Prosperity without growth

In this iciest of new years, you might as well curl up with a good book and hope for sunnier times. A good candidate, if you're at all interested in some of the economics ideas occasionally aired here, would be Tim Jackson's Prosperity without Growth: Economics for a Finite Planet (thanks to publishers Earthscan for the review copy).
Based closely on Jackson's report for the Sustainable Development Commission (published in March last year, and freely available from the SDC site), the book is a painless introduction to the case against that impossible totem of conventional theory, endless economic growth.
Jackson begins with a sketch of ecological limits - it is a small world, after all - and overview of the most unsustainable aspects of our current global economy, addressing the usual objections about the necessity of eternally growing GDPs. Bracingly, Jackson debunks the familiar calls for a 'decoupling' of economic growth and ecological cost - the basic numbers just can't add up.
A broader reconsideration of some of the fundamentals of society is needed, Jackson reckons, particularly what he calls, pace Weber, 'the iron cage of consumerism'. The book argues the case for the now-familiar if ever elusive Keynesian 'green new deal', as well as a new form of ecological macro-economics which relaxes that old presumption of perpetual consumption growth as a prerequisite for stability.
It's all presented as plainly as is possible for such an inevitably complex topic - a little handwavey at times, but there's abundant references for anyone who wants to dig deeper. The arguments are sound but, in the depths of this post-Copenhagen winter, it's too easy to doubt whether they'll ever be usefully heard.

No nonsense?

I recently read The No-Nonsense Guide to Global Finance, courtesy of the publishers at New Internationalist. As you'd expect from the title, it's a very digestible overview of the international finance system, starting from what 'money' actually is, through the increasingly weird and wonderful activities of banks, to the root causes and effects of the recent mess. As such, it's a great introduction, very clearly written, and spiced with some fascinating historical nuggets - it's a rare treat to have such lucid accounts of both the origins of money itself, and the origins of the credit crunch.

And as you'd expect from the publishers of New Internationalist (a venerable magazine on international development issues, originally sponsored by Oxfam and Christian Aid), it takes a deeply sceptical line on the pre-crash orthodoxy. Simultaneously explaining and critiquing something as complex as the global financial system is a tricky task, but author Peter Stalker generally pulls it off.

Some parts do grate a little - the chapter on the role of the World Bank and IMF is titled 'The ugly sisters', a judgmental epithet that does rather beg the question -and there is a vague sense of preaching to the converted. Anyone committed to the old economic models will find some of the conclusions easy to dismiss - but then, anyone still wedded to the old certainties has enough problems of their own.

It's certainly not an entirely objective book, but so ingrained are the ideologies in global finance, and so emotive the effects, that it's questionable whether objectivity would be possible or desirable. It is a lucid and engaging book, and there's few readers - especially among its target audience - who won't come away with something new.

The Complete Ballard

Arriving on my desk with an entirely appropriate crash, comes the new US edition of The Complete Stories of JG Ballard, courtesy of the publishers WW Norton.

An expanded version of the Complete Short Stories, published in the UK by Flamingo in 2001 and now a collector's item, the new volume weighs in at something over 1200 pages and 98 stories. It dwarfs the comparable tome for, say, John Cheever (whose best-known story, 'The Swimmer', is not exactly un-Ballardian).

It's also a monumental work in the literal sense - the book, and its marketing, seems designed to establish Ballard's reputation in the US, where he's more often regarded as a proto-cyberpunk oddity rather than the major literary visionary he latterly became in Europe (the UK lagging somewhat behind France, of course).

Within that unfortunately 80s-styled dustjacket sits everything from all the previous short story collections (apart the bulk of The Atrocity Exhibition, the nature of which as novel or short story collection remains moot for Ballardian scholars), plus a few rarities such as 'The Recognition' (from Dangerous Visions, 1967) and the handful of pieces published since 1990's War Fever collection.

The small number of more recent stories neatly illustrates the decline of the market for short stories, something that Ballard bemoans in his brief introduction republished from the UK edition. The majority of these stories date from the 1960s, appearing in titles from Amazing Stories to Playboy, as the Seer of Shepperton raised his family on the fruits of his restless typewriter.

Many readers (but not myself) rate Ballard's short stories above his novels. It's true that many of the novels resemble extended (arguably, over-extended) short stories rather than the conventional plots of the 'Hampstead novel' (Ballard's own contemptuous phrase for the works of most of his literary contemporaries). Later novels did take their narrative structure from the crime genre, but to create satirical and psychological why-dunnits rather than boring who-dunnits, and overlaid with the near-hallucinatory repetitions and riffs that characterised his more avant-garde masterpieces such as Crash. It's the literary equivalent of the best Krautrock.

By contrast, the short stories are purest pop, offering the most concentrated yet accessible doses of Ballard. The vision and the language are unmistakeable, from the first line of 'Prima Belladonna', written over half a century ago:
I first met Jane Ciracyclides during the Recess, that world slump of boredom, lethargy and high summer which carried us all so blissfully through ten unforgettable years...

The US Complete Stories is actually more complete than the UK Complete Short Stories, but is still not really complete. Unlike the original edition, it does include the minor (and slightly re-titled) 'The Secret Autobiography of J.G. B******' (first published in the French-language Etoile Mecanique in 1982) and Ballard's last published short story, 'The Dying Fall' (Interzone, 1996), as well as 'The Ultimate City' (Low-Flying Aircraft, 1976) which was included in the original single-volume UK edition but not the later two-volume version.

But there's still no 'Journey Across a Crater' (New Worlds, 1970, which Ballard was apparently never happy with), 'Neil Armstrong Remembers His Journey to the Moon' (Interzone, 1991), or various 'surgical fictions' and experimental pieces from Ambit, New Worlds and elsewhere. Nor (understandably) is there Ballard's first actual published story, the Hemingwayesque 'The Violent Noon', with which he won a university short story competition at the tender age of 20. Completists should refer to Rick McGrath's exhaustive (and slightly illicit) Uncollected J.G. Ballard.

But this is still a pretty much essential volume for anyone less obsessive than Rick or myself. It should certainly play a major role in consolidating Ballard's rep in the US - I hope mostly among people who will read it for the pure pleasure of his writing, as well as those in the man's detested 'over-professionalized academia'.

The main question for me is what gets priority on my shelf - this comprehensive volume, or my set of original anthologies, excavated from secondhand shops across the country over the years, all somewhat battered but redolent of their own times.

A cognitive theory of the firm

I've been reading A cognitive theory of the firm: learning, governance and dynamic capabilities by Bart Nooteboom*, professor of innovation policy at Tilburg University (with thanks to publishers Edward Elgar for the review copy)

Nooteboom's core question is: what are the sources of innovation in firms? That's an important issue for a lot of people - managers and entrepreneurs, regulators and policy-makers, as well as economists. To address it, Nooteboom looks to concepts of cognition - a broad category of mental and social processes from rational inference and knowledge, through to value judgments and perception. It's an intriguing subject, though this isn't an easy introduction to it.

The main concepts are taken from social cognitive theory, a model of learning in which individuals learn through interactions with and from observation of others. Nooteboom takes a constructivist 'embodied cognition' view, as in the cognitive work of economist Friedrich Hayek, rather than the computational view currently popular in AI-focused cognitive science.

From the economic perspective, the theory draws on Joseph Schumpeter's proposal that innovation comes from novel combinations of resources. As per Hayek, the elements for these innovative combinations emerge from markets: the firm acting as an entrepreneurial vehicle for turning this innovation into marketable products or services, as per Edith Penrose.

The dilemma for innovative companies is thus between exploration and exploitation - whether to concentrate on developing new innovations, or on selling what you've already got. Exploration must derive from exploitation, Nooteboom argues, and be based on observations of how existing techologies are received by the market.

Nooteboom's key idea, also derived from Schumpeter, is that the firm develops a particular cognitive focus which distinguishes it from other firms or agents, and gives it a particular niche in the market. That can apply to one-man firms, but Nooteboom also considers the role of larger organisations in narrowing the cognitive distance between individual managers and employees (the managerial-speak version of this, I guess, would be 'singing from the same hymnsheet').

That's the nub of the theory, which the book sets out in much more detail. Disappointingly, for me at least, the detail is long on the theory but very short on actual practical applications. Over 100 pages pass before there's even a brief real-world example to illustrate what's being talked about. There's a sprinkling of other illustrative examples in later chapters on relationships between firms (including network and cluster effects), and the evolution of firms and industries, which do help illuminate the often abstract-seeming theory. More would have been very welcome.

The book is very much a resource for theorists working in the same area (and, to be fair, primarily intended as such). Getting the most from it will probably require more rather more specialised background knowledge than I've got - although some of the ideas here might prove valuable resources for further research, I suspect the book won't offer much directly to those people working at the sharp end of innovation.


* - intriguingly, Nooteboom is also working on a philosophical tome Transhumanism: How to affirm life and be a good person without help from God; a reply to Nietzsche.

Without the hot air

Inspired by the glowing review in the Economist, I've just been reading David MacKay's Sustainable Energy - without the hot air (available as a book through the usual sources, or as a free download under a Creative Commons licence). Like the Economist, I'd strongly recommend the book for anyone interested in sustainable energy.

MacKay might seem like an unlikely person to write such a book - a physics professor from Cambridge, he's primarily a specialist in information theory, with a sideline in international development. It's maybe that off-centre viewpoint that allows him to use some simple tools from physics and maths to address the most basic question - can renewable (or, at least, sustainable) sources replace fossil fuels for the UK?

Along the way, he demolishes some of the wilder, waftier claims of industry boosters and environmental campaigners, as well as many of the tedious objections of the climate change deniers and do-nothings.

It's mostly to do with totting up the energy consumption and potential renewable resources for the UK, based on pretty basic material considerations. There's very little about what would usually be considered as the economics of the problem - the marginal costs, externalities, public preferences, game theories, discounted cost-benefit analyses, etc - but the book is, at heart, pure economics: how we can make best use of limited resources to achieve a social goal.

I've written a longer review over at Clean Ventures.

Economics 2.0

I've just been reading (courtesy of a review copy from Palgrave Macmillan) Economics 2.0: what the best minds in economics can teach you about business and life. Written by Norbert Häring and Olaf Storbeck, both economics journalists on the German Handelsblatt newspaper, and elegantly translated by Jutta Scherer, it's a very accessible scamper over some popular areas of economic study - education and employment, stock market success, the roots of the credit crunch, CEO and sports star pay, things like that.

It's undoubtedly part of that post-Freakonomics wave of pop economics books, but it's one of the better ones. It's very clearly written and translated, albeit with the occasional literal. The European origin offers up a few less familiar subjects and perspectives, and the authors also seem refreshingly free of the ideological bent apparent in some such similar books. Indeed, the authors spend the final chapter offering warnings about the effects of political prejudice (and other hazards) among professional economists.

It does take a rather scattergun approach, but the main theme is research which helps close that often overwhelming gap between economic theory and reality. Much of the work is drawn from experimental and behavioural studies, and much of it is very recent though there are some interesting historical cases. References are given after each chapter, though these are not comprehensive - to take a glaring example, Ferguson and Voth's fascinating Betting on Hitler (Quarterly Journal of Economics 2008 - pre-press pdf here) is discussed over several pages in chapter 13, but doesn't appear in the references.

The book gives a very good overview of a lot of interesting work, and should be of interest to economic novices and experts alike. The breadth of the topics means that even the most experienced professionals are likely to find something they didn't know as well as plenty of ammunition for arguments. The less experienced should get a good sense of what economics is really about and why, despite the conspicuous failures of models and ideologies in recent times, the subject is still relevant.

The Road to Huddersfield

Sometimes, a good poke around a secondhand bookshop will turn up something that just leaps off the shelf at you. So it was with 'The Road to Huddersfield: A Journey to Five Continents'. A book commissioned by the World Bank from Guardian journalist James (later Jan) Morris in the early 1960s, with a delightfully Yorkshire-centric title - what's not to like?

Huddersfield here is posited as the exemplar of industrialised society, the epitome of 20th century civilisation, the very birthplace of the modern world, whose 'horny, stocky, taciturn people were the first to live by chemical energies, by steam, cogs, iron and engine grease, and the first in modern times to demonstrate the dynamism of the human condition'. Aye, that's right enough.

The assigned task of the World Bank was then (and, more or less, is now) to help those less advanced nations advance along the titular road to Huddersfield - to fund those infrastructure projects which, according to theory, will speed those economies towards the wealth and freedom from want of industrial society, that very state of Huddersfieldness.

After a visit to the World Bank HQ, under the idiosyncratic rule of Eugene Black, Morris travels through some of the recipients of the Bank's aid - Ethiopia, Siam, southern Italy, Colombia, and the Indian-Pakistani borders - in an elegant and picturesque odyssey. Given that the book was commissioned by the Bank, Morris stays remarkably ambiguous about the effects and efficacy of its work - a lot kinder than many of its latter-day (or even contemporary) critics, but no apologist for its occasional incompetence or amorality.

Some 45 years on, some of the descriptions of the countries visited strike a little odd. 'Nobody is starving' in Ethopia, though that country 'is still a long, long way from Huddersfield'. Further East, 'it is no coincidence that Burma, that gilded stronghold of Buddhism, is perhaps the only country on earth that shows no eagerness at all to take the Huddersfield Road." On the other hand, the chapter detailing political and ethnic tensions in the Indus basin seems ever relevant - though some might see a certain irony as Morris notes of Pakistan, 'never did a country seem to need her Huddersfield more.'

It all makes for an intriguing slice of political and economic history. Although it seems slightly unfair that the book's thin section of photographic plates does not show the titular Yorkshire town, but rather its neighbour Halifax - a view from Beacon Hill of a near-unrecognisable forest of belching chimneys. Were it not for the dark satanic smog, now long gone, you might just see my house from there.

The burning world

"The difference between science and economics is that science attempts to understand the behaviour of nature, while economics attempts to understand the behaviour of models. And many of these models have no relation to any state of nature that has ever existed on this planet."

That, in a nutshell, is the message of Thomas Legendre's remarkable novel The Burning, recently published in paperback in the UK. It's a campus novel which embeds an unorthodox economic polemic inside the usual academic and sexual shenanigans. Apart from some intrusive stylistic tics, it's a much more engaging and well-written story than one initially expects from the introduction of the protagonist:
His name was Logan Smith and he had just earned a Ph.D. in Economics at the University of Pennsylvania and he wasn't going to sleep in his hotel room tonight.

But it's this embedded critique of the neo-classical orthodoxy that distinguishes the book (although, perhaps unsurprisingly, its cover and blurb obscure this major aspect of the work). Legendre draws on the work of Nicholas Georgescu-Roegen to argue that energy and entropy considerations impose fundamental limits on models of economic growth. Coming from a physics background, that does indeed seem obvious (I've often thought the same myself, at least), but it's not something you'll see acknowledged in mainstream economics in any significant way.

Legendre, via his fictional economics and astrophysics PhDs, focuses on energy constraints, but there's also increasing awareness - among materials scientists and geologists, if not among economists - about constraints imposed by specific limited resources. Research published in this week's New Scientist details the rapid consumption of limited resources of metals - from rare elements like gallium and indium, to commonplace materials like copper and silver. Ironically, this places severe limitations on the spread of clean technologies such as solar panels and fuel cells, as well as many other growth technologies:
as [Tom Graedel of Yale University] points out in a paper published last year (Proceedings of the National Academy of Sciences, vol 103, p 1209), "Virgin stocks of several metals appear inadequate to sustain the modern 'developed world' quality of life for all of Earth's people under contemporary technology." And when resources run short, conflict is often not far behind.

Of course, economics has its supply-and-demand models for this sort of thing, but the nice clean orthodox theories generally don't consider the implications for macro growth, or the possibility of technological limitations, or the general human mess of it all. In a real ashes-to-ashes detail, researchers are looking at reclaiming platinum, emitted in trace quantities from vehicle catalytic converters, from the dust accumulating in road-sweepers.

Less scrupulous operators are already responding to scarcity-driven price rises for some common metals through some creative reclamation. In another detail that would fit nicely into a moderately apocalyptic novel, the Guardian today reports that copper thieves, stealing cables and pipes for scrap value, are causing havoc for railway operators and other infrastructure providers, and are even being blamed for a gas explosion that destroyed a house in Bradford. The metal's likely destination is China, as that colossal country invests in its own infrastructure in a bid to reach US levels of production and consumption. At this rate, we're going to need a bigger planet.

Ride a black swan

I've just been reading Nassim Nicholas Taleb's long-awaited new book, The Black Swan: The Impact of the Highly Improbable (I say long-awaited - New Scientist was plugging it as imminent nearly a year ago, and Taleb manages to get an apology for lateness into the text itself).

As the follow-up to Taleb's landmark Fooled By Randomness (a book whose ideas are sadly more widely referenced than acted on), it's been getting plenty of press - for example, this by Oliver Burkeman in the Guardian - so I don't need to repeat its arguments here (basically it's all to do with non-normal distributions for many events and phenomena, not least asset price movements). It covers more ground than the earlier book and is perhaps a bit less coherent, but it's still a pretty great read with a much-needed message. Remarkably for a 300-page polemic about statistics and orthodoxies, it's never dull. Actually, I'm wondering whether I should be worried that I found the closing technical section - which Taleb recommends that most readers can happily skip - the most interesting and provocative.

Taleb firmly places his chips with Benoit Mandelbrot, to whom the book is dedicated, and his work on scaleable distributions. For more on this and Mandelbrot's other work in economics, see my interview with the man himself from 2003.

Stone Age Economics

Just been reading the intriguingly-titled Stone Age Economics by Marshall Sahlins. This one's been sat on my shelf for a year or two since I picked it up at a Fortean Times Unconvention, but I was finally spurred to read the damned thing after it was referenced in Clifford Conner's excellent A People's History of Science.

It's not as wacky as it might sound (as someone asked at the Uncon - 'What's that about, exchange rates for pebbles?'). My copy is a first British edition from 1974, but it appears to still be in print.

It's more a work of anthropology and sociology than economics, though. The opening chapter, 'The Original Affluent Society' (a slightly different version of which is available on various websites like this one), riffs on Galbraith to argue that the hunter-gatherer lifestyle was more than adequate to meet all the needs of its members with just a few hours' labour a day. It's an obviously appealing idea as a riposte to the work-hard/spend-hard ethos of late capitalism.

Vernon Smith, the Nobel-winning experimental economist who I interviewed a few years ago, has written on prehistoric and hunter-gatherer economics, and also concluded that they generally enjoyed plentiful food and a far-from-Hobbesian life. I've also found a recent paper by Charles Kenny of the World Bank (available as a pdf from the Brookings Institution) which asks "Were People in the Past Poor and Miserable?" - Kenny concludes they generally weren't any more miserable than people today (and maybe less so), and suggests a re-examination of the economic doctrines that rising incomes mean more happiness (or 'utility' as economists call that nice warm feeling you get from satisfying your wants). It's another angle to current interest in the economics of happiness, something I've touched on before.

Back to the Sahlins book - the following chapters argue that 'primitive' economies operated at far below their production possibilities to meet their own needs, though production intensifies to meet the extra demands of a tribal chief when such arises. There's also a lengthy exegesis about gifts and exchanges in a pre-monetary society, derived from Mauss' 'Essay on the Gift' - this is all rather steeped in 60s sociology-speak, and didn't quite hold my interest. Throughout, contemporary 'primitive' and hunter-gatherer societies are used as a proxy for prehistoric ones (something Conner also does in the early parts of his history) - I don't know how valid this actually is, but there's some fascinating notes on the traditions and practices of various tribes. The book ends with a briefer consideration of primitive trade, and the emergence of exchange rates for pigs, pots, axes and spears (if not pebbles).