Three Books for 2017: Economics for the Common Good, Janesville, Economism

3 books

Ken Murphy asked me for three books for 2017. Mine are: Amy Goldstein: Janesville: An American Story, Jean Tirole: Economics for the Common Good, and James Kwak: Economism: Bad Economics and the Rise of Inequality:

  • Amy Goldstein: Janesville: An American Story (9781501102233): The best of the very large and very uneven crop of ground-level books attempting to explain why those parts of America that are treading water or losing ground have been unable to adapt to changing technology and organization in the global economy…

  • Jean Tirole: Economics for the Common Good (9780691175164): A very wise book on what high-quality economics is and is not, from the guy who was truly the smartest guy in the room back when I spent a year as a young lecturer in the MIT economics department…

  • James Kwak: Economism: Bad Economics and the Rise of Inequality (9781101871195): How a very large part of the economics profession has failed to get the true message of economics through its own biases and the political and ideological filters…


Amy Goldstein: Janesville: An American Story (9781501102233): This is the best of the very large and very uneven crop of ground-level books attempting to explain why those parts of America that are treading water or losing ground have been unable to adapt to changing technology and organization in the global economy. General Motors closed its Janesville plant in 2008 as it teetered on the edge of bankruptcy. Students began showing up at the local high school hungry and dirty. Teachers and others started social service organizations to supply them with supplies and food. Contributions to local charities fell off just when the need spiked. The closing of the GM plant triggered the closing of its nearby supplier plants as well.

The GM assembly-line workers had earned \$30 an hour at the plant. Some—a few—maintain their paychecks by becoming “birds of passage” working at still-open GM plants in other states. Others see their paychecks collapse: settle at jobs paying half as much, and with minimal benefits. For nobody was willing to pay anywhere near \$30 an hour for the skills and the energy of ex-GM workers. And the ex-workers could not use their skills and energy themselves to find a retraining path to anywhere near the pay levels that GM had offered them.

The big flaw, of course, is Amy Goldstein’s ignorance of and unwillingness to learn about the macro picture that makes the closing of the GM plant so devastating for Janesville. Plants, after all, close all the time because the money being spent on the products they had made is diverted to purchase other commodities made more efficiently that promote greater prosperity. Why weren’t the Janesville ex-workers able to benefit from spillovers from that greater efficiency and greater prosperity? Goldstein has no clue.


Jean Tirole: Economics for the Common Good (9780691175164): This is a very wise book on what high-quality economics is and is not, from the guy who was truly the smartest guy in the room back when I spent a year as a young lecturer in the MIT economics department. “The distinctive characteristic of academics”, Tirole writes, “their DNA, is doubt”. This creates a substantial tension: economists need to teach what they know not just to their peers and their students but to the public sphere; but the public sphere today—did it ever?—does not want nuanced arguments from two-handed economists. Cable TV and Twitter do not like to be told: “It is difficult to tell”. Yet, often, that is what Tirole has to say. Nevertheless, Tirole thinks—and I agree—that we have no alternative but to try: we must imagine Sisyphus happy.

In its thoughtful discussions of market-state interactions, boundaries, and synergies; in its focus on the government’s role not in prescribing actions but remedying information and other externalities; in its pleas for a diversified portfolio of institutional forms; in its speculations about the long-run impact of information and communications technology revolutions; in its use of the economics of information as an organizing principle; in its rich institutional detail; in its application of theory to real-world examples; and in its (much appreciated) boosterism for behavioral economics—this is the best book I read in 2017.


James Kwak: Economism: Bad Economics and the Rise of Inequality (9781101871195): This is a very good book about how a very large part of the economics profession has failed to get the true message of economics through its own biases and the political and ideological filters.

First of all, I think the book is mistitled. It is not economics that becomes a misleading and destructive ideological “-ism”. Rather, it is, as my friend Noah Smith puts it, it is Econ 101—supply and demand, and where the curves cross is always the bet place to be—that became a misleading and destructive ideological “-ism”.

Second, as James Kwak writes, Econ 101 became a misleading and destructive ideological “-ism” because it suited the interest of powerful groups with megaphones that it become so: neoclassical economics badly done via those who learned little economics simplistically applying the most basic supply-and-demand models. Our large upward leap in inequality, the financial crash, and the large holes in our safety net are some of the current flaws in America that Kwak traces to 101-ism. And he is in large part correct do so. 101-ism makes people think that whatever inequality there is in the current market is natural and just, and that government policies will always reduce wealth by generating Harberger triangles. And these are very convenient beliefs for plutocrats—not for plutocrats to hold them, but for those who pay rents to plutocrats to hold in order to make plutocrats richer.

Noah Smith hopes that empirical evidence will disrupt and dismantle 101-ism:

The economics discipline itself has been shifting from theory to data for years now, and the world is taking notice. Every time studies show that tax cuts don’t do much to encourage investment, or that the impact of minimum wage hikes is modest, the public loses a little faith in the power of traditional Econ 101. The cure… is more and better economics…. Americans are now starting to question economism because of declining median income, spiraling inequality and a huge financial and economic crisis…

I think Noah is wrong here: 101-ism provides a simple and powerful intellectual framework easily grasped that makes sense of a complicated world and also works to the advantage of people with a great deal of money who benefit from its spread. Thought is vulnerable to simplistic theories which then gain an unshakeable hold. Simplistic theories are easily propagated because they are, well, simplistic. When it is in the interest of someone with resources that others believe a doctrine, they will devote their resources to spreading it. And it is very difficult to convince somebody of anything when their pocketbook or their sense of self-worth depends on their thinking otherwise. 101-ism thus has powerful material and cognitive advantages over alternatives. And the only thing that the alternatives have going for them is that they are the truth.

I think that James Kwak is showing us here both how much and how little arguments based on the truth can do in the modern public sphere.

But, as I said in talking about Jean Tirole’s Economics for the Common Good: we must imagine Sisyphus happy…

“After Piketty” at Harvard University Press

Cursor and After Piketty Heather Boushey J Bradford DeLong Marshall Steinbaum Harvard University Press

Thomas Piketty’s Capital in the Twenty-First Century is the most widely discussed work of economics in recent history, selling millions of copies in dozens of languages. But are its analyses of inequality and economic growth on target? Where should researchers go from here in exploring the ideas Piketty pushed to the forefront of global conversation? A cast of economists and other social scientists tackle these questions in dialogue with Piketty, in what is sure to be a much-debated book in its own right.

After Piketty opens with a discussion by Arthur Goldhammer, the book’s translator, of the reasons for Capital’s phenomenal success, followed by the published reviews of Nobel laureates Paul Krugman and Robert Solow. The rest of the book is devoted to newly commissioned essays that interrogate Piketty’s arguments. Suresh Naidu and other contributors ask whether Piketty said enough about power, slavery, and the complex nature of capital. Laura Tyson and Michael Spence consider the impact of technology on inequality. Heather Boushey, Branko Milanovic, and others consider topics ranging from gender to trends in the global South. Emmanuel Saez lays out an agenda for future research on inequality, while a variety of essayists examine the book’s implications for the social sciences more broadly. Piketty replies to these questions in a substantial concluding chapter.

An indispensable interdisciplinary work, After Piketty does not shy away from the seemingly intractable problems that made Capital in the Twenty-First Century so compelling for so many.


About the Editors:

Heather Boushey is Executive Director and Chief Economist at the Washington Center for Equitable Growth.

J. Bradford DeLong is Professor of Economics at the University of California, Berkeley.

Marshall Steinbaum is Fellow at the Roosevelt Institute, New York.


Table of Contents:

  1. The Piketty Phenomenon [Arthur Goldhammer]
  2. Thomas Piketty Is Right [Robert M. Solow]
  3. Why We’re in a New Gilded Age [Paul Krugman]
  4. What’s Wrong with Capital in the Twenty-First Century’s Model? [Devesh Raval]
  5. A Political Economy Take on W / Y [Suresh Naidu]
  6. The Ubiquitous Nature of Slave Capital [Daina Ramey Berry]
  7. Human Capital and Wealth before and after Capital in the Twenty-First Century [Eric R. Nielsen]
  8. Exploring the Effects of Technology on Income and Wealth Inequality [Laura Tyson and Michael Spence]
  9. Income Inequality, Wage Determination, and the Fissured Workplace [David Weil]
  10. Increasing Capital Income Share and Its Effect on Personal Income Inequality [Branko Milanovic]
  11. Global Inequality [Christoph Lakner]
  12. The Geographies of Capital in the Twenty-First Century: Inequality, Political Economy, and Space [Gareth A. Jones]
  13. The Research Agenda after Capital in the Twenty-First Century [Emmanuel Saez]
  14. Macro Models of Wealth Inequality [Mariacristina De Nardi, Giulio Fella, and Fang Yang]
  15. A Feminist Interpretation of Patrimonial Capitalism [Heather Boushey]
  16. What Does Rising Inequality Mean For the Macroeconomy? [Mark Zandi]
  17. Rising Inequality and Economic Stability [Salvatore Morelli]
  18. Inequality and the Rise of Social Democracy: An Ideological History [Marshall I. Steinbaum]
  19. The Legal Constitution of Capitalism [David Singh Grewal]
  20. The Historical Origins of Global Inequality [Ellora Derenoncourt]
  21. Everywhere and Nowhere: Politics in Capital in the Twenty-First Century [Elisabeth Jacobs]
  22. Toward a Reconciliation between Economics and the Social Sciences [Thomas Piketty]

Reviews:

The book serves as a fantastic introduction to Piketty’s main argument in Capital [in the Twenty-First Century], and to some of the main criticisms, including doubt that his key equation—r > g, showing that returns on capital grow faster than the economy—will hold true in the long run. It also contains thoughtful interventions in debates about the political economy of inequality.—Aaron Reeves, Nature

Thomas Piketty’s Capital in the Twenty-First Century forcibly entered the public imagination in 2014, but the book’s impact on academic thinking and research is only just starting to be felt. The essays in After Piketty offer new findings and admirably lay out an agenda that will influence future research on inequality, opportunity, and measurement for years to come.—Miles Corak, University of Ottawa

Heather Boushey, Brad DeLong, and Marshall Steinbaum have convened and shaped an ambitious and refreshingly frank conversation about Thomas Piketty’s Capital in the Twenty-First Century. This extraordinary gathering of two dozen authors—working across disciplinary boundaries—interrogates Piketty’s core claims about the causes, correlates, characteristics, and consequences of high and rising levels of income and wealth inequality in the West. The gathered authors celebrate and hone Capital’s far-reaching contributions; they also tackle substantial weaknesses and assess omissions. Readers unfamiliar with Capital will find an accessible synthesis, graduates of the original book will emerge with a more nuanced understanding, and inequality scholars—newcomers and veterans—will revise their research agendas.—Janet C. Gornick, Professor of Political Science and Sociology, Stone Center on Socio-Economic Inequality, City University of New York

Piketty’s work did what decades of rising disparities couldn’t do: it reminded macroeconomists that inequality matters. More starkly, it laid bare just how ill-equipped our existing frameworks are for understanding, predicting, and changing inequality. This extraordinary collection shows that our most nimble social scientists are responding to the challenge, collecting ideas about capital, technology, power, gender, race, and privilege that might help inform a broader understanding.—Justin Wolfers, University of Michigan

Best Business Books 2016: Economy

Best Business Books 2016 Economy

Over at Strategy+Business: Best Business Books 2016: Economy: The Crisis Is Over: Welcome to the New Crisis:

  • Robert J. Gordon: The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton University Press, 2016) http://amzn.to/2eYBETT

  • Adair Turner: Between Debt and the Devil: Money, Credit, and Fixing Global Finance (Princeton University Press, 2015) http://amzn.to/2fahiHY

  • Jacob S. Hacker and Paul Pierson: American Amnesia: How the War on Government Led Us to Forget What Made America Prosper (Simon & Schuster, 2016) http://amzn.to/2ekuOdg

It’s been quite a decade for the global economy. The popping of the American housing bubble in 2006, the subprime mortgage financial crisis and its spread to Wall Street in 2007–08, the collapse of the world economy into the first global recession in decades in 2008–09, the knock-on eurozone financial crisis that began in 2010, and a slow, often faltering recovery — it’s been a tumultuous 10 years. And the period has produced a bumper crop of excellent economics books by academics, journalists, and practitioners who have attempted to grapple with the extraordinary macroeconomic disaster. They have examined why it happened, how to fix it, what it means, and how to avoid a recurrence of anything even remotely as hellish. Read MOAR at Strategy+Business

Hoisted from the Archives: Me Reviewing Robert Skidelsky on John Maynard Keynes

J. Bradford DeLong(2001): Review of Robert Skidelsky, John Maynard Keynes: Hopes Betrayed and The Economist as Saviour: Robert Skidelsky (1983), John Maynard Keynes: Hopes Betrayed (London: Macmillan: 033357379x). Robert Skidelsky (1992), John Maynard Keynes: The Economist as Saviour (London: Macmillan: 0333584996). And my review of volume 3: Fighting for Britain.

A couple of months ago I wrote a less-than-totally-enthusiastic review of the third volume of Robert Skidelsky’s Keynes biography–Robert Skidelsky (2000), John Maynard Keynes: Fighting for Britain (London: Macmillan: 0333604563). I wrote that I was disappointed: that:

I was expecting this to be a great book: as stunning as the first two volumes…. But it was not. Do not get me wrong: it is still a good book, well worth reading. Anyone who loved Skidelsky’s first two volumes will like this one…

Now let me repair the damage by writing a totally enthusiastic, totally adulatory review of Skidelsky’s first two volumes. He gives us John Maynard Keynes’s life, entire. And he does so with wit, charm, control, scope, and enthusiasm. You read these books and you know Keynes–who he was, what he did, and why it was so important.

The place to start is with the observation that John Maynard Keynes appeared to live more lives than any of the rest of us are granted.

Keynes was an academic, but also a popular author. His books were read much more widely outside of academia than within it. Keynes was a politician–trying to advance the chances of Britain’s Liberal Party between the wars–but also a bureaucrat: at times a key civil servant in the British Treasury. He was a speculator, trying to make his fortune on the stock market, but also at the core of the ‘Bloomsbury Group’ of artists and intellectuals that did so much to shape interwar culture.

For the litterati it is Keynes of Bloomsbury–his loves, enthusiasms, acts of patronage, and wit–who is the most interesting. For economists like myself, it is Keynes the academic who is the real Keynes: he was the founder of the half-science half-witchcraft discipline of macroeconomics. For those interested in the political and economic history of the twentieth century, it is Keynes the author and politician who is primary. In either case, John Maynard Keynes is the man who has the best claim to be the architect of our modern world–whether it is how our central banks think about economic policy, what our governments believe that they must try to do, the institutions through which they work, or the habit of thought that views the economy not as Adam Smith’s ‘system of natural liberty’ but as a complicated machine that needs adjustment and governance, all of these trace large parts of their roots to the words and deeds of John Maynard Keynes.

How did this man come to be?

That is the question answered by the first volume of Skidelsky’s biography: it is a bildungsroman, a story of growth and development. Skidelsky writes the best narrative interpretation of growing up as a smart and privileged children of academics in late Victorian Britain than I can ever conceive of being written. He writes of how Keynes was one of a relatively small number of brilliant students thrust as a leaven into the mass of Britain’s upper class at Eton, and thus became part of ‘an intellectual elite thrust into the heart of a social elite’ (HB, page 77). An entire cohort of Britain’s upper class thus learned before they were twenty that Keynes could be very smart, very witty, very entertaining–and very helpful if there was a hard problem to be thought through or something to be done.

Skidelsky then writes of Keynes at Cambridge, his joining the secret society of the Apostles, and his eager grasping with both hands of the philosophy of the aesthete common among the students of the philosopher G.E. Moore. As Keynes put it in 1938, he believed that one should arrange one’s life to achieve the most good, where ‘good’ was nothing more or less than:

states of mind… states of mind… not associated with action or achievement or with consequences [but]… timeless, passionate states of contemplation and communion…. a beloved person, beauty, and truth.

Thus Keynes left Cambridge convinced that:

one’s prime objects in life were love, the creation and enjoyment of aesthetic experience, and the pursuit of knowledge. Of these love came a long way first… (HB, page 141).

This embrace of aestheticism was and remained the key to the ‘Bloomsbury’ avatar of John Maynard Keynes, for whom the lodestars were to ‘be in love with one’s friends, with beauty, with knowledge’ and who was and remained an enthusiastic member of the Bloomsbury group, sharing ‘its intellectual values and its artistic enthusiasms,’ and participating ‘in its wild fancy dress parties’ (HB, page 234). Keynes was a man who could celebrate this appointment to the British Treasury with:

…a party for seventeen… at the Café Royale…. Afterwards they went back to 46 Gordon Square for Clive [Bell]’s and Vanessa [Bell, the sister of Virgina Woolf]’s party. There they listened to a Mozart trio… and went upstairs for the last scene of a Racine play performed by three puppets made by Duncan [Grant], with words spoken by the weird-voiced Stracheys. ‘The evening ended with Gerald Shove enthroned in the center of the room, crowned with roses…’ (HB, page 300).

But at the same time Keynes’s pursuit of knowledge was shading over into politics and policy as well. For Keynes it was never enough to pursue knowledge in order to achieve a good state of mind, one had also to be sure to cause the knowledge to be applied to make the world a better place. And how one could act in politics and policy was greatly constrained by the limits of our knowledge. One argument from Edmund Burke, especially resonated with Keynes. As he wrote:

Burke ever held, and held rightly, that it can seldom be right… to sacrifice a present benefit for a doubtful advantage in the future…. It is not wise to look too far ahead; our powers of prediction are slight, our command over results infinitesimal. It is therefore the happiness of our own contemporaries that is our main concern; we should be very chary of sacrificing large numbers of people for the sake of a contingent end, however advantageous that may appear… We can never know enough to make the chance worth taking… (ES, page 62).

Keynes’s industry and intelligence thus made him a trusted and effective member of Britain’s intellectual and administrative elite well before the eve of World War I. Sir Edwin Montagu, especially, pushed him forward both before and during the war. Before the war Keynes decided that he wanted the life of an academic rather than of an administrator: Cambridge rather than the India Office or the Treasury. Yet he kept a strong presence in both worlds, writing his practical and policy-oriented book Indian Currency and Finance in spare moments as he worked on the deeper and philosophical project that was his Treatise on Probability.

Thus it was no surprise that Keynes found an important and powerful job at the Treasury during the national emergency that was World War I. How do you mobilize the financial resources of Britain to support the war effort? How large a war effort could the British economy stand? How could an international trade system geared to consumer satisfaction be harnessed as an instrument of national power? These are all deep and complicated questions. These are what Keynes worked on. But as the death toll from World War I mounted up toward ten million, Keynes became angrier and angrier at this monstrous botch of human lives and social energy that was World War I–and angrier and angrier at the politicians who could see no way forward other than mixing more blood with mud at Paaschendale.

Keynes’s friend David Garnett wrote him a letter condemning his work for the government, calling Keynes:

an intelligence they need in their extremity…. A genie taken incautiously out… by savages to serve them faithfully for their savage ends, and then–back you go into the bottle…. Oh… our savages are better than other savages…. But don’t believe in the profane abomination.

The interesting thing was that Keynes ‘agreed that there was a great deal of truth in what I had said…’ (HB, page 321). And then the whole project of post-World War I reconstruction went wrong at Versailles–when the new German government was treated as a foe rather than a democratic ally, when the object seemed to be to extract as much in plunder and reparations from Germany as possible (‘until the pips squeak’).

Skidelsky quotes South African politician Jan Christian Smuts on the atmosphere at Versailles:

Poor Keynes often sits with me at night after a good dinner and we rail against the world and the coming flood. And I tell him that this is the time for Grigua’s prayer (the Lord to come himself and not to send his Son, as this is not a time for children). And then we laugh, and behind the laughter is [Herbert] Hoover’s horrible picture of thirty million people who must die unless there is some great intervention. But then again we think that things are never really as bad as that; and something will turn up, and the worst will never be. And somehow all these phases of feeling are true and right in some sense… (HB, page 373).

Keynes exploded with a book called The Economic Consequences of the Peace. It condemned the political maneuvering of Versailles and the treaty that resulted in the strongest possible terms. He excoriated short-sighted politicians who were interested in victory rather than peace. He outlined his alternative proposals for peace:

German damages limited to £2000m; cancellation of inter-Ally debts; creation of a European free trade area… an international loan to stabilize the exchanges…

And he prophesied doom–if the treaty were carried out and Germany kept poor for a generation:

If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for long that final civil war between the forces of reaction and the despairing convulsions of revolution, before which the horrors of the late German war will fade into nothing, and which will destroy… the civilization and progress of our generation… (HB, page 391).

The Economic Consequences of the Peace made Keynes famous. His horror at the terms of the peace treaty won him friends like Felix Frankfurter, a powerful molder of opinion in the United States. In his book, propelled by ‘passion and despair,’ Keynes ‘spoke like an angel with the knowledge of an expert’ and showed an extraordinary mastery not just of economics but also of the words that were needed to make economics persuasive. Before The Economic Consequences of the Peace Keynes was primarily an academic (with some government experience) with a lot of influential literary friends. Afterwards he was a celebrity. He was not only the private Keynes: ‘the Cambridge don selling economics by the hour, the lover of clever, attractive, unworldly young men, the intimate of Bloomsbury.’ He was also–because of what he had done with his pen after Versailles–‘the monetary reformer, the adviser of governments, the City magnate, the feared journalist whose pronouncements caused bankers and currencies to tremble… conferences jostled with holidays, intimacy merged into patronage. In 1925 the world-famous economist would marry a world-famous ballerina in a blaze of publicity…’ (HB, page 400).

So after World War I Keynes used what power he had to–don’t laugh–try to restore civilization. In Skidelsky’s–powerful and I believe correct–interpretation, Keynes before 1914:

believed (against much evidence, to be sure) that a new age of reason had dawned. The brutality of the closure applied in 1914 helps explain Keynes’s reading of the interwar years, and the nature of his mature efforts… to restore the expectation of stability and progress in a world cut adrift from its nineteenth-century moorings… (ES, page xv).

Skidelsky’s narrative of the mature Keynes–Keynes in the 1920s–is far from being a one-note recounting of the brave but losing struggle against the approaching Great Depression, against political insanity, and against the Nazi Party’s attempted revenge for the German defeat in World War I. Bloomsbury takes up a good chunk of the narrative. Skidelsky’s book includes love letters from Keynes to his future wife Lydia Lopokova:

In my bath today I considered your virtues—how great they are. As usual I wondered how you could be so wise. You must have spent much time eating apples and talking to the serpent! But I also thought that you combined all ages—a very old woman, matron, a debutante, a girl, a child, an infant; so that you are universal. What defence can you make against such praises? (page 181).

But when he tries to paint a picture of what it was like to be a member of the Bloomsbury culture group in the 1920s, Skidelsky’s words fail him. Instead, he resorts to the imaginings of one of the characters of novelist Anthony Powell, who thinks that Bloomsbury must have been:

…every house stuffed with Moderns from cellar to garret. High-pitched voices adumbrating absolute values, rational statse of mind, intellectual integrity, civilized personal relationships, significant form…. The Fitzroy Street Barbera is uncorked. Le Sacre du Printemps turned on, a hand slides up a leg…. All are at one now, values and lovers (page 11).

Virginia Woolf had a different, less happy and romantic view. She wrote of her:

vivid sight of Maynard by lamplight—like a gorged seal, double chin, ledge of red lip, little eyes, sensual, brutal, unimaginate. One of those visions that come from a chance attitude, lost as soon as he turned his head. I suppose though it illustrates something I feel about him. He’s read neither of my books… (page 15)

There is a clear lesson: if your circle includes novelists with wicked pens, read their books and praise them as often as possible.

The bulk of this second volume–The Economist as Saviour–is however devoted to Keynes’s political and intellectual struggle for stable money and full employment, and against deflation, overvalued exchange rates, and the sacrifice of the happiness of today’s populations in the hopes of regaining the imagined benefits of the classical gold standard at some time in the distant future. Keynes spent more than a decade arguing against central bankers who ‘think it more important to raise the dollar exchange a few points than to encourage flagging trade.’ He tried to prevent Britain’s return to the gold standard in 1925 at an overvalued exchange rate, for by overvaluing the exchange rate Britain’s Treasury Minister, Winston Churchill, was willing:

… the deliberate intensification of unemployment. The object of credit restriction, in such a case, is to withdraw from employers the financial means to employ labor at the existing level of prices and wages. This policy can only attain its end by intensifying unemployment without limit, until the workers are ready to accept the necessary reduction in money wages under the pressure of hard facts…. Deflation does not reduce wages ‘automatically.’ It reduces them by causing unemployment. The proper object of dear money is to check an incipient boom. Woe to those whose faith leads them to use it to aggravate a Depression! (page 203).

But in the end Keynes failed.

He was unable to persuade British governments that economic policy should be decided upon by rational thought rather than by obedience to old poorly-understood verities. He failed to achieve any material easing of the terms of the Versailles treaty. He failed to prevent deflation and high unemployment in Britain. He failed to convince people that the Great Depression was a man-made catastrophe that could be cured relatively easily. His pen–though strong–was not strong enough. His allies were too few. And among central bankers and cabinet ministers understanding of the situation in which they were embedded was rare.

So the 1930s saw a change of emphasis. Fewer short polemical articles were written. Instead, Keynes concentrated his attention on writing a book, a book which he thought:

…will largely revolutionize–not, I suppose, at once but in the course of the next ten years–the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the upshot will be in its effects on actions and affairs. But there will be a great change…’ (pages 520-521). And he was right.

His General Theory of Employment, Interest, and Money did change the world.

It ends with a bold claim for the importance of ideas rather than interests that, in context, has to be read not as a considered judgment but as his desperate hope:

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas…. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil… (page 570).

The extraordinary thing is that Keynes was right.

The other extraordinary thing is that Skidelsky has told the story so well.

So buy these books. Read these books. These are great books. Time spent with them is time well-spent. Robert Skidelsky deserves great honors for having devoted so much of his life to writing down the story of John Maynard Keynes, and writing it down so well.

Are there any problems with the books? A very few–usually caused by the fact that Skidelsky is not a technically-trained economist.

For example, Skidelsky seems frustrated at the apparent appearance and disappearance of the quantity theory of money from Keynes’s thought (and from economic thought in general). He writes that:

In his youthful exuberance Keynes claimed that adherence to [the quantity theory] was a test of scientific competence…. A few years later he cheerfully jettisoned it; in the 1970s back it popped…. If economics were really like physics, it would be impossible for ideas fundamental to the subject to disappear one moment and reappear the next… (HB, page xviii).

To an economist this sounds simply silly. In the Marshallian tradition in which Keynes was trained, it was always clear that the constant-velocity quantity theory of money was just a first approximation–and indeed Keynes’s General Theory is very clear about just how he intends to get a better, second approximation that reduces to the constant-velocity quantity theory when velocity is indeed constant. The quantity theory may have ‘popped back’ into the sights of economic journalists like Skidelsky in the 1970s; but it had always been present in economists’ models under the guise of the LM curve.

And Skidelsky does not seem to be able to clearly set out what Keynes was trying to achieve in his Treatise on Probability. This is no crime: Keynes was not able to set it out clearly either. We today can because we have the mathematical tools–information sets and expected values taken with respect to them–that make Keynes’s objections to what he took to be ’empirical’ theories of probability both cogent and obvious.

Strangest of all–and this I really do not understand–is Skidelsky’s apparent belief that Keynes’s despair in the immediate aftermath of World War I was an echo of ‘the Victorian fear of a godless society.’ Skidelsky thinks that the rise of atheism ‘severely depleted’ the ‘moral capital which sustained the accumulation of economic capital…’ (HB, pages 401-2). As if everyone would have been optimistic after the Versailles peace conference if only everyone had still gone to church on Sundays! The existential crisis of people seeking meaning for their lives when they can no longer find it in transcendental sanction is one thing. The slaughter of Verdun, the panic of hyperinflation, the social waste of high unemployment, and the (temporary) end of economic progress in Europe is quite another.

No one needed the Death of God to cause despair when they looked around them after World War I, and contrasted the world they saw with the world as they had seen it only six years earlier.

Must-read: Cory Doctorow: “Supreme Court sends Authors Guild packing, won’t hear Google Books case”

Must-Read: A defeat for the rent-seekers!

Cory Doctorow: Supreme Court sends Authors Guild packing, won’t hear Google Books case: “The Authors Guild has been trying to get a court to shut down…

…Google’s book-scanning/book-search program for more than a decade. Last October, the Second Circuit Court of Appeals — the most publisher-friendly court in America — ruled that the program was legal. Today, the Supreme Court settled the question forever, by declining to hear the Authors Guild’s appeal. I’ve written a lot about this, but here’s the tl;dr: if making a copy in order to create a search index violates copyright, then all search engines are illegal….

Unlike other forms of Google search, Google does not display advertising to book searchers, nor does it receive payment if a searcher uses Google’s link to buy a copy. Google’s book scanning project started in 2004. Working with major libraries like Stanford, Columbia, the University of California, and the New York Public Library, Google has scanned and made machine-readable more than 20 million books. Many of them are nonfiction and out of print.

Must-Read: Pam Samuelson et al.: About Us | Authors Alliance

Must-Read: A very worthy endeavor.

However, I feel like a gotta say here that Google Books was the best vehicle for them to realize their dreams.

What is the current state of Google Books, anyway?

Pam Samuelson, Holly van Howling, Tom Leonard, and Carla Hesse: About Us | Authors Alliance: “Authors Alliance promotes authorship for the public good…

… by supporting authors who write to be read. We embrace the unprecedented potential digital networks have for the creation and distribution of knowledge and culture. We represent the interests of authors who want to harness this potential to share their creations more broadly in order to serve the public good. Unfortunately, authors face many barriers that prevent the full realization of this potential to enhance public access to knowledge and creativity. Authors who are eager to share their existing works may discover that those works are out of print, un-digitized, and subject to copyrights signed away long before the digital age. Authors who are eager to share new works may feel torn between publication outlets that maximize public access and others that restrict access but provide important value in terms of peer review, prestige, or monetary reward. Authors may also struggle to understand how to navigate fair use and the rights clearance process in order to lawfully build on existing works.

The mission of Authors Alliance is to further the public interest in facilitating widespread access to works of authorship by assisting and representing authors who want to disseminate knowledge and products of the imagination broadly. We provide information and tools designed to help authors better understand and manage key legal, technological, and institutional aspects of authorship in the digital age. We are also a voice for authors in discussions about public and institutional policies that might promote or inhibit the broad dissemination they seek.