Category: Books

Public Finance and Public Policy

Public Finance and Public Policy, the new textbook by Jonathan Gruber, is not only the best public finance textbooks I’ve ever read it is one of the best textbooks I’ve read in any field.  Gruber and Worth Publishers have clearly put a huge amount of money and effort into this book – the content is superb and so is the presentation (graphs, organization, supplementary material – e.g. check out these cool powerpoint presentations.).

Gruber is especially good at discussing empirical research.  What is the effect, for example, of social security on private savings, on the living standards of the elderly, on the incentive to retire?  What do we learn from the international evidence?

(Quick answers: Social security crowds out about 35 cents of private savings for every social security dollar.  As a result, social security has reduced the eldery poverty rate although not quite as much as naive trends would suggest.  Social security does reduce the labor force participation rates of the elderly but less so in the United States than in most European countries where there are huge disincentives for working beyond the normal retirement age.  (Get the book or this powerpoint presentation for more details – note you need to view the PP in SlideShow mode to get the full effect.)

Gruber covers all the major programs – education, social security, unemployment insurance, Medicaid and Medicare, the tax system etc. – and in each case he carefully explains the institutional details and then he evaulates the empirical evidence focusing on the most telling pieces of evidence (rather than trying to cover everything that has ever been written as in a review paper).

Gruber is so good on the empirical research that this book would be a useful supplement to an applied econometrics class.  Just flipping through it and reading the boxed Empirical Evidence sections gives a good feel for what the cutting edge questions and techniques are in empirical research. 

Congratulations to Gruber on a tour de force!

Camille Paglia on poetry

In my new book, Break, Blow, Burn, I offer
line-by-line close readings of 43 poems, from canonical Renaissance
verse to Joni Mitchell’s Woodstock, which became an anthem for my
conflicted generation. In gathering material, I was shocked at how weak
individual poems have become over the past 40 years. Our most honoured
poets are gifted and prolific, but we have come to respect them for
their intelligence, commitment and the body of their work. They ceased
focusing long ago on production of the powerful, distinctive,
self-contained poem. They have lost ambition and no longer believe they
can or should speak for their era. Elevating process over form, they
treat their poems like meandering diary entries and craft them for
effect in live readings rather than on the page. Arresting themes or
images are proposed, then dropped or left to dribble away. Or, in a
sign of lack of confidence in the reader or material, suggestive points
are prosaically rephrased and hammered into obviousness. Rote formulas
are rampant – a lugubrious victimology of accident, disease, and
depression or a simplistic, ranting politics (people good, government
bad) that looks naive next to the incisive writing about politics on
today’s op-ed pages. To be included in this book, a poem had to be
strong enough, as an artefact, to stand up to all the great poems that
precede it. One of my aims is to challenge contemporary poets to
reassess their assumptions and modus operandi.

In
the 1990s, poetry as performance art revived among young people in
slams recalling the hipster clubs of the Beat era. As always, the
return of oral tradition had folk roots – in this case the incantatory
rhyming of African-American urban hip-hop. But it’s poetry on the page
– a visual construct – that lasts. The eye, too, is involved. The
shapeliness and symmetry of the four-line ballad stanza once structured
the best lyrics of rhythm and blues, gospel, Country and Western music,
and rock’n’roll. But with the immense commercial success of rock music,
those folk roots have receded, and popular songwriting has grown weaker
and weaker.

Read more here.  And here is the Amazon link, if you are willing to pre-order on the presumption that the book actually appears; Publishers Weekly gives the release date as April 1…

Thanks to www.politicaltheory.info for the pointer.

What I’ve been reading

The Big Picture: The New Logic of Money and Power in Hollywood, by Edward Jay Epstein.  Why is opening weekend so important?  "The benefits of prolonging a film’s run in the theaters are now negated by the loss that would be sustained by delaying its video opening past the point at which it can benefit from the movie’s advertising campaign."  This is the best available work on the economics of cinema.  How many books cite both Arnold Schwarzneger and Mises’s discussion of non-pecuniary goods?

King Lear: This is about my fifth reading.  I had never fully realized that Lear had incestuous relationships with at least one of his daughters (for instance check out 1:2, 150-152, 1:4, 176-182, plus the entire Oedipus analogy).  Furthermore he was ready to sell out his country to the French.  Edmund, Goneril and Regan were not so bad after all.

Handbook of Economic Sociology, second edition, edited by Neil Smelser and Richard Swedberg.  Yelp if you wish, but I see sociology as the most underrated social science.  It is (some) sociologists who are the problem.  Most of the advances in economics over the last fifteen years have actually come in sociology done by economists.  Just look at Steve Levitt or behavioral economics.  Since economists have not discovered any new "core mechanisms" since herd behavior (circa 1989 or so), I expect quantitative sociology to whup our collective behinds over the next twenty years.  The only question is who will be doing it, us or them.

Art: A Field Guide, by Robert Cumming.  This has been my favorite bedtime reading book of the last twenty years.  The book gives two or three succinct paragraphs on why each of about 1500 famous artists is good, bad, or somewhere in between.  No cultural relativism here, and obviously the guy should start a blog.  Few good pictures are included, so you do need to know the works of the artists.

Pol Pot: Anatomy of a Nightmare, by Philip Short. One of the best studies of the anatomy of evil, the psychology of colonialism, and twentieth century Cambodian history.

What I wish I was reading: Going Sane, by Adam Phillips.  I read all his books the day they fall into my hands.  Phillips, a psychoanalyst for children, is the master of witty and paradoxical observations about human nature.  I am told that this new book offers a partial "recipe for contentment," but so far it is available only in the U.K. and perhaps Commonwealth countries.

Choice: The Best of Reason

I’ve been enjoying Choice: The Best of Reason.  Reason magazine’s byline has always been Free Minds and Free Markets but perhaps it ought to be Free Minds, Free Markets and Fun.  Here’s Drew Carey (from long before Janet Jackson’s wardrobe malfunction):

The government is really into ‘protecting people’.  The Federal Communications Commission (FCC) says you can’t broadcast certain words and certain pictures.  It says it’s protecting citizens.  But I’m sitting in my home with DirecTC and can watch whatever I want.  I can afford the best pornography – laser-disc porn!  The government’s not protecting me from anything.

All the government’s doing is discriminating against poor people.  It thinks poor people are like cows, that poor people can’t think straight: If we let them hear dirty words or see dirty pictures, there’s going to be madness!  If you’re poor and all you can afford is a 12-inch black-and-white TV and can’t pay for cable – you’re so protected.  You’d probably be happier if you could see some pornography, a pair of titties, once in a while on free TV.  But a pair of titties on free TV?  The government figures if you saw that, you’d just explode!

The Fountainhead

If ethics is about the virtuous man then politics is about the social requirements for the virtuous man to exist (the modern literature lags behind Rand in connecting ethics and politics). One can  understand Rand’s novels as an extended disquisition on virtue ethics and the political and social requirements necessary to practice such an ethics. In particular, she argued that rights, a legal concept creating a protected sphere for independent action, were a necessary condition to live a life of virtue.

One need not buy Rand’s deductive argument that laissez-faire capitalism is the sine-qua-non of ethical action to appreciate her insights connecting the good man and good woman with the good society. Ayn Rand was absolutely right to say that capitalism requires a moral defense. Moreover, the only plausible defense must involve the virtue of selfishness. It is all too obvious that capitalism promotes and rewards self-interest and, Mandeville nothwithstanding, no defense which simply excuses this fact will succeed.

Rand’s language hasn’t done much to advance her case and indeed it has obscured areas where her insights are now widely accepted. Today, for example, you can find many books
attacking the evil of altruism. Surprised? Of course, the books don’t use those terms, instead they call it the problem of codependency (or some other such). Relatedly, it’s no accident that Hillary Clinton was once an avid Randian (recall her political career started with Barry Goldwater) because Rand is an important feminist. Rand’s portrayal of strong, independent, intelligent women is coming to be recognized as a landmark in fiction but in addition Rand’s attacks on self-sacrifice have special meaning in a culture that has long used the “caring ethic” to bind women to the service of others.

Of weaknesses there are many, most of which flow from the combination of Rand as philosopher, novelist and powerful personality. John Galt, for example, is but one instantiation of the Randian/Aristotelian virtue ethic, an instantiation which was created for a particular aesthetic purpose by a particular person. To often both Rand and her detractors have taken the instantiation for the class thereby limiting the vision.

Tips for viewing The Merchant of Venice

1. There is textual evidence that Shakespeare was anti-Semitic, but anti-Semitism is not the primary point of the plot.

2. Shakespeare uses stereotypes about Jews to mock his audience and to mock anti-Semites.  Most of all he is pointing the joke back in the faces of the bigots.  "Who is the merchant and who is the Jew?" is one of the central lines of the text.  And it is no accident that the play is named after the merchant, not after Shylock.

3. Shakespeare shows most of the play’s Christians to be mean, hypocritical, and full of lies.  They have every bad quality that they accuse the Jews of having, and more.  This is a very dark comedy.

4. The stories concerning the rings should be followed carefully.  The film mentions briefly (too briefly, perhaps) that Shylock treasured and kept the ring from his wife.  Compare this to how the Christians treat their rings.

5. The homosexual and lesbian implications of the story are explicit rather than some postmodern reinterpretation.

Elsewhere on the cinematic front, Yana has been watching the Star Wars trilogy for the first time ("…so these are the ones where he has the breathing problem").  I’ve been amazed how readily and appropriately the episodes have made the transition from "slick futuristic vision" to "dark tale of collapse, decay, and clunky technological malfunction."  I can hardly wait for May to roll around.

Do MacArthur Awards stimulate genius?

As part of a program widely known as genius grants, the John D. and Catherine T. MacArthur Foundation most years gives one or more authors $500,000, hoping financial freedom will help the writers produce their best work.

An examination of the program, however, reveals that most of the 31 writers chosen since 1981 as MacArthur Fellows had already hit their artistic peak. That conclusion is supported by the 14 major awards – either a Pulitzer Prize, National Book Award, National Book Critics Circle Award or PEN/Faulkner prize – and 37 minor awards the authors received before getting their MacArthur money.

Surveying book reviews, author profiles and the opinions of literary scholars, Crain’s determined that 88% of the MacArthur recipients wrote their greatest works before being recognized by the Chicago-based foundation. The sheer number of books produced by the writers declined, too, after their MacArthur awards.

It would reinforce romantic notions that great art requires personal sacrifice to suggest that, half-a-million dollars in hand, writers get lazy. But something else appears to account for the failure of the MacArthur program to fulfill its promise: Writers are mostly chosen too late in their careers, average age 48, and well after the literary establishment has recognized them for excellence.

Daniel Drezner offers further commentary.  I see two options.  Either the prizes stimulate genius by paying rewards ex post, or we would be better served by scattering smaller grants to a greater number of unknown writers.  Ex ante subsidies do better than ex post prizes when the relevant creators are liquidity constrained.  That is, without the upfront grant, a great but still obscure writer might have to drop out of the game for lack of money.  Since that is a plausible description of the market for fiction, most prizes and grants in this area should take more chances.  Tenured academics, in contrast, are not usually liquidity constrained (unless they have expensive lab bills); ex post prizes will work better for them.

That being said, it is easy to see why foundations — which involve accountability to a board of trustees — might prefer a more conservative approach.  Yes a foundation may care about the world, but it must also support its own reputation, generate favorable publicity, and build a "ruling coalition" which reaps reputational awards from making quality grants.  All of these factors will militate in favor of awards to established producers.  When accountability is in place, who will opt for a very risky investment which fails in at least ninety percent of all cases?

Murakami and Kafka

The most important fact we gleaned from the records was that, medically speaking, the incident had caused no lasting impact on the children.  From right after the event to the present day, the examination and tests consistently indicated no internal or external abnormalities.  The children were leading healthy lives, just as they had before the incident.  Detailed examinations revealed that several of the children had parasites, but nothing out of the ordinary…The one notable thing was that the two-hour span during which the children had been unconscious in the hills was erased from their memory.  As if that part had been extracted in toto.  Rather than a memory loss, it was more a memory lack.

That is from Haruki Murakami’s new Kafka on the Shore.

He is one of the few contemporary writers always worth reading.  His Underground: The Tokyo Gas Attack and the Japanese Psyche is a minor (and neglected) classic of social science.  Or do you love intellectual-geeky science fiction, but think you have run dry?  Try his Hard-Boiled Wonderland and the End of the World.  The best "literary" introduction is probably A Wild Sheep Chase.

Blink

In one study we were watching newlyweds, and what often happened with the couples who ended up in divorce is that when one partner would ask for credit, the other spouse wouldn’t give it.  And with the happier couples, the spouse would hear it and say, ‘You’re right.’  That stood out…for a marriage to survive, the ratio of positive to negative emotion in a given encounter has to be at least five to one.

That is one early passage from Malcolm Gladwell’s new book Blink: The Power of Thinking Without Thinking.  So far I find the book intriguing but once I have read it I will offer a less accurate evaluation.

Who is James Buchanan?

James Buchanan was asked to define himself in a single paragraph, here is the result:

When
all is said, I have faced few genuine choices between work and play
because there is really no distinction.  My work is my play, and I am
surely among the fortunate in this as in so many other aspects of a
happy and well-ordered life.  I have not been plagued by psychological
hangovers that make me try to respond to the "whys" of existence or the
"whats" beyond.  I hope that I seem what I think I am: a constitutional
political economist who shares an appreciation for the Judeo-Christian
heritage that produced the values of Western culture and institutions
of civil order, particularly as represented in the Madisonian vision of
what the United States might have been and might still become.  Am I
grossly naive to think this definition is sufficient unto itself?

That is from Ideas, Persons, and Events, volume 21 in the collected works of James Buchanan, published by Liberty Fund.  This book is remarkable fun, and costs only $12.00, recommended.

Energy economics

What most of us think about energy supply is wrong.  Energy supplies are unlimited; it is energetic order that’s scarce, and the order in energy that’s expensive…

Our main use of energy isn’t lighting, locomotion, or cooling; what we use energy for, mainly, is to extract, refine, process, and purify energy itself.  And the more efficient we become at refining energy in this way, the more we want to use the final product.  Thus, more efficient engines, motors, lights, and cars lead to more energy consumption, not less…

These are the seven great energy heresies we propound in this book:

1. The cost of energy as we use it has less and less to do with the cost of fuel.  Increasingly, it depends instead on the cost of the hardware we use to refine and process the fuel.  Thus, we are not witnessing the twilight of fuel.

2. "Waste" is virtuous.  We use up most of our energy refining energy itself, and dumping waste energy in the process.  The more such wasteful refining we do, the better things get all around.  All this waste lets us do more life-arrirming thing better, more clearly, and more safely.

4. The competitive advantage in manufacturing is now swinging decisively back toward the United States…[information technologies]

6. The raw fuels are not running out.  The faster we extract and burn them, the faster we find still more.  Whatever it is that we so restlessly seek — and it isn’t in fact "energy" — we will never run out.  Energy supplies are infinite…

That is all from the new Peter Huber and Mark Mills book, The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy.  The authors do not quite connect their premises to their conclusions, but it makes for interesting reading.  I took away the lesson that our energy consumption will rise indefinitely (and why), at least until our civilization falls.

Is French taxation progressive?

…French social policy is not overwhelmingly redistributive, and it is not financed with progressive income taxes, as in Denmark and Sweden, nor is it financed with a mix of progressive income taxes and payroll taxes, as in Germany, Canada, and Britain.  As in other corporatist/continental consrevative welfare states, French social spending is financed with a mix of regressive payroll taxes, regressive sales taxes, and, for a little over a decade, a smaller "general social contribution" tax…

From the 1950s until roughly 1980 France was the leader in income inequality among OECD nations….in France the top 20% of income earners received 24% of transfer payments and the bottom 20% of earners only 18%.  By 1991 French social policy was slightly more progressive, but French manual workers "remain[ed] in virtually the same relative position…"

…France remains a highly stratified society in both the social and economic sense.  The wealthiest 10% of the French income ladder are 50% richer than their Swedish counterparts and the upper quarter of the French income ladder is not brought down by the tax system the way it is in Denmark, Sweden, and Germany…today many of France’s wealthy citizens occupy privileged spots at the core of the "welfare state."  This is one of the key reasons they tend to support it.

That is from Timothy Smith’s recent and excellent France in Crisis: Welfare, Inequality, and Globalization since 1980.  The tale is told from a center-left perspective, and yes he also explains what the French get right.  Highly recommended, it is the best book I know on the contemporary French economy and polity.

MarginalDevolution.com?

…if the atoms obeyed Newton’s laws, they would disintegrate whenever they bumped into another atom.  What keeps two atoms locked in a stable molecule is the fact that electrons can simultaneously be in so many places at the same time that they form an electron "cloud" which binds the atoms together.  Thus, the reason why molecules are stable and the universe does not disintegate is that electrons can be many places at the same time.

But if electrons can exist in parallel states hovering between existence and nonexistence, then why can’t the universe?  After all, at one point the universe was smaller than an electron.  Once we introduce the possibility of applying the quantum principle to the universe, we are forced to consider parallel universes.

That is from Michio Kaku’s Parallel Worlds: A Journey Through Creation, Higher Dimensions, and the Future of the Cosmos.  The book offers the best popular explanation I have seen of why we may be living in a hologram.  But if you wish to feel better about your intellect, and baffle your friend with a Ph.d. in physics, buy him Douglass North’s new Understanding the Process of Economic Change.