Modern macro

Although I don’t teach or practice macroeconomics, if I did I’d certainly be thinking of using the new textbook from Wendy Carlin and David Soskice, Macroeconomics: Institutions, Instability and the Financial System. As the subtitle so clearly indicates, this book does absolutely engage with the messiness of the post-crisis real world. Its aim is to stay simple enough for undergraduate use while also realistic enough to empower its readers to understand the why and how of the financial crisis and to evaluate macroeconomic policy. For graduate students or practising economists wanting a reference book, this offers a tractable, intuitive model that combines the standard 3-equation approach with the insights of Hyman Minsky (mentioned in the Preface) and institutional realism.

The first chapters set out the standard 3-equation model, and chapters on expectations and money & banking follow. The latter includes a description of how a modern banking system works (no whiff of a money multiplier!). Two chapters on the financial sector and the crisis follow – including topics like balance sheet recessions, QE, and a discussion of austerity policies. There is a chapter on innovation, growth and fluctuations – Solow, endogenous growth and Schumpeterian growth. Next comes a section on the open economy, with separate chapters on oil shocks/commodity prices and  the Eurozone.

The final chapters cover monetary and fiscal policies, supply side policies and the labour market, and a final chapter on real business cycles and the New Keynesian approach.

This is certainly the first textbook I’ve spotted to have incorporated the lessons of the crisis, and it does so very elegantly, keeping the modelling framework reasonably simple. The book also weaves in the events of recent economic history, and applies the models it develops to actual events, so students do not have the dispiriting experience of being taught an economics in the classroom divorced from the kind of economics they hear about in the news.

I’m a big fan of Wendy’s already, having had the pleasure of working with her on the CORE curriculum and e-book; and this new textbook confirms my opinion. I’ve dipped in to specific chapters that I can evaluate properly, such as the one on growth and the supply side and labour market sections  – perhaps if I read the whole book properly it will cure me of my ingrained macro-scepticism……

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Big data meets humanitarian response

Some time ago I co-authored a report (for the UN Foundation and Vodafone Foundation) with Patrick Meier on the use of mobiles in emergencies and disasters. Patrick has just released a whole book on this subject, going much wider than the original report, Digital Humanitarians: How Big Data is Changing the Face of Humanitarian Response.

The technology has already moved on considerably – the Big Data phenomenon, for one thing. Importantly, there’s a chapter covering verification techniques; while we found in the original work that crowd-sourced data (as it wasn’t yet called when we first wrote about this) was often more accurate than ‘official’ information, the more verification the better. There’s also a chapter on digital activism – the book’s website sets out all the chapters with brief summaries.

Digital Humanitarians looks like it has lots of examples and it certainly covers some very important and timely questions. Patrick blogs at iRevolution and his latest post talks about the book.

Historicism and its enemies

By the time I had to head back to the station yesterday, I’d almost finished reading the manuscript I’m reviewing, so I borrowed Karl Popper’s The Poverty of Historicism from the shelves of my University of Manchester office mate John Salter (as he teaches political economy, and theories of justice, he has a fine and tempting collection of classics).

I’m not very far into it yet, but it’s striking that Popper excludes economics from his pronouncements about methodology in the social sciences. Eg, “I am convinced that such historicist doctrines of method are at bottom responsible for the unsatisfactory state of the theoretical social sciences (other than economic theory).” No doubt all will be revealed, but it’s surprising to read this at a time when economics is widely criticised.

Nanny state or government Mad Men?

Government Paternalism: Nanny State or Helpful Friend by Julian Le Grand and Bill New has landed on my desk and it looks a very interesting assessment of the trade-off between good ‘outcomes’ from nudge policies and the infantilization of individual choice – a useful counterbalance to the series of books from Cass Sunstein advocating nudging. (Gilles St Paul has a counter-nudge book too, The Tyranny of Utility: Behavioural Science and the Rise of Paternalism.)

Although recognising the power of the argument that governments (and others) can’t avoid ‘nudging’ because the status quo is a choice architecture anyway, I lean towards being very uneasy about the enthusiasm for policymakers using behavioural techniques (familiar to ad men and Mad Men) to manipulate behaviour. So I’m looking forward to this new book.