Category: Books
What should I ask Richard Hanania?
Yes, I will be doing a Conversation with him. Richard does have a new book coming out, Kakistocracy: Why Populism Ends in Disaster. While I liked the book (and blurbed it), I do not feel our conversation about the book would be that interesting — too much beating up on the stupidities of other people, which is an activity not in short supply. So we agreed to (mostly) discuss Joseph Conrad’s Nostromo instead. Given that, what should I ask Richard?
*How to Win a Trade War: An Optimistic Guide to an Anxious Global Economy*
That is the new Soumaya Keynes book, out today. I was happy to have blurbed this book, and here is an essay, on export restrictions, based on the book.
A Beautiful Theory Falls to Ugly Data
My latest paper, A Test of the Coase Conjecture Using Prices of Electronic Books, with the excellent Tim Groseclose, has just been published. The Coase Conjecture is another one of Coase’s little ideas — the original paper is six pages — that has spawned hundreds of follow-up papers and thousands of citations.
The idea is simple. A monopolist of a durable good has a time-inconsistency problem. Set the monopoly price in period 1 and he will be tempted in period 2 to cut the price and mop up the customers whose valuations sit between the period-1 price and MC. But the same logic applies in period 2, and again in period 3, and so on — eventually the price unravels to MC. Consumers see this coming, the monopolist knows the consumers see it coming, and so the monopolist cuts price to MC in period 1. And since a “period” is just the interval between price changes, the whole unraveling happens — in Coase’s phrase — “in the twinkling of an eye.”
The theorists, most notably Gul, Sonnenschein and Wilson and Fudenberg, Levine and Tirole, formalized Coase’s insight and showed that under quite general conditions the logic goes through. Which is rather surprising, since, as Tim and I point out, Coase’s conjecture implies that many patents and copyrights are essentially worthless — a prediction wildly at variance with the facts. Other theorists, including Stokey, Ausubel and Deneckere, and Board and Pycia, have offered variants under which the Coase outcome does and does not obtain.
For all this theory, there have been almost no direct tests of the Coase Conjecture apart from a handful of lab experiments. Ours is one of the first papers to take the conjecture to the real world. We look at e-books, an unusually clean setting: digital goods are durable, marginal costs are low, resale is limited, and prices can be changed quickly. Using the prices of e-books that are in the public domain as a proxy for marginal cost, we ask: (a) do prices rapidly fall to MC, and (b) does the market clear in the first period? The answer to both is no. E-book prices begin well above MC, sales continue over many periods, and prices don’t even decline monotonically.
We reject the Coase Conjecture decisively.
The paper has an interesting history. The theorists (or the referees we guessed were theorists) praised the paper for taking the theory seriously but inevitably had a fillip to offer, distinguishing the world of pure theory from empirical tests. The empiricists, on the other hand, said our tests were too simple since no one takes the theory that seriously. It’s good to see the paper find a home!
We reject the Coase Conjecture decisively, but it remains to say why. We can rule out some explanations — it’s not rising MC, and it’s not the finiteness of buyers (which can support a perfectly price-discriminating Pac-Man equilibrium).
Two theories remain: 1) sellers can commit not to lower prices, and 2) the outside-options model of Board and Pycia. I prefer the former, my co-author prefers the latter. To me, commitment just isn’t that hard. The standard story is that profits are like cookies on the table and the monopolist can’t resist — but at least the people tempted by cookies get to eat the cookies! The Coase profits are illusory: the monopolist races to MC in period 1 precisely because they know they won’t resist later and as a result they don’t even get a taste of profit! Too clever by half. I say, show some backbone. Firms are *all about* commitment — to workers, consumers, contractors. Why not to a price? My co-author points out, however, that this is more Tabarrok-vibe than carefully laid out theory.
Tim likes the Board and Pycia model which begins with the plausible idea that consumers have outside options — if they don’t buy the book today, they will buy another book, rent the movie, or borrow from the library — and crucially, once they take the outside option, the consumer never returns to the market. You might think outside options would make it *harder* for the firm to set a high price, but Board and Pycia show in a very clever but extended argument that when you carefully work out the full equilibrium the opposite holds: outside options give firms a time-consistent incentive to set and keep a high price. Tim explains the argument further here (see also our paper for an intuitive breakdown).
In any case, the Coase Conjecture — at least as modelled by the theorists — fails in an environment most conducive to it.
A beautiful theory falls to ugly data.
What I’ve been reading
1. Paul Mendes-Flohr, Martin Buber: A Life of Faith and Dissent. A beautifully written, first-rate intellectual biography of Buber. It is hard to imagine finding a better book on him.
2. Robert C. Austin and Artan R. Hoxha, Enver Hoxha: Twentieth-Century Tyrant. How did this strange story end up happening? This book offers the best set of explanations I have seen. But Hoxha himself remains a psychological cipher at the end of it all? It turns out he never thought Mao was much of an ideologue, being too influenced by Chinese culture and thought. Also I had not previously realize how much Albania’s growing youth population — with the most natalist demographics in Europe at the time — was considered a major threat to the regime.
3. Malachi Haim Hacohen, Karl Popper: The Formative Years 1902-1945. Such an excellent and high-level work. And the author is not afraid to accuse Popper of making everything about himself, and also writing on topics (Plato, Hegel, Marx) where he was less than well-informed. I had not known that Popper hated Toulmin’s Wittgenstein’s Vienna book, feeling that the actual Viennese environment at the time was far more positive and forward-looking than most intellectual historians were inclined to grant. Nor had I known how cut off Popper was during his New Zealand years, as there were no plane connections, New Zealand news did not cover foreign affairs very much, and the mail was painfully slow. Popper also wanted to turn the Mont Pelerin Society into a coalition group, including socialists. That did not happen.
4. Frank Callanan, James Joyce: A Political Life. An excellent, lengthy study, I now see Joyce as intensely political whereas I did not before. “His fiercely Parnellian critique of Ireland and Irish nationalism is only politically intelligible as written from within Irish nationalism. It is an argument addressed to Irish nationalists. The paradox of Joyce’s nationalism is that it is in his critique of nationalism that his nationalism is most evident.” As Italo Svevo once stated: “Joyce is twice a rebel, against England and against Ireland.”
5. Suzy Hansen, From Life Itself: Turkey, Istanbul, and a Neighborhood in the Age of Erdoğan. An insightful look into Erdoğan, Turkish Islamism, parts of Istanbul, and most of all how Turkey slid into autocracy. One of the best case studies I know of on how a fragile democracy can go away.
All of these books are very good. I’ve been seeing complaining in the press lately, and on social media, about the paucity of book reviews these days. Well, no one is stopping you from reviewing books! Just do it.
The carousel trade (arbitrage)
Imagine two companies which are secretly controlled by the same people. If company A imported some phones, then sold them to company B, it charged VAT on the deal. If company B then exported the phones, it reclaimed — from the government — the VAT it had paid to company A. the integrity of the VAT system depends on the two totals balancing out. The money that A pays in is equl to the money that B takes back. The scam lay in A disappearing and not handing over the money it owed, but B till claiming it. The hidden owners of the two firms therefore earned for themselves 17.5 per cent (the rate at which VAT was then charged) of the value of the shipment of the phones. The more phones you sold to yourself, the more money you made.
That is John Lanchester in the LRB, citing Oliver Bullough’s Everybody Loves Our Dollars: How Money Laundering Won.
Robert Wright’s *The God Test*
The subtitle is Artificial Intelligence and Our Coming Cosmic Reckoning, due out June 23.
In the first chapter, Wright summarizes four of his perspectives, these are my paraphrases of his pp.5-6:
1. When it comes to AI, we should be somewhere on the awe spectrum.
2. We can create a future where the upside of AI far outweights the downside, though that involves steering human understanding toward the better side of the awe spectrum.
3. A major reorientation of human thought is required, and right now few people seem inclined to do that.
4. The worldviews of the current AI acclerationists and also doomers are not cosmic enough.
It is a good time for this book to be published, and I agree with much more of it than I disagree with. My main difference is that I am more focused on very small things — such as Rainier cherries and the forthcoming three to four hour Apichatpong movie — than on cosmic awe per se. For better or worse, I was not born with those genes, and unlike Wright I am far from Buddhism. I do think there will be a transformation of “observed awe,” and I am somewhat worried that it will not go well. Will we be good at building a fairly new world, if not from scratch, on the basis of some new premises about what is possible and what is not? I will in any case interpret the pending transformation through a Straussian lens, namely thinking that a lot of the observed transformation of awe will be about something other than what people are claiming. It will be about people arguing over relative status, but under different guises. Not as tasty as a good Rainier cherry, but interesting to follow as well.
But are we still good at steering and evolving grand visions? Christianity and the Enlightenment are a hard act to follow.
What should I ask Chase Koch?
Yes I will be doing a Conversation with him. Chase and Charles Koch have a new book out, namely
*In the Realm of the Last Man*
As Mark Lilla, a recovering Straussian, once remarked, they [the Straussians] were like craftsmen building a house brick by brick on a foundation that Leo Strauss had laid. But they would never become architects of that house, or decide that the house was too small for them to comfortably live in. Moreoever, Strauss disparaged social science and what he considered naive forms of positivism prevalent in American universities. This led some of his followers to disdain merely empirical accounts of current events. If you are more of a Hegelian, you need to pay attention to actual history if you are to give an account of how ideas play out in the real world.
That is from Frank Fukuyama’s forthcoming memoir, recommended of course.
Repugnant Economics
I spoke on a panel at AEI with Nobelist Al Roth about his new book, Moral Economics, which covers “repugnant markets,” from prostitution to surrogacy to kidney exchange. A fun book!
My case study was acting. Acting was considered repugnant for over 2,000 years. In Rome, actors could not vote, hold office, or be trusted to give an oath in legal proceedings. So why don’t we find acting repugnant today?
One lesson: weighing costs and benefits is not enough. Roth discusses empirical research showing that legalizing prostitution cut STDs and sexual assaults—against prostitutes and others. But evidence alone won’t shift a repugnance norm. You also have to reframe the activity. Acting, for example was reframed from body rental to a skill requiring intelligence, training and ability. So I went out of my way to say that I am a fan of Aella—though not her only fan—and that I see no reason why escorting should not be considered a skill, requiring intelligence, training, and ability. I can think of few better ways of raising social welfare than making sex 10% better!
I also spoke on human challenge trials. Roth and I agree: challenge trials could have sped up COVID vaccines and saved tens of thousands of lives. We should be angry this didn’t happen. Why didn’t it? Even though most people think human challenge trials are a good idea, there was a repugnance bottleneck because the minority who did find human challenge trials repugnant were in charge. I discuss how to change this.
Al leads the discussion. My comments start at 25:15.
What I’ve been reading
1. Mikhail Fishman, The Successor: Boris Nemtsov, Vladimir Putin, and the Decline of Modern Russia. One of the best books to read on how Russia moved from “had some democratic elements in place” to autocracy, on a step-by-step basis. The story is told using the career of Boris Nemtsov, who was assassinated in 2014, as a lens. The author has biases of his own, but they do not detract from what is valuable here.
2. Siri Hustvedt. Ghost Stories: A Memoir. About her history with her now-deceased husband Paul Auster, and how she dealt with his death. Moving and insightful, recommended.
3. Thomas Mann, Doctor Faustus, a new translation by Ritchie Robertson. An imperfect, problematic work, too caught up with its own Germanness, and lacking dramatic tension. Still, an important work and this new translation is much better than the old one.
Elsewhere, here is Beeple on AI and Monet, for the terminally online only.
Christopher Nolan, Straussian?
When asked what secondary literature Nolan consulted in working on his epic magnum opus masterpiece, he said none. None save Benardete’s The Bow and the Lyre. “It was my muse” —Christopher Nolan,
, April 2026.
Here is the link.
My excellent Conversation with Bob Spitz
Here is the audio, video, and transcript. Here is the episode summary:
Bob Spitz has written major biographies of the Beatles, Led Zeppelin, Bob Dylan, and now the Rolling Stones — but also, somehow, Ronald Reagan and Julia Child. In rock, his credentials were hard won: he started out hustling gigs for an unknown Bruce Springsteen for six years, moved on to handling Elton John’s American business, and spent long enough in the world to find himself jamming with Paul McCartney and chatting with Bob Dylan on a stoop in the Village. The Reagan and Julia Child books are harder to explain, and perhaps that’s the point—Spitz seems to do his best work when he has no business writing the book at all.
Tyler and Bob discuss how the Stones became so great so quickly, what they added to the blues, how their melodies stack up against the Beatles’, whether Exile on Main Street deserves its canonical status, which songs are most underrated, what Charlie Watts actually got out of playing in a rock band, the rise and fall of Brian Jones, how the Stones outlasted nearly everyone, the influence of Mick’s London School of Economics training, why popular music has lost its cultural influence, what we should still be asking Paul McCartney and Ringo Starr, whether the Beatles’ breakup was good for the world, how senile Reagan really was in his second term and whether he was ever truly a communist, how good a cook Julia Child actually was, his next book on Lennon’s second act, and much more.
Excerpt:
SPITZ: Mick, from a very early age, was an exercise freak.
As we know from my investigation in the book, Mick’s father was the Jack Lalanne of the United Kingdom. He had a television show, an exercise show like Richard Simmons, and he always had a great person to show off the exercises, young Michael. He would say, Mike, get down, show him 50 pushups. Mike, do 100 chins, and Mick would jump to it and do it. That man still has a 27-inch waist at the age of 83.
Keith, on the other hand, is a medical miracle.
And this:
COWEN: Mick once said his favorite economist was Friedrich A. Hayek. Do you know anything more about that?
SPITZ: I do not, actually. I think it’s incredible that Mick had favorite economists. We do know that Mick was a scholarship student to the London School of Economics, and that for two and a half years, he attended and got pretty good grades. He did fairly well. The one thing that amazes me about Mick coming out of that London School of Economics is this. After 1967, when Andrew Loog Oldham stopped managing the Stones, they have never had another manager. They’ve had some money managers, but as far as managers go, Mick Jagger was their manager.
And:
COWEN: How good a cook was Julia Child? That’s another of your biographies. Actually, how good was she?
SPITZ: She was great. She was a wonderful person, but here’s the little secret. Julia was a great cooking teacher, but not a very good cook. There were people who left her house—and John Updike told me this. He was a frequent guest with her. Corby Kummer, who was a wonderful food writer, told me this as well. They’d leave Julia’s house. They’d go to a little park around the corner, and they’d get physically ill. They’d get sick. Julia used too much butter, too much cream. She really had no reins on her when it came to using things like that.
Bob was excellent throughout, and I very much enjoyed his new biography of the Rolling Stones.
What I’ve been reading
1. David Narrett, The Cherokees in War & at Peace 1670-1840. An excellent book, one of the two best books on a single Native American tribe I have read. The book actually aims at explaining the Cherokees and enlightening the reader – how rare. In 1700, there were no more than 20,000 Cherokees, mostly in the southeast, so it is amazing what the author was able to come up with. Will make the year’s best of non-fiction list.
2. Boyd van Dijk, Preparing for War: The Making of the Geneva Conventions. A very good look at the negotiations behind the Geneva Conventions of 1949 and just how driven by national self-interest they were, including colonial motives from the major colonial powers, who wished to retain stronger rights to put down uprisings. The Soviets wanted strong protections against torture (!), as they thought this might limit the power of the United States to bomb their population into submission. Yet nuclear war ended up being permitted, largely at the insistence of the U.S. And so on. The colonial subjects of course had not much say in any of this.
3. Jim Windolf, Where the Music Had To Go: How Bob Dylan and the Beatles Changed Each Other — and the World. An excellent and engaging book, which even serious fans can learn from. The first time Paul McCartney heard the music of Bob Dylan he called it “folk crap,” to his brother Mike. Dylan and McCartney grew closest in 1971, when Paul was making the Ram album in NYC. Music from Big Pink is one of Paul’s favorite albums of all time. Thingumybob, first composed by Paul in 1968, later received accretions from Harrison and Dylan and became an odd three-party composition, albeit never released on a recording. And here is Paul’s account of bumping into Dylan at the airport.
If you wish to think about the Roman Empire more, there is Pliny & Co., How to Make Money: An Ancient Guide to Wealth Management.
Thomas Asbridge, The Black Death: A Global History of Humanity’s Most Devastating Pandemic is a good overview.
There is also Devon Cox, Beyond Beauty: A Portrait of John Singer Sargent.
*Last Evenings with Teresa*
The author is Juan Marsé, this novel is set in 1956, first published in Spain in 1966, and only now appearing in English. Here is the Amazon link. Marsé is one of the handful of great authors who has no real presence in the Anglo world, Bioy Casares would be another. You can think of the story as covering class conflict, romance, and their intersection in the Barcelona of the 1950s. Definitely recommended, I am excited to see this finally out and am reading it avidly (in Spanish it is too difficult and slow for me). Here is one review out of a very small number in English.
Ryan Avent’s new book *In Good Faith*
The subtitle is How the Nature of Belief Shapes the Fate of Societies. Here is Ryan doing a podcast with Brink Lindsey. As Brink writes:
All of the blessings of modernity, Ryan Avent argues in a fascinating new book, rest on faith. It is our faith in others, our ability to trust strangers we will never meet, that makes possible the large-scale cooperation that has given us science, modern economic growth, and liberal democracy. But if everything depends on our ability to weave and maintain particular webs of complex meaning, what happens when we allow those webs to weaken and fray? In his book In Good Faith, Ryan contends that the dysfunctions and discontents plaguing 21st century democracies reflect such underlying neglect.
I am pleased to see “thought books,” as one might call them, headed in this direction and I was happy to blurb Ryan’s latest effort.