Thursday, March 28, 2013

*Worldly Philosopher* - Biography of AO Hirschman

*Worldly Philosopher*

ALBERT HIRSCHMAN knew what he was talking about when he called one of his books “Essays in Trespassing”. He was an extraordinarily peripatetic practitioner of the dismal science. Born in Berlin in 1915, he fled the Nazis in 1933, studied in Paris, London and Trieste, joined the anti-Mussolini resistance, fought on the Republican side in the Spanish civil war, served in the French army until France’s collapse in 1940, helped to organise an “underground railway” for refugees, emigrated to America, joined the army and was a translator at Nuremberg. He applied the cosmopolitan spirit that he had acquired in these years to everything he wrote.
He made his reputation as a development economist, focusing on Latin America, but he soon found himself trespassing obsessively—not only into other sub-disciplines such as the theory of the firm but also into other disciplines entirely such as political science and the history of thought. Mr Hirschman was never awarded the Nobel prize in economics he so richly deserved, perhaps because his writing was hard to classify. However, as if by way of recompense, Princeton University Press is about to publish a 768-page biography by Jeremy Adelman.

Mr Hirschman raised some problems with the cult of exit. Sometimes, it entrenches the status quo. Dictators may rule longer if their bravest critics flee abroad (indeed, Cuba uses emigration as a safety valve). Monopolies may have an easier life if their stroppiest customers find an alternative. Mr Hirschman got the idea for his book during a ghastly train journey in Nigeria: he concluded that the country’s railways were getting worse because the most vocal customers were shifting to the roads.
Mr Hirschman’s most famous book, “Exit, Voice and Loyalty: Responses to Decline in Firms, Organisations and States”, remains as suggestive today as it was when it first appeared in 1970, for managers and policymakers as well as intellectuals. Mr Hirschman argued that people have two different ways of responding to disappointment. They can vote with their feet (exit) or stay put and complain (voice). Exit has always been the default position in the United States: Americans are known as being quick to up sticks and move. It is also the default position in the economics profession. Indeed, when his book appeared, Milton Friedman and his colleagues in the Chicago School were busy extending the empire of exit to new areas. If public schools or public housing were rotten, they argued, people should be encouraged to escape them.
Mr Hirschman wrote so much about so many different subjects that it is easy to see why his biography stretches to 768 pages. He challenged the conventional wisdom among his fellow development economists that poor countries need “balanced growth”; he argued instead that the “disequilibria” generated by unbalanced growth might do a better job of mobilising resources. He also challenged the conventional wisdom among sociologists and historians that the Protestant ethic prepared the way for capitalism. He suggested, rather, that the starring role should be given to a group of thinkers, such as Montesquieu, who argued that the best way to prevent social disorder was to channel people’s passions into moneymaking.
The Economist claims to engage in a “severe contest” with “an unworthy, timid ignorance obstructing our progress”. Mr Hirschman was an eloquent ally. In “The Rhetoric of Reaction” he wrote that purveyors of “timid ignorance” rely on three types of argument: jeopardy (reforms will cost a lot and endanger previous gains); perversity (reforms will harm the people they are intended to help); and futility (problems are so huge that nothing can be done about them). That certainly describes the current debates about global warming, illegal drugs and countless other topics. With luck, Mr Hirschman’s exit will not silence his voice.

Sunday, March 24, 2013

Triumph of the City - April ASET bookclub

Our April ASET book discussion will take place on April 4 from 5:45 to 7:45pm at the ACEE offices in Scottsale. Look forward to an animated discussion of The Triumph of the City

A nice review of the book in the New York Times - prompts the following possible discussion questions:

1. Which of the cities discussed exempifies the wealth enhancing potential of emergent and evolutionary processes? (Which city would Hayek point to as an example of the positive effects of spontaneous orders?

2. Which city reflects the wealth enhancing role that is possible from state or government shaped development?

3. What is your reaction to the "Three Simple Rules" proposed in the book?

4. How useful to you find Glaeser's categories of: The Imperial City, The Well-Managed City, The Smart City, The Consumer City, and The Growing City? Are these mutually exclusive categories?

Table of Contents

Introduction: Our Urban Species 1

Chapter 1 What Do They Make in Bangalore? 17

Ports of Intellectual Entry: Athens 19

Baghdad's House of Wisdom 21

Learning in Nagasaki 23

How Bangalore Became a Boom Town 24

Education and Urban Success 27

The Rise of Silicon Valley 29

The Cities of Tomorrow 34

Chapter 2 Why Do Cities Decline? 41

How the Rust Belt Rose 43

Detroit Before Cars 46

Henry Ford and Industrial Detroit 49

Why Riot? 52

Urban Reinvention: New York Since 1970 56

The Righteous Rage of Coleman Young 58

The Curley Effect 60

The Edifice Complex 61

Remaining in the Rust Belt 63

Shrinking to Greatness 64

Chapter 3 What's Good About Slums? 69

Rio's Favelas 72

Moving On Up 76

Richard Wright's Urban Exodus 79

Rise and Fall of the American Ghetto 81

The Inner City 85

How Policy Magnifies Poverty 86

Chapter 4 How Were the Tenements Tamed? 93

The Plight of Kinshasa 95

Healing Sick Cities 97

Street Cleaning and Corruption 101

More Roads, Less Traffic? 104

Making Cities Safer 106

Health Benefits 114

Chapter 5 Is London a Luxury Resort? 117

Scale Economies and the Globe Theatre 119

The Division of Labor and Lamb Vindaloo 122

Shoes and the City 126

London as Marriage Market 127

When Are High Wages Bad? 129

Chapter 6 What's So Great About Skyscrapers? 135

Inventing the Skyscraper 136

The Soaring Ambition of A. E. Lefcourt 140

Regulating New York 142

Fear of Heights 144

The Perils of Preservation 148

Rethinking Paris 152

Mismanagement in Mumbai 157

Three Simple Rules 161

Chapter 7 Why Has Sprawl Spread? 165

Sprawl Before Cars 167

William Levitt and Mass-Produced Housing 174

Rebuilding America Around the Car 177

Welcome to The Woodlands 180

Accounting for Tastes: Why a Million People Moved to Houston 183

Why Is Housing So Cheap in the Sunbelt? 188

What's Wrong with Sprawl? 193

Chapter 8 Is There Anything Greener Than Blacktop? 199

The Dream of Garden Living 202

Dirty Footprints: Comparing Carbon Emissions 206

The Unintended Consequences of Environmentalism 210

Two Green Visions: The Prince and the Mayor 213

The Biggest Battle: Greening India and China 217

Seeking Smarter Environmentalism 220

Chapter 9 How Do Cities Succeed? 223

The Imperial City: Tokyo 224

The Well-Managed City: Singapore and Gaborone 227

The Smart City: Boston, Minneapolis, and Milan 231

The Consumer City: Vancouver 238

The Growing City: Chicago and Atlanta 241

Too Much of a Good Thing in Dubai 244

CONCLUSION: Flat World, Tall City 247

Give Cities a Level Playing Field 249

Urbanization Through Globalization 251

Lend a Hand to Human Capital 253

Help Poor People, Not Poor Places 255

The Challenge of Urban Poverty 257

The Rise of the Consumer City 259

The Curse of NIMBYism 260

The Bias Toward Sprawl 264

Green Cities 276

Gifts of the City 268

Saturday, March 23, 2013

NY Times book review of The Triumph of the City

Edward Glaeser, a Harvard professor of economics, has spent several decades investigating the role cities play in fostering human achievement. In “Triumph of the City,” he has embedded his findings in a book that is at once polymathic and vibrant.

Clearly, Glaeser loves an argument, and he’s a wonderful guide into one. “Triumph of the City” is bursting with insights and policy proposals to debate. Sometimes that’s a bit of a problem: there’s a lot of policy in this book, but not a lot of politics. It’s about ideas, not implementation. Some of those ideas may strike you as problematic: the increasing density he credits Atlanta with has been accompanied by an explosion of suburban sprawl. Others, like tilting the benefits of the tax system away from suburbanites and toward city residents, may sound absolutely unrealizable. And still others, like his advice to cities in decline to “shrink to greatness,” seem a little tone deaf, especially since those cities are steadily losing the skills and talent to find that greatness.

Friday, March 22, 2013

Economics versus Politics: Pitfalls of Policy Advice

Economics versus Politics: Pitfalls of Policy Advice

Daron Acemogluy James A. Robinsonz

February 2013.


The standard approach to policy-making and advice in economics implicitly or explicitly ignores politics and political economy, and maintains that if possible, any market failure should be rapidly removed. This essay explains why this conclusion may be incorrect; because it ignores politics, this approach is oblivious to the impact of the removal of market failures on future political equilibria and economic e¢ ciency, which can be deleterious. We Örst outline a simple framework for the study of the impact of current economic policies on future political equilibriaó and indirectly on future economic outcomes. We then illustrate the mechanisms through which such impacts might operate using a series of examples. The main message is that sound economic policy should be based on a careful analysis of political economy and should factor in its ináuence on future political equilibria.

Macroeconomics After the Crisis: Time to deal with the Pretense-of-Knowledge Syndrome,

Great column speculating on the successor to Ben Bernanke at the FED and a super paper on the future of macroeconomics.

Wednesday, March 20, 2013

Economics and Environmentalism: Belief Systems at Odds: The Independent Review: The Independent Institute

Economics and environmentalism are secular religions competing for influence in the public square. Greater recognition of the underlying religious character of these belief systems might help in crafting policy proposals with a greater chance of acceptance by each side.
Economics and Environmentalism: Belief Systems at Odds: The Independent Review: The Independent Institute

Tuesday, March 19, 2013

Book reviews - possible ASET book club selections

The following reviews may be of interest - the first is a book review of a title recommended by our colleague Bill Boyes - A Capitalism for the People: Recapturing the Lost Genius of American Prosperity. The review reads in part:

Every economist should read A Capitalism for the People and ask their students to read it also. Since there is zero appeal to our consciences in most standard economics textbooks these days, Zingales’s book is a great complement.

Understanding how our emotions, beliefs, and limited understanding of complexity can influence whether capitalism flourishes or fails is just beginning. Few economists have tried to reinvent how to govern for the people in the context of the behavioral realities of the people. This great book by one of the people, Luigi Zingales, may be an important leap in the right direction.

The second is a review of a book previously discussed by ASET - Why Nations Fail and a review of Pillars of Prosperity and reads, in part

The two books covered in this review, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Crown Business 2012) by Daron Acemoglu and James Robinson, and Pillars of Prosperity: The Political Economics of Development Clusters (Princeton University Press 2011) by Timothy Besley and Torsten Persson think big. They are written by distinguished academics concerned with the issue of national performance and how national institutions can explain why some nations perform much better than others. Pillars of Prosperity is written for graduate students, and uses a common formal model to explore the factors that they have identified as important for national performance.

Both reviews are in the current issue (March 2013) of the Journal of Economic Literature.

Monday, March 11, 2013

Cutting Size of the Public Sector

Budget sequestration is as modest a step toward cutting Leviathan as one can imagine. Further progress will be difficult as long as people believe that slashing the size of government conflicts with reviving the economy. Nothing could be further from the truth.

In his recent debate on Charlie Rose, Nobel Prize-winning economist and New York Times columnist Paul Krugman said that even wasteful government spending should not be cut, because it would undermine job creation and economic recovery. This view isn’t quite as popular as it once was, but it is still influential.

Full analysis is excellent.

Wednesday, March 6, 2013

Bhagwati on Bangladesh

The Bangladesh fires emphasize again a lax and lackadaisical attitude to the issue of workplace safety by the Bangladeshi authorities, possibly aided and abetted by domestic politics. This reflects a general attitude of neglect in protecting workers against unsafe conditions, like providing goggles and ensuring that they are worn when workers operate close to an open furnace.

But asking Wal-Mart, Gap and other brands to substitute for the somnolent government will only marginally address worker safety reform.

Monday, March 4, 2013

MRUniversity New Courses!

MRUniversity New Courses!

The new courses are The Euro Crisis, a 90 minute mini-course over 3 weeks.

The Economics of Media, 4 hours over 4 weeks.

The American Housing Finance System, 15 hours running to June taught by Arnold Kling.

Mexico’s Economy, a 4.5 hour course over 4 weeks taught by Robin Grier.

Sunday, March 3, 2013

Great book title recommendations

David Warsh has an outstanding set of book recommendations - many of these might be appropriate for the ASET bookclub.

Saturday, March 2, 2013

Great AEA summary

What He Saw at the 2013 AEA Meetings

by James W. Fox

January 2013


Meeting attendance was slightly below last year, with 11,400 participants. There was little on development at the meetings. It was all financial crises, risk and uncertainty, and why things aren’t as simple as we thought.

The blog post is well worth a read.

Friday, March 1, 2013

Book recommendation

My colleague Al Deserpa writes of Jonathan Haidt's new book:

I am currently reading Jonathan Haidt, “The Righteous Mind”. It is more psychology than economics, but provides a fascinating theory about why it is impossible to change someone’s moral philosophy with logical reasoning. So it is something at all political economists should seriously think about.

Product Details

Paperback: 528 pages

Publisher: Vintage (February 12, 2013)

As America descends deeper into polarization and paralysis, social psychologist Jonathan Haidt has done the seemingly impossible—challenged conventional thinking about morality, politics, and religion in a way that speaks to everyone on the political spectrum. Drawing on his twenty five years of groundbreaking research on moral psychology, he shows how moral judgments arise not from reason but from gut feelings. He shows why liberals, conservatives, and libertarians have such different intuitions about right and wrong, and he shows why each side is actually right about many of its central concerns. In this subtle yet accessible book, Haidt gives you the key to understanding the miracle of human cooperation, as well as the curse of our eternal divisions and conflicts. If you’re ready to trade in anger for understanding, read The Righteous Mind.