Category: Books
*Slapped by the Invisible Hand*
That's the new Gary Gorton book and the subtitle is The Panic of 2007. It brings together Gorton's writings on the crisis in one convenient place but it serves up a fascinating afterword in which he asks how people will view this crisis one hundred years from now.
We've already covered Gorton's writings here. As I've already mentioned, for anyone interested in the crisis, or in banking and finance more generally, this is absolutely essential reading. I also take his analysis to suggest (here this is my gloss, not his words) that there is no way to avoid crises since "bank run-like phenomena" can pop up in many different ways in any economy with significant liquidity transformation.
Books which have influenced me most
Chris, a loyal MR reader, asks:
I'd like to see you list the top 10 books which have influenced your view of the world.
I'll go with the "gut list," rather than the "I've thought about this for a long time list." I'll also stress that books are by no means the only source of influence. The books are in no intended order, although the list came out in a broadly chronological stream:
1. Plato, Dialogues. I read these very early in life and they taught me about trying to think philosophically and also about meta-rationality.
2. The Incredible Bread Machine, by Susan Love Brown, et.al. This was the first book I ever read on economics and it got me excited about the topic.
3. Capitalism: The Unknown Ideal, by Ayn Rand. This got me excited about the idea that production is what matters and that producers must have the freedom and incentives to operate.
4. Friedrich A. Hayek, Individualism and Economic Order. The market as a discovery procedure and why socialist calculation will not succeed. (By the way, I'll toss a chiding tsk-tsk the way of Wolfers and Thoma.)
5. John Maynard Keynes: The General Theory of Employment, Interest, and Money. Keynes is one of the greatest thinkers of economics and there are new ideas on virtually every page.
6. John Stuart Mill, Autobiography. This got me thinking about how one's ideas change, and should change, over the course of a lifetime. Plus Mill is a brilliant thinker and writer more generally.
7. Willard van Orman Quine, Word and Object. This is actually a book about how to arrive at a deeper understanding than the one you already have, although I suspect few people read it that way.
8. Reasons and Persons, by Derek Parfit. This convinced me that a strictly individualistic approach to ethics will not in general succeed and introduced me to new ways of reasoning and new ways to plumb for depth.
9. Camille Paglia, Sexual Personae. I don't think the ideas in this book have influenced me very much, but reading it was, for whatever reason, the impetus to start writing about the economics of culture and also to give a broader focus to what I write. Alex, by the way, was the one who recommended it to me.
10. Marcel Proust, Remembrance of Things Past. This is still the best book on interiority.
I'd also like to mention the two books by Fischer Black, although a) I cannot easily elevate one over the other, and b) I capped the list at ten. La Rochefoucauld's Maxims also deserves honorary mention, on self-deception and related issues. Plus there is Shakespeare — also for thinking with depth – although I cannot point to a single book above the others. Harold Bloom's The Western Canon comes to mind as well.
I would encourage other bloggers to offer similar lists.
What I’ve been reading
1. Baba Yaga Laid an Egg, by Dubravka Ugresic. These interrelated stories, which concern the aging of women, are so far my favorite fiction of the year. This was from a Bookslut recommendation; here is one review.
2. Ender's Shadow, by Orson Scott Card. Not as good as Ender's Game and the trilogy, but still worth reading if you have an interest in the series.
3. Stieg Larsson, The Girl with the Dragon Tattoo. Some parts of this story are very good, but overall I felt manipulated by the author and I was glad when it was over. I prefer Henning Mankell.
4. Mikhail Lermontov, A Hero of Our Time. This new translation is a big improvement on the old and thus a chance to rediscover a classic of Russian literature.
5. The Genius in All of Us: Why Everything You've Been Told About Genetics, Talent, and IQ is Wrong, by David Shenk. There's nothing new in here, plus not everybody can be a genius.
My favorite short stories
In the "Request for Requests," yc asks:
Your favorite short stories (or collections)
Most of the twentieth century greats, such as Cheever and Barthelme, don't much stick with me. I am a huge fan of Alice Munro and have read most or all of her work (the last collection is good but somewhat below average.) She is consistently interesting about human nature and its foibles; maybe start here.
From the classics I'll pick Kafka's "A Country Doctor" and lots by Melville. Borges is a special favorite, especially Ficciones. Joyce's short stories I admire but don't much enjoy. I like Poe's "The Gold-Bug" and Hemingway's "Kilimanjaro" For Chekhov I prefer the mid-length fiction, though this may be a problem of translation. Tolstoy's "Hadji Murad" might count as a novella. From Henry James, I would recommend many of the shorter works including "Turn of the Screw" and "The Beast in the Garden." Isaac Babel. Some Shirley Jackson. Mark Twain. There is much in science fiction and arguably the genre is at its strongest in this medium.
That's a very incomplete answer, but it's what comes to mind right away.
*Country Driving*
The author is Peter Hessler and the subtitle is A Journey Through China from Farm to Factory. It is the account of the author's driving journeys throuh the Middle Kingdom. Here is one bit:
…Chinese drivers haven't grasped the subtleties of headlight use. Most people keep their lights off until it's pitch-dark, and then they flip on the brights. Almost nobody uses headlights in rain, fog, snow, or twilight conditions — in fact, this is one of the few acts guaranteed to annoy a Chinese driver. They don't mind if you tailgate, or pass on the right, or drive on the sidewalk. You can back down a highway entrance ramp without anybody batting an eyelash. But if you switch on your lights during a rainstorm, approaching drivers will invariably flash their brights in annoyance.
I found this to be an excellent travel memoir, a very good book on transportation economics, a wonderful book on China, and most of all a first-rate study of the adjustments and changing norms which accompany rapid economic development. I also found it to be a very funny book and, for whatever reason, I don't find most books funny.
Here is another bit on China:
Often I passed billboards dedicated to the planned-birth policy, whose catchphrases ranged from tautology ("Daughters Also Count as Descendants") to unsolicited advice ("Marry Late and Have Children Late") to outright lies ("Having a Son or a Daughter Is Exactly the Same"). As I drove west, the messages became bigger, until barren hillsides were covered with slogans, as if words had swelled to fill the empty steppes, "Everybody Work to Make the Green Mountain Greener" — this in forty-foot-tall characters across an Inner Mongolian mountain that was neither green nor the site of a single working person.
Recommended.
What I’ve been reading
1. The Weeping Goldsmith: Discoveries in the Land of Myanmar, by W. John Kress. The subtitle sounds so intriguing and then you discover its about the search for rare plants. But it turns out to be even better than you thought at first. It's a wonderful introduction to Myanmar, the idea of a scientific quest, and some aspects of botany. The photographs are beautiful too. I very much like books which serve up surprising combinations, as this one does.
2. Umberto Eco, The Infinity of Lists. The color plates are beautiful and favor artworks with large numbers of massed individuals. The book itself is mostly excerpts of classic texts and it doesn't have much insight into…lists.
3. Gridlock: Why We're Stuck in Traffic and What To Do About It, by Randall O'Toole. This Cato book is mostly an attack on transportation planning, including a critique of high-speed rail subsidies.
4. Why Translation Matters, by Edith Grossman. Short but self-recommending. It is part of the "(Why X Matters)" series. Here is one good review.
5. No Such Thing as Silence: John Cage's 4'33", by Kyle Gann. There are over twenty-four recordings of this piece and skeptics can consider that an attempt at competitive rent exhaustion. Yet probably none of those have come close to David Tudor's presentation of the work at its premiere.
6. Delhi: Adventures in a Megacity, by Sam Miller. Bombay had its book, now Delhi has its. Recommended, it captures the feel of the place.
Diane Ravitch turns on school choice and testing
Her new book is The Death and Life of the Great American School System: How Testing and Choice are Undermining Education. Her bottom line is this:
The more uneasy I grew with the agenda of choice and accountability, the more I realized that I am too "conservative" to embrace an agenda whose end result is entirely speculative and uncertain. The effort to upend American public education and replace it with something market-based began to feel too radical for me. I concluded that I could not countenance any reforms that might have the effect — intended or unintended — of undermining public education.
Ravitch of course was once the number one advocate of these very ideas; read this excellent article on her intellectual evolution.
Overall it is a serious book worth reading and it has some good arguments to establish the view — as I interpret it — that both vouchers and school accountability are overrated ideas by their proponents. (Short of turning the world upside down, some school districts will only get so good; conversely many public schools around the world are excellent.) But are they bad ideas outright? Ravitch doesn't do much to contest the quantitative evidence in their favor. There are many studies on vouchers, some surveyed here. Charter schools also seem like a good idea.
Is American public education such a huge success these days that it should be immune from significant restructuring? I don't think so. One of the best arguments for our current system is simply that — because it is lax — it doesn't waste too much time for the really smart kids who want to be doing other things. That's an important factor but hardly a ringing endorsement for the system as a whole.
The pre-existing conditions of Nicole Kidman
Kidman injured her knee during the filming of Moulin Rouge in Australia in 2000, resulting in a $3 million insurance loss, and then quit Panic Room in 2001, leading to the insurer having to pay some $7 million for the replacement actress (Jodie Foster). As a result, her public and critical acclaim notwithstanding, Miramax was initially unable to get insurance on her for its film Cold Mountain, which had a budget approaching $100 million. From the perspective of the insurer, Fireman's Fund, she was a definite risk. As an insurance executive noted in an email, "…the fact remains that the doctor we sent her to for her examination noted swelling in the knee." The executive goes on: "The other major fact that can't be changed is our paying three claims for this actress's knees over the years."
To get the necessary policy from Fireman's Fund, Kidman agreed to put $1 million of her own salary in an escrow account that would be forfeited if she failed to maintain the production schedule, and she agreed to use a stunt double for all scenes that the insurer considered potentially threatening to her knee. In addition, the co-producer, Lakeshore Entertainment, added another $500,000 to the escrow account…Having made the all-important move from borderline uninsurable to borderline insurable, she could make movies again. No matter how great their acting skills and box office drawing power, stars cannot get lead roles if they are uninsurable. Great acting skills and box office drawing may make the star, but insurance is what it takes to make the movie.
That's from the new and noteworthy The Hollywood Economist: The Hidden Financial Reality Behind the Movies, by Edward Jay Epstein. You can buy it new, in paperback, for only $11.
Jamie Lawrence’s principles for judging books
He writes me an email:
We somehow ended up talking about things we absolutely judge by first impression. We both read a lot and widely in general, and it was a fun topic.
An easy one for me to note was that I skip technical/professional/academic work that is far enough outside of my expertise that I know the baseline knowledge assumptions are beyond me. Imperfect, but in general, a good filter.
I skip nearly all books by politicians, executives, and similar people. Even when people tell me that one is good, it usually isn't.
I really dislike reading music reviews. They almost never seem insightful, and rarely tell me anything I didn't realize I wanted to know.
Sort of the opposite of the above filters, I tend to really enjoy reading applied trade books for things far outside my expertise. An example is that about six months ago, I read a treatise on elevator traffic management that was fascinating.
What other principles can you think of? I go to Mary Riley Styles Falls Church Public Library and check the non-fiction Return carts, to see what other people have been reading.
*Reputation and Power*, a new theory of the FDA
The subtitle is Organizational Image and Pharmaceutical Regulation at the FDA and the author is Daniel Carpenter. Here is the book's home page but I don't yet see an Amazon listing. Here is a Barnes&Noble listing, note the price discount.
Where to start? It exhausts me to even write about this book, which is the most comprehensive and most detailed study of a regulatory agency written — ever – to the best of my knowledge. It supplements and overturns all existing work on its subject and it will prove a model for future investigations. It's not short!
The starting point is the notion of reputational capital and the claim that the FDA seeks to preserve and extend its reputation, for a variety of political reasons. One implication of this is that the FDA is sometimes too loose and other times too strict but that both biases are possible. The framework is then used to address numerous questions, including the following:
1. Why the U.S. has the most bureaucratically intensive drug regulation in the world.
2. Why the 1962 amendments were passed.
3. Why FDA regulation is so often treated as de facto irreversible.
4. Why the tenure of a division director matters for how the decisions of that division are treated.
5. Why there is so much judicial deference to the FDA.
6. Why the FDA has been so influential on a global scale.
7. How public attention affects the speed of FDA procedures.
The author makes a strong case that the FDA is one of the most powerful and most important regulatory agencies in the world and one of the most important extensions of state power. Everyone interested in the economics of regulation should read this book, just be prepared to be a little overwhelmed. I would also note that this is not mainly a partisan book in one direction or the other, though on net I read the author as wishing to see a stronger FDA. (On p.379, for instance, I read Carpenter as overly dismissive of the "drug lag" argument.)
Here is Carpenter's previous book, which I have not read. For the pointer to this work I thank Steve Teles.
Germany and Greece
…the Greek Finance Ministry had warned of "complete collapse" if the whole system…was not rethought…"Prices and value move in an atmosphere of imminent catastrophe," he wrote. "In Greece for a while now all the foundations of a healthy economy have been overturned. There can be no stability, neither in economic equilibrium nor in monetary or financial affairs."
…While the Italians…were genuinely worried by Greece's financial crisis, it was the Germans who needed to be persuaded. Initially, Altenburg's advocacy of the Greek position was not well received even in his own Ministry. But then the political stakes were suddenly raised…
…In Athens people expected the Finance Minister to win substantial concessions from the Germans. In actual fact he was in a very weak position.
…It was not that the Greek financial crisis could be ignored; nor that the Greek Finance Minister lacked the wit or intelligence to present his case. It was simply that no Greek politician carried enough weight to be heard seriously in Berlin.
That's from yesterday's Financial Times, no…whoops, sorry! That's from Mark Mazower's Inside Hitler's Greece: The Experience of Occupation, 1941-44. It's a good book.
“Three good books”
Tim Harford reports on his reading:
Tyler Cowen and Alex Tabarrok, Modern Principles of Economics (UK) – well-written, interesting, and some material not normally covered in econ. textbooks. I’ll try to find time to write more about this textbook, but guess students and professors will be the judges.
Ben Goldacre’s Bad Science. I’m a bit embarassed not to have read this until now, but the first few chapters are exceeded even my high expectations. Really very good indeed. Apparently a US edition is in the works – I’ve just been asked to blurb it. Will be a pleasure.
Jonah Lehrer’s The Decisive Moment (now republished as How We Decide). A nice science-and-stories approach to neuroscience, psychology and behavioural economics. I finished the book wanting to put it into action – not as easy as Lehrer makes out – and learned plenty I didn’t know I didn’t know.
All three are recommended.
Formaldehyde
Formaldehyde is a known irritant poison, capable of causing severe internal damage, and formic acid is equally destructive, best known to scientists as an essential part of the venom in bee stings. People poisoned by methyl alcohol would often seem to recover from that first bout of dizzy sickness, feel better while the alcohol was being metabolized, and then ten to thirty hours later by poisoned again by the breakdown products.
First, their vision would blur. The optic nerve and retina are acutely vulnerable to formic acid salts. The nerve, with its continual processing of images, runs in a high metabolic state, causing blood to circulate through it rapidly — which causes poison to be delivered there continuously. Autopsies often revealed a startling atrophy of the optic nerve area, the surrounding tissue swollen, bloody, and spongy. Methyl alcohol and its by-products caused similar damage in the parietal cortex, a region of the brain essential in processing vision. It concentrated as well in the hardworking lungs — the breakdown of pulmonary tissue was what usually killed people.
That is from the new and consistently interesting The Poisoners' Handbook: Murder and the Birth of Forensic Medicine in Jazz Age New York, by Deborah Blum. Although she has won a Pulitzer Prize, she remains an underrated author.
*A Textbook of Cultural Economics*
The author is Ruth Towse and you can buy it here. This excellent book now sets the standard for the field. Here is the home page of Ruth Towse.
*The Rational Optimist*, the new Matt Ridley book
The subtitle is How Prosperity Evolves and you can buy it here. The book is due out in May. Excerpt:
In this book I have tried to build on both Adam Smith and Charles Darwin: to interpret human society as the product of a long history of what the philosopher Dan Dennett calls "bubble-up" evolution through natural selection among cultural rather than genetic variations, and as an emergent order generated by an invisible hand of individual transactions, not the product of a top-down determinism. I have tried to show that, just as sex made biological evolution cumulative, so exchange made cultural evolution cumulative and intelligence collective, and that there is therefore an inexorable tide in the affairs of men discernible beneath the chaos of their actions. A flood tide, not an ebb tide.
This book will be adored by fans of Julian Simon. Ridley is an optimist about the year 2100 and one of the final sections considers whether Africa and climate change will be exceptions to the generally optimistic trends.