Enough at Christmas

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In late February I’m taking part in a workshop featuring the Edward and Robert Skidelsky book, [amazon_link id=”0241953898″ target=”_blank” ]How Much is Enough?[/amazon_link] – no doubt because my last book was called [amazon_link id=”0691156298″ target=”_blank” ]The Economics of Enough [/amazon_link]and is about sustainability, broadly defined. The new edition of their book has just arrived, so I don’t yet know how it has changed.

[amazon_image id=”0241953898″ link=”true” target=”_blank” size=”medium” ]How Much is Enough?: Money and the Good Life[/amazon_image]

Meanwhile, this morning I was looking back through one of the best books on this theme, Fred Hirsch’s 1976 classic [amazon_link id=”0415119588″ target=”_blank” ]Social Limits to Growth[/amazon_link].

It covers the same territory, albeit in the language of the 1970s  – ‘commodity fetishism’, the adverse effects of excessive commercialization, including moral effects, and distributional questions. The book is of course best known for its definition and explanation of ‘positional goods’. Hirsch saw most material goods as having the potential for productivity improvements, but scarce goods and many services as subject to congestion in demand. The relative price of positional goods would rise over time, he argued.

[amazon_image id=”0415119588″ link=”true” target=”_blank” size=”medium” ]Social Limits to Growth[/amazon_image]

Hirsch’s conclusion was that, “The social rationale of individual maximization weakens.” [amazon_link id=”1490944052″ target=”_blank” ]Adam Smith[/amazon_link] could have been right about the benign effect of self-interest in the material economy (the only part of the economy Smith thought mattered), but in the modern economy with positional scarcity, “A shift of the invisible hand from the private into the public or communal sector is needed. Rather than pursuit of self-interest contributing to the social good, pursuit of the social good contributes to the satisfaction of self-interest.” Hirsch has no issue with past capitalism; indeed, he agrees it has been a great leveler. But the distributional tensions due to past growth and increasing scarcity of positional goods now justify – he argues – “drastic limits” on consumption choices. “Society is in turmoil because the only legitimacy it has is social justice,” he concludes.

The book is clearly right about the role of positional goods, from diamonds to houses located in beautiful countryside. So far, so [amazon_link id=”0141023988″ target=”_blank” ]Veblen[/amazon_link]. Hirsch has some sharp insights into hierarchies, too. He spots the arms race that has occurred in educational qualifications – where finishing high school used to be enough, a degree is needed; and instead of a Bachelor’s degree, a Master’s. But – as the note I scribbled on an earlier reading reminds me – he over-aggregates. People in diverse modern societies have at least to some extent taken their search for position in a range of directions. Still, it’s going to be worth re-reading properly before engaging in discussion with the Skidelskys.

Besides, all of this is the perfect accompaniment to the last few days of Christmas shopping. I like the giving and receiving of presents – as do so many economists in their own way – but actually how much better if that’s books and chocolates, or home made jam, or a cosy scarf, rather than positional status symbols of any kind.

Lifting the iron curtain of the mind

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My first trip to Prague was in February 1991. It was my first time away without my eldest son, then one, and I felt extraordinarily light. Memories of the Velvet Revolution were fresh, so I rented an apartment close to Wenceslas Square with a friend for a few days. Vaclav Havel was a hero. It was snowing atmospherically. There were few tourists, and a beer and plate of ham and bread at the famous (still-unrefurbished) Cafe Slavia cost little. The local people were very friendly, as soon as they established that one was not German, and almost nobody spoke a word of English.

(It wasn’t my first visit behind the former Iron Curtain – in early 1990 a stockbroker flew a group of us to Budapest to visit a giant state company first in the line to be privatised, the Ganz works. It was astonishing, a huge plant that started with steel at one end and ended with trams, and other vehicles and electric products, miles away at the other. I was the only woman on the trip, and to go to the toilet had to be escorted by the director’s secretary, bearing the key to the cupboard where the still-scarce toilet paper was kept.)

My second Prague trip was in the autumn of 2000, as a journalist covering the annual IMF-World Bank meetings. There were English signs everywhere, half of them including the word ‘Internet’. Vaclav Havel was still widely admired, although the tourists and designer shops had arrived in force, and there were anti-globalization protests too. One evening I met a senior official for dinner in Old Town Square. We heard music seeping out from the church and walked in to a free concert, a dinner-jacketed pianist playing Rachmaninov. After half an hour we descended into a basement restaurant for a pleasant meal. On climbing the stairs afterwards, we found that a jazz concert was under way in the bar, which was packed full of young people with tankards of beer nodding away in time to the music.

So all in all, like every other visitor since time immemorial, I think of Prague as a magical place. I’ve very much enjoyed reading Derek Sayer’s [amazon_link id=”0691043809″ target=”_blank” ]Prague: Capital of the Twentieth Century[/amazon_link] this past week. It’s a cultural history focused on the unsung Czech role in creating modernity. Sayer makes much of the similarity of things now thought of as opposites. For example, both the USA and the USSR signified the modern in the 1920s, both skyscrapers and socialist realism. A flâneur or radical artist could lean either to the left or the right, be a rebel or a secret policeman.

[amazon_image id=”0691043809″ link=”true” target=”_blank” size=”medium” ]Prague, Capital of the Twentieth Century. A Surrealist History.[/amazon_image]

The surrealists are at the heart of the cultural story told in this book, and the Prague-Paris axis. I confess that surrealism doesn’t do anything for me, and the illustrations here look just enormously dated. As this is an academic book there are also too many long lists of Czech artists with unpronounceable names for the general reader. One can easily lose sight of the wood, while enjoyably wandering around the trees. Still, this is a fascinating, forgotten, cultural history.

It is particularly interesting to read of the closeness of artistic groups working in western and central Europe, and the inspiration they drew from each other. We westerners tend to think only of the thirst people in the east had for western pop culture during the communist years but before the war the cultural exchange was far more mutual. Actually, this aspect of the book reminded me of the underlying theme of Tony Judt’s brilliant [amazon_link id=”009954203X” target=”_blank” ]Postwar[/amazon_link], which is that Europe is one continent with one history, not two. But the Iron Curtain still lives in the public mind – a timely thought, looking at events in Kiev, a place which isn’t really “over there” at all.

[amazon_image id=”009954203X” link=”true” target=”_blank” size=”medium” ]Postwar: A History of Europe Since 1945[/amazon_image]

Those 21st century inequality blues

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Thomas Piketty is well known for having (with Emmanuel Saez and others) assembled long-run (18th century onwards) data on income and wealth in capitalist economies. He has now used the findings in a book forthcoming in English in March from Harvard University Press, [amazon_link id=”067443000X” target=”_blank” ]Capital in the 21st Century[/amazon_link]. It’s recently out in French, [amazon_link id=”2021082288″ target=”_blank” ]Le capital au XXIe siècle[/amazon_link].

There is a set of slides summing up the message (pdf). In short, he predicts that the concentration of wealth could exceed 19th century levels due to the combination of slow growth and high net-of-tax returns as a result in part of tax competition. The charts he presents suggest that the 20th century – fast per capita growth and an expanding middle class – might be an historical aberration.

He warns: “The history of income and wealth inequality is always political, chaotic and unpredictable; it involves national identities and sharp reversals; nobody can predict the reversals of the future.” Still, a global progressive wealth tax would be a good idea, he reckons. I can’t see the globocrats and oligarchs agreeing, however.

[amazon_image id=”067443000X” link=”true” target=”_blank” size=”medium” ]Capital in the Twenty-First Century[/amazon_image]

The publication of the book will be an event – I’m looking forward to it. My thanks to @went1955 for pointing out the slides.

went1955
Inequality & Capitalism in the Long-Run — Slides lecture Thomas Piketty — http://t.co/yMaLyFPnLk (↬ FT Alphaville)
17/12/2013 09:10

J K Galbraith redux

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This morning @J_K_Galbraith (or rather, his representative on earth) tweeted me to say:

J_K_Galbraith
Time 4 another look at JK Galbraith? @raffasadun @rodrikdani @neilrankinza @TheEconomist @diane1859 http://t.co/YjKfoAcbW4 via @cambup_books
16/12/2013 08:40

I haven’t read Stephen Dunn’s book, [amazon_link id=”0521518768″ target=”_blank” ]The Economics of John Kenneth Galbraith[/amazon_link], although I did meet the great man himself when I was at Harvard. He had stopped teaching by then, but funded a prize for the best teacher in the economics department, selected by a panel of graduate students. The panel members, including me, were invited to dinner at the Galbraith house. My colleagues were all American men and at least a foot taller than me, and Galbraith a foot taller then them, so I couldn’t hear all that much as I stood in the circle gathered around the great man.

[amazon_image id=”0521518768″ link=”true” target=”_blank” size=”medium” ]The Economics of John Kenneth Galbraith: Introduction, Persuasion, and Rehabilitation[/amazon_image]

It’s been a while since I read any Galbraith and I must confess to never having been a huge fan. With hindsight, I had the technically-trained young economist’s suspicion of somebody who used no equations at all in any of his work, and that’s something I hope I’ve grown out of. One must also certainly admire Galbraith’s ability to popularize economics, and recognise that the subject is too important not to engage the public.

Just picking off my shelves a couple at random – [amazon_link id=”1856194159″ target=”_blank” ]The World Economy Since the Wars [/amazon_link]and [amazon_link id=”014103825X” target=”_blank” ]The Great Crash of 1929[/amazon_link], they seem a mixed bag. The latter is a deservedly classic account of the crash, a terrific read. The former – a late (1994) book – is for me one of his weaker books, general political argument not well backed up by the economics; it has scarcely any mention of empirical evidence in it, for one thing. In between are the other classics such as [amazon_link id=”0140173668″ target=”_blank” ]The Culture of Contentment[/amazon_link] and [amazon_link id=”0140285199″ target=”_blank” ]The Affluent Society[/amazon_link], writings of genius but stronger on assertion than convincing argument. But I’m open to persuasion.

[amazon_image id=”014103825X” link=”true” target=”_blank” size=”medium” ]The Great Crash 1929[/amazon_image]

 

 

 

A not-so-dismal science

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I was just browsing through a book of this title, A Not-so-dismal Science: A Broader View of Economies and Societies, edited by Mancur Olson and Satu Kahkonen, published in 2000. It has some great essays, including Olson’s Big Bills Left on the Sidewalk: Why some nations are rich and others poor (pdf), a must-read for economists in my view.

[amazon_image id=”0198294905″ link=”true” target=”_blank” size=”medium” ]A Not-So-Dismal Science: A Broader View of Economies and Societies[/amazon_image]

This time my eye was caught by Joel Mokyr’s essay, Innovation and its Enemies: the economic and political roots of technological inertia. It starts with a question both simple and profound. If it is primarily markets that determine the allocation of resources (the ‘fundamentalist economics’ assertion), then how does innovation ever occur – because by definition there are no markets for new goods. “Innovation is much more than an economic phenomenon,” Mokyr writes. It’s a superb essay. I’m going to have to re-read the whole book – judging from the dust, I haven’t looked at it for years.