Category: Books
Further German predictions about 2010
Everard Hustler, writing in 1910, predicted that in 2010 tuberculosis patients will conquer the disease by receiving shots of radium and by inhaling streams of radioactive air, with pipes running to their mouths and cloths tied tightly around their heads, and covering their eyes (the accompanying illustration is a good one), to make sure none of the radioactive air escapes.
He also predicted that a hostile nation could destroy the Berlin Rathaus using a beam of radium energy, shot from…a hovering zeppelin.
Radium: good to inject, good to inhale, bad to shoot at a tower from a zeppelin.
That sounds odd, but radiation as a method of medicine starts in the 1920s and it uses the element of radium. Modern chemotherapy does not arise until 1940, with the use of mustard gas. Chemotherapy to attack tuberculosis starts in 1944.
Still, E.H. was not as perceptive as the guy who predicted the iPhone.
Sentences to ponder
Gabriel Josipovici, a research professor at the University of Sussex, is disenchanted with the absence of disenchantment with the world.
Robert Sloss predicted the iPhone in 1910
Well, more or less. Or is it an iPad? In 1910 Stoss published an essay called "The Wireless Century," intending to predict the world of 2010. In this world everyone carries around a "wireless telegraph" which:
1. Serves as a telephone, the whole world over.
2. Either rings or vibrates in your pocket.
3. Can transmit any musical recording or performance with perfect clarity.
4. Can allow people to send each other photographs, across the entire world.
5. Can allow people to see the images of paintings, museums, etc. in distant locales.
6. No one will ever be alone again.
7. Can serve as a means of payment, connecting people to their bank accounts and enabling payments (Japan is ahead of us here).
8. Can connect people to all newspapers, although Sloss predicted that people would prefer that the device read the paper aloud to them (not so much the case).
9. Can transmit documents to "thin tubes of ink," which will then print those documents in distant locales.
10. People will have a better sense of the poor, and of suffering, because they will have witnessed it through their device (not obviously true, at least not yet).
11. People will vote using their devices and this will empower democracy (nope).
12. Judicial testimonies will be performed over such devices, often from great distances.
13. People will order perfectly-fitting fashions from Paris; this guy should be in the Apps business.
14. Married couples will be much closer, and distance relationships will be closer and better.
15. Military targeting and military orders will become extremely precise.
The essay is reprinted in the Arthur Brehmer book Die Welt in 100 Jahren. The book is interesting throughout; a bunch of the other writers thought in 2010 we would be fighting wars with large zeppelins.
Very difficult questions
I have spoken at Jane St. Capital a few times and it is perhaps my favorite audience; everyone wants analytic content and everyone came prepared. All of the questions were tough, but two in particular I was not prepared for.
First, I was asked "Which is the most underrated statistic for judging the value of an NBA player?"
My attempted answer was the player's presence on a very good, consistently winning team. There are many players with impressive statistics, including unselfish statistics such as assists and rebounds, who are only of value on bad teams. We overvalue such players. Overall, really good teams don't keep bad players and really bad teams don't keep good players. If a player has never been on a really good team, he might not be so good, with apologies to the earlier Kevin Garnett.
Second, I was asked who is most likely to write a novel about the financial crisis which will stand the test of time. I do not see any such author around today, but if you have ideas leave them in the comments. "DeLillo, if he were thirty years younger" was the best I came up with. Or maybe something from genre fiction. There are notable works of fiction dealing with the Great Depression, but I can't recall that any of them focus on the financial side. It's a hard topic to be dramatic about, without being either too simplistic or overly technical.
Official U.S. trailer for *Freakonomics* documentary
You'll find it here. It's a well-done preview, the movie is rated PG-13, and it's from the moviemakers behind the superb King of Kong.
I thank some PR guy for the pointer.
*City on the Edge*
The author is Mark Goldman and the subtitle is Buffalo, New York. I loved this book. It is a splendid portrait of twentieth century America, the connection of industrialism and the arts, the decline of manufacturing and the resulting urban casualties, an applied study of the wisdom of Jane Jacobs, and on top of all that it is the best book I've read on how excess parking helped destroy an American downtown. I recommend this book to all readers of serious non-fiction.
*Seeds of Destruction*
That's the new tract by Glenn Hubbard and Peter Navarro; the subtitle is Why the Path to Economic Ruin Runs through Washington, And How to Reclaim American Prosperity.
Beyond the usual market-oriented prescriptions, the book defends a price floor for oil imports, price indexing of social security benefits, it is anti-fiscal stimulus, anti-easy money, for job training programs, and for health care it advocates eliminating the tax deduction, removing state-level barriers to competition, and malpractice reform. The authors also devote special attention to criticizing Chinese protectionism as a reason why American job growth hasn't been better.
I take Hubbard to be a (the?) future "kingmaker" for economic policy within the Republican party, with possible competition from Douglas Holtz-Eakin. If you wish to know where those debates and proposals are headed, this is the book to pick up.
*Winston’s War: Churchill 1940-1945*
The author of this book is Max Hastings. Although this topic may seem like well-trodden ground, this is so far one of my favorite non-fiction books of the year. Excerpt:
It was remarkable how much the mood in Washington had shifted since January. This time, there was no adulation for Churchill the visitor. "Anti-British feeling is still strong," the British embassy reported to London, "stronger than it was before Pearl Harbor…This state of affairs is partly due to the fact that whereas it was difficult to criticize Britain while the UK was being bombed, such criticism no longer carries the stigma of isolationist or pro-Nazi sympathies." Senator Allen Ellender of Louisiana declared sourly there "there was little point in supplying the British with war material since they invariably lost it all."
Among other things, it is an excellent book for communicating how military alliances actually work and how much humiliation a nation feels if it keeps on losing military battles or is unable to fight in response. I also had not realized what a folly British policy toward Singapore was. Definitely recommended. Here is one review of the book. Here is an excerpt.
Not everyone in Australia likes Max Hastings.
Good sentences about Japan
In Japan, psychologists evaluate astronaut candidates by, among other things, their ability to fold origami cranes swiftly under stress.
Here is more. The review has at least one other good sentence.
Bruce Cumings and what he deserves
Many of you are objecting to my post on his book, either in the form of comments or emails. You are objecting to his ideology and objecting that he does not denounce the North Korean regime with sufficient fervor and with sufficient recognition of its true awfulness, though he does denounce it, using the word "reprehensible."
On these points I (mostly) agree with you, the critics. Yet it is still a good book and it should open many people's eyes to the history of the Korean War and the not always pretty American role in that war. I haven't seen good comments or reviews finding fault with the book itself (but if I do I will pass them on). The book, by the way, does not allege that South Korea started the war.
Keep in mind how many history or foreign policy books or essays are written by people who are essentially toadies to power or apologists for the U.S. government, or for some other foreign regime. It is expected that we accept those problematic inclinations and affiliations without comment or condemnation. In contrast to many of the works by establishment historians, Cumings is a breath of fresh air.
Overall I seek to narrow rather than widen the following category: "cannot be praised without accompanying symbolic denunciation." If it turns out that, in the process, Cumings reaps more relative status than he deserves (and I am not very influential in shaping the reputations of historians), I'm not especially troubled by that.
In fact maybe I'm happy to see you squirm a bit.
One of my major purposes in writing this blog is to nudge people away from judging political issues, or for that matter books, by asking which groups or individuals rise or fall in relative status.
*The Korean War*
That's the new book by Bruce Cumings and it is as good as the reviews indicate (criticisms here). Here are a few choice excerpts:
For decades the South Korean intelligence agencies put out the line that Kim Il Sung was an impostor, a Soviet stooge who stole the name of a famous Korean patriot. The real reason for this smoke screen was the pathetic truth that so many of its own leaders served the Japanese…
And:
…Two Koreas began to emerge in the early 1930s, one born of an unremittingly violent struggle in which neither side gave quarter; truths experienced in Manchukuo burned the souls of the North Korean leadership. The other truth is the palpable beginning of an urban middle class, as peole marched not to the bugle of anti-Japanese resistance but into the friendly confines of the Hwashin department store, movie theaters, and ubiquitous bars and tearooms.
And:
…Most Americans seem unaware that the United States occupied Korea just after the war with Japan ended, and set up a full military government that lasted for three years and deeply shaped postwar Korean history.
And:
What hardly any Americans know or remember, however, is that we carpet-bombed the North for three years with next to no concern for civilian casualties…The air assaults ranged from the widespread and continual use of firebombing (mainly with napalm), to threats to use nuclear and chemical weapons, finally to the destruction of huge North Korean dams in the last stages of the war.
And, from the entire war:
Perhaps as many as 3 million Koreans died, at least half of them civilians (Japan lost 2.3 million people in the Pacific War).
You can buy the book here.
*More than Good Intentions*
Dean Karlan is one of my favorite young economists and in April he will publish a popular economics book, co-authored with Jacob Appel. The subtitle is How a New Economics is Helping to Solve Global Poverty.
Consider the book an accessible account of "the new development economics," based on field experiments and randomized control trials. Much of the text focuses on micro-credit, where Karlan has done considerable work, but there is also material on public health, cell phones, and how to get parents to send their kids to school (pay them!).
Anyone interested in a readable treatment of the new development economics should pick up this book.
Larry Kotlikoff responds on limited purpose banking
You can read his reply here. Note however that my criticisms explicitly are directed at narrow banking more generally, most of all my own (previous) version of the idea, not at the specific version of Kotlikoff's proposal. There is one particular topic I did not deal with, and on it I will quote Kotlikoff reproducing my critique and responding to it:
TC: A lot of what current banks do would be replicated by non-bank commercial lenders and the risk of the banking sector would be transferred somewhere else.
LK: You missed the key point that all incorporated financial intermediaries have to operate as mutual fund companies. There are no “non-bank commercial lenders” unless they operate as proprietorships and partnerships and their owners have their houses and yachts on the line. The risk of the banking sector is reduced because we set it up to eliminate any chance of bank runs and gambling by the banks with the taxpayers’ chips. Recall, the mutual funds are 100 percent equity financed at all times and in all situations.
TC: Ideally, these non-bank lenders would engage in greater “maturity-matching,” but if banks will exploit the moral hazard problem won’t these lenders exploit it too?
LK: The only financial intermediaries who can operate under Limited Purpose Banking according to the current rules of the road are private banks with no limited liability. The lack of limited liability will eliminate the moral hazard problem.
I am not inclined to see unlimited liability as a practical alternative. How many businesses supply commercial credit? Trade credit? Credit by any other name? — namely contracts involving derivatives, annuities, insurance, repurchase agreements, etc., with intertemporal payments and embedded interest rates in the prices. Would they all have to give up limited liability? Or would we end up channeling more financial intermediation through indirect credit transactions, while maintaining limited liability? A version of this dilemma is experienced regularly by systems of equity-based Islamic banking..
Second, unlimited liability creates a pecuniary externality across shareholders. Who wants to be the remaining "fat cat" shareholder? Why should Bill Gates ever invest? Non-mutual fund banks will end up owned by thinly capitalized individuals or entities, thereby defeating the purpose of unlimited liability while at the same time raising transactions costs. Walter Bagehot made this point, see also Joseph Grundfest, here is Hansmann and Kraakman with a reply. Alex very ably surveys the main arguments in an MR post.
Unlimited liability is fine for small-scale, private banking, especially in the international sector where tax evasion is a motive and the banks aren't fully part of any standard regulatory network. It doesn't work to force it on such a large sector of the economy as most commercial credit and non-bank lending.
In sum, I do not believe that narrow banking proposals benefit from being bundled with unlimited liability for other lenders.
What I’ve been reading
1. John Carey, William Golding: The Man Who Wrote Lord of the Flies. The subtitle gets at the point and I still can't finish his other books. Much of his life he wasted in a state of repression. Alcohol and boarding schools play roles in this story. Recommended.
2. Why Europe: The Medieval Origins of its Special Path, by Michael Mitterauer. How many of the preconditions for the European miracle were in place by the Middle Ages? This isn't a fun book (translated from the German), but specialists should pick it up. Here is one very serious review of the book (JSTOR).
3. Being Wrong: Adventuers in the Margin of Error, by Kathryn Schulz. Why do we so enjoy being right and thus so often end up being wrong? This is a good book for many people, but if you've been following Robin Hanson, you won't find it novel or rewarding.
4. Debra Satz, Why Some Things Should Not be for Sale: The Moral Limits of Markets. How many books are there now on this topic? Lots. How many of them take seriously the notion that our moral intuitions can be badly misguided for judging the operation of an impersonal market economy in the modern world? Not so many, though all seem to think they do.
5. Let me get this straight. You, the beautiful and brilliant
6. Super Sad True Love Story, by Gary Shteyngart. I didn't like his previous two books and I usually dislike pomo novels about cool-talking young people in major U.S. cities. Still, the flood of very good reviews nudged me to read this and I'm glad I did.
*Risk and Business Cycles* is now available in paperback
That is my 1998 book on business cycles. Mario Rizzo writes:
I am happy to report that Tyler Cowen’s book, Risk and Business Cycles: New and Old Austrian Perspectives is now available, as of July 15th, in a reasonably-priced paperback edition from Routledge…
This is not an orthodox Austrian approach. In fact, Cowen criticizes that version. However, the “new Austrian” inspired version he presents seems especially relevant in view of the widespread, but not uiversal, agreement that the pre-recession period of very low interest rates contributed to the search for yield and greater risk taking. As the title indicates, Cowen’s theory emphasizes the importance of low interest rates on risk-taking.
This book appears in the Routledge series, “The Foundations of the Market Economy” edited by Larry White and me. Tyler’s book is well worth reading as are many books in this series (now approaching thirty books).
Here is another blog post discussing the book. Here is the Amazon listing. At the time this book was published, it was unpopular to suggest that everyone simply might take too much risk at once, leading to an eventual overextension and collapse. Yet theories of that nature have held up relatively well, in light of the financial crisis.
My one-sentence summary of the book is that it offers various accounts of how an economy might end up in the position of taking too much risk and how that can help explain business cycles. And since these scenarios involve risk, rather than direct negative productivity shocks, they can look fairly innocuous in advance.