Time for more Keynes

In a blog post yesterday Benjamin Mitra-Kahn – now chief economist at IP Australia but perhaps even better known as the author of a superb thesis on the history of defining and measuring the economy – pointed out that Keynes’s works are now out of copyright. The copyright has been held by the Royal Economic Society, which has published the Collected Writings in a handsome series (The General Theory is Volume 7) (RES members can get them online).

However, there is no reliable, reasonably priced paperback version at the moment of Keynes’s major works. (Be warned – expert readers say the paperbacks that pop up on Amazon (pirate editions until this week) are poorly produced and full of inaccuracies.)

So as well as Benjamin Mitra-Kahn’s suggestion of putting all of the works and collected papers online – a terrific idea, practical proposals needed – it would be great if a publisher would pick up the need for a paperback classic version so we can get students reading them for themselves again.

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Think yourself lucky

Robert Frank’s new book Success and Luck: Good Fortune and the Myth of Meritocracy is a nice, brief overview of why luck plays such a big role in an individual’s economic success (or otherwise).

This very readable book canters through some of the key evidence on how economic success depends on chance, amplified by phenomena such as winner take all markets, and by policy. Mainly, though, it is another pitch for Frank’s favourite policy prescription of a progressive consumption tax, something he’s been advocating since The Darwin Economy, Luxury Fever and possibly before. As in those books, he relies here on the argument that much consumption consists of positional spending and the ‘arms races’ need to be limited by policy intervention.

I’m not persuaded about the consumption tax idea, because when you ask policymakers to select luxury goods will probably choose something that might be a luxury now but will become a useful mass market product. Remember Norman Lamont in 1991 taxing mobile phones as yuppie status symbols – which indeed they were at the time. (“I turn now to what I regard as one of the greatest scourges of modern life. I refer to the mobile telephone. I propose to bring the benefit of car phones into income tax and to simplify the tax treatment of mobile phones by introducing a standard charge on the private use of such phones provided by an employer. Tax will be paid of £200 for each phone for 1991-92. I hope that, as a result of this measure, restaurants will be quieter and the roads will be safer.” Budget speech 19 March 1991.) One could be on safer ground with, say, gold leaf covered sports cars, but even so my preference is for progressive income and especially property taxes.

Still, the reminder about the important role of luck is welcome, although it is surely neither wholly necessary nor sufficient for economic success. The most important conclusion to my mind is the negative one that people who are poor are most likely unlucky, whether that be in terms of their parents’ income and status or the quality of their school and neighbourhood, and poverty or unemployment can’t be blamed on laziness. As Julia Unwin pointed out so eloquently in Why Fight Poverty?, we often make unjustified moral judgements about poor people out of fear; we need to recognise the bad hand life has dealt them.

Coase, cars, cities

Alerted to it by Peter Sinclair, this week I read Ezra Mishan’s 1967 (and frequently reprinted up to 1993) book The Costs of Economic Growth. It’s a short, polemical book, and the overwhelming impression you get is that the author was a grumpy chap not at all happy about modern life. Especially in cities. Too much noise, too much dirt, too many people, too much traffic, above all too much traffic. I’m not entirely sure I’d want to have been seated next to him at dinner.

Still, there’s a lot to like in the book. It has some excellent sections on the Coase theorem; on its non-applicability in many situations of environmental externalities because the transactions costs of negotiation are so large; and of the way the legal framework, in defining the status quo, shapes the outcome. If the law does not protect the interest of inhabitants in clean air, polluters will have no incentive or need to negotiate. Mishan in fact calls for general amenity rights to be enacted in law, rather radical but think how much difference it would have made to pollution and emissions since the 1960s. He also wants private vehicles banned from city and town centres, which also seems a radical but basiclly good idea; as he points out, transport analysts too often think their job is to get the traffic moving, when it ought to be to get people moving.

He also points out the importance of the initial distribution of income: “The wealthier the party, the more likely it is that his, or its, favoured outcome will be the optimal outcome.” The reason is that relative wealth will affect the parties’ judgements about what they are willing to accept/pay in a negotiation. Generally, the book is clear – as economists often are not – that an evaluation of social welfare is not possible without taking initial distribution into account. The level and distribution of income are not separable. I might need to go on to read Mishan’s Welfare Economics.

A little bit of his dyspepsia is reserved for the way evaluations of policy only take account of what can be measured even if it is clear that effects that cannot be measured are nevertheless very important. He would like to “arrest the mass flight from reality into statistics,” he writes. He decries ‘growthmania’, “the fact that the fascination with index economics detracts attention from the broader aims of economic policy.” There’s certainly something in this, and indeed I increasingly think economists have to do much better at measuring the size of externalities rather than shrugging the collective shoulders. But, unlike Mishan, I’m for sustainable growth, not no growth.

Mishan died aged 96 in 2014. I’m glad to have filled a gap in my knowledge.

Century city

At the weekend, fossicking along the bookshelf in our front room, I picked up Century City: Art and Culture in the Modern Metropolis, the catalogue of a 2001 Tate exhibition.

It was a terrific exhibition, covering art from 9 global cities during their most creative periods – Vienna in the early 1900s, Lagos in the 50s and 60s etc. The catalogue has a few additional essays including one by Sharon Zukin, ‘How to Create a Culture Capital: reflections on urban markets and places’, which is a concise statement of an point made since by many other people including Richard Florida about the importance of creative ‘industries’ for the urban economy. Zukin refers to it as the ‘Artistic Mode of Production'; echoing my thoughts in The Weightless World, she writes here: “Design adds more ‘value’ to products than their material components do,” linking in also globalisation, the great emphasis on innovation, and the relaxation of traditional ways of working. The essay also cites the very interesting 1994 book, Economies of Signs and Space by Scott Lash and John Urry. It doesn’t cite – but could have done – 1999’s Michael Jordan and the New Global Capitalism by Walter LaFeber. I might need to look at those two again.

Managing assets well is better than managing them badly

There is a lot I liked in Stewart Lansley’s new book, A Sharing Economy – not least that it’s one of another new series of concise, policy-relevant series, this time Policy Press Shorts. There are now several of these, a welcome publishing innovation that I like so much I’ve joined in with the Perspectives series. (Just out – our Bad Habits, Hard Choices by David Fell and A Better Politics by Danny Dorling.)

A Sharing Economy is not about ‘the sharing economy’, rather confusingly, but instead is an argument for an idea I like a lot, namely ‘social wealth funds’. As the book points out, many other countries have versions of these, ranging from Norway’s fund into which past governments invested its oil revenues, to a number of Asian sovereign wealth funds, to examples in other European countries such as Austria and Finland. The OECD has established guidelines for the better management of state assets, and a recent book by Dag Detter and Stefan Folster, The Public Wealth of Nations, have pointed out the huge opportunity for increasing returns by managing public assets consciously as a portfolio with appropriate governance.

The idea should be a no-brainer for governments. The time horizon of politics in the UK (and some other countries) has become ever more short term, however, so any trade off between present and future has become nearly impossible. There is ideology, or perhaps cargo-cultism, in it too: is there an economist who does not think it bananas that the government is failing to borrow at such low interest rates to invest in key infrastructure? Yet the combination of a focus on total (current and capital) spending combined, plus the belief the public sector should own as little as possible as an article of faith, make it unlikely the present government will explore the idea of managing public assets efficiently with a view to longer term returns. Yet how mad is it that we have no consensus that it is better to manage public assets well than to manage them badly?

The book suggests a number of possible sources of funds for a social wealth fund, and a number of possible structures, of varying radicalism. Some versions are not radical at all; countries like Austria and Singapore are after all not hot beds of anti-capitalism. It also suggests the steps needed to move toward implementation.

An additional chapter advocates a citizen income or basic income, which fits into an overall framing of the argument for a social wealth fund as a means to address inequality. The arguments from common sense appeal more to me, as I’d rather tackle inequality more directly (eg by legislating if necessary against the corporate governance that has created boardroom excess, by suitable property taxation etc). The idea of a basic income has re-emerged with every wave of anxiety about automation destroying jobs, but there are good counter-arguments – Emran Mian of the SMF covers them here.

But the case the book makes for the nation managing its assets properly and with a view to financial and social sustainability is very welcome.