoundly flawed the more you think about it. The recent excellent Interfluidity blog posts on welfare economics spell out some of the issues.

That’s a subject for another day, possibly another book. Meanwhile, I just read The Arrow Impossibility Theorem, lectures by Eric Maskin and Amartya Sen. It’s not an easy read, but it does make the Impossibility Theorem as simple as can be – pretty much equation-free, and clearly explained by two of the biggest brains in the business. Maskin’s lecture looks at the implications for voting systems, Sen’s at the informational basis on which one can make social welfare assessments. The book is an excellent one stop shop on the Impossibility Theorem. Useful for teaching it, and also an important reminder to economists who talk about or operate in the policy world that this question of social welfare is difficult and important.


Innovation, the Romans and ‘us’

There’s a new e-book free to download from Vox EU,Secular Stagnation: Facts, Causes and Cures.

The list of contributors is stellar, starting with the leading Stagnationists, Robert Gordon and Larry Summers, but also including economists such as Ed Glaeser and Joel Mokyr who disagree with the basic secular stagnation assertion that the pace of innovation and therefore technology-driven growth has declined.

For example, Glaeser writes: “It is hard to think of any innovations before the modern age that increased demand for the most skilled workers while providing consumer benefits for
the masses. Indeed, for such a thing to occur, one must imagine a world in which highly paid elite workers toil for the benefit of services that will be used by the poor. Could
such a thing be imaginable in pre-revolutionary France or in Ming China? Yet that is
exactly what happens at Google or Facebook. Highly paid workers work constantly to
improve a service that is provided freely to hundreds of millions of poorer users.”

He continues: “This inversion of the traditional nature of innovations represents the rise of superstarlike technologies (Rosen 1981) that enable the highly competent to provide their
services as almost a public good, with no congestion in use. The most natural precursor
to this modern inversion was well-paid artists, such as writers and movie stars, who
entertained the masses. The inversion also happened when Fred Astaire and Ginger
Rogers danced for depression-era movie audiences. The essentially zero marginal cost of providing internet-related services means that they are often monetised through the advertising of goods with a positive marginal cost. It is free to use Google, but their search engine will nudge users towards their advertisers. The free nature of these services has meant a democratisation of access to information; a fact that is rarely considered in attempts to measure inequality.”

However, the essay goes on to say this does not mean that all is well. It focuses on the adverse employment consequences of the interaction of negative demand shocks and labour market/educational institutions. There’s innovation, and then there’s who benefits from it. In that famous question, ‘What did the Romans ever do for us?’, the emphasis should be on ‘us’ not on ‘Romans’.

The book is a great summary of the state of the debate. I’m in the Glaeser/Mokyr camp at present, but none of us should be anything other than open-minded about these questions.

Urban economics

In reply to my post yesterday about The Atlas of Cities, Jonathan Davies suggested it was time for a list of books on urban economics. Se here’s a starter list. Other suggestions welcome.

1. The best of the most recent, Ed Glaeser’s The Triumph of the City. There’s also his Cities, Agglomeration and Spatial Equilibrium on the basic economics of it.

2. The classics by Jane Jacobs: The Death and Life of Great American Cities, Cities and the Wealth of Nations, The Economy of Cities.

3. Some history: Tristram Hunt’s Building Jerusalem: The Rise and Fall of the Victorian City and his latest (which I’ve not yet read) Ten Cities that Made an Empire.

4. Edge City, Joel Garreau, about the economics of suburbs.

5. The Rise of the Creative Class, Rich Florida (beloved by local governments everywhere)

6. Planet of Slums by Mike Davis

7. Owen Hatherley’s two marvellous extended rants about Britain’s urban landscapes, A Guide to The New Ruins of Great Britain and A New Kind of Bleak: Journeys Through Urban Britain.

8. Edgelands by Michael Roberts and Paul Farley the wilderness spaces that spread into towns and cities.

9. Another Classic, Lewis Mumford, The City in History.

10. Estates by Lynsey Hanley.

11. Reinventing London by Bridget Rosewell.

12. The key textbook, The Spatial Economy, Fujita, Krugman and Venables.

That’s a start – no doubt there are loads more.

Update: other titles suggested by Andrew Curry and Ami Shah, & my thanks to them. I don’t know all of these books, as they’re mainly not by economists.

Saskia Sassen, The Global City
John Reader, Cities
Stephen Graham, Cities Under Siege
David Harvey, Rebel Cities and Social Justice and the City
Herbert Girardet, Cities People Planet
Radical Cities by Justin McGuirk, and

Peter Hall/Manuel Castells, Technopoles of the World

Later update: further titles via Twitter today are:

Anna Minton Ground Control

Edward Soja

Louis Wirth

Herbert Gans

Please keep the suggestions coming!

Beautiful cities

Oh joy. The Atlas of Cities edited by Paul Knox has arrived in the post. It’s a series of essays with titles such as ‘The Industrial City’, ‘The Imperial City’, ‘The Green City’, ‘The Networked City’. Each has a ‘core’ city or two covered, and some secondary ones. For instance, for the Industrial City, Manchester is the main event, with appearances from Berlin, Chicago, Detroit, Sheffield, Glasgow and Dusseldorf. It’s also an absolutely beautifully produced book, with maps, pictures, infographics. It looks a complete treat.