What I’ve been reading

by on October 22, 2014 at 1:59 am in Books | Permalink

1. Doris Kearns, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism.  This Pulitzer-Prize winning book is compulsively readable and is most valuable on how the Roosevelt and Taft administrations fit together in American history.  I wish it had more detail on economic issues.

2. Walter Isaacson, The Innovators: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution.  At first I was bored but the book picks up and is then interesting throughout, most of all I enjoyed the portrait of Bill Gates.  It is a good overview of how some of the main pieces of today’s information technology world fell into place, starting with the invention of the computer and running up through the end of the 1990s.

3. Russ Roberts, How Adam Smith Can Change Your Life: An Unexpected Guide to Human Nature and Happiness.  The best and most readable introduction to Adam Smith’s Theory of Moral Sentiments.

4. Mark Metzler, Capital as Will and Imagination: Schumpeter’s Guide to the Postwar Japanese Miracle.  More interesting on Japanese economic history, and in particular postwar economic planning, than on Schumpeter.

5. Jan Swafford, Beethoven: Anguish and Triumph.  A consistently excellent and engaging treatment of a figure you cannot read too many books about.  It does not seem like a book of 1000+ pages.  The funny thing is, this book does not come close to exhausting Beethoven, in fact it barely scratches the surface.  It’s as good as the classic Maynard Solomon biography.

Maybe that welfare cost is not very high at all.   After all, if Amazon does not carry a book you can sign up at the Barnes & Noble website and that takes a few minutes at most.

There is a tension in most criticisms of Amazon.  On one hand, the critic wishes to argue that a “not carry” decision by Amazon has a big impact on how a book does.  On the other hand, the critic wishes to argue that the loss of access to particular titles is a big deal.  You cannot easily have it both ways.  If readers won’t switch to B&, they must not care very much about particular titles, in which case the Amazon refusal to carry (or delay in shipping) is small even relative to the size of the (small) trade in books.

Krugman’s column today, which covers Amazon vs. Hachette, appears terrible at first glance, but in fact he presents a new and original argument.  Get past the mood affiliation and you come to this:

…what Amazon possesses is the power to kill the buzz. It’s definitely possible, with some extra effort, to buy a book you’ve heard about even if Amazon doesn’t carry it — but if Amazon doesn’t carry that book, you’re much less likely to hear about it in the first place.

If I may fill in some blanks, one possible version of the hypothesis — to pull an idea from Gary Becker and Steve Erfle — is that readers consume both “books” and “buzz around books” as complements.  The marginal gains from books can be low but the marginal gains from the bundled package may be much higher and those higher gains will not be measured by the (high) price elasticity of book purchases.

In the early stages of this war, Amazon boycotts have often increased the buzz for a book, such as with Beth Macy’s Factory Man.  But if these practices continue, they will cease to be news stories and an Amazon refusal to carry or promote plausibly will damage how books will do, without much potential for upside.

How much of the value in a book/buzz package is due to the buzz?  65 percent?  That would explain the concentration of reading interest among bestsellers and books your peers are reading.  But if Amazon won’t carry or promote a book, does the total supply of buzz fall?  Or does the buzz simply transfer to other titles?  In the latter case we are again back to small welfare costs from an Amazon refusal to carry.  Krugman’s idea is fun, but I am still inclined to think the welfare cost of Amazon supply restrictions on individual books likely is small, again even relative to the size of the book sector, much less relative to gdp.

It is fine to argue that Amazon is being unfair to some authors and to object on ethical grounds.  The economist also should add that readers don’t seem to mind very much.  Most of the objections I am seeing are coming from authors and publishers, who of course in this sector are much less diversified in their interests than are readers.

Charles Murray on Ayn Rand

by on October 19, 2014 at 7:30 am in Books, Philosophy | Permalink

Charles Murray has a good piece on Ayn Rand, critical in parts but especially insightful about why Rand’s books continue to be so inspirational and influential:

Ayn RandRand expressed the glory of human achievement. She tapped into the delight a human being ought to feel at watching another member of our species doing things superbly well. The scenes in “The Fountainhead” in which the hero, Howard Roark, realizes his visions of architectural truth are brilliant evocations of human creativity at work. But I also loved scenes like the one in “Atlas Shrugged” when protagonist Dagny Taggart is in the cab of the locomotive on the first run on the John Galt line, going at record speed, and glances at the engineer:

He sat slumped forward a little, relaxed, one hand resting lightly on the throttle as if by chance; but his eyes were fixed on the track ahead. He had the ease of an expert, so confident that it seemed casual, but it was the ease of a tremendous concentration, the concentration on one’s task that has the ruthlessness of an absolute.

That’s a heroic vision of a blue-collar worker doing his job. There are many others. Critics often accuse Rand of portraying a few geniuses as the only people worth valuing. That’s not what I took away from her. I saw her celebrating people who did their work well and condemning people who settled for less, in great endeavors or small; celebrating those who took responsibility for their lives, and condemning those who did not. That sounded right to me in 1960 and still sounds right in 2010.

Second, Ayn Rand portrayed a world I wanted to live in, not because I would be rich or powerful in it, but because it consisted of people I wanted to be around. As conditions deteriorate in “Atlas Shrugged,” the first person to quit in disgust at Hank Rearden’s steel mill is Tom Colby, head of the company union:

For ten years, he had heard himself denounced throughout the country, because his was a ‘company union’ and because he had never engaged in a violent conflict with the management. This was true; no conflict had ever been necessary; Rearden paid a higher wage scale than any union scale in the country, for which he demanded—and got—the best labor force to be found anywhere.

That’s not a world of selfishness or greed. It’s a world of cooperation and mutual benefit through the pursuit of self-interest, enabling satisfying lives not only for the Hank Reardens of the world but for factory workers. I still want to live there.

…In scene after scene, Rand shows what such a community would be like, and it does not consist of isolated individualists holding one another at arm’s length. Individualists, yes, but ones who have fun in one another’s company, care about one another, and care for one another—not out of obligation, but out of mutual respect and spontaneous affection.

Ayn Rand never dwelt on her Russian childhood, preferring to think of herself as wholly American. Rightly so. The huge truths she apprehended and expressed were as American as apple pie. I suppose hardcore Objectivists will consider what I’m about to say heresy, but hardcore Objectivists are not competent to judge. The novels are what make Ayn Rand important. Better than any other American novelist, she captured the magic of what life in America is supposed to be. The utopia of her novels is not a utopia of greed. It is not a utopia of Nietzschean supermen. It is a utopia of human beings living together in Jeffersonian freedom.

Also worth reading is this superb piece by Robert Tracinsiki, All an Ayn Rand Hero Really Wants is Love.

There is a new product to help you with getting things done,

Write or Die is an application for Windows, Mac and Linux which aims to eliminate writer’s block by providing consequences for procrastination and, new to this version, rewards for accomplishment. Historically Write or Die has specialized in being the stick in the carrot/stick motivation continuum, but it’s time to experiment with encouragement.

One of the biggest improvements is the inclusion of visual stimulus. Instead of just writing to avoid annoying sounds and alarm warning colors you can now customize your stimulus. If you like to see a cute puppy after you’ve reached a certain number of words, you can. If you’d like to write in fear of a jiggling spider, you can do that too.

Under some modes, if you spend too much time without typing, it starts erasing the words you already have created.

For the pointer I thank Jonathan Falk.

What I’ve been reading

by on October 11, 2014 at 1:40 am in Books, Food and Drink | Permalink

1. David Sterling, Yucatán: Recipes from a Culinary Expedition.  This cookbook is “too good” to actually cook from, but as account of food from Yucatán, along with history, photos, and recipes, it has to count as one of the year’s most notable publications.

2. Sebastian Edwards, Toxic Aid: Economic Collapse and Recovery in Tanzania.  He gives foreign aid to Tanzania an “F” for the 1961-1981 period, a “B minus” for 1981-1994, and a B+ for the latter part of that period.  Edwards is a top international economist and this is one of the best thought out books on foreign aid.

3. Todd Kashdan and Robert Biswas-Diener, The Upside of Your Dark Side.  Only some people should read this book.

4. Virginia Woolf, Flush: A Biography.  This one doesn’t get huge amounts of play, but it’s actually an awesome book about…a dawg.  Recommended, beautifully written and easy to read, Straussian too though you can read it straight up for fun as well.

5. Rabih Alameddine, An Unnecessary Woman.  A charming tale for bibliophiles, centering around a Lebanese woman who translates one classic novel a year, but for herself only.

*The End of Normal*

by on October 7, 2014 at 1:08 am in Books, Economics, History | Permalink

That is the new James K. Galbraith book, subtitled The Great Crisis and the Future of Growth.  It covers a lot of ground and everyone will find something to object to in here.  Still, I found it a good example of some fresh thinking, though it is not a tract which sees through its arguments with a lot of detail.  I am glad to have read it.

I especially enjoyed the integration of high resource costs with Keynesian economics, as Galbraith has become more of a pessimist about long-run growth and he now sees the energy price shocks as essential to the economic history of the last forty years.  The analysis of the Soviet Union as an economic regime with super-high fixed costs, heavily reliant on (supposed) economies of scale, was my favorite part of the book.  Here is one excerpt from that:

The Soviet economy was a deeply integrated system, with little redundancy, little internal competition, weak capacity for introducing new technologies, and vulnerable to breakdowns in transportation and distribution.  This did not matter all that much for bulk items such as oil or steel, but it was a serious problem for perishables like food.  Fresh produce usually did not survive the trip from farm to market, which is why Russia’s urbanites so prized their dachas…

One way to sum up the Soviet system is to say that it operated with very high fixed costs.  It had high overheads.  To produce anything at all  (or, for that matter, even to produce nothing), those fixed costs had to be paid.  And they had to be paid whether or not output reached the consumer, and whether or not the consumer wanted that output when it did.

Galbraith also makes the important point that stagnant or falling median incomes need not imply growing envy or growing class warfare or growing frustration and the like.  Very often wage profiles fall by having the new labor market entrants start at lower rates.  Individuals still make steady wage progress over the major part of their working lives and feel they are “getting somewhere.”  Furthermore the gap between them and their most noticeable peers — those right above them — may not be growing at all.  Other discussions of median wages often serve up a good deal of sloppiness on this point.

[China] must adopt a planned economy and social legislation to secure the livelihood and survival of every citizen, and it is imperative that we eventually accomplish the objective of “transforming [all] capital into state capital [nationalization of capital], and transforming [all] enjoyment into enjoyment of the masses.”

The answer is here.

That is from Morris L. Bian, The Making of the State Enterprise System in Modern China: The Dynamics of Institutional Change, p.205.  This book is useful for showing early Chinese moves in the direction of state planning and state-owned enterprises.

The pooling equilibrium

by on October 4, 2014 at 1:30 pm in Books, History, Sports, Uncategorized | Permalink

During the Nazi occupation of Paris:

Germans spent a good deal of their free time in the bathhouses and swimming pools of Paris for the same reason: “In a swimsuit, no one could tell the difference between a German and a Frenchman.”

That is from the new and excellent When Paris Went Dark: The City of Light Under German Occupation, 1940-1944, by Ronald C. Rosbottom.

1. Popular music: The Everly Brothers, I recommend this song.  There is also Loretta Lynn and Dwight Yoakum and Merle Travis, I like this video.  In jazz there is Lionel Hampton.

2. Visual artist: Edgar Tolson, that image is not fully safe for work.  John James Audobon worked in the state quite a bit.

3. Movie, set in: Goldfinger, though of course immobilizing that stock would not affect the world price of gold very much.  And keep in mind the nominal price of gold was pegged back then under Bretton Woods — should we really have expected a lot of goods and services deflation, just because some nutcase set off a bomb?  I don’t think so.

4. Monk: Thomas Merton.  He was an excellent writer, as a monk I cannot judge.

5. Author: Hmm…I don’t really like either Robert Penn Warren or Hunter S. Thompson.  So Thomas Merton wins a second category, try The Seven Storey Mountain.

6. NBA player: The incandescent Rex Chapman, recently arrested for shoplifting.  I liked Pervis Ellison too, believe it or not.

7. Movie director: I believe John Carpenter grew up there, he has several excellent films, including The Thing, Starman, Dark Star, and Escape from New York.  I don’t actually enjoy the D.W. Griffith movies.

8. Poet and impresario: Muhammad Ali.

For some inexplicable reason Victor Mature was one of my father’s favorite actors.  There is also Johnny Depp and George Clooney.  Economist Milton Kafoglis passed away not long ago.  How about the Kentucky Colonels?

The bottom line: If I had better taste in fiction, this list would be strong across the board.  I’m in Louisville for the day.

Arrived in my pile

by on September 27, 2014 at 5:41 pm in Books, Uncategorized | Permalink

Walter Mischel, The Marshmallow Test: Mastering Self-Control.

Isabel Sawhill, Generation Unbound: Drifting into Sex and Parenthood without Marriage.

Eric Kaplan, Does Santa Exist?: A Philosophical Investigation, by one of the producers of The Big Bang Theory.

China fact of the day

by on September 26, 2014 at 5:51 am in Books, Political Science | Permalink

…the size of the Chinese government and party bureaucracy is surprisingly modest…In this respect, the Chinese communist Party is similar to previous Chinese dynasties as far back as the Han, which ruled the vast Chinese empire with a modestly sized civil service.

…China has only 31 government and party employees per thousand residents.  The number of civil servants per thousand residents in France is 95, in the United States, 75, and in Germany 53.

You will note that these numbers exclude state-owned enterprises, which in China are extensive although shrinking in relative terms.

That is from the new and excellent Nicholas Lardy book Markets Over Mao: The Rise of Private Business in China.  In my view the truth lies somewhere between the arguments of Lardy and the thesis of Joe Zhang, see the first Amazon review for Zhang’s critique of Lardy, plus Zhang’s comments here.  Here is Scott Sumner criticizing Zhang.

*Trillion Dollar Economists*

by on September 24, 2014 at 3:18 am in Books, Economics, History | Permalink

That is the new book by Robert E. Litan and it is the single best attempt to answer the question of what good economists have done the world (I am also a big fan of Alex’s earlier edited volume, Entrepreneurial Economics on this topic, the Litan is more current).  The subtitle is How Economists and their Ideas have Transformed Business.

Every chapter is clear and convincing, and the topics include optimization, regression, Moneyball, experimental economics, auctions, consulting, matchmaking (romantic and otherwise), finance, deregulation, the telecommunications revolution, Hal Varian at Google, prediction markets, and much more.

Definitely recommended.

Jeremy Waldron on Nudge

by on September 23, 2014 at 11:08 am in Books, Education, Philosophy, Political Science | Permalink

Waldron is one of my favorite contemporary philosophers, here is one bit from his NYRoB essay:

More reassuring, I think, would be a candid assessment of what might go wrong with nudging. One of Sunstein’s many books (from before his time in the White House) is entitled Worst-Case Scenarios. Could we please have something like that as a companion to Nudge?

I am afraid there is very little awareness in these books about the problem of trust. Every day we are bombarded with offers whose choice architecture is manipulated, not necessarily in our favor. The latest deal from the phone company is designed to bamboozle us, and we may well want such blandishments regulated. But it is not clear whether the regulators themselves are trustworthy. Governments don’t just make mistakes; they sometimes set out deliberately to mislead us. The mendacity of elected officials is legendary and claims on our trust and credulity have often been squandered. It is against this background that we have to consider how nudging might be abused.

The full piece is here.  By the way, there is a new Cass Sunstein book out, which I have not yet read, Valuing Life: Humanizing the Regulatory State.

The Twitter pointer is from Michael Clemens.

What I’ve been reading

by on September 23, 2014 at 1:46 am in Books, Uncategorized | Permalink

Ruth Towse, Advanced Introduction to Cultural Economics.  She remains the definitive presenter of this material.

I very much enjoyed Ian Leslie’s Curious, a polyglot look at being…curious.

Richard Flanagan, The Narrow Road to the Deep North.  A moving and vibrant novel about an Australian in a prisoner of war camp in WWII and his escapades surrounding that time in his life.

Edward D. Kleinbard’s We are Better Than This: How Government Should Spend Our Money is a well-done progressive take on the expenditure side of fiscal  policy.

Andrea Louise Campbell, Trapped in America’s Safety Net: One Family’s Struggle.  A good anecdotal but also analytical study of how means-tested welfare programs can make life very difficult for the poor.  Recommended.

There is a symposium in The Guardian on that question, here is my short contribution:

Thomas Piketty’s Capital in the Twenty-First Century has been a hit for several reasons, most notably the quality of the work. But I’d like to focus on a neglected reason why the book has found so much support, namely it appears to strengthen the case for redistribution.

Most previous commentators focused on income inequality. Bill Gates or JK Rowling have earned more than CEOs or authors in the past, while incomes in the middle class or lower middle classes are often stagnating below what previous generations could expect. That’s a labor market issue – namely that some individuals are not very much demanded by employers.

The obvious questions are then a) how can we make low-earners more productive, and also b) how can we improve education?

Perhaps most importantly, as these issues get processed by the public there is a common attitude – whether justified or not – that many of the lower earners are partially or fully responsible for their own plight. The egalitarians don’t tend to win these policy debates.

In the simplest version of the Piketty model, wealth grows more quickly than does the economy as a whole and thus the picture changes. The relative losers are no longer low earners but rather anyone who is not a capitalist. Any disparity is due not to their shortcomings in labor markets but rather to their lack of a high initial endowment.

Furthermore redistribution will work like a charm, at least provided the redistribution is enough to give the poorer individuals some capital to invest.

If you are an activist who favors lots of redistribution, the Piketty story is a lot easier to tell yourself and to tell your audiences – and that is yet another reason for its popularity.

The other contributions are by Brad DeLong, Stephanie Kelton, and Emanuel Derman, who cannot bring himself to read the book.