Category: Books
Timothy Noah’s *The Great Divergence*
The subtitle is America’s Growing Inequality Crisis and What We Can Do About It. His policy conclusions are:
1. Soak the rich
2. Fatten government payrolls
3. Import more skilled labor
4. Universalize preschool
5. Impose price controls on colleges and universities
6. Reregulate Wall Street
7. Elect Democratic Presidents
8. Revive the labor movement
This book is well-written and it is a useful survey of left-democrat points of view on the problem. I do not think most of these recommendations will much limit inequality (though they may have other virtues), but my main wish is that he had offered some additional possible solutions. #1 on my list is “more innovations which benefit virtually everybody,” which is how the last great equalization (1870-1970 or so) came about. Parts of his list, such as #3, get at this obliquely but it should be front and center of the entire book. Let’s debate how we can make that happen. If there were a new invention as important as the toilet, shareholders would not and could not appropriate most of the gains. “Deregulate housing” and “deregulate medical care” also deserve a ponder, as does “abolish occupational licensing” and “subsidize basic science.” That global inequality has fallen radically is understood and recognized but not emphasized. It is culturally beyond the pale — on the left at least — to write “encourage conversions to Mormonism” but as a recommendation it is right on the mark. This book needs more which is culturally beyond the pale. How about “run some of the bad schools with lots of discipline, more like the KIPP academy?”
*The Idea Factory*
I loved this book and devoured it in a single sitting. The author is Jon Gertner and the subtitle is Bell Labs and the Great Age of American Innovation. Here is one excerpt:
Scientists who worked on radar often quipped that radar won the war, whereas the atomic bomb merely ended it. This was not a minority view. The complexity of the military’s radar project ultimately rivaled that of the Manhattan Project, but with several exceptions. Notably, radar was a far larger investment on the part of the U.S. government, probably amounting to $3 billion as contrasted with $2 billion for the atomic bomb. In addition, radar wasn’t a single kind of device but multiple devices — there were dozens of different models — employing a similar technology that could be used on the ground, on water, or in the air.
One lesson of this book is how much war can spur innovation. Here is one Gertner article on the themes of the book. Here is a review of the book. Anyone interested in the history of science, tech, or innovation should buy and read this book.
*A Naked Singularity*
Contemporary American fiction faces an ongoing problem of what to write about. Yuppie life in Brooklyn doesn’t have the gravitas, suburban ennui is long since overdone, and so much of American life — mostly for the better — doesn’t face serious moral choices. Sergio de la Pava has solved this problem by writing about the American legal system, set in New York City and with a Colombian immigrant public defender. At first I was skeptical but at page 256 (out of 678) it is still getting better. It is likely to make my “best of the year” list. My five word summary would be “A more approachable William Gaddis.” You will note it is published by University of Chicago press and presumably it is “too serious” to have attracted a major trade contract. It’s not for everyone, but it’s living up to its billing as a sleeper under the radar. You can pre-order it here.
All of postwar development economics in one exchange?
Check out the book Economic Development for Latin America, edited by Howard S. Ellis and Henry C. Wallich, circa 1961 and read Paul Rosenstein-Rodan’s classic essay “Notes on the Theory of the “Big Push””.
In ten pages you get the essence of increasing returns arguments, though do see Paul Krugman’s cautionary notes about this era and its lack of formal modeling.
After those ten pages, there is then Celso Furtado, that underrated and perhaps someday forgotten Brazilian economist, who in five pages tries to take PRR apart. The big push didn’t work in Bolivia, and in conclusion
“The point is not, therefore, to show that there are indivisibilities in the production function. The main interest lies in demonstrating how processes can be modified so as to elude the effects of those indivisibilities.”
The reader is then treated to three and a half pages of Ragnar Nurske, who shores up PRR.
There is then transcribed discussion, including remarks from Theodore Schulz (he rejects big push as an analytical tool), Albert Hirschman, Howard Ellis, Henry Wallich, more from Nurske, and Haberler, who wrote:
“…the lumpy factor could often be stretched to accommodate a varying amount of the co-operating factors. The big push was no substitute for normal piecemeal progress.”
That was a popular point in those days. Hirschman also…
“doubted that as a general rule overhead facilities would create a demand for their services. This depended on the kind of entrepreneurship available. Certainly there was no fixed short-run relation between investment in overhead and other investment, since overhead could be stretched.”
Nurske then fought back. Whew!
Reading those twenty pages exhausted me, and transported me to another and earlier era. It was like watching one of those taped 1980s NBA games, as they show them in Taiwan and some other countries, without the timeouts and breaks and besides they weren’t playing much defense anyway.
Overall it raised my estimation of those economists.
*Capitalism with Chinese Characteristics*
Great book, Virginia Postrel tell us it is on Kindle for $3.99. Buy it! Here is my previous post on the book.
Charles Murray on the role of economic forces
This has been debated by Brooks, Krugman, and around the blogosphere, so let us hear from the man himself:
“OK, let’s try this,” he said. “If you get a rising economy, for example, if Barack Obama could say we are going to bring on seven years of incredibly low unemployment, then he would argue that this would do a lot of good to the working class, wouldn’t he?” I agree. “But we already had that in the 1990s, and yet the dropout from the labour force continued to go up, people on social disability went up. Divorce went up. We have no evidence that a robust economy has much to do with these problems at all.”
I point out that many employers complain of a shortage of skills – a large chunk of America’s workforce is not as well equipped as it used to be relative to the rest of the world. If you don’t have the skills to make a living, how can you feel pride in your situation? “Well, that’s a different problem,” says Murray, looking suddenly uninterested. “If you are arguing that 22-year-old men are saying to their girlfriends, ‘I just need a job and then I’ll behave responsibly …’ Well, that’s just bullshit. If you ask women in working class communities, they will say, ‘Why should I marry these losers? It’s like taking another child into the household.’ ”
That is from his FT interview, I am not sure if it is gated for you. The closing paragraph is this:
I feel mildly guilty at having spoiled Murray’s jovial mood but he quickly bounces back. The bill arrives. I disguise my shock at its size. As we get up to leave, Murray says: “Here is an interesting commentary: I was willing to talk to the Financial Times under the influence of alcohol but I’m not willing to play poker under the influence. What does that say?” Don’t worry, I reply, you won’t lose your shirt. Murray laughs. As we are shaking hands, he adds, “I really enjoyed that. We must do it again some time.” Then he strides off in what looks to me like a straight line.
Charles Murray’s policy proposals
To narrow the class divide, that is. I am almost completely in disagreement (how about more aid and opportunity, less attempted equalization?), the Op-Ed is here. In the form of a list:
1. Apply the minimum wage to internships for the young, so privileged children cannot so easily receive this training.
2. Replace the SAT with specific subject tests.
3. Replace ethnic affirmative action with socioeconomic affirmative action.
4. Sue to challenge the constitutionality of a B.A. degree as a job requirement.
He does admit these proposals will not do so much good in absolute terms, but he nonetheless praises them for their symbolic value.
*Turing’s Cathedral*
The author is George Dyson and the subtitle is The Origins of the Digital Universe. It is a first-rate, splendid book, causing us to rethink the origins of computing systems, the connections between early computers and nuclear weapons systems, how to motivate geniuses, and also the career of John von Neumann. Here is one excerpt, I may be giving you more:
In 1943, Bigelow left MIT, reassigned by Warren Weaver to the NDRC Applied Mathematics Panel’s Statistical Research Group. Under the auspices of Columbia University, eighteen mathematicians and statisticians — including Jacob Wolfowitz, Harold Hotelling, George Stigler, Abraham Wald, and the future economist Milton Friedman — tackled a wide range of wartime problems, starting with the question of “whether it would be better to have eight 50 caliber machine guns on a fighter plane or four 20 millimeter guns.”
Here is one Francis Spufford article about the book. Definitely recommended.
Robert Shiller’s new book
Three on Launching
1. The excellent Reihan Salam writes, “Tabarrok’s Launching the Innovation Renaissance is my favorite manifesto in years. In a better world, it would be the roadmap for the U.S. center-right.” Small steps towards a much better world, Reihan!
2. A truly Straussian Straussian Reading of Launching the Innovation Renaissance.
3. I will be speaking at Inventing the Future: What’s Next for Patent Reform at AEI in Washington, DC on Wed. March 14, 12:30-2:00.
Matt’s new book
As I had predicted, it is very good. Most of all I like the suggestion that the economy is becoming more Ricardian with higher resource rents.
I am assuming that most of the United States will not follow Matt’s policy prescriptions, which are unpopular with homeowners to say the least. Which secondary adjustments and rent-seeking losses will result? If you cannot easily live in Manhattan, next to the stylish people, how will you respond? One option is to damn them and tune into NASCAR. Instead you might compete more intensely for their attention and approval. Write a blog. Send them ads. Try to chip away at the privileged status of their attention and capture some of that value for yourself. Either way cultural polarization seems to increase.
For all their other virtues, lower rents also help satisfy the demand for affiliation. I know people who are proud just to live in San Francisco and not only because it signals their income and status. It sounds cool. At what level of zoning is this consumer surplus maximized?
What is the most serious estimate of how much denser agglomeration — boosted by lower rents — would increase productivity? I do not take the urban wage premium as the correct measure here, since at the margin the extra worker currently does not move in. I would like to read a good study of this issue, which I have discussed with Ryan Avent as well.
Is this available improvement a level effect or a rate effect?
If people were the size of ants, without encountering any absurdities of physics or biology, how would the “public choice” of urban building change? Would urban centers be equally exclusionary?
How much space do we need to live? Say you have a 3-D printer nanobox which can produce (or obliterate) any output on demand. Is a studio apartment then enough? Just print out your bed come 11 p.m., or summon up your kitchen equipment before the dinner party. How much of the demand for space is for storage and how much is for other motives? My personal demand for space is highly storage-intensive, but I may be an exception in this regard.
If zoning stays too tight, are there (second best) general negative externalities from storage?
I don’t recall Matt calling for the widespread privatization of government-owned land, but would he agree this is the logical next step? It’s hardly as important as freeing up more urban and suburban building, but is there any good reason for government to own all that turf? I don’t think so. Let’s keep the public works and military facilities and national parks, and sell most of the rest.
Here is Matt’s summary of the book.
*The Rent is Too Damn High*
The new eBook from Matt Yglesias is out today, I will likely read (and finish!) my copy tonight. Self-recommending, you can get one here.
Adam Smith on Charles Murray
In every civilised society, in every society where the distinction of ranks has once been completely established, there have been always two different schemes or systems of morality current at the same time; of which the one may be called the strict or austere; the other the liberal, or, if you will, the loose system. The former is generally admired and revered by the common people: the latter is commonly more esteemed and adopted by what are called people of fashion. The degree of disapprobation with which we ought to mark the vices of levity, the vices which are apt to arise from great prosperity, and from the excess of gaiety and good humour, seems to constitute the principal distinction between those two opposite schemes or systems. In the liberal or loose system, luxury, wanton and even disorderly mirth, the pursuit of pleasure to some degree of intemperance, the breach of chastity, at least in one of the two sexes, etc., provided they are not accompanied with gross indecency, and do not lead to falsehood or injustice, are generally treated with a good deal of indulgence, and are easily either excused or pardoned altogether. In the austere system, on the contrary, those excesses are regarded with the utmost abhorrence and detestation. The vices of levity are always ruinous to the common people, and a single week’s thoughtlessness and dissipation is often sufficient to undo a poor workman for ever, and to drive him through despair upon committing the most enormous crimes. The wiser and better sort of the common people, therefore, have always the utmost abhorrence and detestation of such excesses, which their experience tells them are so immediately fatal to people of their condition. The disorder and extravagance of several years, on the contrary, will not always ruin a man of fashion, and people of that rank are very apt to consider the power of indulging in some degree of excess as one of the advantages of their fortune, and the liberty of doing so without censure or reproach as one of the privileges which belong to their station. In people of their own station, therefore, they regard such excesses with but a small degree of disapprobation, and censure them either very slightly or not at all.
Did Oprah steal book sales with her reading club?
There is a new paper (pdf) from the excellent Craig Garthwaite, here is the abstract:
This paper studies the economic effects of endorsements. In the publishing sector, endorsements from the Oprah Winfrey Book Club are found to be a business stealing form of advertising that raises title level sales without increasing the market size. The endorsements decrease aggregate adult fiction sales; likely as a result of the endorsed books being more difficult than those that otherwise would have been purchased. Economically meaningful sales increases are also found for non-endorsed titles by endorsed authors. These spillover demand estimates demonstrate a broad range of benefits from advertising for firms operating in a multiproduct brand setting.
Book splat (What I’ve been reading)
Jean Edward Smith, Eisenhower in War and Peace, very well written, not that much economics.
Alasdair Roberts, America’s First Great Depression: Economic Crisis and Political Disorder After the Panic of 1837, stronger on aftermath than causes.
David Tuckett, Minding the Markets: An Emotional Finance View of Financial Instability, a behavioral/cognitive/neuro interpretation of the actions of four fund managers, as they related to the financial crisis.
Alan Peacock, Anxious to do Good: Learning to be an Economist the Hard Way, memoirs, gentlemanly not juicy.
David Wolman, The End of Money: Counterfeiters, Preachers, Techies, Dreamers — and the Coming Cashless Society, an informed and well-written look at the continuing evolution of money.
In my pile is Michael J. Sandel, What Money Can’t Buy: The Moral Limits of Markets (how many times has this book been written by now?), Kevin A. Clarke and David M. Primo, A Model Discipline: Political Science and the Logic of Representation (philosophy of science), and Robert V. Dodge, Schelling’s Game Theory: How to Make Decisions.
The very good The Coming Prosperity: How Entrepreneurs are Transforming the Global Economy, by my colleague Philip Auerswald, will be out very soon.