Books

The world’s urban population is growing very rapidly, especially in the developing world. The McKinsey Global Institute estimates that in India alone such an expansion will require the building of, in essence, a new Chicago every year for the next several decades. The problem with these numbers is not the expense. The problem is political and organizational. Many currently less-developed countries, including India, remain high in corruption and low in efficiency, especially in the administration of their towns and cities. It would be wonderful if foresighted and public-spirited government planners would provide India and other developing nations with wise urban planning but it seems unwise to rely on what has historically been rare for this massive transformation. Is there an alternative?

In Lessons from Gurgaon, India’s private city (working paper) found in a new book Cities and Private Planning  Shruti Rajagopolan and I explore this question. Gurgaon, which I have written about before, shows both the successes and failures of private development. On the surface, Gurgaon is a gleaming, modern city built nearly overnight on wasteland. Gurgaon was built, however, without benefit of planning and its failures–most notably poor and inefficient provision of  water, sewage, and electricity–are a warning. The failures all stem from high transaction costs, Gurgaon’s private developers have simply not managed to Coasean bargain and internalize externalities. It’s clear from Gurgaon that cities need advance planning–a reservation of rights of way for water, sewage and electricity at the very minimum–but does the planning have to be provided by government which is often incapable of such foresight?

The lessons of Jamshedpur, India, suggest another approach. Jamshedpur is a private township, planned from the beginning by visionary businessman Jamshetji Nusserwanji Tata, who, after travelling to the United States to see Pittsburgh, returned to India to found Tata Iron and Steel. Jamshedpur has been run by a single, integrated entity for over 100 years and as it is integrated it has internalized externalities. As a result, Jamshedpur, India’s other private city, has some of the best urban infrastructure in all of India.

Gurgaon shows the benefits of competition. Jamshedpur the benefits of integration. Can we get the best of both worlds?

If the rights to develop Gurgaon had originally been sold in very large packages, some five to seven proprietary but competitive cities could have been created in that region. Within this system the role of the state is to make it possible to auction large parcels of land. Once such parcels and associated rights to develop the land are created, private developers will provision public goods and services up to the edge of their property.

As proprietary communities, the competitive cities would have every incentive to invest in and especially to plan for appropriate infrastructure. Moreover, with five to seven communities in the same region, competitive pressures would keep rents low and at efficient levels for maximizing net benefits (Buchanan and Goetz 1972, Sonstelie and Portney 1978). Within the larger city, subdivisions on the order of neighbourhoods and business districts could be sublet and run by competitive firms with the overarching city establishing rules to internalize externalities. Competitive private governments would also generate experimentation and innovation in new rules that would then spread through intercity learning (Romer 2010).

Thus, Rajagopolan and I conclude:

In the next five decades many entirely new cities with populations in the millions will be built in places where today there is little or no population or infrastructure. Most of the urban development will occur in the developing world where government resources are stretched thin and planning is in short supply. Gurgaon illustrates the scope and the limits of private sector provisioning when the state machinery fails to provide essential public goods. The lesson of Gurgaon, Walt Disney World, and Jamshedpur is that a system of proprietary, competitive cities can combine the initiative and drive of private development with the planning and foresight characteristic of the best urban planning. A proprietary city will build infrastructure to attract residents and revenues. A handful of proprietary cities built within a single region will create a competitive system of proprietary cities that build, compete, innovate, and experiment.

Jason Weeden and Robert Kurzban report:

Despite occasional statements to the contrary, most political scientists have long known — going back at least to Philip Converse’s work in the 1960s, and probably farther to Walter Lippmann’s in the 1910s/1920s — that many Americans do not in fact show substantial ideological consistency across policy views, except among limited groups…The 20% of the adult population who are white voters with bachelor’s degrees show some degree of coherence when it comes to views on same-sex marriage and income redistribution.  But, when it comes to the 40% of the adult public who have one or none of these characteristics — including, for example, African Americans and Latinos without bachelor’s degrees and nonvoting whites without bachelor’s degrees — there is no tendency whatsoever for people who lean in a given direction on one of these issues to lean in the same direction on the other.  For the remaining 40% of the adult public, who have two but not three of these features (e.g., white voters without bachelor’s degrees), ideological coherence is barely measurable.

That is from their new book The Hidden Agenda of the Political Mind: How Self-Interest Shapes Our Opinions and Why We Won’t Admit It, interesting throughout.

What I’ve been reading

by on October 27, 2014 at 1:52 am in Books, Film | Permalink

1. Emmanuel Carrère, Limonov, The Outrageous Adventures of the Radical Soviet Poet Who Became a Bum in New York, A Sensation in France, and a Political Antihero in Russia.  Blends fiction, non-fiction, and occasional social science (was a non-corrupt transformation of the Soviet Union really possible?, Gaidar ultimately decided it wasn’t), but in terms of the subjective experience of the reader it is most like a novel.  Excellent and also entertaining.  I consider this a deep book about why liberalism will never quite win over human nature.  Here is an interesting Julian Barnes review, although in my opinion it is insufficiently appreciative.

2. Kenneth D. Durr, The Best Made Plans: Robert R. Nathan and 20th Century Liberalism.  I may be biased because I just gave a talk at the Nathan Foundation and received it as a gift copy.  I call this the “real history of economic thought.”  It’s a look at the career of a man who worked with Simon Kuznets to improve gdp statistics, helped lead the war effort in the 1940s, supported the civil rights movement, founded a major economic consulting firm, and supported the idea and practice of economic development, most of all for South Korea and Myanmar.  It’s a splendid look at twentieth century economics as it actually influenced the world, without centering the story on academia.  By the way, here is Diane Coyle on Walter Lippmann.

3. Marlon James, A Brief History of Seven Killings.  This account of 1970s Jamaica, centered on a plot to shoot Bob Marley, shows a remarkable amount of talent, as well as a mastery of plot construction and different novelistic voices, some of which are in Jamaican patois.  If you pick up this book you will be impressed and indeed many of the reviews are glowing.  Yet somehow never did I care, feel entertained, or wish to read further.  I stopped.  I remain interested in that era, but will instead recommend a viewing — or reviewing — of The Harder They Come or Marley.

4. John D. Mueller, Redeeming Economics: Rediscovering the Missing Element.  That element would be Providence, and this work looks at how Scholastic insights can serve as a foundation for economic thought.  Loyal MR readers will know that is not exactly my brew, but some of you will find this of interest.

Matt Yglesias on publishing and ebooks

by on October 24, 2014 at 1:04 am in Books, Economics | Permalink

It is undeniably true that Amazon has a very large share of the market for e-books. What is not true is that Amazon faces a lack of competition in the digital book market. Barnes & Noble — a company that knows something about books — sells e-books, and does so in partnership with a small outfit called Microsoft. Apple sells e-books and so does Google.

These are not obscure companies. It is not inconvenient for customers to access their products. And since these are companies that are actually much bigger and more profitable than Amazon, there is absolutely no way Jeff Bezos can drive them out of business with predatory pricing.

Amazon’s e-book product is much more popular than its rivals because Amazon got there first, and the competition has not succeeded in producing anything better. But consumers who prefer to buy a digital book from a non-Amazon outlet have several easy options available, and thus a book publisher who chooses to eschew Amazon will not actually be unable to reach customers.

There is more here, a good rant.

Heilman, the expert in Hasidic succession, told me that one reason so many dynastic fights emerged in the past decade is that the grand rabbis are living longer, sometimes too long to have the vigor to conclusively determine whom their successors will be or so long that their increasingly entrenched institutional court refuses to cede power.  In Hasidic Europe before World War II, a contender to the throne unhappy with a chosen successor could set up his seat in a neighboring village, Heilman said.  But since the war, with the consolidation of Hasidim into relatively few sects, each sect’s brand name has been enshrined so that successors want to become, say, the Satmar Rebbe, not the Kiryas Joel Rebbe.

That is from the new Joseph Berger book, The Pious Ones: The World of Hasidim and Their Battles with America.

Let’s assume books — at the margin of course — bring some external social value, perhaps by stimulating ideas production or by improving the quality of voting and citizenship.  If that were the case, at which margin should we look for this external benefit?  I can think of a few possibilities:

1. More books should be produced.  Yet this hardly seems plausible, as there are so many books produced right now and most of them are largely ignored.  In any case, Amazon clearly makes a larger number of books readily accessible, although its lower prices may discourage the number of books longer run.

2. Better books should be produced.  Arguably this is true by definition, but it is not a useful means of evaluating most proposed changes to the book market.  That said, Amazon creates an open forum for useful reviews.  That may improve long-run book quality, or at least lead to a more useful matching of readers with books.

3. Books should be cheaper and thus purchased and read more often.  Maybe so, but public libraries give books away for free — great books too — and their shelves are not stripped bare.  So making commercial books cheaper will get us only so far.  If all books were completely free, reading would go up by only so much, because time and attention would remain scarce.  In any case, with reference to the recent debates, Amazon does in fact make books cheaper.

4. Books should be more vivid in the minds of readers.  People would read more if the books meant more to them and that is a more effective lever than simply making books cheaper.  You will note of course that “buzz” can make books more vivid, and so Piketty’s Capital became a vivid book for a large number of people.  They bought it, though most of them did not read past page 26.  So even making books more vivid will not necessarily bring about the desired end of additional interested readership.  That said, Amazon does create various lists to try to boost the buzz around books, and Amazon tries to raise the relative status of reading and book-buying more generally.

It is in fact not so easy to specify how we might reap significant additional social benefits from the current book market.  The real externality, if there is one, lies in improving the humans not the books.

In the meantime, Amazon, in its current configuration, seems to be producing some marginal social benefits.

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&N.com, 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, writeordie.com:

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.