Pre-postliberal zombies

This week’s read has been Adrian Pabst’s Postliberal Politics, with the cheery subtitle The Coming Era of Renewal. It’s hard to believe the past 18 months, on top of the post-2008 real wage stagnation, and the Brexit/Red Wall voting phenomena that there will not be some kind of realignment? This book advocates for a community-centric economic and political model, focusing on family, dignity and local identity. It’s an appealing vision, in the same vein as some other recent books by economists (Mark Carney, Minouche Shafik, Raghuram Rajan, Sam Bowles) but with a focus on the politics rather than the economic policies. I’m suppose I’m enough of an old-fashioned (pre-post) liberal that the communitarian flavour makes me a bit uncomfortable, as does the religious thread, while agreeing intellectually that excessive individualism has been highly problematic.

The book is short (and wonderfully jargon-free) so it doesn’t bother with the always-unsatisfactory bullet point lists about what are the top 10 policies needed to get from here to that future political renewal. Indeed, it concludes: “BuildingĀ  a new consensus requires more than a political and policy programme. It has to be anchored in a public philosophy to outflank both technocracy and ideological extremes. A public philosophy expresses the shared ends of political action.” Quite. The public philosophy guiding policy and politics since the late 1970s has crumbled yet lives on in zombie form in many arenas of policy-making. This is a thought-provoking building block in an alternative that might take some time to rise out of the rubble. An interesting read.

51O6nU3jpRL._SX317_BO1,204,203,200_Speaking of outmoded public philosophies, I also polished off Qiu Xiaolong’s Hold Your Breath China. This series of detective novels isn’t all that well-written; I like them mainly for the flavour of Shanghai life. However, the culprit in this one, whose plot concerns air pollution is clear: GDP. Who would have expected the flaws of GDP to be the central issue in a crime novel?

Spreading the thriving

Jan Eeckhout’s The Profit Paradox: how thriving firms threaten the future of work is a very good read. It’s a game of two halves (yes, someone in my household is permanently watching the football at the moment).

The first half (in fact parts 1 and 2) is a nice synopsis of the reasons the economy (mainly the US but others are covered) tend towards a) concentration across many markets and hence b) diverging fortunes of companies and their employees, and the places where people live. This covers the features of digital technology, superstar phenomena, agglomeration economies – these are familiar to anyone who has been keeping up with the literature, but I applaud how well the book is written. Hooray for an economist who can write so engagingly. This section documents the evidence on concentration and mark-ups, the growing divergence between companies in terms of productivity and profits, and the corresponding decline in the labour share as outsourcing of routine occupations (call centres, cleaners, admin) has progressed. Eeckhout argues that there is assortative matching such that pay and conditions are polarising between people with high value jobs in frontier firms and people with low value added jobs in their contractors.

The book’s focus is on the implications of market power for people as workers, rather than as consumers – although it also notes the excess pricing power too. In sum, it reduces wages, both directly through monopsony power in individual labour markets and also because of the the macroeconomic consequences: with so many people in contingent work with low pay, aggregate demand is inadequate. (Some) firms are doing well but the economy isn’t. And this is the heart of Eeckhout’s argument: “The effect of the tide of market power is lowering wages across the economy.” I find this link persuasive. While there are many economists looking at the elements of this story, the way they are combined here is enlightening.

The second half turns to the much harder question of what to do, starting with an affirmation that for all the disruption the new technologies are a good thing (this chunk reminded me a bit of my own Paradoxes of Prosperity, which first came out in September 2001 and not surprisingly was hardly noticed).

The recommendations boil down to: enforce labour standards; mandate more data openness; and beef up anti-trust policies. In particular (under the last heading) stop big tech making more acquisitions, regulate them rather than break them up (so as not to lose beneficial network economies), and assess market impacts in the round rather than firm by firm. (Tricky to implement but I do remember that in my days on the Competition Commission, as it then was, we often had to include a section of the report on ‘Features of the market’ – problems in concentrated markets do often spread beyond an individual transaction).

I’d agree with all these suggestions in the book but they add up to a meta-suggestion: find the political will to change the institutional architecture so that it delivers fairer outcomes. The technological tides won’t retreat but the effects depend on what institutions confront them. Is Lina Khan’s appointment in the US a sign of lasting change?

 

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Why is there no government chief anthropologist?

Almost a decade ago I gave a lecture which opened with this question. I was probing the influence of economists in government, for good or ill. (This discussion is picked up in my forthcoming book, Cogs and Monsters.) Perhaps I’d been influenced more than I realised by having been on the economics reporting beat with Gillian Tett in the 1990s, she for the FT and me for The Independent. We were all very impressed by her PhD in anthropology, as fieldwork in Tajikistan seemed very exciting and adventurous.

Gillian’s new book, Anthro Vision: How Anthropology Can Explain Business and Life, starts with that fieldwork, including the less thrilling part about being trapped in a hotel room as civil war raged outside. It’s a rattling good read, as one would expect from a top journalist. The book is divided into what she describes as the core principles of anthropology: the need to make the strange familiar, to make the familiar strange and to listen to what is not said. These add up to an effort to develop some objectivity about the group or society under investigation – I was struck for example, by the parallel with the outsiders who foresaw the financial crisis in Michael Lewis’s The Big Short. Gillian’s reputation was totally confirmed by her early warnings about impending crisis.

At the same time, the methods of anthropology, especially ethnography or participant observation, bring the researcher close to the objects of study. The book is adamant that use of data and computers alone fails to deliver important insights. I couldn’t agree more, both in terms of determining economic policy and in terms of research. I love applied economics but one of the joys of my work now is working in interdisciplinary teams using different methods.

The book has loads of interesting vignettes about the use of anthropology, particularly in business, where there seems to be more of it than I had realised. Some that particularly struck me: teenagers seem addicted to their mobile phones because that is the only space left where they are free to roam and hang out, now that their lives are so constrained in the physical world. As Gillian points out, when we were young we wandered around by ourselves, met friends, drifted around the shops. For various reasons, all of these spaces have closed to today’s adolescents.

Another is the account of the engineers of the Internet Engineering Task Force, which oversees technical management of the internet, voting on changes to rules and protocols by – humming. Votes are taken by which group hums the loudest. Lockdown has made decision-making most unsatisfactory.

So to return to my starting point, it seems to me that a Government Chief Anthropologist would be a good innovation. And they should sit in an office with the Government Chief Economist.

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Public policy & public interest

I enjoyed another short book I opted for this holiday weekend, Power to the Public: The promise of public interest technology by Tara Dawson McGuinness and Hana Schank. It’s about the process of making policy and implementing it, rather than the analysis, and that’s one of the key points: that delivery of outcomes is integrated with the design of policies and the data on which analysis is based. The three ‘Ds’ are all essential, and linked to each other. I was interested in this book because we also published one (Digital Transformation at Scale) on the UK (the focus here is the US) about the digital delivery of public services, by Public Digital, the team that originally set up the Government Digital Service.

There are some clear lessons from the experiences on both sides of the Atlantic. One is that talking to the service users and administrators is essential because they contribute information about outcomes and barriers that is otherwise unknowable. Another is that thinking about the data that is not there is as important as the data that’s available, and this is why diversity of experience is important in public service delivery – a somewhat broader point than data bias. A third lesson is that the project of digitising services opens the door to changing processes and even policies – it is not just a matter or replicating paper processes online. Automating a bad policy is not a good outcome. A fourth lesson is the way the decision to digitise helps to bring about policy co-ordination that never happens at the level of policy analysis, for delivery is impossible without tackling all the obstacles to success. This means – fifth lesson – that it can be difficult and slow, and requires building coalitions of support.

The book has lots of examples and convinced me. The rapidly-growing ‘govtech’ or public interest tech movement is encouraging – for instance the US has Code for America and now New America, which these authors lead, and the UK has Public Digital, and State Up. One advantage the US has over the UK is the federal system, meaning different states can provide many opportunities to reform, and natural experiments. As McGuinness and Schank note, successful projects do require consistent political support right from the top. Let’s hope that the imperatives of having to deliver better outcomes for political reasons and needing to restore some order to the public finances during the recovery will mean that support is there.

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Humanomics – yes please

After a 700+ page tome, excellent as it was, I went next for Deirdre McCloskey’s 100 page Bettering Humanomics: A New, and Old, Approach to Economic Science. Her style is something of an acquired taste – I like it, but know some don’t. In any case, there is no doubting the extraordinary breadth and depth of her knowledge (which was on full display in her Bourgeois Virtues trilogy).

This essay is an update on a constant theme through McCloskey’s work, which is the need for a broader methodological approach to economics by economists. The discipline is hobbled by a narrow range of methods, an obsession with one particular style of showy reasoning (often powerful, but often tipping over into ‘mathiness‘ or the cult of statistical significance. Nick Crafts refers to the ‘identification police’, a character everybody who has had a paper rejected by Reviewer 2 because he doesn’t think causality has been demonstrated in the approved way will recognise. The methodological constraints are reinforced by the tyranny of the Top 5 and the insider process for selection that characterises them.

Anyway, I was predisposed to agree with McCloskey in Bettering Humanomics. Her main theme is that ideas and language shape the economy, and economics needs to listen. As she points out, rhetoric has often changed things on the ground in dramatic and sudden ways – we are not deterministic products of centuries of culture. Economies can turn around in short periods – think post-war Germany, Ireland and Portugal, or Thailand and South Korea. Such changes – and many other examples from the impact of advertising to same-sex marriage – torpedo a “notion of preknown preferences derived from utilitarian theory of decision without rhetorical reflection.” The implication is that the kind of arguments about economic development popular among economists based on game theory or some other theoretical structure explain too much: they are too universalist, and ignore the way our actions at any moment are shaped by the expectations of others and the contextual specifics. I cover similar ground in my next book, Cogs and Monsters (out October 12th!).

So, I liked Bettering Humanomics. It’s critical of economics but a critique by someone who knows what she’s talking about and loves the analytical and empirical power of the subject. I think economics is changing, re-embracing the work of economists such as Hirschman and Baumol and Veblen – I hope so. 51jI00dx7mL._SX331_BO1,204,203,200_