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.

Pop economics and pop economic methodology

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It took me a while to work out what was odd about Ha-Joon Chang’s [amazon_link id=”0718197038″ target=”_blank” ]Economics: The User’s Guide[/amazon_link]. It is that the title is literally descriptive. I was expecting a book about the economy, or economies, told from the author’s refreshingly distinctive perspective. It’s actually a book about the economics profession. An alternative title would be Economic Methodology: an introduction to the issues, although it would obviously sell fewer copies. So it’s a useful book but I wonder about the intended audience? The campaigning economics students will really enjoy it, but I’m just not sure what the general intelligent readership will make of it.

[amazon_image id=”0718197038″ link=”true” target=”_blank” size=”medium” ]Economics: The User’s Guide: A Pelican Introduction (Pelican Books)[/amazon_image]

The first couple of chapters irritated me. He asks, ‘Why are people not very interested in economics?’ Actually, they are. Student numbers are going up, and pop economics books sell well (including [amazon_link id=”0141047976″ target=”_blank” ]23 Things They Don’t Tell You About Capitalism[/amazon_link]).

He then goes on to distinguish between the imperialist version of economics (anything can be seen through the lens of rational choice and claimed as economics) and economics as the study of economies – and I agree with his view that it should mainly be the latter. But along the way the book asserts that ‘most’ economists pay no attention to issues such as bargaining power in labour markets, or technology and the structure of production. Excuse me?! This is a simple bizarre dismissal of huge swathes of economics (including my own areas). I find it increasingly frustrating that critics of economics portray the subject in such a Manichean way that they can’t acknowledge that we’re not all Eugene Famas or Steven Levitts, and in fact very, very, very few actual economists take the kind of approach presented as the ‘neo-liberal mainstream’. Indeed many of us agree with some aspects of the criticisms, and would like to engage in fruitful debate rather than Punch and Judy knockabout. Many – most – of the economists I know think economic history is important and read it themselves, in contrast to Ha-Joon Chang’s assertion. Maybe it’s just Cambridge, although I don’t think so.

The book gets better after this. There are a couple of chapters that cover – briefly – key economic concepts and an outline of global economic history. This is a kind of ‘pass notes’ introduction. A description of the main ‘schools’ of economic thought follows, a one-chapter intro to the history of economic thought. It’s a bit tendentious, but hard for anybody not to be in such a concise summary.

The remaining chapters pick selected macroeconomic topics , including inequality, the role of the state, growth, welfare and happiness, finance. In most cases, Ha-Joon Chang’s preferred approach to the question is contrasted with what a ‘free market’ economist would say about it. There is little about all the other schools of thought such as the Austrian or straight Marxist, described in the earlier history of thought chapter. The presentation is: ‘here’s my sensible, realistic way to think about think about this issue, and here’s what most mainstream economists (by implication, mad ideologues) say about it.’ So it’s a bit irritating but they are decent overviews of the chosen issues.

It takes me back to the audience question, though. This is an interesting read for 6th formers or undergraduates but as a supplement because there isn’t enough economics in it, or rather not enough economics to make sense of the meta-economics. Still, it would give them a useful perspective on macroeconomic issues. The history of thought chapter seems to me the most useful because it is a good capsule overview of something too rarely taught. As for the general reader, I find it hard to tell. I might have to try it on my economist son and my non-economist husband to see what they think. Perhaps I’m just too close to this debate to judge.