Category Archives: Books

An Economist’s Love Letter to Books

 
“No university will ever have at one time four economists of the quality of Adam Smith, David Ricardo, Irving Fisher, and Alfred Marshall, to say nothing of a dozen of their best colleagues—but they can all reside in one’s library. Their subtle minds are ever ready to instruct and tease and baffle.”
 
George Stigler (U. Chicago, 1982 Nobel laureate), Memoirs of an Unregulated Economist, p. 219.

The Level of Political Discourse Has Never Been Very High

From pages 140-41 of Nobel laueate George Stigler’s 1988 autobigoraphy, Memoirs of an Unregulated Economist:

I have recently reread it [F.A. Hayek’s 1944 book Road to Serfdom], and I simply cannot understand why it became popular. I mean this as a compliment to Hayek… Hayek has always been both a gentleman and a scholar.

2016: The Year in Books

Fatherhood means less time for reading than before, so this list is shorter than in previous years (2009, 2010, 2011, 2012, 2013, 2014, 2015). The tradeoff is well worth it, as is introducing our daughter to Dr. Seuss and other great authors. Here is what I found time for this year:

  1. Charles C. Alexander – Our Game: An American Baseball History
    A thorough history of baseball from the the 1840s up to about 1990. It hits all the stages: mid-19th century amateurs such as the legendary New York Knickerbockers, the 1876 birth of the National League, its early competitors and eventual merger with the American League, the deadball era, the liveball era, segregation and the Negro Leagues, integration, expansion, the DH rule, player strikes, free agency, and more. But the book weakens when it gets to the mid-1970s. Alexander forgets to tell a story, and instead coldly lists the stats of the top teams and star players in a given year, along with verbal descriptions of the box scores from each year’s World Series. This stage of the book offers little else, with only occasional digressions into the Bronx Zoo, the Big Red Machine, the 1981 strike, and a few other compelling stories.
  2. Mary Beard – SPQR: A History of Ancient Rome
    Highly recommended. A lengthy and entertaining survey of Rome from its alleged 753 B.C. founding up to about 200 A.D., just after where Gibbon’s Decline and Fall begins. Beard is a distinguished classicist with a healthy sense of skepticism. She is knowledgeable about archaeology as well as texts, and regularly refers to new findings. As for the title, SPQR abbreviates “Senatus Populusque Romanus,” or “The Senate and People of Rome.” It roughly meant “this is mine,” and was stamped everywhere in the ancient world. Fitting.
  3. Jason Brennan and Peter Jaworski – Markets without Limits: Moral Virtues and Commercial Interests
    Their thesis is the best kind: simple but deep. If you can give something away for free, you can sell it for money. This implies legal markets in organ transplants, prostitution, drugs, surrogate pregnancy, and other controversial areas. Things that are inherently wrong–slavery and child pornography, for example–remain wrong. This is because “the problem isn’t the market in those things; it’s those things themselves.” (p. 224).
  4. Jason Brennan – Political Philosophy: An Introduction
    A quick-reading take on the major problems facing political philosophers, from natural rights to political legitimacy and authority, to the advantages and disadvantages of utilitarianism. It also contains several valuable insights on John Rawls’ thought. The link goes to a menu of free electronic versions.
  5. Sean B. Carroll – The Serengeti Rules: The Quest to Discover How Life Works and Why it Matters
    How do ecosystems know how many of each species to maintain? From predators to prey to plants to microbes, a delicate balance has maintained itself for literally billions of years. But how? Carroll’s answers are mainly uninspired environmentalism-by-rote. A deeper answer to his question lies in an ongoing equilibrating process that never ends. The equilibrium point is never actually reached, even though every ecosystem is constantly moving that direction. Random outside events, from rainfall to drought, from migration to climate change to meteor strikes, constantly shift where that equilibrium point lies. The parallels to economics and its ongoing spontaneous order vs. central planning debate are obvious. It is also obvious that Carroll’s focus on only one academic discipline has left him almost entirely ignorant of that debate. His unintentional message may be the profound conservatism that animates the environmental movement. Whether it’s climate, overpopulation of one species, or underpopulation of another species, everything should stay just as it is at this flashpoint in Earth’s 4.7 billion-year history. As Pangloss said in Voltaire’s Candide, we live in the best of all possible worlds.
  6. John Cleese – So, Anyway…
    Cleese recounts his long and varied career in comedy, but only until he became famous. It ends at the early days of Monty Python, and does little more than mention Fawlty Towers and A Fish Called Wanda. Though tactless at times, Cleese offers excerpts from a number of his early scripts that had me laughing hard enough to earn several quizzical looks from my wife. That is this book’s real treat.
  7. Tom Haudricourt – Brewers Essential: Everything You Need to Know to Be a Real Fan!
    Less a narrative history than a series of vignettes of Milwaukee baseball. Covers everything from the Atlanta Braves’ 1953-65 tenure in Milwaukee, including a 1957 World Series victory over the Yankees, to profiles of Brewers players from Henry Aaron to Robin Yount to Gorman Thomas, on down to the 2007 season. The author is a Brewers beat writer for the Milwaukee Journal-Sentinel.
  8. Robert Heinlein – Starship Troopers
    The movie was awful, but the book is pretty good. It’s both military-themed and violent, neither of which play to my tastes. But Heinlein’s creativity about lifestyles and forms of government, and his rare-for-his-time rejection of racism, nationalism, and isolationism are refreshing. He does it mostly without editorializing; he lets some of his characters express disgusting views without comment, trusting his readers to know better. Other characters are far more progressive. And the final battle scene is one of the most memorable bits of fiction I’ve ever read.
  9. Israel Kirzner – Competition and Entrepreneurship
    Markets are not places or things; they are ongoing processes. Entrepreneurs and consumers continually adapt, compete, enter, exit, and evolve in a never-ending dynamic process. From that conceptual framework, Kirzner offers insights on equilibrium theory, monopoly, Schumpeterian creative destruction, the roles of information and advertising in markets, and short run-vs.-long run thinking. The author, now mostly retired, is Ludwig von Mises’ most accomplished student and a longtime NYU economics professor, as well as a practicing rabbi. His name still pops up in Nobel speculations every year, and he is considered one of the award’s biggest snubs.
  10. Michael Kranish and Marc Fisher – Trump Revealed: An American Journey of Ambition, Ego, Money, and Power
    This quickly-written biography is a team effort by several Washington Post journalists. It came out shortly after Trump won the GOP nomination, and before he won the election. The book is not hostile or politically motivated, but Trump does not come off well. His braggadocio and insecurity apparently emerged early in life–as did his flexible approach to business and personal ethics.
  11. Don Lavoie – Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered
    On its surface, this book is a history of the 1920s-1930s ivory tower socialist calculation debate. It is actually far less dry. That debate, as Lavoie makes clear, is just one chapter in an ongoing debate between spontaneous order and central control that has raged for almost the entire history of civilization. Lavoie mostly focuses on the main 1920s and 1930s combatants, with Lange and Lerner on the central planning side, and Hayek and Mises on the spontaneous order side. Both sides have arguments more nuanced than can be summarized in this capsule review. But Lavoie’s deep understanding of both sides and surprisingly clear writing make this book a highly recommended read.
  12. Janna Levin – Black Hole Blues and Other Songs from Outer Space
    Gravitational waves are one of the most important discoveries in physics in decades. Levin, a Ph.D physicist, explains the science with both clarity and detail. But the book’s real emphasis is the messy, unpredictable process of scientific discovery. Personality conflicts, funding problems, land-use regulations, and more all put in appearances. Gordon Tullock’s The Organization of Inquiry is a good complementary work on scientists’ behavior.
  13. Deirdre McCloskey – How to be Human*: *Though an Economist
    A collection of essays on economists and economics itself. She praises qualities such as having outside interests, reading books (many economists don’t, sticking to journal articles), humility, and having physics department values, not math department values. By this she means that economists should use quantitative methods to study real-world phenomena, like a physicist–as opposed to using math for its own sake, like a mathematician. Don’t use arbitrary numerical standards for statistical significance, use your human judgment. She develops this last theme in greater detail with Stephen Ziliak in The Cult of Statistical Significance.
  14. Deirdre McCloskey – Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World
    The conclusion to Deirdre’s brilliant Bourgeois trilogy. Why are some countries rich, and others poor? Most economists will say secure property rights, limited corruption, stability, and other good institutions are the answer to getting rich. Yes, Deirdre says, but those are not enough. People need to value such things before they can emerge. Rhetoric, persuasion, and public opinion are the root causes to those positive institutions. Her thesis goes at least one level deeper than the average economist in explaining the last two centuries’ Great Enrichment, and all of her books deserve at least one close reading. This one is no exception.
  15. Carl Menger – Principles of Economics
    This 1871 textbook revolutionized the profession. It contains one of the first explanations of the subjective theory of value, which replaced the labor theory of value favored by John Locke, Adam Smith, and Karl Marx. Menger, along with Walras and Jevons, also sparked the marginal revolution in economics with this book. Finally, Menger’s theory of the emergence of money is an early example of what economists today call spontaneous order. Because of these accomplishments, Menger is considered the founder of the Austrian school of economics. The link goes to a free PDF.
  16. Jared Meyer – Uber-Positive: Why Americans Love the Sharing Economy
    A short primer not just on Uber’s business model, but on the sharing economy in general. This business model will play a big role in the economy going forward, so might as well learn about it now. Jared’s book is the best introduction there is.
  17. Isaac Moorehouse, ed. – Why Haven’t You Read This Book?
    Isaac and his collaborators flip the burden of proof. Instead of asking yourself why you should move across the country, get a new job in a field you’re passionate about, climb a mountain, travel the world, and so on, why shouldn’t you? Why not? What’s stopping you? An inspirational way to think outside the box.
  18. Johan Norberg – Progress: Ten Reasons to Look Forward to the Future
    Media reports focus on the here, the now, and the rare. Every plane crash makes headlines for days, but the 40 million flights that land safely every year are ignored. Do the math; there is no reason to be scared. Norberg takes this numerate perspective, and pairs it with a conversational, easy-reading prose style. For two centuries and counting, life expectancy has been going up, disease rates have been going down, and new technologies are continually making people’s lives better, to the point where mass prosperity is finally starting to reach the developing world. Moreover, violence, war, and terrorism are rarer threats than ever, despite their wall-to-wall sensationalist coverage. That is what is really newsworthy.
  19. Daniel Okrent – Nine Innings
    On June 10, 1982, the Milwaukee Brewers and Baltimore Orioles played a baseball game. This book chronicles that game from start to finish. Rather than a simple play-by-play narrative, Okrent breaks up the action with frequent vignettes on the players’ backstories and playing styles, including Hall-of-Famers such as Robin Yount, Paul Molitor, Cal Ripken, Eddie Murray, and Rollie Fingers. Okrent also explains how managers and GMs go about their jobs, delves into the history of the game, and even shows how groundskeepers slyly try to give the home team an edge. Some of the tangents are too long, and this book would be better if it was about 50 pages shorter. It is still beautifully written, and a classic baseball book.
  20. Jeff Pearlman – Gunslinger: The Remarkable, Improbable, Iconic Life of Brett Favre
    Not a hagiography, and a much better book for it. The reader gets a flavor of what it’s like to grow up in the deep South, and how Favre’s family life may have played into his loutish behavior when he was young. One also learns how combining raw talent with a relentless work ethic can create amazing accomplishments.
  21. Murray Rothbard – Man, Economy, and State, with Power and Market
    Two books which together comprise a long and thorough economics textbook. In a way, it’s a more approachable version of Mises’ Human Action, and begins with what is probably the clearest explanation of Mises’ theory of human action (praxeology) ever written. This makes it a valuable read for any aspiring economist. The trouble is Rothbard’s distasteful stridency and capital-C Certainty. This is actually the book’s most important lesson. The sheer number of times words such as “all,” “none,” “always,” “never,” “fallacious,” and the like evince a simpliste, Manichaean, and black-and-white way of thinking that serious scholars should avoid. The link goes to a free PDF. Worthwhile, despite (or because of) my criticisms.
  22. Matt Taylor – Metallica: Back to the Front: A Fully Authorized Visual History of the Master of Puppets Album and Tour
    The lengthy opening chapter details all four members’ early lives, their early history as a band, and ends with bassist Cliff Burton’s death in a bus accident while on tour in Sweden. He was 24. The rest of the book is a scrapbook-style collection of memories, with interviews, pictures, hand-written notes and lyric sheets, and recollections from the band.
  23. Abigail Tucker – The Lion in the Living Room: How House Cats Tamed Us and Took Over the World
    Lots of good stuff about feline biology and evolution. Our little friends aren’t entirely domesticated, unlike many dog breeds and even certain kinds of foxes. Later parts of the book are weaker, with scare stories about cats’ impact on birds and other wildlife, and some comical recommendations about how to make our homes more accommodating. These range from keeping the thermostat at 85 degrees to getting rid of computers and televisions, which emit high-frequency noises that we can’t hear, but cats can. An hour-long documentary with the same title is much better.
  24. Congressman X – The Confessions of Congressman X: A Disturbing and Shockingly Frank Tell-All of Vanity, Greed and Deceit
    Most people aren’t nearly cynical enough about politics. This anonymously written rant by a current Democratic member of Congress is a good antidote. Pairs well with works by Ronald Kessler and Peter Schweizer.
  25. David Zimmerman – In Search of a Hero: The Life and Times of Tony Canadeo, Green Bay Packers Gray Ghost
    A biography of the hall-of-fame Packers running back who played in the 1940s and 1950s. Canadeo grew up in Chicago and went to college at Gonzaga in Spokane, Washington, where he earned the nickname “Gray Ghost” because of his prematurely gray hair, as well as his elusive running style. After his playing days ended, he served for more than 30 years on the Packers’ executive committee, and played a role in hiring Vince Lombardi, who won five championships, including the first two Super Bowls.
  26. Paul Zimmerman – The Thinking Man’s Guide to Pro Football
    One of the most renowned sports journalists of all time, Dr. Z’s book is filled with fantastic storytelling, a clean prose style that writers of any genre can learn from, and a keen eye for the little things about the game. His love for overlooked aspects of offensive line play–he was a lineman in college–shows throughout.

Regulatory Discretion: Both Good and Bad

From p. 137 of Cornell political scientist Theodore Lowi’s 1969 book The End of Liberalism: Ideology, Policy, and the Crisis of Public Authority:

The move from concreteness to abstractness in the definition of public policy was probably the most important single change in the entire history of public control in the United States.

Lowi’s point concerns the separation of powers. In theory, Congress passes a law directing a regulatory agency to regulate something in a specific way, then the agency does so. The executive branch executes legislation; hence its name.

This is not how things work in practice. More and more, Congress delegates its legislative powers away to the executive branch. On issues ranging from health insurance subsidies to power plants to Internet infrastructure, executive branch agencies act unilaterally. And when they cite congressional statutes, they do so abstractly, not concretely, just as Lowi said nearly 50 years ago.

An example: the text of the Clean Air Act says nothing about CO2 emissions. But a few years ago, the EPA issued a cap-and-trade regulation for CO2 emissions, even though Congress explicitly rejected a bill to do so. The EPA justified its decision on the abstract principles on which the Clean Air Act is based. The fact that the text of bill, as amended over the years, does not mention CO2 emissions as a pollutant, did not matter to the EPA.

There is a role for discretion in regulatory matters. Discretion makes it possible to avoid regulatory abuses, clear needless bureaucratic hurdles, and avoid obvious stupidities such as suspending children from school for wielding Pop-Tart “guns” in cafeterias.

But Lowi makes a good point: discretion is a double-edged sword. Without a clear separation of powers, its outer edge can spill blood by executive order just as easily as the inner edge can cut innocents loose from government-mandated ropes.

The Subjective Theory of Value in One Sentence, Two Translators, and Three Languages

John Locke, Adam Smith, and Karl Marx all used a labor theory of value in their very different works.  To them, a good is worth however much work someone puts into making it. This is incorrect. Value is actually subjective; there is no absolute standard.

As a personal example, I would place a very high value on a nice guitar, since I would play and enjoy the instrument–talent level aside. Someone who isn’t interested in music would be unwilling to pay much money for the exact same good, and rightly so–they would get little use out of it.

So what is a good worth? That’s something every individual decides for himself. There is no single right answer. Value is subjective.

This subjective theory of value originated in part in 1871 with Carl Menger’s textbook Principles of Economics. But this theory is actually best explained by an Italian economist, Ferdinando Galiani, who the German-speaking Menger quotes on p. 296 of his Principles:

ch’essendo varie le disposizioni degli animi umani e varj i bisogni, vario é il valor delle cose.

Any Italian-speaking readers, please correct any of my mistakes. The same quotation reads in English:

since the dispositions of human minds vary, the value of things varies.

Another aphorism that captures the spirit of subjective value is “one man’s trash is another’s treasure.”

Economics can be a dismal science. It can quickly get technical and unnecessarily complicated, but the basics are understandable to everyone. The subjective theory of value is one of those basics–language barriers aside.

Forecasters in Proper Context

Whether it’s the local weatherman getting it wrong, or especially some economic shaman predicting the stock market’s next swing, forecasters have a record that doesn’t always outperform chance. This poor record has been known since at least Roman times, as Deirdre McCloskey notes on p. 265 of her 2000 book How to Be Human, Though an Economist:

The early Latin poet Ennius sneered at forecasters “who don’t know the path for themselves yet show the way for others.”

Or, as the philosopher Yogi Berra put it, “It’s tough to make predictions, especially about the future.”

Defining Stasis

From p. 1097 of Murray Rothbard’s Man, Economy, and State with Power and Market (two books in one, and available for free):

[T]he government defines “bread” as being of a certain composition. This is supposed to be a safeguard against “adulteration,” but in fact it prohibits improvement.

Considering similar regulations for the size of holes in Swiss cheese, the definitions of certain kinds of pasta, and hunreds of other rules, it is a minor miracle that food innovation happens at all. Fortunately, people can make up new words faster than the government can regulate them.