Books

The author of this new and excellent book is David Skarbek and the subtitle is How Prison Gangs Govern the American Penal System.  It carries rave blurbs from Thomas Schelling and also Philip Keefer.  My favorite section was the discussion of how the rate of gang formation in prisons depends on how the prisons are governed (start at p.65).  For instance when prison officials cannot reliably protect prison inhabitants, gang membership is especially likely.  Gangs rarely operate in UK prisons and when they are do they are usually far less powerful.  Some observers believe that indeterminate sentences increase inmate frustration and stimulate gang formation within prisons.  Female prisoners in many states, such as California, also do not have gangs in the traditional sense, although they may form into “small families.”  Gangs are also more likely in large prisons with many inmates than in small prisons.

A very interesting book, which should be read by anyone with an interest in this topic.

War: What is it Good for? The Role of Conflict in Civilisation, from Primates to Robots, by Ian Morris, Profile, RRP£25/ Farrar, Straus and Giroux, RRP$30

In this remarkable book, historian Morris argues not only that war is a source of technological advance but that it brings peace. Through war, more powerful and effective states emerge and these in turn do not merely offer the blessings of peace, but impose it. The thesis is disturbingly persuasive. But, in a nuclear age, the great powers will have to try something else.

The full list is here, possibly gated.  They also recommend the Adam Tooze book on the post WWI era, which I now have finished and really like and also find to be quite Sumnerian.  Adam Minter’s Junkyard Planet is an excellent read as well.

I interviewed him.  You will find the full version here, the edited version here.  Not surprisingly, I prefer the full version.  Here is one excerpt:

TC: If I look back at your career, I see you’ve been fighting various kinds of wars or struggles against a lot of different injustices. If you look back on all those decades, during which time you’ve been right about many things, what do you think is the main thing you’ve been wrong about?

RN: Oh, a lot of things. Nobody goes through these kinds of controversies without making bad predictions. I underestimated the power of corporations to crumble the countervailing force we call government. We always knew corporations like to have their adherents to become elected officials; that has been going on for a long time. But I never foresaw the insinuation of corporatism as a policy in one agency after another in government. Franklin Delano Roosevelt foresaw some of this when he sent a message to Congress when he started the temporary national economic commission to investigate consecrated corporate power. That was in 1938. In his message he said that whenever the government is controlled by private economic power, that’s facism. Now, there isn’t a department or agency in Washington where anyone has more power—over it and in it, through their appointees, and on Congress, through lobbyists and political action committees. Nobody comes close. There’s no organized force that comes close to the daily power to twist government in the favor of Wall Street and corporatism, and to disable government from adequately defending the health, safety and economic well-being of the American people.

TC: Let’s say we look at the U.S. corporate income tax. The rate on paper is 35 percent, which is quite high. When you look at how much they actually pay after various forms of maneuvering or evasion, maybe they pay 17–18 percent, which is more or less in the middle of the pack of OECD nations. So if corporations have so much political power in the United States, why is our corporate income tax still so high?

…Sweden, a country you cited favorably, taxes capital income much more lightly than the United States does—not just on paper but in terms of what’s actually paid.

I also ask him about the Flynn effect, whether America needs a new kind of sports participation, and how much American churches have resisted corruption through corporatization, among a variety of other topics.  I tried to avoid the predictable questions.

By the way, you can buy Nader’s new book, Unstoppable: The Emerging Left-Right Alliance to Dismantle the Corporate State.  I very much enjoyed my preparation for this interview, which involved reading or rereading a bunch of his books and also a few biographies of him.

Arrived in my pile

by on June 24, 2014 at 2:20 pm in Books, Data Source, Economics | Permalink

Morten Jerven, Poor Numbers: How We Are Misled by African Development Statistics and What To Do About It.

This seems to be the place to start on this topic.

Peter de Keyzer, Growth Makes You Happy: An Optimist’s View of Progress and the Free Market.

Steven D. Gjerstad and Vernon L. Smith, Rethinking Housing Bubbles: The Role of Household and Bank Balance Sheets in Modeling Economic Cycles.  They present a bank balance sheet account of the Great Recession, with a good deal of background coming from the experimental economics direction.

In 100 Years, Leading Economists Predict the Future, edited by Ignacio Palacios-Huerta.

Robert Howse, Leo Strauss: Man of Peace.

He has an NBER review essay on the book.  Here is one bit:

Piketty’s “r > g” device, for all its amazing rhetorical power, does not take us very far. Our task of explaining and predicting inequality movements is not made any easier by the requirement that we must first predict both a “rate of return” and the growth rate of the economy. The formula r – g takes us no further than we were transported fifty years ago by the concept of total factor productivity as a “source” of growth. It will be another “measure of our ignorance.”

Here is more:

Oddly, however, for the twentieth century trends that he and his collaborators have documented so well, the relevance of the wealth/income and capital/income ratios for the income distribution is less compelling. Across countries, the levels and movements of this ratio do not correlate well with those in income inequality. Over time, there is more correlation, within Britain, or France, or Germany, or the United States. Yet, as we shall see later, the same overall movements will show up when we look at the inequality movements in incomes that have little to do with wealth, such as wage rates or in middle/lower income ratios.

The essay is interesting throughout and you will see at the end that Lindert is no friend of inequality and no enemy of highly progressive taxation.  By the way, here is a Lindert essay on three centuries of inequality in Britain and America (pdf).  Here is Lindert, with Williamson, on whether globalization makes the world more unequal.  He knows this area very well.

What book changed your life?

The Guinness Book of World Records. I mean that earnestly. It was the book that taught me that the world was full of passionate, peculiar human beings.

And these parts:

Where do you feel most free?

In airport bars.

How do you relax?

In movie theatres.

A longer FT interview is here.  The pointer is from @HugoLindgren.

An excellent new book drawn from some 2011 lectures he gave in China.  Macfarlane of course is a highly esteemed historian who has made critical breakthroughs in understanding the medieval roots of later English success, but he also has written extensively on Nepal, Japan, and China, including from anthropological perspectives. His status is high, and his works are generally quite readable, but somehow he has missed out on the recent interest in popular yet serious non-fiction books.

This work is not written as a book (thank goodness), it is more as if he is simply sitting down and telling you what you want to know.  He runs through all of the different factors that helped motivate the Industrial Revolution and the British breakthrough.  Here is one excerpt:

England was part of one of the most war-like civilizations in history.  The constant warfare in Europe was different from the long periods of peace in Japan or China.  The constant recurrent strife led to rapid technological and scientific evolution through a process of Darwinian selectionary  pressures — the survival of the “fittest.”  Guns, boats, navigation, knowledge of physics and chemistry, all rapidly improved.  The ships which crushed the Chinese in the Opium Wars in the nineteenth century were enormously different from the primitive medieval boats which would have been no match for a Chinese armada in the fourteenth century.  So England benefited from the positive effects — but others paid the cost.  Thus, at the battle of Omdurman, the British had six Maxim guns.  The result was 28 British dead, and eleven thousand of their enemies were slaughtered.

…So we need to understand that central imperial phase — the worst of all Empires, except perhaps the rest which were even worse.  The cost in terms of lives destroyed in slavery, opium and conquest is unbearable.  Yet it was also the context which allowed the most massive material and economic transformation in human history since the discovery of agriculture to occur, namely the Industrial Revolution.

His discussion of the importance of the legal system is also very good.  You can buy the book here.

I have written a review of this book, subtitled The Great Housing Disaster, for the Times Literary Supplement of 13 June 2014.  As I explain in the review, he tried to write a book about housing problems in the UK without accepting the Avent-Yglesias analysis that legal restrictions on supply are a big part of the problem.  Rather than looking to supply and demand, Dorling instead tries to blame “inequality, selfishness and hoarded extra bedrooms.”  It doesn’t succeed.  Here is an excerpt from my review:

There is not much of an argument in this book against a greater reliance on additional building and thus cheaper house prices.  Dorling refers to “slum landlords and cowboy builders” and complains that not all housing for low-income groups will be of high enough quality.  But that’s more of a general complaint about the nature of poverty than a problem with the way the housing market works.  He then retreats to the claim that the mobilization of space and empty bedrooms around the country, combined with refurbishing, will solve the problem.  On any given night, he argues, most bedrooms in the country are not being slept in.

But how to redistribute this unjust largesse of sheets and pillows?  It is not as if a bureaucratic authority can scour the country for the empty bedrooms of the elderly and hand over keys to struggling young families.  Dorling repeats the incantation that housing inequality is immoral, but without much of a recipe for turning spare rooms into cheaper housing.  Refurbishment, as the author suggests, is all to the good.  But why isn’t more of that happening already?  Either regulatory forces are holding back redevelopment (a suggestion Dorling is reluctant to entertain), or landlords are waiting because it is not yet clear which kinds of investments will be best on a piece of land.  In that latter case, the law would be unwise to force the matter too quickly and, more generally, legal control could well discourage entrepreneurs from refurbishing at all.

As I write in the concluding section of the review: “You can’t write a good book which attempts to repeal the laws of economics, especially when it focuses on an economic topic.”

I don’t yet see any link on line, not even a gated one.

What I’ve been reading

by on June 15, 2014 at 7:01 am in Books | Permalink

1. Alan Macfarlane, Thomas Malthus and the Making of the Modern World, Kindle edition.  It starts off slow, but overall an excellent short look at Malthus as an underrated thinker and a theorist of the cultural and demographic preconditions of capitalism.

2. Louise Lawrence, Children of the Dust, excellent, short and highly readable post-apocalyptic story, think of it as a precursor (1985) of some of today’s YA popular fiction, it should be turned into a movie.  I’ve ordered two more of hers.

3. Sudhir Vadaketh, Floating on a Malayan Breeze: Travels in Malaysia and Singapore.  A Singaporean travels through Malaysia to discover what divides their two countries and what ultimately unites them too.  I read this one straight through.  File under “great books you’ve never heard about.”  Honest and frank throughout.

4. Adam Tooze, The Deluge: The Great War and the Remaking of World Order, 1916-1931.  This one also starts slow but after about 13% becomes fascinating, especially about the internal politics in Germany and Russia, circa 1917-1918.  I’m not quite halfway through but finishing is a sure thing.  He has yet to cover monetary policy, however.

5. David Bromwich, The Intellectual Life of Edmund Burke.  Clear, thorough, and to the point on its stated topic.

6. Jenny Davidson, Reading Style: A Life in Sentences.  Why do we fall in love with some sentences rather than others?  This book is consistently insightful into classic (and sometimes not so classic) fiction.  For whatever reason, I agree with her about various novels to a remarkable degree.  Here is Jenny’s daily read.  Here is her blog.  This book induced me to order Stephen King’s Needful Things, which I have never read.

I have a new piece for The Upshot on that topic, here is one excerpt:

Counterintuitive though it may sound, the greater peacefulness of the world may make the attainment of higher rates of economic growth less urgent and thus less likely. This view does not claim that fighting wars improves economies, as of course the actual conflict brings death and destruction. The claim is also distinct from the Keynesian argument that preparing for war lifts government spending and puts people to work. Rather, the very possibility of war focuses the attention of governments on getting some basic decisions right — whether investing in science or simply liberalizing the economy. Such focus ends up improving a nation’s longer-run prospects.

It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

I also discuss new books by Ian Morris, Kwasi Kwarteng, and some research by my colleague Mark Koyama, as well as Azar Gat.  I did not have room in the piece to point out there is an interior solution concerning this issue.  That is, if the chance of war is too high, and property rights are too insecure, that isn’t good for economic growth either.

Matt has what is probably the single best, focused technical critique of Piketty.  Here are his concluding remarks:

Compared to the grand scope of Piketty (2014), the objective of this note has been quite narrow: to systematically explore the relevant evidence on diminishing returns to capital. Technical and uninspiring as this question may be, it is an essential step in knowing whether the prediction of rising capital income and inequality through accumulation—a prediction that gives Capital in the Twenty-First Century its title—will really come to pass. And given the evidence here that Piketty (2014) understates the role of diminishing returns, some skepticism is certainly in order.

But rejection of this specific mechanism does not constitute rejection of all Piketty (2014)’s themes. Inequality of labor income, for instance, is a very different issue—one that remains valid and important. Capital itself remains an important topic of study. Among large developed economies, the remarkably consistent trend toward rising capital values and income is undeniable. As Sections 3.3 and 3.4 establish, this trend is a story of rising capital prices and the ever greater cost of housing—not the secular accumulation emphasized in Capital — but it has distributional consequences all the same. Policymakers would do well to keep this in mind.

The full piece is here (pdf), excellent and on target throughout.

To be perfectly frank on this one, Matt here is completely correct and Piketty has not produced any effective response to this point, either within the book or without.  The internal response “I still think we need to worry about inequality therefore I side with Piketty” simply represents a misunderstanding of Matt’s argument.  Piketty’s mechanism of accumulation, as laid out in his book, is simply the wrong mechanism for understanding growing inequality, both theoretically and empirically.  And it is a shame that the Giles critique from the FT has attracted so much attention because it has distracted everyone from the more serious problems with the argument of the book.

Artistic musts

by on June 11, 2014 at 2:33 am in Books, Film, Music, Television, The Arts | Permalink

Not long ago, a group of people were sitting around a New York City Laotian restaurant and a challenge was made.  The challenge was to create a list of a particular kind, drawing upon the wisdom of the groups.  The producer of the dare (not myself, the person wishes to remain anonymous) put it like this:

…these are MUSTS, not “here’s something I like.”  You aren’t recommending, you are obligating.  That is a much larger responsibility and I urge you to use it with extreme caution.  Also, adding to the list constitutes a commitment to take in the list [emphasis added by TC], with the one caveat.

There is currently no food or visual art on the list.  We briefly discussed adding some food but I think it was going to get out of hand, plus Amazon can’t drone you tacos from Tyler’s favorite gas-station Mexican restaurant.  If the food or visual art is in NYC and readily accessible it could be considered.

Yes, we all obliged ourselves to consume the resulting list.  And what did we put on it?

Primer (movie)
[I am going to remove Upstream Color from the list.  I think it's a better movie than Primer, and I would watch it again twice back to back right now, but it's less of a cultural touchstone. ]

The Power Broker (book)

Nature’s Metropolis, especially Chapter 3 (book)

“Blink” (episode of Dr. Who from TV)

Before Sunrise trilogy (movies)

A State of Wonder: The Complete Goldberg Variations 1955 & 1981 (music)

The Forever War (book)

A Deepness in the Sky (book)
[Redacted and I agree that the first book, A Fire Upon the Deep, is excellent but not as good as this.  All voices say the third book is a pass]

Prisoners of War (TV series, Israeli)

Loveless (music, 1991 album by My Bloody Valentine)

The Lives of Others (movie)
[there was some controversy around this one]

Thought of You (animated short)

Persona (movie, Ingmar Bergman)

The Godfather (movie)

Beethoven String Quartet Opus 132 (music)

What would you add to such a list?  Of course from this list I do not endorse every pick, but I can report that I do not have “too much extra work to do.”

He wrote:

[When] computers acquire the necessary capabilities…speeded-up data processing and interpretation will be necessary if professional services are to be rendered with any adequacy.  Once the computers are in operation, the need for additional professional people may be only moderate…

There will be a small, almost separate, society of people in rapport with the advanced computers.  These cyberneticians will have established a relationship with their machines that cannot be shared with the average man any more than the average man today can understand the problems of molecular biology, nuclear physics, or neuropsychiatry.  Indeed, many scholars will not have the capacity to share their knowledge or feeling about this new man-machine relationship.  Those with the talent for the work probably will have to develop it from childhood and will be trained as intensively as the classical ballerina.

Michael then discusses what will happen to those people who cannot work productively with the machines.  Some will still work in person-to-person interactions, but the others will end up in government-designed public tasks and work short hours and subsist on the public dole.  He also considers the possibility of sending some of these individuals to poorer countries where automation is not so far advanced.

Michael wrote all of that and more in his book Cybernation: The Silent Conquest in…1962.

Arrived in my cyberpile

by on June 7, 2014 at 1:02 pm in Books, Philosophy, Science | Permalink

Nick Bostrom, Superintelligence: Paths, Dangers, Strategies.

Due out September 3, 2014, self-recommending.

It is here, he mostly really likes the book but thinks they are not sophisticated enough in their policy prescriptions.  Here is one good excerpt on whether the federal government should have worked harder to institute mortgage cramdowns:

First, there was the risk of bringing down the system in an effort to save it. Banks had substantial mortgage holdings and especially large quantities of subordinated second mortgages and home equity lines of credit, which would have been wiped out if mortgage principal had been reduced in a way that respected the seniority of first mortgages. We recognised that large-scale principal reduction would draw in a large number of mortgages that were not delinquent and would otherwise be paid in full. As a consequence, there was the risk of sucking hundreds of billions of dollars out of the banking system. Given that government funds for capital infusions were scarce and that each dollar of bank capital supports $12 of lending, we worried that the spending gains from reducing mortgage debt might well be exceeded by the spending losses from reducing the flow of capital. This fear may have been exaggerated. If they think so, Mian and Sufi owe an explanation as to why.

Second, there was the issue of chilling future lending… This was not a small concern, as the automobile industry was in freefall and consumer confidence was deteriorating very rapidly.

Third, there was the danger of prolonging the housing market’s problems. Even the relatively limited programmes in place have spent as much as a third of their money delaying, rather than avoiding, foreclosures. All that we heard at the time suggested that a significant part of the reason why the housing market was dead was that no one wanted to buy because of a fear that it had further to fall. Delaying inevitable foreclosures with relief risked exacerbating this problem and risked larger foreclosure discounts when houses were ultimately sold.