Summer murder

One of the joys of being on holiday is of course the extra reading time. Among the thrillers and novels, I read Jill Leovy’s Ghettoside: A True Story of Murder in America. It’s a brilliant piece of reportage about the many murders of young black men in southern Los Angeles, mainly killed by other young black men.

Ghettoside: Investigating a Homicide Epidemic

The book mixes in a gripping narrative a few individual cases – the dead youths and their families, the immediate events, the detectives working on the case – along with a wider analysis of both the sorry history of the high murder rate and the structures of society and policing that (she argues) largely account for it. Leovy’s fundamental point is that the apparent lawlessness of the ghetto is in fact the law of the streets filling the vacuum left by the absence of ‘normal’ law, and the state’s abdication of its monopoly of violence in such territories. She, like her few heroic detectives working hard to solve every case like any other murder, sees the absence of genuine law enforcement as the root problem.

As she writes: “Gangs could seem pointlessly self destructive, but the reason they existed was no mystery. Boys and men always tend to group together for protection. They seek advantage in numbers. Unchecked by a state monopoly on violence, such groupings fight, commit crimes, and ascend to factional dominance as conditions permit. Fundamentally, gangs are a consequence of lawlessness, not a cause.”

One of the eye-opening aspects of the book lies in its descriptions of how little resource the homicide divisions in the south of LA have been allocated, compared to policing fads such as visibly patrolling streets, or preventive schemes. This extended to under-manning, overtime bans (on murder cases!), not allowing detectives to take their cars home, and even stationery shortages.

Interestingly, the epilogue describes a recent steep reduction in the murder rate, albeit remaining many times higher than other parts of the city and state. Leovy argues that there have been a number of contributory factors including demographic change (fewer blacks and more Hispanics in the city itself) but highlights in particular a significant increase in social security payments to poor black people, specially men, and especially to people coming out of prison. Supplemental Security Income payments give individuals a crucially different set of incentives: “Money translates to autonomy. Economic autonomy is like legal autonomy. It helps break apart homicidal enclaves by reducing interdependence and lowering the stakes in conflicts.” It is easier to walk away from the calling in of tit for tat favours by other gang members. Leovy suggests the Affordable Care Act will reinforce this autonomy. The section briefly notes the high rate of imprisonment too – David Skarbek’s The Social Order of the Underworld is a great complement to this book, looking specifically at the interactions between gangs and the US penal system.

Still, Leovy concludes, it is important not to lose sight of the key lesson that too little policing and enforcement of the law is corrosive. Every desperately sad story in this book underlines the message.

Money and civilization: it’s complicated

William Goetzmann’s Money Changes Everything: How Finance Made Civilization Possible is exactly the kind of book I find relaxing to read before going to sleep. Apart from the fact that it’s too chunky to carry around, it is a panoramic historical sweep packed with interesting nuggets.

Money Changes Everything: How Finance Made Civilization Possible

Money is hardly my Mastermind special subject, and I certainly don’t get emotional about it as so many commentators do. So I have no view about the criticism of the book by people like this reviewer, whose point seems to be that Goetzmann doesn’t agree with every word of David Graeber’s Debt . I’m certainly not going to opine about pre-history. However, Goetzmann is making a far more general argument, rather than a specific case about the role of debt in ancient society (& anyway I think that particular dyspeptic reviewer significantly misrepresents the book’s argument).

Goetzmann’s point is that there is an intimate inter-relationship between financial arrangements and instruments and other economic and social institutions. Indeed, he argues that this is causal and financial innovations made ‘civilisation’ (in the sense of social and political changes observed through history) possible. Intellectual innovations like writing or probability theory, and social innovations like the intermediation of individual savings into investment at scale, were driven by finance. Of course, the causality runs the other way round too: certain economic and social institutions were necessary for financial innovations to occur. “The joint development of financial tools and complex society was a process of give and take on many levels.” It’s complicated, folks! Simple accounts are probably wrong.

Goetzmann is certainly not a financial determinist. He writes: “Necessity is the mother of invention. … Financial technology is redundant, adaptive, and sometimes mercurial. The institutions we take to be sacrosanct, inevitable and indispensable probably are not. Given the random outcome of historical events, another set of institutions might have emerged to serve the same financial problems. Financial innovation is thus a series of accidents of history – the caprice of time, location and opportunity.” This seems absolutely convincing to me, rather than any Graeber-like projection of ideology onto the past. And – as Goetzmann notes – “In times of financial crises, society has tended to express a collective nostalgia for a pre-financial world.”

The book is broadly chronological, starting in ancient Mesopotamia, visiting China, mediaeval Europe, 18th century France and western Europe, back via Marx to China, then the 1920s, Keynes and the war, and a final short section on modern finance. There are all kinds of examples I didn’t know about – the Templars as bankers, the early example of corporate structure in the shape of Toulouse’s Honor del Bazacle. Like Jared Diamond through a different lens, Goetzmann sees the fragmentation and political competition of western Europe in mediaeval and early modern times as an important contribution to its subsequent reliance on capital markets. All very enjoyable, and I’d say essential for anyone interested in financial history.

Summer reading ctd.

I’m looking forward to having a couple of weeks in a place with no internet or 3G signal, and am piling up books to take. This includes a selection of detective fiction, this year:

Linda, As in the Linda Murder: Bäckström 1 Vanished (Nick Heller 1) Leaving Berlin Extraordinary People: An Enzo Macleod Investigation (The Enzo Files)

Some serious fiction/non-fiction:

The Suspicions of Mr. Whicher: or the Murder at Road Hill House Ghettoside: Investigating a Homicide Epidemic A Strangeness in My Mind American Pastoral

A couple of forthcoming economics books, Brook Harrington’s Capital Without Borders, and Ryan Avent’s The Wealth of Humans.

Capital Without Borders: Wealth Managers and the One Percent The Wealth of Humans: Work and its Absence in the Twenty-first Century

I will need a couple of others just in case – suggestions welcome.

Of the books I’ve read recently, if anybody wants recommendations, Sam Bowles, The Moral Economy and two books on GDP, Phillip Lepenies The Power of a Single Number and Ehsan Masood’s The Great Invention are all good reads. I enjoyed The Lonely City by Olivia Laing and Street of Eternal Happiness by Rob Schmitz. Francis Spufford’s Golden Hill is a terrific novel. And yesterday I pointed to my two recommendations for Nature’s summer reading section but all of the books nominated there are great.

The Moral Economy: Why Good Incentives are No Substitute for Good Citizens (Castle Lectures Series) The Power of a Single Number: A Political History of GDP The Great Invention: The Story of GDP and the Making (and Unmaking) of the Modern World

The Lonely City: Adventures in the Art of Being Alone  Street of Eternal Happiness: Big City Dreams Along a Shanghai Road Golden Hill

Summer reading – a prelude

It’s summer reading lists season & I think I’ll do one here at the weekend for all the saddo folks who (like me) will be taking some economics books away for the summer. Meanwhile, here’s the one from Nature which includes my recommendations: Robert Gordon’s The Rise and Fall of American Growth, not because I agree with it (I don’t), but because it’s asking the right questions in a compelling way; and James Bessen’s Learning By Doing, essentially about the same questions (and I do agree with it).

 

I’ve been thinking a lot about productivity and GDP measurement, and am doing a paper on why the effect of digital is far more pervasive than much of this work recognises. Just recently I re-read after a very long time a 1994 AER paper by Zvi Griliches, Productivity, R&D and the Data Constraint. Zvi was one of my econometrics teachers when I was at Harvard, and a lovely man although terrifyingly clever (at least to a not very confident PhD student). The paper concludes:

“Knowledge is not like a stock of ore sitting there waiting to be mined. It is an extremely heterogeneous assortment of information in continuous flux. Only a small part of it is in use to someone at a particular point in time, and it takes effort and resources to access, retrieve and adapt it to one’s own use. Thus models of externalities must perforce be models of interaction between different actors in the economy. … Our measurement frameworks are not set up to record detailed origin and destination data for commodity flows and less so for information flows.”

Civilising money

I’m enjoying William Goetzmann’s Money Changes Everything: How Finance Made Civilization Possible. So far I’ve gone through pre-history and early Chinese financial innovation and am embarking on mediaeval and early modern Europe. The book’s general theme is that financial innovations enabled civilisation to progress, starting with the origins of writing in ancient Mesopotamia because of the need to record financial transactions including the payment of tribute to the temple. It is stuffed full of the kinds of new information I love to accumulate. For example, in 386 BCE a group of Athenian grain traders were put on trial for price fixing and hoarding. They faced the death penalty, rather stiffer than the fines facing cartels these days. Who knew the Athenians had competition policy?

Money Changes Everything: How Finance Made Civilization Possible

The book argues that ancient Greece also originated the mentality that wealth could be intangible, abstract. Finance was decoupled from physical assets such as land or grain. What’s more, because hundreds of Athenian citizens acted as jurors in trials, often concerning financial matters such as compound interest or cost-benefit calculations, financial literacy was widespread: “Athenian numeracy was not simply a skill required for a successful business. It was a trait on which the democratic process fundamentally relied. …. The monetization of Athens was not only important to the emergence of democracy, it was also a factor in the development of Greek philosophy. … Monetization led to abstract thought.”

Sadly, we now seem to have the financialization without the widespread numeracy and capacty for abstract thought. Seems like the ancient Greeks were ahead of 21st century democracies on that front. For new technologies – including financial innovations – to bring progress, surely they need to be widely understood. A populace that doesn’t understand can’t ensure they share in the benefits.