Tag Archives: review

Standards

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Colleen Dunlavy’s Small, Medium, Large is an interesting and thought provoking read – and relevant to today’s debate on industrial policy. It’s a relatively short book, a history of the emergence of standards in US goods in the 1910s and 1920s. For example, in 1918-21 there were 78 different mattress sizes on the market and in 1922 the industry agreed to bring this down to 4 standard sizes, the ones we still use in the US and UK (apart from Ikea’s!). I write ’emergence’ but the book tells the fascinating history of the way industry agreements were brokered by the US government. During the years of US participation on World War 1 this was for reasons of prioritising production capacity and materials for the war effort. In the 1920s and beyond it continued at the behest of Herbert Hoover as Commerce Secretary in a drive to improve the productivity of US manufacturing. This took places under the auspices of a division ofhte Department with the wonderful name of Division of Simplified Practice (‘Simplified Practice’ sounded less socialist than ‘standardisation’.) Making multiple models in short production runs meant US firms could not capture economies of scale. Meanwhile in the UK and Germany separate standardisation drives were under way.

Of course, this meant not giving customers what they had wanted in terms of variety and choice – it was the Henry Ford approach of any colour you like as long as it’s black. A Ford executive is quoted as saying, “We standardized the customers.”  Officials railed against the “excessive mulitiplicity of styles” as wasteful.  The customers got mass production and lower prices in return, but they were kept out of the government-organisaed co-ordination between producers. Of course, another word for this might be ‘collusion’ and the book notes the obvious tension with anti-trust policy. By definition, if competition occurs over price rather than variety or attributes, this kills small producers.

Anyway, the history was new to me, and the book set me thinking about the role of standards. There has been a proliferation of variety and personalisation of goods because the technological possibilities have made this cheap enough to do without losing the benefits of flexible and rapid manufacturing. Yet as the well-known Marc Levinson book The Box pointed out, some standards have transformative productivity effects – the GSM mobile phone standard would be another example. This seems a highly relevant question now as we continue the ‘war on carbon’ – when is avoiding waste a good rationale for enforced co-operation over technical standards? At what level of the production or technology stack should governments want standardisation – requiring collaboration – so as to enable competition and variety at higher levels – for example in generative AI now? The dimensions along which firms compete are to some extent a social choice variable.

 

Industrial policy – the long and the short of it.

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I’ve been dipping into the proofs of a substantial book, Industrial Policy for the United States by Marc Fasteau and Ian Fletcher, due out in September. It will prove a significant resource for anybody interested in the issue. The book starts with the economic case for strategic government interventions in the supply side structure, arguments that have been gaining traction recently as the utlra-free marketism paradigm fades in the US and elsewhere. The authors focus particularly on increasing returns and technological innovation.They bring a certain zero sum mentality to the analysis – the US must win, other countries must lose – which I don’t share; the technological frontier is broad and granular. But the demolition of the idea that a ‘free’ market is the way to organise the economy at a time of significant structural change is spot on.

The second section explores brief country case studies (“Chapter 10, Britain: No Theory and Little Execution” puts it in a nutshell for the UK: “Britain has become a byword for ineffective industrial policy.”). These are for the most part short factual histories for readers who have no prior knowledge of the countries concerned, with an introductory commentary. The book is wholly US-focused.

The third section is a history of industrial policy in the US from colonial times and Hamilton onwards, while the fourth moves into the US innovation system. It paints a picture of government support for innovation as a de facto industrial policy even during periods when political rhetoric emphasised markets. And it describes the innovation system as the ultimate private-public partnership. The section argues the case for a shift to more active Federal government innovation programmes using both market-creating policies, innovations induced by regulatory requirements and a role for novel types of innovation organisation in the system – manufacturing institutes, for example.

The final two sections consist of industry case studies and regional case studies. In the former are the well-known semiconductor example, and also nanotechnology (“Is America Losing the Future?”, this one is titled. The regional examples are life sciences in Massachussetts and emiconductors in upstae New York.

The book ends with recommendations for the US. While welcoming the Biden policies, the CHIPS and the Inflation Reduction Act, the authors want more: “The challenge now is to maje industrial policy comprehensive, coherent, institutionalized, and a fixture of the policy consensus.” The US needs to focus on its most dynamic industries and develop them as oligopolies to enjoy economies of scale and the profitability for continuing innovation, they argue. They see a national security as well as an economic need for the US to stay at the frontier in multiple industries – just as the Cold War imperatives drove policy in the 1950s and 60s. The final chapter has a lengthy set of specific recommendations for different actors in the US political and industrial systems.

At 670 pages of text and 150 pages of notes and bibliography, has the obvious advantages and disadvantages of its sweep and scale – a superb place to start on any aspect of US industrial policy, but only a starting point for depth on any particular aspect. I found the parts I’ve read very interesting given my relative lack of knowledge about the institutional and historical details in the US. But I applaud the ambition and think the historical perspective suggests the authors are right in drawing a curtain on what – it turns out – is the aberrational period of policy free-marketism.Screenshot 2024-07-23 at 11.23.05

 

 

DIY electricity

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My student Aneesha gave me a book a few weeks ago before she headed off to do her PhD in energy systems at Berkeley, The Grid by Gretchen Bakke. OK, I thought, I’ll give it a try – but how well she knows me. I loved this book. It’s part history of how the electricity grid was built, part diagnosis of how it’s all going wrong, and part reflection about the net zero transition. What I loved about it was the way it links this fundamental infrastructure system to its social and cultural context.

I’ve always reckoned (eg around p 80 in here) that the provision of electricity is fundamentally social rather than technical, and the book illustrates that on every page. Who knew that Texas and Quebec have separate grids (in case they ever want to secede)? In a sign that the US is starting to become a failing state, it has”the highest number of outage minutes of any developed nation” – six hours a year compared with 11 minutes in Japan and even 51 minutes a year in Italy. Trees and squirrels account for much of this – or to put it another way, lack of maintenance.

Interestingly, the book pinpoints the separation of generation from transmission, and the arrival of wholesale electricity trading, as the start of the end. The margins in operating the grid itself are low, so maintenance got cut, while the arbitraging meant there was too much electricity trying to travel too far along the wires. Increasingly American companies, people and the military are setting up their own microgrids, including using renewables such as rooftop solar, and in the case of the military compost from kitchen waste and latrines. “They have all stopped expecting the state and the utilities to do their job.” Rugged individualism is the order of the day in getting stable access to electricity.

Highly recommended – I underlined something on pretty much every page. I’m thinking a lot about infrastructure these days. Thank you Aneesha!

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Private revolutions

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Yuan Yang’s Private Revolutions: Coming of Age in New China is quietly revelatory. One of the new intake of Labour MPs, the author was born in China, moved to the UK at age 4, and returned to China as an adult when working as a journalist for the FT. The book is a history of four women of her generation who became friends and contacts during that period. It’s a gripping read as the women have extraordinary stories. It’s also a powerful reminder of how much the country has changed within a generation – a rapid transformation that can’t help but have had an impact on people’s psyches. The word ‘revolution’ is not hyperbole. It reminded me a bit of a 1986 book I read decades ago by John Hooper about Spain, in which he pointed out the pyschological impact on young men from conservative villages of going to work as waiters or similar in the new resorts of hte Costa Brava. So I warmly recommend Private Revolutions, a fascinating read and a different perspective on a country we will have to learn more about in the years ahead.

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Always and everywhere a political phenomenon

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I was quite excited about Carola Binder’s Shock Values: Prices and Inflation in American Democracy, as I expected something similar to Thomas Stapleford’s (2009) The Cost of Living in America. It isn’t about price indices, however, but about monetary policy and inflation. Macroeconomics is so much not my area that I feel unable to comment on the argument of the book, except to wholeheartedly agree that inflation is always and everywhere a political phenomenon. I’ve written (in my forthcoming book, The Measure of Progress) about the scarring experience of the late 1970s inflation for my working class family.

Anyway, Shock Values is a very readable monetary history of the United States, from the Revolutionary era to the 2020s. The theme throughout is the question of the political legitimacy of prevailing monetary arrangements, particularly the role of the state in aiming to stabilise prices. As the final chapter notes, the current episode of inflation has combined with broader US political instability and the arrival of crypto to raise new questions about that legitimacy – the book borrow’s Paul Tucker’s concept of legitimacy as set out in his book Unelected Power.

I knew less about the early (19th century) period and so particularly enjoyed that; perhaps I was the only audience member to leave Hamilton wishing there had been more about the formation of the first federal banking system. The sections on wartime price controls are also very interesting. If you’re already steeped in monetary history there might not be much new in the book, but I found it an excellent overview and it didn’t seem to be ideological – politely ignoring MMT and casting justifiably measured doubt on crypto assets.

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