Category Archives: books and book reviews

Books of the Year, 2016

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1. Sebastian Mallaby, The Man Who Knew. A very readable biography of Alan Greenspan. It corrects many misconceptions. It offers useful lessons on the history of economic policy, on the role of economists in Washington, and above all on the effect of politicians on economists. I have a review essay forthcoming.

2. Thomas Leonard, Illiberal Reformers. A highly original and devastating account of how American economics was “born bad,” so to speak. The founders and early stars of the American Economic Association were filled with hubris and racism, quite the opposite of Adam Smith and the English liberals. Here is my review essay.

3. Yuval Levin, The Fractured Republic. There is at least implicit in Levin’s book the claim that libertarianism has unwittingly served the cause of statism by helping the left in its project of undermining intermediating institutions such as the family and organized religion. I wrote a review essay and, in addition, I decided to read and review Robert Nisbet’s 1953 work, The Quest for Community, which is a major influence on Levin.

4. Erwin Dekker, The Viennese Students of Civilization. This book offers some novel and provocative analysis of early 20th century Austrian economics. It is marred by Dekker’s lack of facility with the English language, a problem which Cambridge University Press does not seem to have bothered to address. Here is my review essay.

5. Joel Mokyr, A Culture of Growth. Mokyr takes the view that leading Enlightment thinkers helped to pave the way for industrialization by putting forth notions of progress aided by the combination of science and commercial innovation. It is marred by Mokyr’s heavily academic writing style, with citations and asides constantly interrupting the flow. I can barely imagine even specialists plowing through the entire book, much less general readers. My review essay is forthcoming.

In addition, I would like to mention two other books. One is my own Specialization and Trade, which I was happy with and has actually grown on me since it appeared this summer. The other is Martin Gurri’s The Revolt of the Public, which appeared in 2014 but only came to my attention this year. As I argued in my review essay, Gurri is one of the few analysts who can legitimately claim to have anticipated something like the Trump phenomenon.

Jason Collins on Joseph Henrich

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Self-recommending. One excerpt:

Contrast cultural evolution with genetic natural selection. In the latter, high fidelity information is transmitted from parent to offspring in particulate form. Cultural transmission (whatever the cultural unit is) is lower-fidelity and can be in multiple directions. For genetic natural selection, selection is at the level of the gene, but the future of a gene and its vessels are typically tightly coupled within a generation. Not so with culture. As a result we shouldn’t expect to see the types of results we see in population/quantitative genetics in the cultural sphere. But can cultural evolution get even close?

Suppose that we define culture as socially communicated thought patterns and behavioral tendencies. Then cultural evolution would be the process by which the “fittest” thought patterns and behavioral tendencies survive. One can imagine that such a process could be extremely messy. There are non-linear interactions among thought patterns and behavioral tendencies. We would expect the evolutionary process to make a lot of mistakes, and indeed a little reflection would tell you that we have seen a lot of mistakes.

The Best Writing on the Presidential Transition

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is by David Halberstam, in The Best and the Brightest. Of course, it is about the Kennedy transition of 1960-1961. As the book opens, President Kennedy is meeting with Robert Lovett to discuss candidates for important offices, such as Secretary of State and Secretary of Defense.

Note that the first sentence of the book is “A cold day in December.” By today’s standards, Kennedy must have spent the month of November in “disarray.”

Halberstam explains that two party icons who might have offered independent thinking, Adlai Stevenson and Chester Bowles, were passed over for Secretary of State. One important reason is that during the nomination contest, Stevenson and Bowles had failed to live up to Kennedy’s standards of loyalty. Those standards evidently were met by Kennedy’s choice for Attorney General–his brother.

Kennedy selected for his key foreign policy team Dean Rusk, Robert McNamara, and McGeorge Bundy, all of whom were wedded to orthodox views. They also had no independent political base to detract from their loyalty to Kennedy. Their legacy is the Vietnam War.

On the Trump transition, I ran across this WaPo piece by Eliot Cohen.

The president-elect is surrounding himself with mediocrities whose chief qualification seems to be unquestioning loyalty…By all accounts, his ignorance, and that of his entourage, about the executive branch is fathomless.

Recall that before the election I wrote

On the Republican side the best and the brightest are NeverTrumpers, and I don’t see Mr. Trump reaching across those burned bridges.

Cohen is certainly not repairing those bridges (he is close to declaring them beyond repair). If his strong words are based on a single interaction he had with someone on the Trump team, then shame on him. On the other hand, if Cohen has accumulated a plural of anecdotes, then he is delivering a fair warning.

[UPDATE: Yuval Levin writes,

I respect Cohen, certainly share his concerns about Trump, and can understand his worries here. But I think his piece is unfair in some important respects, and ultimately unpersuasive

I should add that I also find the piece a bit strange, in this respect: my guess is that Cohen could reach a lot of his friends among conservative foreign policy wonks with a more private medium, such as email. What was the purpose in going public in the Post? As Levin puts it,

if Trump’s team concludes that every frank private conversation they have with anyone outside their circle will end up in the newspapers, they will be even less likely to reach beyond that circle in recruiting talent, and the country will pay for it.

Thanks to a commenter for pointing to Levin’s post, which I had somehow missed.
]

I do not know Eliot Cohen. However, it happens that his daughter was in my class when I taught AP statistics in 2001-2002. That was my first full year of high school teaching, and I was not yet competent at explaining concepts. After several months, I realized that what the students were getting from me was just a general indication of what they were supposed to know. Most of the students who were actually learning the subject were getting their instruction from Eliot Cohen’s daughter.

Martin Gurri Watch

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Jim Newell writes,

The Democratic Party establishment has beclowned itself and is finished.

I think of the lawmakers, the consultants, the operatives, and—yes—the center-left media, and how everything said over the past few years leading up to this night was [baloney sandwich].

Once again, Martin Gurri’s Revolt of the Public seems to be the best guide to events. It seems as though the Democratic Party is ripe for the sort of anti-establishment revolt that hit the Republicans this year.

Speaking of Gurri, prior to the election, he wrote,

In somewhat slower motion than the Republicans, the Democratic Party is unbundling into dozens of political war bands, each focused with monomaniacal intensity on a particular cause – feminism, the environment, anti-capitalism, pro-immigration, racial or sexual grievance. This process, scarcely veiled by the gravitational attraction of President Obama and Clinton herself, will become obvious to the most casual observer the moment the Democrats lose the White House.

That moment has come, and we’ll see how the prediction plays out.

Weakest-Link Theory

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In a review of Garett Jones’ Hive Mind, Jason Collins writes,

Jones’s argument builds on that of Michael Kremer’s classic paper, The O-Ring Theory of Economic Development. Kremer’s insight was that if production in an economy consists of many discrete tasks and failure in any one of those tasks can ruin the final output (such as an O-ring failure on a space shuttle), small differences in skills can drive large differences in output between firms.

Let us meditate on this for a while. Toss out all of your intuition based on marginal productivity theory, and instead think of a business as undertaking a set of processes, with the overall profit constrained by its weakest process. It fails if it is great at engineering but lousy at marketing, or vice-versa. A firm that has great engineering and great marketing can be done in by poor internal controls. And so on.

First, this theory helps explain why there are firms. An engineer working by himself automatically has a lousy marketing department.

Second, it may explain why we see higher pay at highly profitable firms. These are firms that know how to identify and retain high-performing workers. That includes giving their high-performing workers appropriate compensation.

Joseph Henrich Defines Culture

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Since I was talking about the challenge of defining culture, we should look at how Joseph Henrich defines it in The Secret of Our Success, an important book that I have referred to often (most notably in this piece for National Affairs). On p. 3, he writes

By “culture” I mean the large body of practices, techniques, heuristics, tools, motivations, values, and beliefs that we all acquire while growing up, mostly by learning from other people.

That’s all he has to say in terms of definition, which leaves some questions unanswered.

1. Why the qualifier “while growing up”? It implies that we reach an age at which the receipt of cultural transmission stops, which seems odd. What empirical or theoretical problems does Henrich think he is avoiding by including the qualifier, rather than taking the view that cultural transmission can be received at any age?

2. Why the qualifier “mostly”? If it were me, I would be tempted to partition our personalities into three components: biologically innate; acquired through our own experience with nature; and learned from other people. Of course, any single behavioral tendency or thought pattern can be the product of all of these components, so that the precise partition may not be readily applicable. Still, I would make the general point that much of our behavioral tendencies and thought patterns are learned from other people, either directly or indirectly. In fact, that might serve as a one-sentence statement of the thesis of Henrich’s book. But in the definition of culture, I would drop the “mostly” and say that to the extent that a behavioral tendency or thought pattern is not learned from other people, then it is not cultural. In that case, it is mostly innate and/or learned through our own experience. If culture includes more than what we learn from other people, then what does it not include?

3. Note the inclusion of “tools,” which goes beyond my shorthand of “behavioral tendencies and thought patterns.” While we are at it, why not include consumer goods, or at least say that consumer goods are included as “tools” that help satisfy our wants? If we are going to include tools, then don’t we have to include institutions? Note that “institutions” is another term that gets used to mean many things, so we would do well to define it, also.

But perhaps instead of broadening the definition of culture, why not narrow it? Tools and institutions in part act as channels for socially communicating thought patterns and behavioral tendencies. But why not define culture itself as socially communicated thought patterns and behavioral tendencies (which I think covers everything other than “tools” in Henrich’s definition)?

Anyway, I think that if Henrich were to embark on another edition of the book, I would encourage him to spend several pages discussing the definition of “culture” and related terms, rather than leaving it to one off-handedly casual sentence.

Ben Bernanke takes on Sebastian Mallaby

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Bernanke writes,

Mallaby’s argument that Greenspan should have known that a tighter monetary policy was appropriate in 2004-2005 (if that was in fact the case!) strains credulity. In 2003 the Fed was navigating a deflation scare and a jobless recovery from the 2001 recession—no net payroll jobs were created in the U.S. economy over 2003—which had led the Federal Open Market Committee to cut the fed funds rate to a record-low 1 percent. The FOMC did not stay at that level for long, however; Greenspan began to prepare the ground for a rate increase in January 2004, when the Committee’s language about keeping policy accommodative for a “considerable period” was modified. As Brad DeLong has pointed out, citing the FOMC transcript, at that point Greenspan was far from certain that the rise in housing prices was a nationwide bubble or that it could pose a threat to financial stability. Indeed, much of the increase in housing prices was still to come

Pointer from Tyler Cowen. Read the whole thing. I take Bernanke’s side on this one. Feel free to re-read my earlier post on Mallaby.

Joel Mokyr Interviewed

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He says,

It isn’t just that China doesn’t have an Industrial Revolution, it doesn’t have a Galileo or a Newton or a Descartes, people who announced that everything people did before them was wrong. That’s hard to do in any society, but it was easier to do in Europe than China. The reason precisely is because Europe was fragmented, and so when somebody says something very novel and radical, if the government decides they are a heretic and threatens to prosecute them, they pack their suitcase and go across the border.

Without an exit option, voice does not get you very far.

Honestly, I did not notice the small type in Mokyr’s new book until commenters pointed it out to me. Maybe at my age, every type face looks small.

What I did notice is the tsunami of citations. There are something like 40 pages of references, with something like 20 works listed on each of those pages. It is quite overwhelming. That, along with the fact that Mokyr usually refrains from making definitive judgments* makes the book somewhat ponderous. But I will withhold overall judgment until I am finished.

*As my father used to say, the First Iron Law of Social Science holds (“Sometimes it’s this way and sometimes it’s that way”)

Let’s Eliminate “Culture” from Social Science (er, Disciplines)

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Joel Mokyr, in his new book A Culture of Growth, says on p.8

Culture means various things to different people, and to begin, we need to clarify the concept and our use of it. Given the rather astonishing popularity of the concept of culture in the social sciences and the humanities and the mind-boggling number of definitions employed. . .

What follows from this is that social scientists should not use the term “culture” and instead replace it with a word or phrase that is less loaded with alternative definitions and connotations. Mokyr goes on to explain what he means by culture, pointing out that it is similar to a definition that can be found in Boyd and Richerson’s book Culture and the Evolutionary Process. Mokyr offers

Culture is a set of beliefs, values, and preferences, capable of affecting behavior, that are socially (not genetically) transmitted and that are shared by some subset of society.

My recommendation would be to replace the term “culture” with the phrase “socially communicated knowledge and behavior.” I think it is pretty obvious that a large subset of what we know is socially communicated through conversation, writing, teaching, on-the-job training, and such. A large subset of our behavior also is socially communicated. We imitate prestigious people. We obey authorities. We covet praise and fear being shamed by friends, family, and strangers.

I am not saying that everyone should define culture as “socially communicated knowledge and behavior.” Other people may wish to define it differently. Rather, I am suggest that Mokyr and others who use the term “culture” as he does should instead use the phrase “socially communicated knowledge and behavior.”

If you want to say that economic growth and development are affected by culture, some people will be inclined to resist. But if you say that economic growth and development are affected by socially communicated knowledge and behavior, my guess is that you will have pretty much everyone on your side immediately. If you say that the market is an institution that contributes to culture, again some people will resist. But if you say that the market is an institution that contributes to socially communicated knowledge and behavior, people will be ready to listen to your account of that process.

In short, the best way to get “culture” appreciated as an important factor in economics and other social sciences disciplines is to stop using the term “culture.”

Brad DeLong on Joel Mokyr’s New Book

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DeLong writes,

perhaps 10,000 well-educated Europeans thought of themselves as participants in the search for useful knowledge. Knowledge flowed between them and the tens of thousands of “trained engineers, capable mechanics, and dextrous craftsmen”, the (rather few) industrialist-inventors such as Josiah Wedgwood, and the (rather more) entrepreneurs who had little abstract interest in science or innovation, but found that in a competitive market economy, the dynamic few drag along the inertial many.

DeLong says that he prefers the view of Robert Allen. who

places the origins of the Industrial Revolution in the British Midlands in the eighteenth and early nineteenth centuries. In Allen’s view, the only route to modern economic growth required an array of elements never seen together before in Britain. Among them were high, imperialism-driven wages; cheap coal next to an ample canal network; and an open trading network allowing for a vast expansion of textile exports.

Here, you can see the contrast between a materialist view (Allen’s) and an idea/culture view (Mokyr’s). I think that this is a very important division in economics, and I am strongly on the idea/culture side.

I have been thinking about this in the context of my latest book Specialization and Trade. I ask myself, what would make someone unable to grasp its insights? I think that the bias toward materialist explanations of social phenomena is a major factor. What seems obvious to me, coming from a culture/idea perspective, is just downright baffling to people who instinctively think the other way. (Note that Brad has thought about these issues–he is not just coming at them from instinct.)