Money stuff

Modern money is intangible, electrons whizzing around – unlike older forms of money, whether paper and coin, or wartime cigarettes, or huge stone wheels. Paid: Tales of Dongles, Checks and Other Money Stuff, edited by Bill Maurer and Lana Swartz, is a reminder that even the 1s and 0s have a material basis – such as credit card machines, dongles, mobile phones, and indeed the whole physical infrastructure of the wired and wireless networks and the electricity network. What’s more, the less tangible the tokens of exchange, the more important the accounting system recording transactions. This explains the emphasis crypto folks put on the blockchain, but as one of the essays in the book points out, this has its drawback as nothing is reversible, not even transactions that ought to be reversed. There is no substitute for trust in a co-ordinating institution that keeps record.

The book is a nicely illustrated collection of essays by money afficionados from different disciplines, and spanning the Inca civilisation to Dogecoin. As a collection, there’s no central argument – except that we would do well to remember the physical and social embededness of money. There are lots of, “Well, who knew?” moments, which makes it an enjoyable read – at least if you have a fact-magpie mind like mine. I particular enjoyed Keith Hart’s reminiscence of becoming a fence and money lender during his PhD fieldwork in Ghana – which gave rise to the notion of the informal economy; I’ve met Keith (a fellow Mancunian) and love his book The Memory Bank.

Also Swartz’s essay about cash, and the notion that technological innovation in money – the Diners Club card and later credit cards – was forced by the postwar economic boom and associated travel. It reminded me of my first job at the Treasury in the 1980s, trying to find a monetary aggregate that wouldn’t grow too damn quickly for a monetarist government, at a time when rapidly increasing use of ATMs and credit cards was affecting the velocity of money and making monetary aggregate control a hopeless task.

416Tng+JSbL._AC_UY436_QL65_

Share

Capitalism, property and production

Capitalism: The Story Behind The Word by Michael Sonenscher is an enjoyable short read (with a great cover) that does what the subtitle says. It compares the history of ‘capitalism’ with the history of the idea of ‘commercial society’ and the division of labour, making the case that the two referred to different economic arenas. Capitalism concerned capitalists: people who lent money to governments to fund war and other expenditure. It was thus a concept relating to public finance and taxation, and concerned with private property. Commercial society and the division of labour were concepts used in broader societal debates about the organisation of production, markets and prices – issues that predate the general use of the word ‘capitalism’. The essay argues that the distinction is worth keeping, although this may be a losing battle as ‘capitalism’ has swallowed the wider issues – and much of the wider contemporary literature on these latter has been largely forgotten.

Among other things, a quotation from Hegel struck me: “Money is not in fact one particular resource among others; on the contrary it is the universal aspect of all of them, in so far as they express themselves as an external existence in which they can be apprehended as things. Only at this extreme point of externality is it possible to determine services quantitatively and so in a just and equitable manner.” (This is obviously not the modern usage of the term ‘externality’.) I was surprised to see a rationale for using the measuring rod of money as a common standard from this author.

61r+nrlcRAL._AC_UY436_QL65_

Share

Use it or lose it – semiconductor version

I highly recommend Chris Miller’s Chip War: The Fight for the World’s Most Critical Technology. It starts with the history of the development of semiconductors, which might be familiar from other Silicon Valley histories (such as Margaret O’Mara’s also excellent The Code). But the book then goes on to less familiar and more recent territory, encompassing the technological changes needed to manufacture ever-more precise chips and the huge scale, complexity and sophistication of their fabrication. This introduces companies that have recently become familiar (AMSL in the Netherlands, making the machines that are needed to do the fabrication, and TSMC in Taiwan, which produces more than 90% of the most advanced chips) – and also others key to the process that are still not very well known in general.

The narrative arc is a steady shift from US leadership in both technology and manufacturing, to Asian leadership in manufacturing and rapid catch-up – especially in China thanks to large-scale subsidies and IP theft – in some slices of the technology. The result is an extraordinarily complex global supply chain with a number of very narrow 1 or 2 firm bottlenecks. The best to hope for seems to be a version of the Mutually Assured Destruction doctrine: no country can afford disruption. The worst? Massive disruption of all aspects of modern economic life.

That there would be some shift seems inevitable: as East Asian economies developed in the late 20th century they would always try to move up the value chain into more sophisticated sectors. However, the book is quietly but strongly critical of the pro-globalisation philosophy of the US (and rest of the west) that gave up on retaining core manufacturing and engineering competencies at home – their loss didn’t matter until it really did, with the re-emergence of geopolitical strife. As the book puts it, there was a “liberal internationalist ethos that guided officials of both political parties amid America’s unipolar moment.” Yet Andy Grove’s paranoia was valid, when he said in the early 2010s: “Abandoning today’s ‘commodity’ manufacturing can lock you out of tomorrow’s emerging industry.” (One of the best summary articles making eactly this point is Gregory Tassey in JEP in 2014.)

There is a lot of interesting detail. For example, I hadn’t realised how much Darpa focused on educational infrastructure – funding students and workshops, and university computer equipment, as well as futuristic tech research. There are lots of great examples of the difficulty of copying advanced chip technology because of the necessary tacit knowledge: for instance, every AMSL photolithography machine comes with a lifetime supply of AMSL technicians to tend to it. This is either hopeful – China will find it hard to catch up fully –  or not – the US or EU will not be able to catch up with TSMC because of the latter’s vast embedded know-how. Another example is the fact that defence dollars bought 72% of all integrated circuits produced in 1965, but Robert McNamara’s deffence budget cuts led Robert Noyce of Fairchild to bet on the consumer market and slash chip prices from $20 to $2. Annual US computer sales went from 1000 in 1957 to 18,700 a decade later.

All this and much more. The book has no easy policy solutions but is an essential contribution to current debates about industrial policy.

81k-FqQ-6NL._AC_UY436_QL65_

 

 

 

Share

Times without a rulebook

“This is a short book on a vast topic.” So starts Rules: A Short History of What We Live By, by Lorraine Dalston. I enjoyed reading it without ever feeling I got to grips with what it’s about, and the vastness of the topic might be the explanation – or the fact that it’s a lecture series in origin. The chapters work roughly chronologically from the ancient world to today, exploring different aspects of rules – rules versus discretion, rules as regulations, rules of art, rules as laws or norms, rules as algorithms. The book is packed with historical nuggets of information, of the kind I very much enjoy. On the other hand, there’s no narrative arc. It’s a pointillist painting of a book at a focal length that doesn’t reveal the big picture.

Perhaps this is a bit unfair. There are some mid-level conclusions. ‘Thin’ rules such as routine algorithms or traffic regulation work well in stable contexts, and require a good deal of pre-existing infrastructure, be it training data or investment in traffic lights and cameras. ‘Thick’ rules are needed for situations requiring flexibility and judgement, and tend to have exceptions to prove them. “Low tolerance for discretion indexes rampant distrust in society,” she writes. Either governments which don’t trust their citizens, and so apply pettifogging rigour, or sometimes citizens who don’t trust authority.

Sometimes explicit rules need implicit ones to support and enforce them; the ideal of sufficient stability and predictability to do without the implicit is perhaps a modernist interlude. But the book’s final conclusion? “In abnormal times, when we are thrown into the breach without a rulebook, we once again become aware that there are no rules to help us reason about rules.”

41j6DM8Xy5L._AC_UY436_QL65_

Share

Models and Morals

This has been a busy term so I’m behind on my reading, but have recently finished a fine biography, Jan Tinbergen and the Rise of Economic Expertise by Erwin Dekker. I knew little about Tinbergen so was bound to learn a lot from any biography, and this one is genuinely interesting. It has some personal detail but is much more an intellectual history, locating Tinbergen in his historical context. That was not a happy one: the Depression and the Second World War occurred in his early adulthood. The intellectual currents were, of course, fascinating. I had never realised how much Tinbergen was engaged in policy throughout his career. As well as being the founding director of the CPB (which gave me as a thank you gift for a talk a fine bronze bust of Tinbergen earlier this year now in prominent position on my shelves),  he had previously worked at the League of Nations, and continued throughout his career to be heavily engaged in policy. This followed a youth involved in idealistic progressive political movements.

To the extent economists now know anything about Tinbergen, we think of the econometric models for which his Nobel Prize was awarded. The book prompted me to read the Prize Lecture, which is very interesting: “Models constitute a framework or a skeleton and the flesh and blood will have to be added by a lot of common sense and knowledge of details.” He went on to suggest using models to compare different social orderings – communism and capitalism – on a scientific basis; it seems a forlorn hope now but evidently not in 1969. And think about the literary illustration of the equivalance of perfect markets and perfect planning in Francis Spufford’s wonderful book Red Plenty.

Dekker comments that Tinbergen found it irritating that this work from the 1930s was remembered rather than his later thinking about the institutional framework within which economies operate – the ‘Ordnung’ (the book uses the German word). I found particularly interesting a chapter titled ‘The Expert in the Model, the Economist outside the Model’, portraying Tinbergen’s effort to reconcile the fact that he had put policymakers inside his model of the how the economy operates with his simultaneous view that economists could nevertheless analyse from above  – ‘the view from nowhere’ – how the system then changes and can be controlled. The chapter uses the Lucas critique to analyse this in a macro context. It’s one of the themes of my Cogs & Monsters.

I also greatly enjoyed the chapter ‘Measuring the Unmeasurable: Welfare and Justice’. Dekker writes: “Tinbergen was mostly silent on philosophical matters. …. One of the very few exceptions are his reflections on ‘measurement in the human sciences.” He saw measurements as a vector for changing behaviour, and in addition saw the purpose of economic measurement as measurement of economic welfare. His was not a positivist view, but rather a moral one: economic policy had a deep societal purpose.

The book is quite long but the 400 pages zipped by. Tinbergen was clearly a fascinating person and deserves to be better appreciated by the Anglophone dominated economics profession. This biography serves him well.

71HVzOHsdBL._AC_UY436_QL65_

Share