Category: Books

Where is our economy headed?

The ever-interesting Brad DeLong is on a real roll lately. Read his post on current economic trends. Here is my favorite part:

…more important than the short-run cycles are the long-run trends. Labor productivity growth in the United States rose from 1.2% per year from the mid-1970s to the mid-1990s to 2.3% per year in the late 1990s to 4.2% per year–so far–in the 2000s. How much of that second jump-up in productivity growth will be sustained? We do not know, but it is safe to bet that some of it will. (Me, I don’t believe those numbers: I prefer to look at the income rather than the product side of the National Income and Product Accounts, and say that the three economy-wide productivity numbers are 1.2%, 3.1%, and 3.2% respectively, with the difference between the income and product side blamed on an erratic “statistical discrepancy.”) When will the rapid productivity growth that we have seen in the United States and ascribed to information technology spread to the rest of the rich countries? We do not know, but we do know that one of these years it will make itself visible. How long will it take world trade in information-services like form-processing, accounting, and customer service to truly boom as a result of the internet and the fiber-optic cable in the same way that the iron-hulled ocean-going steamship and the submarine telegraph made world trade in staple goods–not just luxuries and preciosities–boom in the late nineteenth century? Once again we do not know, but once again we do know that one of these years it will make itself visible.

It is time for governments, firms, investors, workers, and parents worldwide to begin betting on the long-run trends that have become visible over the past decade. Such bets probably won’t pay off in the next year, or two, or three. But they surely will start to pay off sometime in the next ten.

I will direct your attention again to Brad’s recent post comparing Bob Rubin and Paul O’Neill. I think it is one of the finest things an economist has written on bureaucracy, ever.

Risk aversion, immortality, and science fiction

Jacob Levy, following up on my earlier discussions (click here, here, and here) considers how immortal characters in fiction have behaved. Many but not all are extremely risk-averse. Part of the basic thread is how immortality would change our behavior. Randall Parker argues that immortality would not alter our behavior much, at least not until we could alter our genetic programming.

How do consumer reviews affect book sales?

Judith Chevalier and Dina Mayzlin have studied the impact of consumer reviews of books on word of mouth and subsequent sales, here is their NBER working paper, here is another draft. They find the following:

1. Most consumer reviews of books on Amazon.com and Barnesandnoble.com are very positive.

2. The reviews at Amazon are longer and more extensive. They are also more critical on average.

3. Better reviews on one site boost relative sales. The use of two sites gives us a controlled experiment to determine that word of mouth does indeed help authors rather than being a mere side effect of higher sales.

4. A bad review hurts you more than a good review helps you.

5. It remains to be seen whether allowing consumer reviews increases aggregate sales or simply shifts around sales to more suitable titles. Even a shifting affect, however, may increase consumer loyalty to the on-line site. If you know that Amazon helps you discover good books, you may be more likely to buy from Amazon.

My advice: I don’t put much stock in how favorable the Amazon reviews are, whether I am buying books, movies, or music. (I am most likely to buy music from Amazon.) This well-known example is one reason to distrust the reviews, although I think bad taste is more common than masquerades. Instead I look at how many reviews have been generated. I take this as a kind of sufficient statistic for how much passion the item has generated. Since I am at the tails of just about any distribution of taste, and since most cultural products disappoint in any case, look for something that creates a spark in people. I then see some chance of finding a product that I truly love. This advice will sometimes steer you wrong, but a little added intelligence will allow you to make the necessary adjustments.

By the way, there is now a whole blog, www.corante.com/many on how collaborative web enterprises shape society. Clay Shirky writes for it regularly, it is highly recommended.

Thanks to Eric Crampton for the pointer to the article.

Violence and Economy Building

Vadim Volkov’s “Violent Entrepreneurs” has an interesting discussion of protection rackets in the Russian economy. An interesting point is that Russian business and oranized crime have become symbiotic. Once a gang provides “protection” to a business, the gang considers the business their “turf” and becomes dependent on the income from the business. Eventually, gangsters come to guarantee transactions of the businesses they protect, a sort of underwriter that facilitates business. Volkov points out that a later wave of ex-army “protectors” came to provide a more legitimate, institutionalized form of protection against these earlier gangsters, which in turn opens the door for the reclaiming of the Russian state’s monopoly over violence. Robert Cottrell has a nice discussion in his New York Review of Books essay.

Oxford Encyclopedia of Economic History

Oxford University Press has just published a five-volume Encyclopedia of Economic History, edited by Joel Mokyr of Northwestern University.

Virginia Postrel offers a good review and some interesting details:

Did you know that the oldest records of chemical pest control date back 4,500 years, to Sumerian farmers who used sulfur compounds to kill insects and mites?

Or that a century ago, railroad companies accounted for half the securities listed on the New York Stock Exchange? (Before the railroads, with their huge demand for capital, securities markets traded almost entirely in government debt.)

Or that in 1850, shoemaking employed more workers in the United States than any other manufacturing business?

The past doesn’t look quite like we tend to picture it: many of the people who got rich from the Industrial Revolution were not industrialists, but landowners who held urban real estate or property with access to water power or mines. From 1880 to 1914, unions went on strike at least 50 times to stop American employers from hiring black workers. Above all, Professor Mokyr says, “in the Middle Ages and in classical antiquity, the destitute were the vast majority of the population.”

And what is the bottom line to economic history?

Professor Mokyr says: “There are certain unifying themes that you see everywhere. People have to make a living. People would rather have more than to have less. On the whole, they don’t behave stupidly. They do as well as they can under the circumstances. The variation is in the circumstances, in the richness and diversity of human economic institutions that have emerged over time.”

That is not all:

“Economic history,” Professor Mokyr writes in the preface, “covers nothing less than the entire material existence of the human past.” The encyclopedia gives theoretical economists a way to check their ideas against the realities of the past. “You guys can’t write these big, fancy models without looking at the details,” Professor Mokyr says.

I have not yet seen the volumes but most likely the set will not be surpassed anytime soon.

The importance of status in business

Gregg Easterbrook directs our attention to the following two anecdotes about business, both taken from Art Kleiner’s Who Really Matters:

Why, for example, does Coca-Cola insist on keeping its original formula in a safe-deposit box that only a few top executives are allowed to open when at this point any cola company could reverse-engineer the ingredients? It’s done, Kleiner says, to make the Coke “core group” feel important. Another great anecdote: When former ITT CEO Rand Araskog published an as-told-to book of self-praise in 1989, ITT public relations panicked on learning that almost all copies were going to be remaindered. Araskog would be furious if he walked past the Strand, New York’s famed used book store, and saw his book on sale for $1. So ITT contracted for another company to buy up thousands of copies of the book and quietly destroy them.

Here is a brief review of the Kleiner book, here is Kleiner’s home page. The remainder of Easterbrook’s post contains brief reviews of other recent books of note.

Evolution

Often I love the idea of science fiction more than science fiction itself. I’ve read most of the classics, and I am left with junk at the relevant margin. But lately I’ve been wrapped up in Stephen Baxter’s Evolution, published earlier this year. The book, spanning almost six hundred pages, tells the story of evolution from the point of view of our genes. To be sure, the book would be easy to satirize. It has no central characters, covers 65 million years of history, and frequently presents how different animals think [sic] about copulation. OK, that doesn’t sound like an obvious recipe for success but Baxter pulls it off to a surprising degree. The treatment is reminiscent of H.G. Wells or Olaf Stapledon, a particular favorite of mine. If you, like me, are desperate for science fiction that is actually intellectually stimulating, give this book a try. We are told, by the way, that the capacity to believe contradictory ideas is what makes human beings special.

Baxter pushes the Stephen Jay Gould line that the results of evolution are highly dependent on small accidents. For a contrasting point of view, from a more scientific front, see Life’s Solution: Inevitable Humans in a Lonely Universe. The author Simon Conway Morris argues that the path of evolution is much less contingent than is commonly believed. He points to numerous biological structures, such as the eye, that have evolved repeatedly under different guises. Here is one brief summary, here is a longer and more critical presentation. Life’s Solution, which occasionally verges on theology, should be read with a critical eye. Nonetheless if you feel you have read all the good popular books on evolutionary biology, here is a text with something new and provocative.

Why do women read more fiction?

Yesterday I asked why women buy and read more fiction than do men, and whether there might be an evolutionary explanation for this phenomenon. In response, Fabio Rojas writes:

(a) It’s sometimes thought that dreaming, play and story telling are opportunities for people for practice their emotional/interpersonal skill without danger. They’re all about fictional social worlds that you can explore and relate to without endangering real world relationships.

(b) Women seem to specialize in cooperative, social interactions. I’m sure there’s an Evolutionary explanation for this.

(c) As specialists in social interactions, women would be more likely to refine and practice that skill, through engagement with literature/story telling.

John Paschetto notes:

…when I used to commute by train to Philadelphia, almost all the men read newspapers, and almost all the women read paperbacks.

My student Erte suggests that men have a greater evolutionary need to be physically stronger, which induces them to read less and be more active, perhaps they play more sports instead.

My take: All of these are noteworthy ideas. I might add that when men do buy books, they often prefer stories of adventure, such as Tom Clancy novels. Furthermore men may invest more effort in potentially high status activities, which presumably does not include reading novels. It remains a puzzle, however, why women start reading more toward the latter part of their childbearing years. True, they are busier when they have young children, but if we are going to use an evolutionary explanation, it would be nice to explain the timing as well. Do older women have some special interest in understanding social networks?

Who buys fiction?

“More than 60 percent of fiction is bought by women and most of that by women aged between 35 and 55”, according to John Baker of Publishers Weekly, here is the link. Men don’t read fiction that much. Please write me if you have a good explanation for this fact in terms of evolutionary biology.

If you are curious, here are bestseller lists for the century, here is a New York Times bestseller list for right now, The Da Vinci Code remains number one, number five is Shepherds Abiding, described by Amazon in the following manner:

Karon [the author] works more homespun magic with this latest uplifting story set in sleepy Mitford, N.C. Father Timothy Kavanagh, stalwart of the Mitford series, is approaching 70 when he comes across pieces of an old English nativity scene at his friend Andrew Gregory’s antique shop. The set has definitely seen better days, and Andrew is hoping that someone will volunteer to restore it. Who better than Father Tim, who seems to have reached a turning point in his life and needs a project to distract him? Inspired by memories of a manger from his childhood that was destroyed in a rainstorm, Father Tim, after much deliberation, takes up the cause, planning to surprise his artist wife, Cynthia…The author’s warm spirituality and vibrant holiday spirit make this heartwarming eighth series entry a welcome one.

No, men are not buying this book in large numbers.

I am always amazed how strongly demographics predict our patterns of cultural consumption. People typically think that their cultural choices reflect their free will and their determination to construct their own identity. But when push comes to shove, it is young people who buy (or download) most of the music, see most of the movies, and middle-aged women who read most of the fiction. If you have a smart 19-year-old girl, who goes to Brown, I bet she doesn’t like heavy metal, but will have sympathies for Tori Amos and REM. And education and “social class” predict cultural taste better than does income.

The first linked piece also details just how hard it is to make a living writing fiction. You can have a few hit books, with reasonably large advances, but unless they are huge you might net no more than $20,000 a year. Yet overall incomes are rising. I predict that having an upper-middle class spouse, or richer, will prove the key to making it as a writer in the future.

Thanks to the ever-excellent www.2blowhards.com for the pointer to the first link.

50 Things You’re Not Supposed to Know

That is the title of this new book, which I picked up while browsing in Harvard Book store in Cambridge. The book is most interesting as someone’s vision of what he thinks might, or ought to, shock other people.

In reality, few of the examples succeed. I suppose not everyone knows that “Black People Served in the Confederate Army” (#20), and surely few people know that “The first CIA agent to die in the Line of Duty was Douglas Mackiernan” (#4). But the author moves pretty quickly to gross exaggerations, such as “The US is Planning to Provoke Terrorist Attacks” (#7), or “World War III Almost Started in 1995” (#10), for a while the Soviets were misreading data and thought we had launched some nukes.

The funniest one, for me, is #27: “Most Scientists Don’t Read All of the Articles They Cite.” Who exactly is supposed to be shocked by this? The authors, however, do offer some data. A particular article was cited 4300 times, 196 times with typographical errors in the citation. Of those 196 errors, 78 times the same mistake appeared, which suggests the author simply copied the reference from another bibliography. In reality, I think this is a gross underestimate of the phenomenon, noting that a common typographical error doesn’t mean the scholar didn’t read the piece, it only means he compiled his bibliography from others.

It was news to me, however, that Pope Pius II, in fifteenth century Europe, had written an erotic book.

Aphorisms

I need a much larger vocabulary to talk to you than to talk to myself.

From James Richardon’s Vectors: Aphorisms and Ten-Second Essays, a recent book of aphorisms.

It is hard to write a good book of aphorisms today, it no longer suits the temper of the times, perhaps a bit like the classical symphony. Some in this book I find trite, such as:

Wind shakes the flame but feeds the fire.

Huh?

Bryan Caplan, with whom I regularly argue about free will, might like this one:

Determinism: How romantic to think the mind a machine reliable enough to transform the same causes over and over again into the same effects. When even toasters fail!

Tell that one to Gary Kasparov!

More to the point is:

If only we were satisfied to have others think of us what we think of them.

While we are on the topic, here is a web list of favorite aphorisms of Nietzsche. And here is a selection of aphorisms from Schopenhauer, also not a cheery fellow, how about this one:

National character is only another name for the particular form which the littleness, perversity and baseness of mankind take in every country. Every nation mocks at other nations, and all are right.

For aphorisms to fit the spirit of the times, perhaps we need a world where at least some negative thoughts are still shocking.

Henny Youngman once said:

“What good is happiness? It can’t buy money.”

Here is an insightful review of Gregg Easterbrook’s new The Progress Paradox: How Life Gets Better While People Feel Worse. Why is it that we are wealthier than ever before, but not much happier?

The reviewer, drawing on Easterbrook’s text, suggests a few answers. Bad news sells, and progress always brings new problems. People will always envy their neighbors and compare their lot in relative terms. The bottom line?:

“We are built to be effective animals, not happy ones,” evolutionary psychologist Robert Wright has written.

I’ll blog more about this book when my copy arrives.

Christmas gifts

OK, the end of the year is approaching, here are my “best of” lists:

1. Classical music CD: Bach, St. Matthew’s Passion, conducted by Paul McCreesh. As good a recording as you will find, and this is arguably the best piece of music ever. One voice to a part, as they did it in Bach’s day, but never stale or musty.

2. Popular music CD: Outkast, Speakerboxx/The Love Below. Starts at hip-hop but spans the entire musical map, from an immensely talented duo.

3. Book, fiction: J.M. Coetzee, Elizabeth Costello. The finest novel yet by this year’s Nobel Laureate in literature, deep and philosophical, but also a great read.

4. Book, non-fiction: Michael Lewis, Moneyball: The Art of Winning an Unfair Games. Baseball puts me to sleep, this book is actually about human irrationality and performance. Everyone should read it.

5. DVD: Jean-Luc Godard, Band of Outsiders. OK, so he was (is?) a commie. Still, he understands the power of cinema in a way that few other directors do. The screen sparkles in every frame, the release is of course by Criterion.

And if you really want to go on a shopping spree, here is an article about notable art masterpieces still in private hands. I would recommend the Pollock at $50 million, except that the owner is not selling at that price.