Grand Pursuit by Sylvia Nasar is a tough book to describe. I've alternately been calling it a series of economic biographies, and a sweeping history of political economy. The blurb refers to it as a "survey" of the characters that shaped economics.
I'm not sure any of these really get at what makes it so wonderful.
Nasar, who previously wrote A Beautiful Mind (which is not only a great movie but a fantastic book), has weaved together both the lives and ideas of the giants of economics. From Malthus and Riccardo, right up to Amartya Sen.
The first third of the book is straight up biography. Of Marx, Marshall, Webb, Fisher and Schumpter. Each chapter it's own little world.
Nasar beautifully builds a story of progress, of theory and worldview. From a world of harsh limits to entrepreneurial magic, from zero to positive sum, and back, from theories that resembled simple mechanics, to intricate and complex biology.
But it's the little vignettes of their lives that really make the book pop.
"Marx never did step outside. He never bothered to learn English well. His world was restricted to a small circle of like-minded émigrés. His contacts with English working-class leaders were superficial. He never exposed his ideas to people who could challenge him on equal terms. His interaction with economists... whose ideas he wished to demolish, was nonexistent... Astonishglingly for the best friend of a factory owner and the author of some of the mos impassioned descriptions of mechanization's horrors, Marx never visited a single English factory - or any factory at all until he went on a guided tour of a porcelain factory near Carlsbad, where he took the waters toward the end of his life."
These little glimpses, the events that shaped their focus and reactions, really ground ideas that often feel abstract. They explain the blind spots and short sightedness that can be maddening in retrospect. These were people, not robots, whose theories and ideas were born out of lived experience and necessity.
"From the age of eight, he commuted daily by omnibus, ferry, and foot through the most noxious manufacturing districts and slums bordering the Thames. Marshall had been looking into the faces of poor people all his life."
Another thing you can't fail but notice is the sheer fortune. That, until Sen, they were exclusively white. And almost all were either independently wealthy or married into it.
"Beatrice's identity was shaped by having been born into Britain's "new ruling class," and her mind by having been "brought up in the midst of the capitalist speculation" and "the restless spirit of big enterprise." As the historian Barbara Cain notes, Beatrice distinguished her class not by wealth but by the fact that it was "a class of persons who habitually gave orders, but who seldom, if ever, executed the orders of other people."
In the second and third parts of the book, the narrative switches. Rather than characters in self-contained chapters, the story hinges on the big events of the 20th century - the world wars, the depression, the rise of international institutions and decolonialism. Characters weave in and out of the narrative, based on their links, intellectual and personal, to events and each other.
"World War 1 destroyed globalisation, disrupted economic growth, severed physical, financial, and trade links, bankrupted governments and businesses, and led weak or populist regimes to rely on desperate measures that were supposed to head off revolutions but just as often hastened them. When the war was over, the victors as well as the vanquished were crippled by colossal debts and subjected to vicious attacks of inflation and deflation."
Against this backdrop some of the magic and mystery of their ideas disappears. Joseph Schumpeter, for instance, is widely lauded nowadays for "creative destruction" and an emphasis on entrepreneurialism. But this seems less like a flight of genius and more a position of necessity when you consider he was the Austrian finance minister in 1919.
The country had been devastated by war, stripped of empire, and was faced with a blockade and dwindling reserves. With few resources at his command, it's understandable Schumpeter put his faith in an X factor.
"[Schumpeter] believed that a shrunken Austria had the means to recover economically. His deepest conviction was that nations' resources matter less than what they did with what they had. As long as entrepreneurs were allowed to create new enterprises, the financial system was functioning efficiently, and there were not too many barriers to trade, society could regenerate itself. He rejected the popular assumption that economic viability depended on vast territories, huge populations, and natural resources."
Of course the elephant in the room here is Keynes. But he, too, gets brought back to earth with stories.
"For most of his twenties, Keynes was Britain's resident expert on obscure currencies. Thinking about currencies got him into the habit of thinking about economies holistically instead of focusing on "trade" or "labor" or "industry" in isolation, and taught him how to draw salient conclusions from a handful of indicators. It also gave him a feeling for which government actions exerted systemic effects, like those of the moon on tides, instead of effects on a particular industry or group.
None of this should take away from their brilliance. But it's refreshing to get away from economics as received wisdom, or mathematical laws of nature, and into a world of messy identity and politics. Grand Pursuit is undoubtedly one of the best economics books I've ever read.
One of the mainstays of modern life is GDP. Newspapers harp on about it, investors set their expectations by it, politicians' careers live and die by it. But until I read GDP: a brief but affectionate history by Diane Coyle, I had never really appreciated how artificial the whole thing is.
Of course, GDP isn't a natural phenomena. There isn't a GDP-shaped mountain range somewhere. Moses didn't bring us tablets etched with the formula. But that's not really it.
"The concept of 'national income' may seem clear enough, but measuring it in practice means choosing what to include and exclude, which is surprisingly fuzzy".
You see, from the start, our measurements were both malleable and rife with ideology. Obvious, you may say. But what we choose to include and exclude ultimately shapes how we view the world. And this is largely invisible. No one can "see" the economy. Very few can or do investigate the statistics. Instead, we go with the heuristics.
You may hold in your head that economics is a human construct but still come under the influence of its selective view of the world.
According to Adam Smith's definition of productive labour, for example, "only those involved in the making of physical commodities, agriculture and industry would count toward national income."
The very essence of what is "productive" is a construct that has changed over time. And changed massively.
But perhaps Coyle's most cogent example of this artifice is military spending. Again to Smith:
...money spent on warfare or the interest on government debt was also being used unproductively. The nation's wealth was its stock of physical assets less the national debt. National income was what derived from the national wealth."
First, compare this to the current system, which is essentially a measure of flows of income, expenditure and production, rather than a measure of assets or liabilities. Change.
Secondly, how big would our modern militaries be if their expenditure was still considered a drain on the national accounts? In fact, Simon Kuznets, the father of national accounts, originally tried to count military spending as a negative to the national output.
"Kuznets, however, specifically saw his task as working out how to measure national economic welfare rather than just output."
"With this aim, in fact, Kuznets was out of tune with his times. Welfare was a peacetime luxury... Before long, the president would want a way of measuring the economy that did indicate its total capacity to produce but did not show additional government expenditure on armaments as reducing the nation's output."
Politics. With the Second World War approaching, governments needed to ramp up military spending. But, as now, the heuristic of growth held sway over the electorate. It's an easy mental shortcut. So, the government changed the national accounts to include military spending on the "plus" side.
"By the time the wartime economists developed the modern concept of GDP, government was already a far greater presence that it had been. Subtracting Defense spending from the older conception of national income would have wrongly given the impression that the war effort was going to involve a huge sacrifice in private consumer spending."
"...early definitions of "national income" did not include government spending, because governments before the late nineteenth and early twentieth century had such limited functions. Paying for war, or similarly for the justice system, was seen as a necessary evil reducing national income, rather than a positive contribution to the economy."
Of course, we can extend this. There are plenty of things inexplicably included or excluded from our national accounting.
"The main reason for not counting unpaid housework as part of "the economy", while paid housework is counted, is the difficulty of measuring it. Well, difficulty is not the right word. It can be measured by surveys, like the many other economic statistics, but generally official statistical agencies have never bothered - perhaps because it has been carried out mainly by women."
We all need to remember this the next time politicians tout growth. We've chosen what goes into growth and what doesn't. Our figures only show us changes in what we choose to count, what we currently find "important". They say more about our current priorities than anything else.
None of our measures are immutable laws of nature. They are subject to whims and change.
"The imaginary line dividing productive from unproductive activity is called the "production boundary." There is no sharp division in reality, so at the boundary there are arbitrary decisions, and this can be simply a matter of convenience. The border also becomes self-fulfilling, though, as being included in the national accounts definition of GDP is taken as a mark of "productiveness."
I really recommend GDP: a brief but affectionate history by Diane Coyle
If there is one abiding image from my time in Sri Lanka, it's the weird odds and ends that wound up in the fridge, covered by cling film.
It didn't matter how little milo was left in my glass. The tiniest drop was whisked away to the fridge, expected to be finished later.
This is just a small example of something much larger. Nothing is wasted in Sri Lanka. Cars, computers, cans – everything can be put to another use. Anything can be mended or broken down, given away or put to some other purpose.
In the West this behaviour is, unfortunately, met with something akin to derision. Recycling, upcycling and zero waste are part of a subculture. I often visit my local tip or re-use and repair centre to find perfectly serviceable furniture and gadgets. Disposability and planned obsolescence are accepted norms.
We've come a long way from considering waste an input, consumption as a chain.
But this is a recent phenomena. Recycling and upcycling played a pivotal role in humanity's rise. Many parts of the world have just gotten so wealthy they've forgotten about it. From The Ghost Map by Steven Johnson:
Waste recycling is usually assumed to be an invention of the environmental movement, as modern as the blue plastic bags we now fill with detergent bottles and soda cans. But it is an ancient art. Composting pits were used by the citizens of Knossos in Crete four thousand years ago.
So we've been doing this a while. It wasn't invented by the gluten intolerant.
But Johnson keeps going, and starts making interesting allusions to the natural world.
We value tropical rain forests because they squander so little of the energy supplied by the sun, thanks to their vast, interlocked system of organisms exploiting every tiny niche of the nutrient cycle. The diversity of the system is precisely why rain forests do such a brilliant job of capturing the energy that flows through them: one organism captures a certain amount of energy, but in processing that energy, it generates waste. In an efficient system, that waste becomes a new source of energy for another creature in the chain.
Here's the magic – our cities were once ecosystems like this. Before we went to extraordinary lengths to haul stuff out of sight and mind, we had to do something with it. We, too, created energy and input loops. And they helped build our modern world.
Waste recycling — in the form of composting and manure spreading — played a crucial role in the explosive growth of medieval European towns. High-density collections of human beings, by definition, require significant energy inputs to be sustainable, starting with reliable supplies of food.
The towns of the Middle Ages lacked highways and container ships to bring them sustenance, and so their population sizes were limited by the fecundity of the land around them. If the land could grow only enough food to sustain five thousand people, then five thousand people became the ceiling. But by plowing their organic waste back into the earth, the early medieval towns increased the productivity of the soil, thus raising the population ceiling, thereby creating more waste—and increasingly fertile soil.
The collecting of human excrement was a venerable occupation; in medieval times they were called “rakers” and “gong-fermors,” and they played an indispensable role in the waste-recycling system that helped London grow into a true metropolis, by selling the waste to farmers outside the city walls.
Of course, there's an obvious reason Sri Lankans and eighteen century Londoners are careful with waste. And despite the veneration, I doubt anyone really chose to be an 18th century "raker".
That's not what I'm advocating. But the mindset is. Let's go back to thinking of waste as an input. Just think of all the potential we are squandering.
So I wanted to add to something I just wrote about – the construction of our realities. It’s a topic much enriched by Gillian Tett’s brilliant book, The Silo Effect.
…humans always assume that the way that they organize the world around them is entirely natural and inevitable.
So, Tett’s book is primarily a reaction to the Global Financial Crisis. An anthropologist by training, she started to question why traders in the same bank were making opposing bets, how risk analysts could have been so blissfully unaware of the downside of some of these trades, and how economists and regulators missed the forrest for the trees.
The answer, she claims, is our unfortunate tendency to break the world down into neat little boxes. This can be effective, and even necessary, in our taking in and understanding the world. But the siloisation of expertise, information and people can be dangerous.
And it’s also not very accurate.
A common theme of anthropological research is that the way we classify the world never really matches the reality of our environments. People might draw neat diagrams of their kinship structures and family trees, but there are often ambiguities, overlaps, and underlaps. Things fall between the cracks. Life does not always fit into the official descriptions of what people are supposed to do. Much of the time we ignore these messy realities. It feels easier to stick with the neat classification systems we have than constantly rewrite them, be that in the sphere of kinship, religion, domestic life, or anything else.
If you watched any of this year’s campaign coverage, this should be familiar to you. Analysts broke America down into categories – white voters, women voters, black voters, latino voters, rural voters, working class voters; they ascribed motivations and prescribed answers.
But the world doesn’t want to conform to our little boxes. When it comes to institutions this can cause confusion, blindness and infighting. And, guess what, it does that in politics too. Maybe it’s time to question the boxes.
…the conventions that we use to classify the world are often not officially defined or spelled out. Instead, they arise out of a dense set of rules, traditions, and conventions that we have absorbed from our surroundings, often in an unthinking way.
Like many, I’ve spent in the last few days in a state of disbelief. How could Donald Trump win? I was certain it wouldn’t happen. Not based on polls or probabilistic models, but my perception of the way the world works.
Trump just doesn’t get elected in a country with well-developed institutions, I thought. This is something that happens in Sri Lanka.
It’s this sense of certainty that I now find most interesting. It was obvious to me that Trump would not win. And this was shared by everyone I spoke to, both before and after the event.
But this certainty, especially this shared sense of the obvious, is a problem. As explained by Dave Gray in his book Liminal Thinking:
The obvious is not obvious. It is constructed. We work together, as individuals and in groups, to construct the obvious every day. We band together in “obvious clubs” that defend competing versions of reality. When you walk into your obvious club, you will find people reading the same books, watching the same news channels, and talking to the same people, all of which tends to reinforce the same version of reality.
The idea of reality as a construct is not new. We filter our world through a lense, one made up of our experiences and beliefs. But the idea of a mutually constructed obvious – what one might call common sense – rather than an inherited or inherent one, is a new framing for me.
And this rings especially true as I think back on my many conversations about this election. So many of which were kicked off by the realisation we had read the same article or listened to the same podcast. It wasn’t just that my friends and I arrived at the election from the same place – as outsiders looking in. We were searching for bricks and gluing them together in our conversations.
If you think something is obvious, that’s an idea that bears closer examination. Why do you think it’s obvious? What personal experiences have you had that led to that belief? Can you imagine a different set of experiences that might lead to a different belief?
There’s a whole bunch of people taking a hard look at their priors right now, talking about breaking outside their bubbles. This is where you should start. There is no inherent obvious.