Read this book!

On the train yesterday I devoured Do No Harm: Stories of Life, Death and Brain Surgery by Henry Marsh. I can’t recommend it highly enough. It is the author’s retrospective take on his career in neurosurgery, as he approaches retirement. From the start you share his sense of the strangeness of taking surgical instruments to people’s thoughts and emotions, memories and reason – as he puts it, too strange to think about really. He gets on with the delving into the jelly of the brain. This is a fascinating and utterly humane book.

It does illustrate – as so many others have done – the strains on the NHS, due to demand growing faster than resources, but even more due to the madness of mediocre bureaucracy and constant reorganisation.

But the overwhelming message I took was the importance of the counterfactual in medicine. Marsh writes that as he grew more experienced as a surgeon, and older himself, the urge to operate always – because it’s what families and patients expect, and what surgeons do – began to ebb. Increasingly often, he concluded that the choice his patients often faced was between two different ways of dying, one of them involving painful and sometimes brutal surgery that gave false hope, a short extension of life at best. Given the strains on the NHS, the ageing population, the continuing advances in technology that make new interventions possible, this is going to be an important debate.

Anyway, as I get older too, getting the counterfactual right increasingly seems the key issue in any context. And one that it’s very hard for people to get to grips with, because seeing the realistic alternative course of events requires reason, experience, judgement and imagination.

On the medical theme, I’m also keen to read Atul Gawande’s Being Mortal: Illness, Medicine and What Matters in the End. I loved the other books by him I’ve read, Complications: A Surgeon’s Notes on an Imperfect Science and Better: A Surgeon’s Notes on Performance.

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World cities

Notice of a new title to join the literature on the economies of cities, The Making of A World City: London 1991 to 2021 by Greg Clark. He writes:

“In The Making of a World City: London 1991 – 2021 I have sought to draw on over 25 years of experience working within London policy and economic development organisations, and on interviews with around 100 leading thinkers about the past, present and future of London, including commentators and leaders in New York, Tokyo, Hong Kong, Paris, Singapore, and São Paulo.

London’s path to becoming a leading world city is not well understood. The assumption is that the Big Bang, London Docklands, the EU, or global finance is the key explanatory factor. The reality is richer and more surprising. The book sets out in clear detail both the catalysts that have enabled London to succeed and also the qualities and underlying values that are at play: London’s open-ness and self-confidence, its inventiveness, influence, and its entrepreneurial zeal. London’s organic, unplanned, incremental character, without a ruling design code or guiding master plan proves to be more flexible than any planned city can be.”

I’m looking forward to reading it, especially having commissioned relatively recently Bridget Rosewell’s Reinventing London.

A while ago I posted a list of books on urban economics, and this literature keeps growing (no doubt there were many omissions from the list too). It is a subject whose time has come – the politics is slowly catching up with the economics. Recent days have brought news of an impending significant devolution of powers from Whitehall/Westminster to Manchester. It’s a first step in decentralising one of the most centralised OECD economies, and part of the global relocation of economic activity as a network around key urban hubs. Perhaps I’m biased, but among all the UK cities other than London, I think Manchester has the best shot at growing into a world city.

A couple of sessions at the upcoming Festival of Economics in Bristol touch on this broad theme – as do other Festival of Ideas events this autumn.

Investment and values

Normally I don’t read books about investment, but I know and like Guy Spier, author of The Education of a Value Investor, so obviously I was going to buy it. And, once I started, I devoured the book in a couple of train journeys. It is a thoroughly enjoyable and enlightening read.

The investment advice is actually pretty straightforward: be a value investor. Guy is a *huge* admirer of Warren Buffett.

What’s far more interesting, and perhaps even practically useful, in the book is the advice about how to build into your life the capability to be a value investor. Guy does this through recounting his own career, intellectual and psychological trajectory, from ambitious ex-Oxford and HBS financier living the high life in New York to well-grounded, Zurich-based investment fund manager and family man. The personal story carries the underlying message about the psychology and morality of investing in a very appealing narrative.

For the difficulty in actually being a value investor, as Guy explains it, is human psychology – the strength of social pressure, of ‘everybody’s doing it’, the buzz of responding to the latest information, the imperatives created by rivalry and status. He cites the literature on behavioural economics and finance, and also explains how he has put it into practice in his own life. For example, he checks Bloomberg screens and stock prices only occasionally and has the terminal in a separate room from the place he reads and thinks; never places orders during trading hours; has an investment checklist before acting on a decision; has a group of like-minded people to discuss issues with; moved out of New York to run his fund, Aquamarine – whose returns look impressive. I’m not an investor but made a few notes about habits that seem very sensible.

One very interesting chapter is an early one in which he describes his first job at a cut-throat and unscrupulous New York investment bank, D.H.Blair. He had ignored warnings about its reputation on joining the bank as a ‘vice president’, but quickly found that the only way to survive in the Wall Street game was to play by the rules of the game, unpalatable as they are. It reinforced my view that the problem with so much of finance is not that there are some ‘bad apples’ but that it’s systemic – the structure of the barrel turns all the apples bad. So punishing some individuals, or working on bankers’ ethics, will make no difference at all.

Maybe it’s because he and I had the same intellectual formation, having been first taught economics by the wonderful and brilliant Peter Sinclair at Brasenose College, Oxford (albeit some years apart, as Guy is younger than me) that I find the philosophy behind The Education of a Value Investor so appealing. Guy & I met and became friends relatively recently, but a teacher who catches you at the right stage of your life is of course a uniquely powerful influence on your life. Interestingly, Guy questions his elite education, though, suggesting it was a good grounding for conventional, worldly success but taught the habits of reductionism and intellectual arrogance. However, in his case at least, a modest and wise man seems to have been forged by it.

Cybernetic dreams

I read Eden Medina’s Cybernetic Revolutionaries: Technology and Politics in Allende’s Chile because I spotted the fuss on Twitter about Evgeny Morozov’s New Yorker piece, The Planning Machine: Project Cybersyn and the Origins of the Big Data Nation. I’m not all that interested in the fuss but was very intrigued by what people were saying about the book.

It is indeed a completely fascinating history and reflection on the interaction between technology and politics, and I highly recommend it. The cover photograph gives a good flavour of the weirdness of this episode. It is the control room built in Santiago in late 1972 under the guidance of British cybernetician Stafford Beer. The control room, that is, for the economy, linking a network of telex machines in factories around the country to a mainframe computer in the capital.

While not a fully planned economy, the Allende government had nationalised substantial sections of industry and, as time went on and the American-led sanctions began to bite, planned to control key prices. It also had to contend with a nationwide strike led by businesses opposed to the leftist government. The aim with Project Cybersyn, as the cybernetic plan was labelled, was to deliver to the central authorities ample real-time information on production while allowing individual factories the freedom to make their own decisions. Government policy could be adapted quickly in response to the trends identified. In other words, it was meant to avoid the pitfalls of central planning while enabling the co-ordination benefits. As Medina puts it: “Connecting the State Development Corporation to the factory floor would … allow the government to quickly address emergencies such as shortages of raw materials and adapt its policies quickly. Up-to-date production data would also allow Chile’s more experienced managers to … identify problems in factories and change production activities in the enterprise when necessary to meet national goals.”

Apart from the obvious practical difficulties (eg only one mainframe and very few programmers), one challenge was actually modelling the economy. It is unclear what kind of relationships were written in to the code, but they must have been something similar to those embodied in the simple linear model of the Phillips Machine. For all that it was a project about managing the economy, there was just one economist on the team, according to the book. However, Medina emphasises the intended flexibility of Project Cybersyn: “The model would not function as a predictive black box that gave definitive answers about future economic behaviour. Rather, it offered a medium in which economists, policy makers and model makers could experiment and, through this act of play, expand their intuition about [the economy].” The structure embodied the cybernetic emphasis on responding to the information contained in feedback. I must say I didn’t understand Beer’s cybernetic models at all, as the language and concepts are so different from anything I’m familiar with – but then cybernetics itself comes across as rather futuristic-retro.

Beer also hoped to have a method of getting real-time feedback from the people to the government by installing ‘algedonic meters’, or dials indicating their happiness or dissatisfaction, that would be installed in community centres or public places. This part of his plan was never taken up. However, he was keen on getting public engagement with the project and even persuaded Chile’s most famous folk singer Angel Parra to write a Project Cybersyn song.

One of the divisions within the project, well-described in the book, was between the technocrats who saw it as a tool for managing the economy more effectively, and those who saw it as a means of reverse engineering politics and society on the ground. The latter group hoped workers in the factories would develop their own sense of autonomy through inputting information into the telex, and understanding in this way the part they played in the whole. “[Beer] believed that engineering a technology also provided opportunities to engineer the social and organizational relationships that surrounded it.” The technocrats tended to dominate, though, largely because of the growing difficulty Allende’s government had in sustaining its coalition. Politics didn’t co-operate with the technology.

One of the interesting aspects of Project Cybersyn is that the technologies it used were not the most advanced. The US blockade largely prevented Chile from importing more computers or sophisticated equipment. Aside from the one mainframe and the telexes, the futuristic control room used slide projectors and hand drawn slides. The fibreglass control chairs, based on Italian designs, were one of the most cutting-edge aspects of the control room. And yet the project was the most ambitious cybernetics project ever (partially) implemented.

The project Cybersyn control room

It’s hard to decide whether the people behind Project Cybersyn were crazy dreamers or just 50 years ahead of their time – what would they have made of the possibilities of the web and ‘big data’? The basic cybernetic question the project poses remains valid: can policymakers do a better job with rapid real-time feedback on economic indicators – or is the economy as a dynamic, complex system simply beyond the kind of mapping implicit in any such project? Can what is measured about the economy reshape the economy or underlying social order in turn – and what does that imply for the indicators one might try to include in a Project Cybersyn 3.0?

Fascinating questions, and a fascinating book.

PS After finishing the book, I read the Morozov column. It is a precis of the story told in Medina’s book, with a handful of extra paragraphs woven in that give his own reflections on the issues raised – including, for example, exactly the obvious ‘what could we do in the era of the internet of things’ question. If the column had actually been billed as a review of Cybernetic Revolutionaries, I don’t think there would have been any fuss. While not plagiarism, as the book is the only source mentioned, for Morozov to have given it just one passing mention in the ‘Critic at Large’ section seems ungenerous.

Markets in stories

Yesterday I attended a very interesting conference, on Non-Equilibrium Social Science, which stands for making economics more realistic and interesting – looking at the economy in terms of non-linear dynamic systems. As ever at a good conference there were some great opportunities for conversation – and book recommendations. I came away with Marion Fourcade’s Economists and Societies, and W.E.G.Salter’s Productivity and Technical Change, and William Hazlitt’s 1805 Essay on the Principles of Human Action.

  

Also, after hearing him speak, David Tuckett’s Minding the Market. His argument was, in a nutshell: “Financial markets are markets in stories.” He classed as standard models both the rational choice and ‘behavioural’ approaches to decision making, because both assume there is an objective reality about which an optimum can in principle be known or calculated. Instead, Prof Tuckett argued, the decision problem is one of making any sense at all of how to act now on the basis of information now about an ontologically uncertain future. His answer is that we act on the basis of ‘conviction narratives’ which are collective interpretations of what today’s ‘facts’ (all based on our sense perceptions) mean for tomorrow. He described some empirical work looking at the stories that run in financial markets, as extracted from unstructured texts such as newswire reports, brokers’ notes and Bank of England reports.

This is intriguing. It certainly chimes with my unease (as in my Tanner and Pro Bono lectures) about the way economists talk – especially in the context of policy – as if they are omniscient outsiders, not part of what they are analysing. My question – which Prof Tuckett agreed is still-unexplored territory – is how reality interacts with our narratives, sometimes changing them. I’d like to have followed up by asking if the idea is a Kuhnian paradigm shift, but in the domain of financial markets, or economic life in general, rather than scientific exploration.

Another conference highlight was Bridget Rosewell on the inadequacy of our standard cost-benefit approach for deciding whether or not to go ahead with transport infrastructure projects, inadequate because they use a comparative static, equilibrium framework for something that is bound to change the dynamics of the economy. She gave many examples of projects that would never have passed a modern cost-benefit assessment, from Bazalgette’s London sewers to the Jubilee Line Extension and – as she is scrupulous – an example of one that wasn’t making it in terms of her tale of self-fulfilling visions that deliver the benefits they subscribe. (This is the fantasy airport on Boris Island, which she supports.) Bridget touches on this infrastructure question in Reinventing London.