Category Archives: books and book reviews

The Protectionist Spirit

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Tyler Cowen concludes,

it has become harder for insiders to capture the gains from building more, opening up or liberalizing systems. And so they are closing off opportunities and limiting potential gains for everyone.

I have just started reading The Innovation Illusion, by Frederik Erixon and Bjorn Weigel. They take the view that capitalism’s main strength is its ability to adopt new and better methods while discarding what is inefficient. They also take the view that this strength has diminished in recent decades. If you read Tyler’s entire essay, you will see that his point is that the benefits from capitalism are tending to go toward people with less political power and the displacement from capitalism is tending to affect people with more political power.

Still Looking for a Present?

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Yuval Levin recommends my book, among others.

It helps you unlearn what is untrue and then try to learn what is true. And it treats economics as a discipline—that is, not just a set of tools and facts but an ongoing project engaged in by real human beings with a purpose and a history and all manner of virtues and vices. It seems to me that we are living through something of a crisis in economic theory at the moment (not for the first time), and Kling can help us through it.

Supply, Demand, and Immigration

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Don Boudreaux writes,

An increase in the supply of labor lowers wages only if nothing else changes. But when immigrants enter the workforce two very important other things change. First, immigrant workers spend or invest their earnings, both of which activities increase the demand for labor – thus putting upward pressure on wages. By focusing only on immigrants’ effect on the supply of labor, Mr. Burwell overlooks immigrants’ effect on the demand for labor.

A second change is one that was emphasized by Adam Smith: larger supplies of workers, as well as more consumers of the economy’s output, lead to greater specialization. Jobs change. As Smith explained, this greater specialization makes workers more productive. This increased productivity, in turn, causes wages to rise.

Peter Turchin would disagree. In Ages of Discord, he finds a strong historical correlation between periods of high rates of immigration and stagnant wages for ordinary workers. I have read through Turchin’s book once, and I mean to write a review. But I keep procrastinating. I am tempted to say that the book, while it appeared to be very interesting on a first pass, is un-rereadable. The data that lands in Turchin’s charts takes a very circuitous route to get there, and it hard for me to stay on top of the relationship between the underlying data and what Turchin says that they represent.

Tyler Cowen Talks with Joseph Henrich

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Self-recommending. A couple of excerpts from Henrich.

Humans really don’t think as individuals. We don’t innovate as individuals. We innovate as groups. Groups that, for whatever reason, are able to create more social interconnections produce fancier tools and technology, and they’re able to maintain larger bodies of know-how.

and

Much of behavioral economics, at least at the time, was based on running experiments on undergrads. It’s actually mostly American undergrads that are studied.

The point is that these studies may not replicate, because they are limited to people who are Western, Educated, Industrialized, Rich, and Democratic–WEIRD.

Recall that I based a lot of my essay on cultural intelligence on Henrich’s book.

The interview with Cowen is lively and interesting throughout.

The State of Arab Youth

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From a UN development report press release.

Today, youth in the region are more educated, more connected and more mobile than ever before.

Pointer from Timothy Taylor.

We know from Martin Gurri’s The Revolt of the Public that this is a mixed blessing. Indeed, also from the press release:

increasing levels of armed conflict are destroying the social fabric of the Arab region, causing massive loss of life not only among combatants, but also among civilians. Conflicts also are also reversing hard-won economic development gains by destroying productive resources, capital and labour, within a larger territory neighbouring countries where they are fought. Between 2000–2003 and 2010–2015, the number of armed conflicts and violent crises in the region have risen from 4 to 11, and many of them are becoming protracted in nature.

Why it May be Hard to Change My Mind

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Cass Sunstein offers a list of books from the left or center-left for a conservative to read to possibly change one’s mind. Pointer from Tyler Cowen.

You recall that I appreciated his idea of proposing books for liberals to read that presented a conservative or libertarian perspective.

If you go back and read his first list, written by conservatives and libertarians, the books are quite obscure. I have not done a Google search to check, but I would not be surprised if there are only one or two that have been reviewed in publications that liberals would read. My guess is that if you gave a typical liberal intellectual only the title and author of one of these books and said, “Tell me what you think it says,” you would get an answer that is blank or incorrect.

It turns out that I have not read any of the books on Sunstein’s new list, but long before I saw Sunstein’s post I had read op-eds by the authors and/or reviews of all of them other than Dworkin’s (which falls outside of my area of interest). Based on these, I presume that:

–Nordhaus makes the case that climate models are uncertain, that we need to be worried that they under-estimate the danger, and that a carbon tax is the most efficient way to buy “insurance” against climate risk.

–Frank makes a case that we live in luck village.

–Mullainathan and Shafir say that there is a household-level poverty trap in that the less income you have, the less mental/emotional slack you have, and the worse decisions you make.

–Gordon makes the case that current technological innovation is not boosting living standards as dramatically as innovation a hundred years ago.

My point is that when liberals publish books, conservatives become aware of them. So at the margin, actually reading the book does not introduce us to new ideas–although the book may make the argument more compelling. When conservatives publish books, liberals are not aware of them. So just encountering the ideas would be new. Other things equal, I would expect liberals to find more unfamiliar ideas in conservative books than vice-versa.

Russ Roberts interviews Thomas Leonard

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Self-recommending. I could choose almost any paragraph to excerpt. Here is one:

Darwinism, with its kind of material explanation for evolution, for human evolution, seems to imply that the idea of having inalienable natural rights invested in you by a Creator–the language that you find in the Declaration of Independence–Darwin seems to suggest that’s just kind of a nice fiction.

He is trying to explain how the progressives in general, and economists in particular, came to downplay individual rights.

I put Leonard’s book at number 2 on my books of the year for 2016. I wrote an essay about it earlier this year.

Accountability and the Administrative State

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On Thursday, I attended an event at Cato where the authors of a new book, What Washington Gets Wrong, presented some of their findings. They had the cute idea of doing an opinion survey of Washington insiders, to find out what they think about the public and to find out how well the insiders’ views correlate with those of the outsiders. I purchased the book and at some point I will check out its contents. Meanwhile, I found myself more stimulated by a conversation I had afterward with Cato’s Mark Calabria, who has experience as a Senate aide.

What Mark believes, and it sounds right to me, is that we have the Administrative State (in which unaccountable and un-elected bureaucrats make important decisions) because Congress wants it that way. For Congress, making the actual policy decisions has more down side than up side. Constituents whose families or businesses are adversely affected will cause a lot of trouble.

Thus, the Administrative State is an adaptation that emerged with the purpose of moving decisions away from a body that is relatively responsive to the people (Congress). You may not like it, but there it is.

There may even be reasons to believe that this adaptation is a feature rather than a bug. That is, you might want decisions to be made by people who have expertise and who are focused on the general interest rather than the particular interests of constituents. This was the view offered by a (non-libertarian) guest speaker at the Cato event.

If what you want is an organization that is accountable to its constituency, then I would argue that you want is a market process rather than a government process. While the government process adapts to diffuse accountability, the market process forces businesses to be accountable to their customers.

In the 1980s and 1990s, many American businesses discovered that their bureaucracies were undermining the firm’s responsiveness to its customers. Under competitive pressure, businesses reformed by adopting “business process re-engineering” and other management tools to ensure a better customer experience. Prior to this wave of reform, a customer’s problems would get buried in the corporate bureaucracy, with no one taking responsibility for finding a solution. Following these reforms, customers encountered businesses that were capable of solving problems, and better yet, anticipating the customer’s wants and avoiding causing problems in he first place.

Government agencies are capable of making these sorts of organizational changes. The guest speaker cited the passport office of the State Department as having become much more responsive in recent years. In side conversations afterward, a couple of Cato folks admitted that the infamous Department of Motor Vehicles in DC is better than it was twenty years ago. But I think you get improvement more rapidly and more reliably when there is market competition.

Peter Turchin’s Latest Book

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It is called Ages of Discord: A Structural-Demographic Analysis of American History, and I received a review copy. I am not very far into it. An alternative title might be “Average is over. . .and maybe so is everything else.” From the back cover:

Historical analysis shows that long spells of equitable prosperity and internal peace are succeeded by protracted periods of inequity, increasing misery, and political instability. These crisis periods–“Ages of Discord”–have recurred in societies throughout history. Modern Americans may be disconcerted to learn that the US right now has much in common with the Antebellum 1850s and, more surprisingly, with ancien regime France on the eve of the French revolution.

I will have some problems with his approach to history, if what he says on p.6-7 is any indication.

What we need is theory in the broadest sense, which includes general principles that explain the functioning and dynamics of societies and models that are built on these principles, usually formulated as mathematical equations or computer algorithms. Theory also needs empirical content that deals with discovering general empirical patterns, determining the empirical adequacy of key assumptions made by the models, and testing model predictions with the data from actual historical societies.

This sounds like it borrows some of the more dubious methodological doctrines of economics. I have been arguing that mental processes are important in explaining social outcomes. I fear that the emphasis on mathematical equations and data leads instead to a focus on physical processes, to the neglect of mental processes. I do not think that Turchin will turn out to be such a physical determinist. But we will see.

Somewhat related: Yascha Mounk on indicators of fragility in democracy.

The first factor was public support: How important do citizens think it is for their country to remain democratic? The second was public openness to nondemocratic forms of government, such as military rule. And the third factor was whether “antisystem parties and movements” — political parties and other major players whose core message is that the current system is illegitimate — were gaining support.

Pointer from Tyler Cowen.

Turchin also uses indicators, but his set is different.