Living on the never never

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I’ve been looking through an interesting book by UBS economist Paul Donovan and Julie Hudson, [amazon_link id=”1849714142″ target=”_blank” ]From Red to Green: How the financial credit crunch could bankrupt the environment[/amazon_link]. It starts with the simple point that people were relying on credit in two ways, using both financial and environmental resources for current rather than future consumption. In some cases the credit-financed consumer boom before the crisis accelerated the consumption of environmental resources, and in other cases had positive environmental benefits. More consumption clearly uses more of some materials and more energy; but has also encouraged investment in additional infrastructure (to use water more efficiently, for example) or innovation. In either case it’s important to note that the two are related, when thinking about what the crunch after the crisis implies for financial and environmental sustainability.

[amazon_image id=”1849714142″ link=”true” target=”_blank” size=”medium” ]From Red to Green?: How the Financial Credit Crunch Could Bankrupt the Environment[/amazon_image]

The bulk of the book looks in detail at different issues to explore the interactions between red and green credit. For example, a chapter on food discusses what actions could increase agricultural productivity while protecting biodiversity and soil quality, how the credit crunch is affecting the outlook, and also what changes in behaviour might be desirable . So declining real incomes could lead to reduced consumption of meat and less food waste, but these depend on changed consumer habits and changed practices in the food retailing business. On the other hand, there is less funding for R&D in agriculture and food production – unless the corporate sector concludes that it needs to do more to limit its exposure to supply chain risks like the horse meat scandal. Other chapters look at water, energy, infrastructure, housing, human health, and consumer goods.

The detail is all fascinating, and the book obviously covers a wide territory. It seems to offer a very practical and fruitful approach to turning the crisis to some longer term benefit by getting people to focus on specific actions to reduce the economy’s reliance on financial credit and at the same time economise on natural resource use and preserve natural assets. Ever since writing [amazon_link id=”B00GP1RV0U” target=”_blank” ]The Economics of Enough[/amazon_link] a few years ago I’ve been obsessed with the chronic short-termism of modern economies. So a book about what people can do right now to safeguard future living standards – written by a City economist too – was bound to appeal to me. Any investors who are genuinely interested in long-term returns rather than quarterly results will find it very interesting. However, although the advice in [amazon_link id=”1849714142″ target=”_blank” ]From Red to Green[/amazon_link] is practical and specific, it does highlight how much needs to be done by many people to lengthen the economic time horizon.

The social life of innovation

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I’m half way through and really enjoying [amazon_link id=”1594203288″ target=”_blank” ]The Idea Factory: Bell Labs and the Great Age of American Innovation [/amazon_link]by Jon Gertner. It was published in the US in 2012 and was a bestseller, but I’m not sure it was ever published here in the UK – it was a tweet from Tim Harford that alerted me to it. If that’s right, perhaps Penguin thought it was too American and nobody on this side of the Atlantic had ever heard of Bell Labs. Yet this is the organisation that employed Bill Shockley, John Tukey, Claude Shannon and many other brilliant scientists and mathematicians in the mid-20th century. When I studied at Harvard in the early 1980s one of my fellow-students, Kaye Husbands, had worked at Bell Labs, which is how I first came to learn about it.

[amazon_image id=”1594203288″ link=”true” target=”_blank” size=”medium” ]The Idea Factory: Bell Labs and the Great Age of American Innovation[/amazon_image]

I’ll review the book at length later in the week. The question it immediately raises, though, is about the structure of innovation, a costly business. AT&T funded Bell Labs from its monopoly profit but its executives were well aware that its privileged position of a regulated monopoly meant Bell Labs had to serve public purposes as well as private profit, and to do so in a public way. This meant that, for example, the transistor technology was publicised and quickly licensed on reasonable terms to competitors – AT&T knew there would be an outcry if the company tried to keep that innovation to itself. An interesting history lesson for large technology organisations. Indeed, as John Kay often points out, sustained success for any business depends on its moral purpose as a social institution delivering benefits to everybody, not on maximising short term profit; and the very purpose of a tech business is innovation.

Of course, the AT&T monopoly was eventually broken up by the US authorities, but I’m not yet that far through Gertner’s account.

Festivities

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Yesterday I was at the Hay Festival talking about [amazon_link id=”0691156794″ target=”_blank” ]GDP: A Brief but Affectionate History[/amazon_link]. My slot was the opposite of headlining, 9am on Monday morning, after a weekend of rain, on a rather muddy site. It was heartwarming to see the level of interest in how to measure economic progress, even in those unpromising circumstances.

Me talking about GDP in a new pair of Festival wellies

There were loads of other economics-related sessions. [amazon_link id=”0718197038″ target=”_blank” ]Ha-Joon Chang[/amazon_link] was on yesterday too, [amazon_link id=”1846146895″ target=”_blank” ]Philip Coggan[/amazon_link], [amazon_link id=”1846147557″ target=”_blank” ]Levitt and Dubner[/amazon_link]. And of course there’s all the non-economics non-fiction too.

The silver lining in living in interesting times is that lots of people are interested in understanding what’s going on in the world. Besides, in one of the obvious paradoxes of the ever-more digital world, one of the things people are increasingly spending their money on is participation in events, from lectures, concerts and sports events to maker faires and literary festivals. Speaking of which, information about the 2014 Festival of Economics in Bristol in late November will be available soon.

Signing copies

 

Chewing over the beautiful game

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Arrived in the post, and only slightly chewed on one corner by the dog on dropping through the letter box, is [amazon_link id=”0691144028″ target=”_blank” ]Beautiful Game Theory: How Soccer Can Help Economics[/amazon_link] by Ignacio Palacios-Huerta. Football is so much not my thing that a book using game theory to explain soccer isn’t very enticing, and using soccer to explain game theory would mystify me. The book aims to do both. Not one for me but I *love* the title.

Slightly chewed

Handling policy on the ground

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Like all thinking economists, I’ve been fascinated by the transformation of China in our lifetimes and the implications of its emergence as a major economic power. Although no expert, I’ve read quite a lot of the popular books on the country and its economy. Many fall into the hype trap – either China will take over the world, or it will experience a terrible setback because of the many challenges of rapid development on a huge scale.

My favourites have been the books of reportage such as Leslie Chang’s [amazon_link id=”033044736X” target=”_blank” ]Factory Girls[/amazon_link] or Richard McGregor’s [amazon_link id=”0141975555″ target=”_blank” ]The Party[/amazon_link] or even Fuschia Dunlop’s [amazon_link id=”0091918324″ target=”_blank” ]Shark’s Fin and Sichuan Pepper[/amazon_link]. I’m also looking forward to Danny Quah’s forthcoming book on global economic hegemony in the post-US unipolar world  – he recently posted this online.

Meanwhile, this week I’ve read one of the best books so far about the drama of China’s journey – in my lifetime – from the brutality of the Cultural Revolution to the cultural and political as well as economic and social tensions of a society whose average living standards have doubled every seven years but very unevenly distributed. It’s Jianying Zha’s [amazon_link id=”1595588809″ target=”_blank” ]Tide Players: the movers and shakers of a rising China[/amazon_link].

[amazon_image id=”1595586202″ link=”true” target=”_blank” size=”medium” ]Tide Players[/amazon_image]

It’s a slim book, a series of essays focussing on certain individuals in the business and in the cultural worlds. Ms Zha has lived her adult life between China and the US, having grown up with a family sent to work on a farm out of Beijing during the Cultural Revolution, and having made her way out via university as soon as the climate began to change. The dual perspective is illuminating. I particularly enjoyed the chapter about economist Zhang Weiying’s proposals for reforming Beijing’s university – some of the description of the controversy could have been applied verbatim to the UK context. “Like a typical economist, he marches stridently by the logic of the market and tries to turn the university into an efficient production line, a lean and mean academic market. … He sees running the university essentially as a management affair, not a supple and subtle art which requires, among other things, tolerance and the ability to recognize idiosyncratic geniuses who don’t fit a cookie cutter plan.” Are there any universities even in the US that really march by the logic of the market?

The book also furnished me with a bunch of new-to-me Chinese proverbs. My favourite: “When there is policy from above, there is always a way of handling it on the ground.” Also: “Dropping a stone on someone’s head after he falls into a well.” (Equivalent obviously to kicking someone when he’s down.)

It’s beautifully written and illuminating about debates within China, rather than the western debate about China. Highly recommended.