Category: Books

What I’ve been reading

by  Tyler Cowen in

1. From London to Elista: The Inside Story of the Three Matches that Vladimir Kramnik Played for the World Chess Title, by Eugeny Bareev and Ilya Levitov.  Via John Nye, the quality and drama of this book stunned me.  Chess aside, the use of the dialogic form works remarkably well.

2. The Yacoubian Building, by Alaa Al Aswany.  Fun, philosophical, erotic, and a bestseller in the Arab world.  Many Americans don't know this book but it is worth picking up.

3. Lanark, by Alasdair Gray,  This book is as good as I remember it; I was surprised to see it has only four reviews on U.S. Amazon.  Many critics consider it the best and most creative Scottish novel of the twentieth century and of course it has tinges of science fiction and fantasy.

4. Venus in Furs, by Leopold von Sacher-Masoch.  If you are drawing inferences, keep in mind this means I had not read this book to date.  It is a source for Roissy and also has some early anticipations of behavioral economics.  Sporadically interesting, I would say.

5. Time Out Barcelona. The Time Out series is the most useful resource for urban travel, including for food.  No other guide book comes close.

Textbook Contest – Results

by  Alex Tabarrok in

Many thanks for all the excellent suggestions for an epigraph for Modern Principles.  Here were some of our favorites:

"He tried to read an elementary economics text; it bored him past
endurance, it was like listening to someone interminably recounting a
long and stupid dream."

Ursula K. Le Guin, "The Dispossessed"

We liked that this has an exoteric and esoteric meaning but we suspect that it would be hard to get past "the Corporation."  (The esoteric meaning?  The novel is about a communist utopia so it's really no surprise that the characters (and the author) think that elementary economics texts are boring!). Suggested by Dave C.

"Competition is good for consumers."
N. Gregory Mankiw

Suggested by Eli Dourado.

"Economics is really about understanding the world — and changing it
— and not in a messianic fashion but in an honest fashion."
James J. Heckman

A close one.  Suggested by Jared.

Advertise Here.
Suggested by Alex Tabarrok.

I liked it!

And the winner is:

Economics is the study of how to get the most out of life.

I thought this phrase, which was suggested by Scott Gustafson, captured the joie de vivre and the love of economics that Tyler and I have tried to bring to Modern Principles.  It's unclear who said this first, although nicely for us Russ Roberts used this phrase to describe Tyler's book Discover Your Inner Economist, thus there is some history.

Thanks everyone for your many helpful and excellent suggestions!

The new Gabriel García Márquez biography

by  Tyler Cowen in

One day [Alvaro] Mutis climbed the seven flights of stairs, carried two books into the apartment without saying hello, slapped them down on the table, and roared: "Stop fucking about and read that vaina, so you'll learn how to write!"  Whether all García Márquez's friends really swore all the time during these years we will never know — but in his anecdotes they do.  The two slim books were a novel entitled Pedro Páramo, which had been published in 1955, and a collection of stories entitled The Burning Plain (El llano en llamas), published in 1953.  The writer was the Mexican Juan Rulfo.  García Márquez read Pedro Páramo twice the first day, and The Burning Plain the next day.  He claims that he had never been so impressed by anything since he had first read Kafka; that he learned Pedro Páramo, literally, by heart; and that he read nothing else for the rest of the year because everything else seemed so inferior.

That is from the new and noteworthy Gerald Martin biography of García Márquez.  This very impressive (and enjoyable) book was seventeen years in the making.  It's also not a bad way to learn about the political and economic history of northern Colombia.  This should make any short list of either the best non-fiction books this year or the best literary biographies.  The reader also learns the probable origins of the famed spat with Mario Vargas Llosa (p.375); it had to do with a woman, namely Vargas Llosa's wife.

China kiln fact of the day

by  Tyler Cowen in

At around the time of the Industrial Revolution:

Pottery, for instance, was manufactured in both England and China. The
design of the kilns differed greatly, however. English kilns were cheap
to build but very fuel inefficient; much of the energy from the burning
fuel was lost through the vent hole on the top (Figure 4). The typical
Chinese kiln, on the other hand, was more expensive to construct and,
indeed, required more labour to operate. Figure 5 shows how heat was
drawn into the chamber on the left and then forced out a hole at floor
level into a second chamber. The process continued through many
chambers until the air, by then denuded of most of its heat, finally
exited up a chimney. In England, it was not worth spending a lot of
money to build a thermally efficient kiln since energy was so cheap. In
China, however, where energy was expensive, it was cost effective to
build thermally efficient kilns. The technologies that were used
reflected the relative prices of capital, labour, and energy. Since it
was costly to invent technology, invention also responded to the same
incentives.

Check out the accompanying sketch, from a short essay by Robert C. Allen, drawn from his new book The British Industrial Revolution in Global Perspective.  The bottom line seems to be this:

Success in international trade created Britain’s high wage, cheap
energy economy, and it was the spring board for the Industrial
Revolution.

Here is what WolframAlpha gives you for "Industrial Revolution."

Amazon as book publisher

by  Tyler Cowen in

Here is the latest:

In its most significant foray into publishing, Amazon has acquired world English rights to a self-published novel by a midwestern teenager called Legacy. The acquisition is the first for the e-tailer's newly launched publishing banner, AmazonEncore. Amazon is re-releasing the fantasy title, in hardcover, in August. The book, by Cayla Kluver, is part of a planned a trilogy–it was published under the banner Forsooth Books, founded by Kluver and her mother–and, according to Amazon, is the first in a currently unknown number of titles from AmazonEncore.

Economic theory predicts that if Amazon were to start publishing, it would publish nobodies rather than established star writers.  Can you explain why?

What I’ve been reading

by  Tyler Cowen in

1. Brian Boyd, On the Origin of Stories: Evolution, Cognition, and Fiction.  If you've read Geoffrey Miller, Karen Dissanayake, Denis Dutton, and Comeuppance, this is the next book in line.  It's well-written and intelligent, but also a little underwhelming.  The main point is that the arts are an extension of the play instinct.  Blog audiences, who expect rapid delivery of the main points, may be especially frustrated.

2. Richard Goldthwaite, The Economy of Renaissance Florence.  Dull for some, definitive for others.  If the thesis about commerce sounds a little late to the party, it is only because of Goldthwaite's own previous work.

3. John Reader, The Potato: A History of the Propitious Esculent.  Not as good as his excellent book on  Africa, but I liked the sections on potatoes in the Incan empire.  This book could have been great, it isn't, but it is still above average.

4. Portfolios of the Poor: How the World's Poor Live on $2 a Day, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven.  A good overview of how the world's poor intersect with financial institutions at the micro level.

5. Twenty Thousand Roads: The Ballad of Gram Parsons and His Cosmic American Music, by David N. Meyer.  A serious and excellent book, noting that every now and then the reader is hit by a strange sentence like: "Of course the temptation to get all bourgeois on Gram's a** is irresistible."  Meyer underrates the album Burrito Deluxe, however.

Going to Extremes

by  Tyler Cowen in

That's the new book by Cass Sunstein and the subtitle is How Like Minds Unite and Divide.  I am a fan of Cass Sunstein and I hope they confirm him for OIRA, but I am not persuaded by the main thesis of this book.

I take the main point to be that polarization is increasing and in a bad way.  Sunstein offers plenty of good evidence that when people discuss a problem together, they tend to polarize if they disagreed in the first place.  But this does not mean polarization is increasing in absolute terms.  You can find poll-based public opinion diagrams which point in either direction, but viewing the problem in general and longer-run terms, here are a few offsetting forces:

1. Most of the time people aren't talking with others about controversial problems.  During these "cooling off periods" their polarization might well decrease.  It's not a one-way ratchet effect.

2. The population is aging in many countries.  Even if you believe in the notion of "crochety old men," they are tame crochety old men.

3. Highly polarizing ideologies, such as communism and Nazism, have been on the decline.  Maybe jihadism is on the rise but even that is not clear.

4. Wealth and commerce soften morals.

5. Public reactions to the financial crisis have been quite low-key for the most part.

6. Obama goes out of his way to adopt a non-polarizing style (no matter what you think of his policies) and it brings him considerable popularity.  That suggests a demand for non-polarization, or at least the perception thereof.  In many countries politicians have an incentive to straddle the median and bring outlying groups closer to the center, for purposes of governance and re-election.

Polarization is highly visible in certain segments of the media, including the web.  But I am not convinced that increasing polarization is occurring or is a major problem, once we adjust for what one might call "perennial stupidity."

How our macro book differs

by  Tyler Cowen in

Alex already has suggested some points related to economic growth; I'll add to that:

1. We make macroeconomics as intuitive as microeconomics.  Our macro is based on the idea of incentives, consistently applied.

2. We cover the current financial crisis.

3. We show a simple — yes truly simple — way of teaching the Solow Growth model.  I call it Really Simple Solow.  But if that's not simple enough for you, you can skip it and just call it Long-Run Aggregate Supply.

4. We offer equal and balanced coverage of neo Keynesian and real business cycle models.  Most other texts emphasize one or the other.

5. We offer an intuitive way of teaching real business cycle theory.  No intertemporal optimization representative agent models.  Can you explain to your grandmother why swine flu has been bad for the Mexican economy?  If so, you also think that real business cycle theory can be taught simply and intuitively.

6. Our version of the AD-AS model actually makes sense.  We don't mash together real and nominal interest rates into the same diagram, we don't treat the Taylor rule as an assumption for deriving an AD curve, and we do the analysis consistently in terms of dynamic rates of change.  (On the latter point for instance it is the rate of inflation which influences economic behavior, not the absolute level of prices per se, yet so often "p" rather than "pdot" goes on the vertical axis.) 

The AD-AS analysis covers both neo Keynesian and RBC models and can be done with three simple curves in one simple graph.  There is only one (consistent) model which needs to be taught for presenting the major macro ideas.

Alex and I vowed we would not stop working on this book until macro ceased to be the "ugly sister" of the micro/macro pair.  Modern Principles: Macroeconomics is the result of that Auseinandersetzung.

We are heartened by the response to our previous posts on the book.  Again, please do contact us if you are interested in a review copy for teaching purposes.  Here is the book's home page.

Modern Principles: Macroeconomics, Economic Growth

by  Alex Tabarrok in
In the United States, diarrhea is a pain, an annoyance, and of
course an embarrassment. In much of the developing world, diarrhea
is a killer, especially of children. Every year 1.8 million
children die from diarrhea. Ending the premature deaths of these
children does not require any scientific breakthroughs, nor does it
require new drugs or fancy medical devices. Preventing these deaths requires
only one thing: economic growth.

That’s the opening paragraph of The Wealth of Nations and Economic Growth, Chapter 6 in Modern Principles: Macroeconomics.  Does the opening make you a little bit squeamish?  We hope so–we wanted an opening that would jar students out of complacency and remind them how vital economic growth is to human life.  

Due to its importance, we have more material on growth and development than any other principles text.  In Chapter 6 we lay out the key facts and the basic framework for understanding economic growth.  I think we do an especially good job explaining that the proximate causes of growth, increases in capital, labor, and technology must themselves be explained.  Why do people save?  Why do people invest?  Why do people research and develop new ideas?  It’s these questions which connect macroeconomics to microeconomics and point to the fundamental importance of incentives and institutions.  These questions also foreshadow future chapters on savings, investment, financial intermediation and the economics of ideas. 

For a limited time, you can read Chapter 6 at the link above (and do enjoy the pretty color pictures before you print!).  Tyler and I will be writing more about Modern Principles: Macroeconomics this week; you can also find more information at www.SeeTheInvisibleHand.com.

More on the new Geoffrey Miller book, *Spent*

by  Tyler Cowen in

Here is a typical bit:

Sexual traits are also well predicted by the Central Six [personality traits]…The highly sociosexual, open, impulsive, and selfish tend to invest more of their time and energy in "mating effort" rather than "parenting effort": they are constantly seeking new sexual partners rather than raising the offspring from existing relationships.  On the other hand, people with "restricted" sociosexuality (the virginal, the chaste, and the happily married) have fewer sexual partners, less infidelity, lower openness, higher conscientiousness, higher agreeableness, and lower extraversion.  They invest more time and energy in parenting effort and less in mating effort.

Miller suggests also that parasite loads of various societies predict (cause?) their openness.  A "mating-primed" man is more likely to express bold taste when asked about his preference in cars.  Mostly I am skeptical of such claims (many of the studies fall apart upon inspection) but still it is worth hearing Miller out as long as you approach the cited results with some skepticism.

I liked this passage:

Some common themes emerge from these slightly whimsical suggestions.  One is that buying new, real, branded premium products at full price from chain-store retailers is the last refuge of the unimaginable consumer, and it should be your last option.  It offers low narrative value — no stories to tell about interesting people, places, and events associated with the product's design, provenance, acquisition, or use.  It reveals nothing about you except your spending capacity and your gullibility, conformism, and unconsciousness as a consumer.

The impish troublemaker in me — and yes I have now been Robin's colleague for over ten years — wonders if indeed that is exactly what people are signaling with those purchases.

Here is my first post on the book.

Restricted purchases as signaling, a proposal from Geoffrey Miller

by  Tyler Cowen in

Geoffrey Miller, in his new book Spent, suggests an intriguing but I think absurd idea:

For example, companies could sell certain products only to consumers who have a certain minimum or maximum score on one or more of the certain Central Six [personality] traits.  Hummer dealers could advertise that the "Party Animal Red Pearl" paint color is available only to customers who score in the top 5 percent for extraversion.  Customers who want to display their unusually high extraversion through that bright red color would have to electronically validate their extraversion score at the dealership before they could sign the purchase agreement.  In this way, Hummer could guarantee that Party Animal Red Pearl becomes a reliable signal of friendliness, self-confidence, and ambition.  Or Lexus could sell the "Mensa Quartz Medallic" color of the LS 460 only to customers whose validated intelligence scores are high enough for them to join Mensa International (IQ 130+ or the top one in fifty).  The more exclusive "Prometheus Glacier Pearl" color could indicate an IQ above 160 (the top one in thirty thousand) — the qualification for joining the Prometheus Society.

But why those proposals are so absurd — that is harder to answer.  What are your thoughts?  Can it be that people ought not to be seen as signaling too purposively?  Maybe, but if so, that would seem to rule out so much — too much — of the marketplace signaling which we in fact observe.

Old people love Kindle

by  Tyler Cowen in

Citing this Amazon forum, Publishers Lunch Deluxe reports:

We extracted about 75 percent of the responses on age (representing about
700 responses, taking equally from the earliest and most recent postings,
which show very similar age distributions). Per John Makinson's quip at an
LBF panel, over half of reporting Kindle owners are 50 or older, and 70
percent are 40 or older. Here is the full age bracket distribution:

0 – 19: 5%
20 – 29: 10%
30 – 39: 15%
40 – 49: 19.5%
50 – 59: 23%
60 – 69: 19.5%
70 – 79: 6%
80+: 2%

The comments themselves are as illuminating as the numbers. So many users
said they like Kindle because they suffer from some form of arthritis that
multiple posters indicate that they do or do not have arthritis as a matter
of course. A variety of other impairments, from weakening eyes and carpal-tunnel-like
syndromes to more exotic disabilities dominate the purchase rationales of
these posters. Which in turn explains Amazon's pseudo-statistical case that
e-book purchases are incremental/additive, rather than cannibalistic of
their print sales. Countless people report being able to read much more
with Kindle because it overcomes physical obstacles or limitations that had
made reading difficult for them previously.

I thank S. for the pointer.