Category Archives: Books

New CEI Series: Retro Book Reviews

My colleague Richard Morrison is overseeing a new series of retro book reviews. In a fast-moving policy world focused mostly on breaking news, sometimes it’s useful to step back, look at the larger picture, and see how people have reacted to similar problems in the past. Richard’s introductory post is here.

The first retro review is also up. It’s my review of Eric Cline’s book 1177 B.C.: The Year Civilization Collapsed, which has some surprisingly relevant lessons for the coronavirus response. That review, drawn from a version originally published at this site, is here.

Which reminds me, I have a lengthy backlog of reviews to post from books I’ve recently read, several of which are already written. I will post them when time allows.

Book Review: A.J. Liebling – The Earl of Louisiana

Review of A.J. Liebling, The Earl of Louisiana (Baton Rouge: Louisiana State University Press, 1961)

A colorful book by a colorful author. I read this as preparation for a work event in New Orleans, which I had not previously visited. Liebling was a journalist for The New Yorker who was assigned to write about Earl Long’s 1959 campaign for governor of Louisiana. Liebling’s enthusiasm for food and drink were legendary, and his accounts of his and his interviewees’ restaurant meals are almost unbelievable. Earl Long, the younger brother of the legendary Huey Long, had a mental breakdown during the campaign and was forcibly institutionalized in Texas for a time before returning to the campaign trail.

Liebling gives a vivid portrait of Long. But he paints an even more vivid portrait of Louisianan politics and culture. As CEI founder and Louisiana native Fred Smith likes to say, people in Louisiana don’t expect their politicians to be corrupt; they insist upon it. The people Liebling meets, whether high-ranking officials or ordinary man-in-the-street types, speak to this truth, often hilariously so. Liebling draws frequent parallels between Louisiana’s political system and Middle Eastern oil dictatorships. There are obvious differences, but also enough parallels to give one pause.

Book Review: Steven Strogatz – Infinite Powers: How Calculus Reveals the Secrets of the Universe

Review of Steven Strogatz – Infinite Powers: How Calculus Reveals the Secrets of the Universe

This book is really, really good. It should be required supplemental reading for math teachers, who should assign relevant portions to their students. Most math pedagogy consists of memorizing procedures. It’s mostly how, with only a little bit of what or why. There is rarely much of any unifying theme that ties the separate problem-solving procedures together in a way that makes sense. Strogatz provides all that, and in a compelling way, complete with examples ranging from medicine to astronomy.

Strogatz also explains terminology, which is another common weak spot in classrooms. Why are calculus’ two main concepts called derivative and integrals? I didn’t learn that in undergrad. Nor in a high-quality graduate economics program. Instead, I learned it from Strogatz’s popular-level book in my late 30s.

Another fun bit of etymology is that the word “calculus” is derived some the world for rock. It shares a root with calcium, chalk, calcite, and other similar words. This is because in ancient times, people did their counting by sliding stones along an abacus’ strings.

The concept of infinity is key. Calculating the area of a circle is hard because of the curves. Slicing it into quarters, like a pizza, makes it a little easier. The wedges are kind of triangle-like, but there is still plenty of curved surface on the outside. Cutting into 8, 16, and 32 slices makes the curve progressively less important. Tending the number of slices towards infinity sends that tricky curved area towards zero. Long before infinity, it reaches deep decimal territory, where the accuracy of the calculation is good enough to satisfy even the most exacting engineers. Infinite parts are simpler than a complex whole. This view of infinity is the key to understanding calculus.

Differentiating is taking a complex whole, like a circle, and converting into many different parts, which are easier to calculate accurately. Derivatives are parts derived from a larger whole. Integrals take these differentiated parts and integrate them back together. Calculus is essentially the math of moving from a whole to its parts and back, as needed to accomplish the task at hand.

This is simple stuff that is so obvious to veteran instructors that they never bother to teach it to rookie students. This kind of larger context and purpose should be taught on day one of any course, and regularly reinforced as new material is introduced.

In high school, I spent months memorizing procedures for calculating sines and cosines, but never really learned much about their significance, or knew that they had anything to do with calculus. Moreover, why does it matter that the same curved shape is shifted horizontally? More than twenty years later, I finally learned why. The sine wave is interesting because of its continually changing slope. And a sine wave’s derivative is… it’s cosine. And now I have a greater appreciation of everything from the changing length of daylight during the seasons to how sound waves interact with each other. The rate of change in daylight as the calendar moves from solstice to equinox is a sine wave. The rate of change is slowest at the solstice (about 40 seconds), and fastest at the equinox (more than two minutes). Figuring out the rate of this change at any given point can be figuring out the derivative. In the special sine wave case, this is simple—just figure out the cosine.

Again, this is basic stuff that high schoolers deserve to know. GPAs would likely be measurably higher, and understanding measurably greater, by teaching a little bit more of this big-picture context and a little less rote memorization.

Needless to say, I will be reading Strogatz’s other books in short order. Infinite Powers would pair well with David Salsburg‘s The Lady Tasting Tea, which accomplishes a similar task with statistics.

Alfred Marshall on Free Trade

Here is a gem of a quotation by Alfred Marshall on free trade, unearthed by Doug Irwin on p. 221 of his 1996 book Against the Tide: An Intellectual History of Free Trade: 

“[Free trade] is not a device, but the absence of any device. A device contrived to deal with any set of conditions must become obsolete when they change. The simplicity and naturalness of Free Trade–that is, the absence of any device–may continue to outweigh the series of different small gains which could be obtained by any manipulation of tariffs, however scientific and astute.”

Fred P. Hochberg – Trade Is Not a Four-Letter Word: How Six Everyday Products Make the Case for Trade

Review of Fred P. Hochberg, Trade Is Not a Four-Letter Word: How Six Everyday Products Make the Case for Trade (New York: Avid Reader Press / Simon & Schuster, 2020)

Hochberg, who headed the Export-Import Bank from 2009-2017, has written a surprisingly good book on trade. Few economists have favorable views of Ex-Im. The agency’s longstanding corruption problems, cozy relationships with Boeing and other large companies, and its mercantilist economics make it almost indefensible on the merits (see my papers here and here). As with many ex-government officials, Hochberg is a much better economist when he doesn’t have to play politics.

Unfortunately, Hochberg says little in the book about his eight years at Ex-Im. This would have made for fascinating reading. It would have been useful to learn, in extended form, about Hochberg’s views on how Ex-Im works in practice, how he would defend the agency, and where he would criticize it.

Hochberg also presided over the most eventful chapter in Ex-Im’s 85-year history, which included its authorization lapse in 2014-15, when the agency practically shut down. Even after its eventual reauthorization, Ex-Im operated at a severely limited capacity for the remainder of Hochberg’s tenure. The Senate refused to confirm the new board members needed to approve large transactions. Ex-Im did not return to full capacity until 2019.

While Hochberg does refer to his old job several times, it is usually in passing, and never in detail. He does not once mention the great post-2014 Ex-Im political controversy.

By sticking instead to broader-brush trade policy and avoiding anything too controversial, Trade Is Not a Four-Letter Word comes across as a subtle job application for a higher-level position in the next Democratic administration, such as Commerce Secretary or U.S. Trade Representative. If the Ex-Im version of Fred Hochberg took such a job, trade policy would likely continue to be ridden with special-interest handouts and trade-unrelated inititatives. If, instead, the Fred Hochberg who wrote this book took office, trade policy would be not perfect, but it would be pretty good, and certainly an improvement over the last few administrations.

Unfortunately, I have a hunch which side of Hochberg would prevail if he re-entered politics.

Like many politicians who also know better, Hochberg almost bends over backward trying to argue that the American middle and lower-middle classes are net losers from trade. These are America’s largest voting blocs, and many of them live in swing states.

This is a difficult long-term case to make when living standards by almost every measure, from life expectancy to average height to access to air-conditioning, internet, and other technologies, have been improving for both rich and poor for more than a century. In terms of hours of work needed to afford everything from a refrigerator to a new car, goods are becoming more affordable and higher-quality over time, which benefits the poor most of all. This has been happening for decades, and the process is not slowing down. Trade, as Hochberg persuasively argues elsewhere throughout the book, is a major reason why. This doesn’t stop him from trying to appeal to likely voters, though his biggest successes come from reasoning through anecdote, and by omission.

Still, Hochberg gets the big picture right, and he paints it well. The six chapters on the six products he chooses as examples are the strongest part of the book. Trade makes modern life possible, he argues. Whether it’s taco salads, minivans, bananas, smartphones, college degrees (an odd choice, but think of it as a stand-in for human capital), or Game of Thrones, just about everything we enjoy today is a product of international trade. Moreover, this is a good thing. What we have today is far better than what we would have under closed borders. As other thinkers from Hans Rosling to Matt Ridley to Julian Simon have argued for a long time, living standards today are higher, health care is better, ideas are more rigorously tested, and technology improves faster. This is what happens when there is a relatively open global market for both supply and demand.

Narrowing down to policy specifics, Hochberg is strongly anti-tariff. One hopes he would maintain this stance in a cabinet role or in elected office. His long section on why trade deficits don’t matter—in short, because people get something in return for their money—is similarly excellent. It is also inconsistent with his Export-Import Bank tenure. Ex-Im is intended, at least in part, to reduce the U.S. trade deficit by increasing exports. But at least Hochberg knows better now, and is willing to say so publicly now that he is out of office, though he doesn’t mention Ex-Im’s role in the capacity.

His defense of some other policies is weak, such as his case for defending trade adjustment assistance. He does not favor similar measures for workers displaced due to non-trade factors, such as technology or changing fashions. His way of resolving this inconsistent stance is unconvincing. Essentially, he argues that trade-related job displacements are due to government policy, while other job displacements are not. Therefore, the government owes them something to soften the blow of trade-related job displacements. But trade decisions are made by private individuals, and the role of policy in those decisions is indeterminate; how does one calculate how many job losses, or which ones, is policy-related? In jobs that are cut for more than one reason, which is most cases, what proportion is policy-related?

Moreover, many non-trade government policies cost jobs. These range from barriers to entry to environmental requirements to minimum wages to cumulative paperwork burdens. By Hochberg’s criteria, these displaced workers deserve compensation, yet he doesn’t favor it. I would argue that rather that treating symptoms with compensation, it would be better to treat the root problem by getting rid of the bad policies in the first place. But that’s for another time.

Taken as a whole, Hochberg is neither a brave nor an adventurous thinker, but he gets the big picture. As a bonus, Hochberg’s prose style is informal and easy to read, though the Game of Thrones references get to be a little much at times. Trade has costs and benefits. Add them up on a ledger, and the benefits are greater, by far. However, Hochberg’s interventionist streak is almost reflexive and seemingly unthinking. Markets fail all the time, including in international trade. That does not mean policymakers can improve matters. Given knowledge and incentive problems, this is rarely the case. The view that market failures can be fixed by an idealized government is known as the Nirvana fallacy, and Hochberg would do well to take it into account.

Just as a fish doesn’t think of the water it swims through, so do Washington types rarely think about the complicated web of policy they make others swim through. It’s just there, and always has been. It’s nothing to question or give careful thought to in a big-picture sense. Trade Is Not a Four-Letter Word definitely has that Washington vibe to it. But if Hochberg moves more Washington types to favor freer trade at the margin, his book will have done more good than he has, or will, in office.

Charles Davenant on the Need for Humility in Policymaking

Douglas Irwin, on page 53 of his 1996 book Against the Tide: An Intellectual History of Free Trade, quotes from page 32 of Charles Davenant’s 1696 Essay on the East India Trade:

“Wisdom is most commonly in the wrong, when it pretends to direct nature.”

This wisdom applies to much more than trade restrictions and government-granted monopolies.

Immanuel Wallerstein – The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century

Immanuel Wallerstein – The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century

Wallerstein was the primary creator of the core-periphery framework that many historians use to view world economic history. This 1974 book started it all. Several publishers rejected his initial manuscript, but when he did finally get it published, it caught on quickly. Wallerstein eventually completed four volumes in the series before he passed away in 2019.

In the context of the 16th century, the first major core country was Spain, though the Netherlands and England eventually overtook it as silver-induced inflation and the costs of empire caused Spanish decline. The two periods of Spanish dominance and Dutch-English dominance make up what Wallerstein calls the long 16th century. The periphery economies were the somewhat nearby countries that traded with these core economies throughout the long 16th century, and on through later periods.

Typically, periphery economies provide raw materials and food, which the core countries either consume or turn into more finished products. At this stage of the world economy, there were still countries outside of the European core-periphery network. For Wallerstein, these are simply separate economic systems. The boundaries are fluid, and Wallerstein was quick to point out that his categories are not categorical. Countries such as Poland and the Ukraine were nearly always periphery countries in this period. Russia went in and out of the periphery over the years. Farther-off countries such as India and China had their own independent core-periphery networks.

By the 20th century, with industrialization, mass media, and air travel, the entire world was unified into a single core-periphery system. In this book’s focus, the two-part “long 16th century,” this had not yet happened. But this was also the period when that process began in earnest, which is why Wallerstein’s larger project began there.

Wallerstein was a Marxist, and it shows in his hyper-materialist view of history, and his neglect of individuals in favor of focusing on aggregates such as nations, regions, and classes. It also causes him to ignore non-material factors such as culture, art, social norms about openness and progress, and more. Though he favorably cites Douglass North a few times, proving at least some engagement with the economic history literature, he also is not the most astute economic analyst, especially in matters of monetary policy. He seems not to grasp the concepts of equilibrium, the neutrality of money, or the law of one price. These shortcomings are not fatal to his core-periphery thesis, but they don’t help his case.

As the world becomes ever more prosperous in the 21st century, Wallerstein’s core-periphery framework is quickly becoming obsolete. It’s not the worst way to view the history of empires of colonialism, which are based on exploitation and hierarchy. But the world of the post-1800 Great Enrichment is based increasingly on equal exchange and cross-cultural tolerance and respect. There is a long way to go, obviously, and there will be stutters and reversal. But if the process continues, Wallerstein’s thesis will age as poorly as his Marxism already has.