Advice for madmen

Madmen, Intellectuals and Academic Scribblers: The Economic Engine of Political Change by Wayne Leighton and Edward López has been out for a while but I’ve just read it. The Madmen are politicians or policy makers, the Scribblers are academics, scholars, generating new ideas, and the Intellectuals are those who translate ideas into politically digestible form, journalists, think-tankers, consultants. (I’d have found it more intuitive to reverse those last two labels, but there we are.)

The over-arching aim of the book is to explain why bad economic policies are implemented, why they last so long, and why they are sometimes overcome. The transmission mechanism runs from Scribblers’ ideas to decisions by Madmen, mediated by the competitive marketplace of ideas and entrepreneurs among the Intellectuals and junior Madmen.

This account, not particularly new (indeed, the title is drawn partly from the famous Keynes quotation about madmen in authority), is wrapped around some useful central chapters. These give a clear and concise history of thought that starts with the political philosophy of government (Plato, Aristotle, Cicero, through to Locke, Hume, Marx, and (as it’s an American book) the US Constitution and Pragmatism. This is followed by a chapter on the marginalism revolution in economics and the Pigouvian approach to social welfare as an allocation problem codified by Samuelson, which is contrasted with the Hayekian view of the economy as an organic entity concerned with exchange rather than allocation. It then sets out clearly Coase’s argument about the symmetry of ‘externalities’ and moves on to the start of the public choice revolution. (Including this sentence about James Buchanan: “He was determined to translate Wicksell’s forgotten book [from German] for the English-speaking world.” How marvellous to hear of such a well-rounded economist.)

The book comments: “For all its precision, the great vice of the new welfare economics [of externalities, second best theorem and so on] was to crowd out politics and philosophy. … Economists at mid-century were preoccupied with the pure theory of households and firms and busied themselves with proving equilibrium and devising optimal conditions for allocating scarce resources. Interestingly, the main problem was that many of those optimal conditions included very specific policy choices, like taxing polluters, subsidizing education and deficit spending during recessions. But the people making these policy choices – the madmen in authority – are not part of the economic model.”

A full chapter on public choice theory, voting theorems, Olson’s interest group analysis and the economics of regulation follows. The final chapters set out in more detail the argument about how ideas get turned into policies, and a description of four US examples: radio spectrum, air traffic control, welfare reform and the housing bubble and sub-prime crisis. Of these, the first example generalises most easily to other countries.

The book is very clearly written and an accessible introduction to an important strand of the history of economic thought that is still highly relevant to policy debates today. The three core chapters and the examples make it an extremely useful introductory or background resource for students, and I’ll certainly add them to my reading list for next semester. The final chapter does also end with good advice for wannabee policy entrepreneurs: “Improving the human condition should start with recognising that people respond to incentives, and that incentives are part of institutions that neither rise nor fall overnight, and that the slow emergence of both good and bad ideas can change these institutions and thus have an enduring impact on the human condition. … Ideas indeed can have consequences.”


Calling young economists who want to write

Here’s a great incentive to do so: the Financial Times & McKinsey, who run the Business Book of the Year competition, are offering a £15,000 prize for an essay that will serve as a proposal for a book about the challenges and opportunities of economic growth.

Here’s the challenge: “The proposed book should aim to provide a compelling and enjoyable insight into future trends in business, economics, finance or management. The judges will favour authors who write with knowledge, creativity, originality and style and whose proposed books promise to break new ground, or examine pressing business challenges in original ways.”

The prize is called the Bracken Bower Prize – after Brendan Bracken, the famous FT chairman in the 1940s and 50s, creating the marvellous newspaper as we know it today, having been Minister of Information during the second world war; and Marvin Bower, who was McKinsey’s MD in the 50s and 60s.

Wikipedia says of Bracken: “He was particularly vociferous in his support for the independence of the BBC.” That independence is of course vital. But his employee at the Ministry of Information, George Orwell (Eric Blair), saw Bracken as the propogandist – and this is in the BBC Archive.

The BBC Archive note says: “Brendan Bracken, a flamboyant and controversial character, was Churchill’s Parliamentary Private Secretary and closest confidant before becoming Minister of Information in 1941. He is credited with transforming the ministry, which previously had fallen foul of both journalists hungry for news and defence staff wary of giving away too much information. Bracken was convinced that the public could handle the truth and he soothed relations with the BBC by using a dual approach, insisting on close scrutiny of overseas broadcasting while allowing the BBC much freer rein for domestic programmes.”

That’s by the by, though. The important thing is to get to work on your book if you fit the entry criteria.

The essay should be no more than 5,000 words. You have to be under 35 on 11 November 2014. Full details are here. The closing date for entries is 5pm (BST) on September 30th 2014. The winning essay will be published on but they can’t guarantee a book deal. Still, £15,000 is more than almost all non-fiction book advances.

Life, leaving, and existentialism

The Boxer and the Goalkeeper: Sartre vs Camus by Andy Martin was recommended to me by somebody commenting on this blog, I remember not when. It’s a thoroughly enjoyable book, using the soap opera of French intellectual life in the mid-20th century to illustrate the philosophical debates.

I particularly liked the personal touch here. Andy Martin writes about his own intellectual discovery, starting out as an alienated small town teenager who happens upon a copy of Sartre’s L’Etre et le Néant (in fact, he shoplifts it), and from there progresses to university, the Ecole Normale Supérieure, and academic life. I grew up in the 1960s and 1970s in a small town (Ramsbottom) in Lancashire where many people, including my dad and aunts and uncles, then worked in the cotton mills. Occasionally we visited Manchester  – once, I went to London. Our holidays were spent in Blackpool or Filey. From an early age, though, I dreamed of leaving and leading an entirely more glamorous life. Many small town young people do of course, but for in my mind glamour involved philosophy and abroad.

I particularly fixed on philosophy after our French teacher (Mme Sandler, I salute you) started us on Sartre’s Les Mains Sales and told us to read up on existentialism. My entire being came to be focused on becoming a philosopher and spending my career writing books while sitting in a Parisian café. Then I read Simone De Beauvoir’s The Second Sex, which was an enlightenment.

Initially, Sartre and Beauvoir seemed more enticing, but before long it was obvious that Camus was more appealing as a person and as a philosopher. The Boxer and the Goalkeeper reinforces that. In particular, Sartre’s political calls post-war look highly morally dubious and I for one am all with Camus as their friendship turned to antagonism. But make your own mind up – read the book. There are some taster extracts here.

A footnote: an entirely different story about leaving behind the north of England, this column by Adnan Sarwar in this weekend’s Financial Times is absolutely beautifully written and thoughtful.

Your economic history suggestions collated

A few days ago I asked, what economic history do economists need to know? Since then, I’ve thought of a few extra myself – although the list below barely still scratches the surface! Keep the ideas coming.

Power and Plenty, Ronald Findlay and Kevin O’Rourke

The Institutional Revolution, Douglas Allen

Against the Gods: The remarkable story of risk, Peter Bernstein

The Prize: the epic quest for power, oil and money, Daniel Yergin

Accidental Empires, Robert Cringely

Below, I’ve collated some of the additional suggestions other people have made.

Tom Clark, author of Hard Times: The Divisive Toll of the Economic Slump, emailed: “Robert Shiller’s Irrational Exuberance. Arguably a bit old now, but still teaches you how to make sense of what’s going on in financial markets today in the light of decades of experience. Barry Eichengreen’s Globalising Capital, which does the whole history of the global monetary system v elegantly in a couple of hundred pages. The classic Marienthal study of the effect of unemployment (which I read in full for Hard Times, and is a powerful as well as a nice quick read).” He also suggested Galbraith’s The Great Crash 1929.

Robotenomics: “I’d recommend considering Prophet of Innovation: Joseph Schumpeter and Creative Destruction by Thomas McCraw, and Technological Revolutions and Financial Capital by Carlota Perez.”

Christopher May: Karl Polanyi’s classic The Great Transformation

Brian Labatte: A. Chandler, Strategy and Structure; A. Sloan, My Years with General Motors.

Steven Clarke: “I’m currently reading David Landes The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present and would thoroughly recommend it.”

Ronald Grey: Manias, Panics, and. Crashes. A History of Financial Crises by Charles Kindleberger

Duncan Green: Anything and everything by Ha-Joon Chang (from Kicking Away the Ladder: Development Strategy in Historical Perspective onwards) and Dani Rodrik (One Economics, Many Recipes).

Merjin Knibbe: Money, the unauthorized biography

Martin Chick tweeted:

@diane1859 My first year’s in British EH begin with Keynes, Essays In Persuasion; Meade Intelligent Radical’s Guide to Economy;
14/07/2014 07:52