Category: Books
The culture that is Norway?
The UK’s 2011 bestseller lists might have been dominated by cookery, courtesy of Jamie Oliver, and romance, courtesy of David Nicholls, but Norwegian readers were plumping for another sort of book last year: the Bible.
The first Norwegian translation of the Bible for 30 years topped the country’s book charts almost every week between its publication in October and the end of the year, selling almost 80,000 copies so far and hugely exceeding expectations. Its launch in the autumn saw Harry Potter-style overnight queues, with bookshops selling out on the first day as Norwegians rushed to get their hands on the new edition.
I’ve been wondering what the new religion of Europe (is Norway Europe?) is going to be. The article is here.
*The Coming Prosperity*
The author is the highly intelligent Philip Auerswald and the subtitle is How Entrepreneurs are Transforming the Global Economy. I am less optimistic about the next ten years, but this is a very well-argued book. I am hoping to have a chance to work more with Phil, my colleague at George Mason, in the near-term future.
The opening sentences of *Paul Clifford*
By Edward George Earle Lytton Bulwer-Lytton:
It was a dark and stormy night; the rain fell in torrents—except at occasional intervals, when it was checked by a violent gust of wind which swept up the streets (for it is in London that our scene lies), rattling along the housetops, and fiercely agitating the scanty flame of the lamps that struggled against the darkness.
In his defense, the book was published in 1830.
Andrew Lo reviews 21 books on the financial crisis
The paper and abstract are here:
Abstract:
The recent financial crisis has generated many distinct perspectives from various quarters. In this article, I review a diverse set of 21 books on the crisis, 11 written by academics, and 10 written by journalists and one former Treasury Secretary. No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed.
It is an instructive look at how bad we are at discovering the truth and talking about it. Here is part of his beginning:
To illustrate just how complicated it can get, consider the following “facts” that have become part of the folk wisdom of the crisis:
1. The devotion to the Efficient Markets Hypothesis led investors astray, causing them to ignore the possibility that securitized debt2 was mispriced and that the real-estate bubble could burst.
2. Wall Street compensation contracts were too focused on short-term trading profits rather than longer-term incentives. Also, there was excessive risk-taking because these CEOs were betting with other people’s money, not their own.
3. Investment banks greatly increased their leverage in the years leading up to the crisis, thanks to a rule change by the U.S. Securities and Exchange Commission (SEC).
While each of these claims seems perfectly plausible, especially in light of the events of 2007–2009, the empirical evidence isn’t as clear.
Starting on p.35, you can find a new take on the myth of the 2004 SEC change to Rule 15c3–1 (though see the first comment), relating to the supposed increase in leverage requirements from 12-1 to 33-1:
…it turns out that the 2004 SEC amendment to Rule 15c3–1 did nothing to change the leverage restrictions of these financial institutions. In a speech given by the SEC’s director of the Division of Markets and Trading on April 9, 2009 (Sirri, 2009), Dr. Erik Sirri stated clearly and unequivocally that “First, and most importantly, the Commission did not undo any leverage restrictions in 2004”. He cites several documented and verifiable facts to support this surprising conclusion, and this correction was reiterated in a letter from Michael Macchiaroli, Associate Director of the SEC’s Division of Markets and Trading to the General Accountability Office (GAO) on July 17, 2009, and reproduced in the GAO Report GAO–09–739 (2009, p. 117).
It is also shown that the higher leverage was common in the late 1990s. There is more to the discussion, but it is time to reconsider this point.
What I’ve been reading
1. Garry Kasparov on Garry Kasparov, Part 1: 1973-1985, by Garry Kasparov. Self-recommending! His chess books are full of history, drama, and suspense, in addition to the chess, he is simply a great mind.
2. Michael Krondl, Sweet Invention: A History of Dessert. The best book I know on the history of dessert, with plenty of information on India, my personal favorite dessert country. There is also the short and useful Bread: A Global History, by William Rubel.
3. Nan Shepherd, The Living Mountain. Written in the 1940s, published in the late 70s, ignored, just republished. It’s like reading a poem. The Guardian is on the mark to call it “The finest book ever written on nature and landscape in Britain.”
4. Katerina Clark, Moscow, The Fourth Rome: Stalinism, Cosmopolitanism, and the Evolution of Soviet Culture 1931-1941. A revisionist take which portrays the culture of the era as about more than just about communism, in any case thought provoking.
5. Peter Conrad, Verdi And/Or Wagner. A multifaceted comparison of the two composers, integrating music, politics, and history, readable and recommended.
6. William A. Barnett, Getting it Wrong: How Faulty Monetary Statistics Undermine the Fed, the Financial System, and the Economy. He pushes his own work on Divisia monetar aggregates, although Scott Sumner will tell you that a steely focus on nominal gdp will suffice.
7. David Mikics, Who Was Jacques Derrida? Recommended by Gordon, this book is a good intelligent and intelligible introduction to Derrida.
8. Ben Lerner, Leaving the Atocha Station. So good (and short) that I read it twice in a row, it is a mock of “creative” slackers who decide they wish to live abroad. One of my favorite novels of the year.
In my pile of review copies are Jonathan Schlefer, The Assumptions Economists Make, and Paula Stephan, How Economics Shapes Science.
Scrooge and Adam Smith
It will no doubt delight critics of economics everywhere to learn that Ebenezer Scroggie, the merchant who inspired Charles Dickens’ miserly tale, was related to Adam Smith:
Scroggie was born in Kirkcaldy, Fife; his mother was the niece of Adam Smith, the 18th century political economist and philosopher.”
Dickens, however, had mild dyslexia and read Scroggie’s headstone as “Ebenezer Lennox Scroggie – mean man” when in fact it read “meal man,” referring to Scroggie’s trade in corn. Scroggie by most accounts was actually the life of the party.
Hat tip to Tim Taylor who has further thoughts.
Steven Landsburg Reviews Launching
I am a big fan of Steven Landsburg’s books such as The Armchair Economist, More Sex is Safer Sex, and The Big Questions so Landsburg’s review of Launching the Innovation Renaissance was a personal thrill:
…This is a great book. It’s fast-paced, fun to read, informative as hell, and it gets everything right. At first I wished I’d written it— until I realized I could never have written it half so well.
…I wish everyone in the world would read this book. It only takes a couple of hours, and it is by far the best introduction I know of to the topic that towers above all others in its importance for the happiness of human beings everywhere, now and in the future, namely how to foster and accelerate the kinds of innovation that lead to economic growth. It will, I hope and expect, make you an enlightened advocate for enlightened policies. And it will arm you with a bundle of fun facts and anecdotes to share with your friends. This book might turn you into a proselytizer, but it will surely not turn you into a bore.
Buy Launching the Innovation Renaissance (Amzn, Nook, iTunes) and read it over the holidays!
India and the Promise of Productivity
In the comments to Anti Chain Store Policies in India and America, “Lark” posted a long “refutation” from Triple Crisis of the “neo-liberal” arguments for retail reform in India. I will focus on one remarkable argument:
…experience across the world makes it incontrovertible that large retail companies displace many more jobs of petty traders, than they create in the form of employees. This has been true of all countries that have opened up to such companies, from Turkey in the 1990s to South Africa. Large retail chains typically use much more capital intensive techniques, and have much more floor space, goods and sales turnover per worker.
One estimate suggests that for every job Walmart (the largest global retail chain) creates in India, it would displace 17 to 18 local small traders and their employees. In a country like India, this is of major significance, since around 44 million people are now involved in retail trade (26 million in urban areas) and they are overwhelmingly in small shops or self-employed.
Of course this is no refutation, fewer jobs are precisely the point. What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.
Fewer workers in farming (or retail) means more workers producing more goods in other industries. The same basic lesson holds throughout an economy, it is the declining sectors that allow other sectors to advance. Instantaneously? Immediately? With higher wages for every worker? No. Transitions always involve some pain; creation always involves some destruction; growth always involves change. The alternative, however, is stagnation.
The politics of growth are difficult because those who lose from change are always present and are often more numerous and perhaps even more deserving than the present winners, the capitalists, the business people, the international mega corps; but today’s losses and gains are fleeting, the permanent winners are the workers and consumers of the future who will know only the benefits of productivity.
*Why Nations Fail*
The authors are Daron Acemoglu and James Robinson and the subtitle is The Origins of Power, Prosperity, and Poverty. Could there be a better and more up to date book on the importance of economic institutions? Self-recommending! Excerpt:
[In Russia] Opposition to railways accompanied opposition to industry, exactly as in Austria-Hungary. Before 1842 there was only one railway in Russia. This was the Tsarskoe Selo railway, which ran seventeen miles from St. Petersburg to the imperial residencies of Tsarskoe Selo and Pavlovsk. Just as Kankrin opposed industry, he saw no reason to promote railways, which he argued would bring a socially dangerous mobility, noting that “Railways do not always result from natural necessity, but are more an object of artificial need or luxury. They encourage unnecessary travel from place to place, which is entirely typical of our time.”
This book has literally hundreds of good examples of how to apply institutional economics and property rights theory to economic history.
If I have a worry about the book, it is this. I do not disagree with the claims about institutions. But I am less sure that Acemoglu and Robinson dispose of the more “fundamentalist” theories, which might invoke say geography or other pre-institutional factors behind economic growth, political change, or for that matter levels of interpersonal trust. Where exactly do the institutional changes come from? They seem to come from other institutional changes (see p.209 for one example of many), elephants all the way down. I would have chosen the alternative subtitle: “Power, Prosperity, and Poverty, Everything but the Origins.” That’s still a lot.
The book is due out March 20.
Victorian street food
Victorian street food was a huge industry. In the north you would find tripe sellers; I remember the one in Dewsbury market that sold nine different varieties of tripe, including penis and udder (which is remarkably like pease pudding). Another popular street food was pea soup with, according to where you lived, either pig’s trotters or bits of ham chopped up into it. Peas boiled in the pod and served with butter were similarly popular. Stalls known in my youth as whelk stalls also sprang up, selling jellied eels, whelks, winkles and prawns, all by the pint or the half-pint. You could splash a bit of vinegar on them and eat them at the stall or take them home with you.
That is from the new and excellent A History of English Food, by Clarissa Dickson Wright. This book also offers up a good deal of confirming evidence for Paul Krugman’s prior hypotheses about English food.
*First Principles*
That is the new book by John Taylor (not Herbert Spencer) and the subtitle is Five Keys to Restoring America’s Prosperity. I predict Taylor will play a leading role in a new Republican administration, should there be one. He advocates, among other things, the use of the Taylor rule.
*Pricing the Future*
The author is George G. Szpiro and the subtitle is Finance, Physics, and the 300-Year Journey to the Black-Scholes Equation, A Story of Genius and Discovery. Excerpt:
As the scion of a WASP family, [Fischer] Black headed straight to Harvard for his undergraduate studies. He didn’t even apply to any other college. Once there, he took a wide range of courses, including psychology, anthropology, sociology, mathematics, physics, logic, biology, and chemistry. Strangely missing in this eclectic selection was anything related to finance, although he mentioned to his parents that he was considering “even economics.” He also experimented with psychedelics and — ever the scientist — took notes about his mental state every half hour. Once Black got arrested by the Cambridge police for demonstrating…but not again bigotry, racism, or world hunger. He was jailed for demonstrating against Harvard’s decision to issue degrees in English rather than Latin. Behind bars, his bluster soon vanished and when a Harvard dean came to check on the detainee’s conditions, Black quickly accepted the opportunity to get out.
I can’t remember the last time I learned so much about the history of economic thought, and on an important matter at that. This book is a real contribution. It doesn’t have the fancy or seductive writing style that you find in many popular science books nowadays, but it rates high in terms of substance.
How American food got so bad
Here is a podcast with me, interviewed by Stephen Dubner. Excerpt:
I think there is a very bad period for American food. It runs something like 1910 through maybe the 1980’s. And that’s the age of the frozen TV dinner, of the sugar donut, of fast food, of the chain, and really a lot of it is not very good. If you go back to the 19th century and you read Europeans who’ve come to the United States, they’re really quite impressed by the freshness and variety that is on offer.
I attempt to explain how this came about, in the podcast and in one chapter of my forthcoming book An Economist Gets Lunch: New Rules for Everyday Foodies. Believe it or not, a lot of the blame can be placed on government, including Prohibition and immigration restrictions. The book is due out in April, in both physical and e-copies, and it’s the longest and most comprehensive book I’ve written (yet without the price being high).
By the way, am I a food snob? I told Dubner:
Let me just give you a few traits of food snobs that I would differ from. First, they tend to see commercialization as the villain. I tend to see commercialization as the savior. Second, they tend to construct a kind of good versus bad narrative where the bad guys are agribusiness, or corporations, or something like chains, or fast food, or microwaves. And I tend to see those institutions as flexible, as institutions that can respond, and as the institutions that actually fix the problem and make things better. So those would be two ways in which I’m not-only not a food snob, but I’m really on the other side of the debate.
Are we stagnating aesthetically?
Some of you have been emailing, asking for my opinion of this recent Kurt Andersen Vanity Fair article. Here is the summary introductory paragraph:
For most of the last century, America’s cultural landscape—its fashion, art, music, design, entertainment—changed dramatically every 20 years or so. But these days, even as technological and scientific leaps have continued to revolutionize life, popular style has been stuck on repeat, consuming the past instead of creating the new.
There is plenty more at the link. A serious response would require a book or more, so let me offer a few conclusions, noting that it’s not possible in blog space to defend these judgments at any length. This is all about aesthetics, and it is distinct from the TGS technology argument, though one might believe that technical breakthroughs are needed to usher in aesthetic innovations, and that slowness in the one area would lead to slowness in the other. That’s not a claim I’ve ever made, but it’s worth considering even if it can’t be settled very easily. In any case, here’s my view of the evidence:
1. Movies: The Hollywood product has regressed, though one can cite advances in 3-D and CGI as innovations in the medium if not always the aesthetics. The foreign product is robust in quality, though European films are not nearly as innovative as during the 1960s and 70s. Still, I don’t see a slowdown in global cinema as a whole.
2. TV: We just finished a major upswing in quality for the best shows, though I fear it is over, as no-episode-stands-alone series no longer seem to be supported by the economics.
3. Books/fiction: It’s wrong to call graphic novels “new,” but they have seen lots of innovation. If we look at writing more broadly, the internet has led to plenty of innovation, including of course blogs. The traditional novel is doing well in terms of quality even if this is not a high innovation era comparable to say the 1920s (Mann, Kafka, Proust, others).
4. Computer and video games: This major area of innovation is usually completely overlooked by such discussions.
5. Music: Popular music has been in a Retromania sludge since the digital innovations of the early 90s, but classical contemporary music continues to show vitality and it is even establishing some foothold in the concert hall and in nightclubs too. Jazz has plenty of niche innovation, but it’s not moving forward with new, central ideas which command the attention of the field.
6. Painting and sculpture: Lots of good material, no breakthrough central movements comparable to Pop Art or Abstract Expressionism. Photography has seen lots of innovation.
7. Your personal stream: This is arguably the biggest innovation in recent times, and it is almost completely overlooked. It’s about how you use modern information technology to create your own running blend of sources, influences, distractions, and diversions, usually taken from a blend of the genres and fields mentioned above. It’s really fun and most of us find it extremely compelling. See chapter three of Create Your Own Economy/The Age of the Infovore.
8. Architecture: Slows down after 2008, but there were numerous innovative blockbuster buildings prior to the crash.
Today the areas of major breakthrough innovation are writing, computer games, television, photography (less restricted to the last decade exclusively) and the personal stream. Let’s hope TV can keep it up, and architecture counts partially. For one decade, namely the last decade, that’s quite a bit, though I can see how it might escape the attention of a more traditional survey. Some other areas, such as the novel, global cinema, and the visual arts are holding their own and producing plenty of small and mid-size innovations.
Although that is a relatively optimistic take on the aesthetics of the last decade, it nonetheless supports the view that aesthetic innovation relies on technological innovation. Most (not all) of the major areas of progress have relied on digitalization, and indeed that is the one field where the contemporary world has brought a lot of technological progress as well.
The New Da Vinci Code?
Over at Digitopoly Joshua Gans says that the breezy style of Launching the Innovation Renaissance (Nook, iTunes) makes it a page-turner “reminiscent of Dan Brown.”!!! I take this to mean that the book will sell millions of copies and be turned into a movie starring Tom Hanks; this does seem unlikely but after the Moneyball and Freakonomics movies who can say? FYI, Joshua is more confident than I am that the Coase theorem applies to rent division.
Over at Slate, Matt Yglesias also offers a short review saying the worst thing about the book is that it is too short!
Nick Schulz interviewed me at The American on some of the book’s themes, the WSJ also published part of this interview in their Notable and Quotable section.