Category Archives: Main Page

Saving and spending time

Posted on by

My first read of the New Year has been an eccentric book, Jam Tomorrow: Why Time Really Matters in Economics by Charles Crowson. I bought it because of a very positive although short FT review that called it: “an important exposition of why economists ought to think deeper about how we value time — past, present and future.” I’m about four fifths of the way through writing my next book, which is all about my research on economic measurement over the past decade or so. (BTW I need ideas for a title – current working title is ‘The Measure of Progress’.)

Most of this is concerned with measuring the digital economy (we don’t). But one of my preoccupations is a paper I wrote with my friend Leonard Nakamura about whether time use would be a useful accounting framework. Productivity is about saving time. On the consumption side, what wellbeing (or utility) we get from how we spend time is surely what matters to people. The paper is open access.

Anyway, there are relatively few books on this subject so I thought Jam Tomorrow might be interesting. It is quite interesting but not what I thought. It’s about money, assets and interest rates – the price of time. The central point is that ‘we’ in general (in the high income west) have been too short-termist and borrowed to consume, at great environmental cost, and also leading to a malfunctioning housing market in the UK, where housing is seen mainly as an asset. I don’t disagree at all. But reading the book was a bit like sitting at dinner next to someone with lots of strong opinions who is speaking a slightly different language (and there’s an obligatory but irritating chapter about why all economics is rubbish … sigh). There are long chunks of text I either found obvious or alternatively hard to understand – and not a few cliches – but with some really thought-provoking formulations popping up.

For example: “If the price of bread or milk rose sharply in a given week we would instinctively cal it inflation. Yet of the Dow Jones stock index were to rise by 2% on a given day, we don’t say, ‘The Dow inflated by 2% today.” One could rationalise the difference but the point about language is really interesting (and there’s a whole chapter about language and analytic philosophy).

So it’s a sort of mixed review from me; interesting but could have done with quite a hands-on edit. The core argument is summed up nicely: “The central idea in this book is that economic decisions are fundamentally decisions about time, reflecting a basic choice between consumption in the present or delaying that consumption by saving for the future.” Yes indeed. But economists have in fact thought quite deeply about this choice. I’m thinking of a different time margin, how we use – ‘spend’ – our time in the present, the 24 hours a day we cannot save to carry over for tomorrow.

Screenshot 2024-01-03 at 16.00.25

 

The beauty of infrastructure

Posted on by

How Infrastructure Works by Deb Chachra is a good complement to Brett Frischmann’s now-classic Infrastructure, which has more of a focus on the economic analysis. Chachra is an engineer, which leads to her focusing more on the physical aspects and affordances of the technologies involved. Having said that, there were two aspects of the book I really appreciated. One is that she links access to infrastructure to Sen’s capabilities approach, and the fact that it gives people agency to lead their lives as they see best. It is also progressive – those with fewer private assets get more value out of public assets.

The other is the emphasis on the collective character of infrastructure assets – which is one reason my colleagues and I recently called for a Universal Basic Infrastructure (rather than income, or even services, both of which involve an individual perspective). The ability of a society or community to invest in and indeed maintain infrastructure – now very complicated and multi-layered – is a thermometer of its political and social health. Something Chris Arnade recently pointed out with regard to the US: decaying transport system, declining polity.

As Chachra points out, the lens of economic efficiency is inadequate. It leads to under-investment in systems that need redundancy, to create resilience at all, and all the more necessary now to enable the needed energy transition.

She’s optimistic about the possibility of shifting to green energy – more so than Brett Christophers in his excellent forthcoming book The Price is Wrong – perhaps because Chachra assumes the state will undertake a lot of the needed investment. Although she adds, “Stability of all sorts, including political and economic stability, is what makes it feasible to front-load large investments of resources with the expectation of continuing benefits over a long period.”

“The true value of these [infrastructure] systems is literally incalculable … because they enable systems and behaviours that wouldn’t be possible without them,” she writes. Above all, what I like about the book is its recognition that “the political and the engineering questions are inextricably linked.” I’ve been slightly obsessed with the dysfunction of applying cost-benefit analysis to major infrastructure, and the need to maintain and upgrade it to at least mitigate deep spatial inequalities. Bennett Institute colleagues have worked on social infrastructure and we have a new British Academy project on a measurement framework for social and cultural infrastructure. The term has recently been more widely used, and perhaps the definition needs revisiting. But the focus on the collective rather than the individual, on the future not just the immediate present, and on the inadequacy of the static efficiency lens when we need an “ethics of care rather than utilitarianism”, is surely correct.

The Guardian had a taster essay extracted from the book, but it is well worth a read as a whole. It’s thoughtful, informative and also very well written.

Screenshot 2023-12-24 at 13.32.31

 

When preferences change

Posted on by

One of the assumptions an economics student is quickly socialised into accepting is that people’s preferences are fixed – those indifference curve diagrams mapping one’s trade-off of apples for bananas. Of course at the back of your mind you know it isn’t true, but fixed preferences are a key building block of most of the subsequent economics one learns. At every stage we assume that people maximise their utility subject to budget constraints, and if preferences are not fixed that becomes a task like nailing jelly to the wall. How do you do a welfare evaluation in that case?

Well, it’s a key question for economists to tackle, not only on principle but because this is an age of saturated traditional media and social media aimed exactly at changing people’s preferences. So I was delighted to see David Kreps, a game theorist, tackling this in a book of lectures, Arguing About Tastes: Modeling How Context and Experience Change Economic Preferences. As Joe Stiglitz points out in his commentary in the book, there is a long and now growing literature on endogenous preferences, much of it linking with other areas such as social psychology or cultural evolution. What this short book does is formalize other-regarding preferences (which indeed date back to Adam Smith and Moral Sentiments) and changing preferences, with a focus on intrinsic versus extrinsic motivation in areas such as work effort. As the other commentary, by Alessandra Casella notes, the next step is to take this to social choice theory.

I couldn’t agree more. Recently I argued (with distinguished co-authors) for a reboot of welfare economics – applied social choice theory. Among the many reasons for this are the pressing collective action problems facing humanity (climate, biodiversity) amd the automation of a growing number of decisions in modern life using algorithms implicitly encoding social welfare functions. Arguing About Tastes is a technical book (for non-economists – fairly straightforward for those habituated to Max(U)) but a useful contribution to the challenge.

Screenshot 2023-12-17 at 09.35.29

Festive reading?

Posted on by

It was a huge pleasure to take the two Enlightened Economist Prize winners, Ed Conway and Paul Johnson, to a celebratory lunch yesterday. The conversation turned to other things we’ve read and – importantly at this season – what we’d like to read. Ed and I have both read the proofs of Brett Christophers’ *excellent* February 2024 book on energy markets and the challenges of investing in renewables, The Price is Wrong. I’m partway through David Kreps’ book on preference formation and the implications for economics, Arguing About Tastes – an important subject.

But various others came up in the conversation. It sounds like Underground Empire by Henry Farrell and Abraham Newman would be right up my street. I want to read Anu Bradford’s Digital Empires, Fei Fei Li’s The Worlds I See, and also haven’t yet got round to Angus Deaton’s Economics in America. I bought Charles Crowson’s Jam Tomorrow but haven’t yet read that either. I see from the new Princeton University Press catalogue that they have a book, Discounting the Future, by Liliana Dogonva, that I’ll definitely want to read when it’s out in April

In any case, other recommendations for holiday reading (and beyond) please!BCBF7F75-24DB-4F1F-9A62-B43D8E96F7AE_1_105_c

The social life of measurement

Posted on by

How could I resist a book called Beyond Measure: The Hidden History of Measurement. By James Vincent, it’s a pacily-written whistle stop tour of – well, the history of measurement. It runs from the beginnings of standardised measurement in the ancient world through mediaeval markets, the scientific revolution, the French Revolution, land surveying, the development of statistics all the way through to the Quantified Self movement.

It’s aimed at the popular audience, getting over the key message that the measurements used to understand the world are both socially constructed and in turn construct society. “In our attempt to measure uncertainties we construct new knowledge and in doing so we inevitably remake our understanding of the world.” It also points out that measurement systems can be at the same time utopian and totalitarian – we should stay aware of the fact that reality never fits neatly into a measurement framework.

For those interested in developing new ways of measuring – like the Beyond GDP movement – the book also offers a somewhat cautionary note: “The pervasive nature of measurements helps explain why the changes to units so often occur in times of social upheava such as conquest or revolution. It is only during these moments when old sueties are tossed into the air. … that reordering of anything as fundamental as measurement can take place.” GDP itself was the progeny of world war.

Screenshot 2023-12-06 at 08.34.16