Club Troppo

I’ve been thinking for a while about retail and information flows.  If sellers were performing their task in a socially efficient way, they would be conveying the best information they could to their customers.  Of course retailers and marketers don’t do that. They try to spin things to get customers to buy what it is in the interests of the seller for them to buy.  So called ‘financial advisors’ generally restrict their advice to buying products which pay them a commission, fridge salespeople want to get a sale.  And advertisers want to get you buying what they want to get you buying. And even at the cost of annoying you, they want to get in front of your face and sell to you, whether you want their product or not. 

Yet this isn’t all there is to it.  Even salespeople try to appear honest – that’s the best way they can influence you to buy.  And salespeople are also keen on selling stuff that sells because it’s good value – because it makes their job that much easier. So the problem is this? How can we strengthen these incentives that get salespeople telling you the truth – and actually providing you with a service that has social value – which is good information about relative product quality to help you make the best decision you can.  That needn’t be against their interest.

One lead is provided by the regulation of financial advisors.  It’s pretty useless, I’d argue it’s possibly worse than useless (because it legitimates the process of selling in the guise of providing advice).  But we’re just thinking things through at this stage. Regulation of financial advisors tries to police advisors so that they’re taking the interests of their customers into account. So it makes them go through all sorts of hoops – like risk analyses for customers and so on.  In other words it at least goes through the motions of the financial advisor doing things that add social and individual value.  And if it’s done well, people should value, and could arguably educated to value such services.

So let’s look at retail. (Continued)

Someone asked me the other day for ten books on economics that they should read (not being an economist).

I haven’t given this a lot of thought, but here are some books – and some comments on them. I’m hoping the list can be filled out by other Troppodillians. 

• John Kay, The Truth about Markets 

The best popular book about economics I know.  Friendly to markets without being mesmerised by them. 

• James Surowieki, The Wisdom of Crowds

The best bestseller I know.  A simple idea, expounded (relatively) briefly, with great power. I wrote it up here. 

• Amatya Sen, Development as Freedom

A rich treatment of a lot of Sen’s work on rational choice fused with development and the idea that development is about developing human capability.  A fondness for Adam Smith doesn’t go astray. 

• Dani Rodrik, One Economics, Many recipies

I haven’t read it I’m afraid, but would if I hadn’t read lots of Dani’s articles leading up to the publishing of the book. I’ve reviewed several of Rodrik’s articles on troppo. Rodrik was very influential in taking on the Washington Consensus.  He points out that the most successful development stories simply don’t conform with the WC.  Rather countries like India, China and Vietnam are sensibly and strategically pragmatic about addressing economic priorities as they come up. 

• Nassem Nicholas Taleb, Fooled by randomness

A bitof a ratbag, not that there’s anything wrong with that.  Taleb is scathing, and generally right, in his criticisms of the way in which economists pretend they’re in a Gaussian world in which, while there is risk (known unknowns as in a casino) they can downplay Knightian (or Rumsfeldian) uncertainty – or unknown unknowns. A good rave which you don’t have to read every word of.

This is a quirky list I realise, spirred on by the request and what swam into my head.  I coudl add I’m sorry I don’t have anything by Krugman up there, but I don’t think he has produced a classic, just a string of great books and one classic column after another.  Recent good books, which I’ve partially read are Supercrunchers and Nudge, both of which give good interesting surveys of what they’re taking about (behavioural economics and numbercrunching using techniques often pioneered in econometrics respectively). And I have Akerlof and Shiller’s book Animal Spirits on my ‘to read list’ also.  Looking at my bookshelf a couple more that are of interest are Brian Loasby’s Choice Complexity and Ignorance, though I expect it woudl be of more interest to economists than general readers.  Its discussion of what I call ‘the antinomies of perfect competition’ is great fun (the paradoxes in the state in which competition is so thoroughgoing that no-one’s sales has any influence on anyone else and so firms compete without being rivals, and make choices which are not really choices because the level of competition does not permit it).  And Emma Rothchild’s Economic Sentiments about Adam Smith and Condorcet is a great read (at least the two best chapters on Smith – which I can send you if you want to email me).   

Anyway, other suggestions are now welcome.

Having just read this pussy footing review of this film, I am brought back to thinking about it, though not that much.  I saw it last week in Sydney while killing some time before heading off to my hotel for the night.  I was very keen to see it having seen it get five stars (that’s a lot of stars out of five) from I think both Margaret P and David S.  Now I loathe both of them, but stars are stars and often if they think a film is good I agree.

So off I went expecting something pretty damn triffic. I read another comment from someone which was that this film was a lot better than a lot of stuff made about aborigines with ‘liberal – ie left – sentiment’ or some such thing.

I can’t really say whether I think the film is worth seeing or not.  It was well filmed, and very ‘real’. It’s not a put up job, not phoney and presumably keenly felt.  But it was still a little beyond my white middle class ken.  Here’s some things I  remember about the film: 

It’s an agonisingly slow coming together of two people at least one of whom is a petrol sniffer from way back, the other (the girl) is very attractive in a slow, passive, resilient, long suffering kind of way.  The boy – a 14 year old (she’s 16) gets up every morning and sniffs a good draft of petrol fumes.

As a result he doesn’t speak.  He decides he rather likes Delilah and grabs his mattress and heads down towards her house (they live in a remote settlement) with a few cars up on blocks rotting away).  He also rather likes playing the guitar of a guy who is in a band and tries to get the guitar to play, but isn’t allowed to. When he does get the guitar he thrashes it and gets de-guitared by other members of the group, and things go back to normal. The next time he isn’t allowed to play the guitar, he goes and gets a large branch of a tree and poleaxes the guy who is playing guitar.  This fells him – he doesn’t seem to be dead, but there you go.  He picks up the guitar and plays for a while.

A little while later he’s lying in his bed and someone comes in and smashes his head with a branch – perhaps the same one. He heads down to Delilah who stitches him back together.  Delilah’s aunty dies. She’s been painting paintings and bringing in some money.  Delilah is blamed for neglecting her (which she hasn’t) and the women in the community come and bash her horribly. Samson and Delilah go off (to some town) to nurse their considerable wounds and live under a bridge with a drunk.  The drunk didn’t appeal to me – there was something a bit staged about him to me, but who am I to say that this wasn’t realistic?

Anyway life goes on (just) and eventually Samson’s enthusiasm for Delilah is reciprocated (sort of). Samson tries to kiss Delilah who rejects the entreaty (to kiss her on the lips) by stopping Samson and then kissing him back on the head. At the end of the film they are together and seem to like each other – though they don’t speak.

So there you go.  Delilah is a very sympathetic character. I liked her and I suppose felt for her but somehow things were so uniformly ghastly that it was difficult to really get into it. It was too like anthropology to me, but you might give it five stars. I’d be interested in what other people thought.

By which I mean, one in which amazing, deep moves are made, and after a flurry of sacrifices, the king is slain, with each of its opponents’ remaining pieces playing a role in dropping the final curtain. For those of you who care for such things, Enjoy!

From Martin Wolf 

We have three alternatives: liquidation; inflation; or growth. A policy of liquidation would proceed via mass bankruptcy and the collapse of a large part of the existing credit. That is an insane choice. A deliberate policy of inflation would re-awaken inflationary expectations and lead, inevitably, to another recession, in order to re-establish monetary stability. This leaves us only with growth. It is essential to sustain demand and return to growth without stoking up another credit bubble. This is going to be hard. That is why we should not have fallen into the quagmire in the first place.

Sydney Morning Herald 29 May 2009

An abattoir worker has been jailed for eight years for raping his 14-year-old stepdaughter and then blaming his crime on her wearing short skirts around the house.

The man, who cannot be named as it would identify his young victim, tried to seduce the teenager before raping her between August and November 2007 when her mother was asleep in another room. …

Judge Leanne Clare SC said the man had left the girl “profoundly traumatised.”

She said the girl said in a victim impact statement she began cutting herself after the rape as she was “overwhelmed with self-loathing.”

“She has flirted with the thought of suicide, has had counselling for two years … (this was) a terrible breach of betrayal of trust,” she said.

“You made various attempts to seduce her, you ignored her plea for you to stop, you blamed her, accusing her of flirting and leading you on.”

She jailed him for eight years and ordered he be eligible for release on parole after 29 January 2011.

But then I would say that wouldn’t I?

Lawrence Lessig quotes an Australian economist explaining why free access to public goods isn’t ‘socialism’, it’s ‘civil society’.  Lessig’s piece is below the fold. 

(Continued)

A triffic little service, allowing you to have a peek in ‘real time’ as we say, at the state of Sydney traffic.  Click on one of the bright green diamonds.  (Apologies if this is old news and you know all about it).

I put quite a bit of effort into my two pieces on Adam Smith in Ross Gittins’ column while he was on leave and got quite a lot of positive feedback about them.  So when I was asked to talk to an excellent conference organised by the indefatigable Fitzgerald siblings of QUT – Professors Brian and Anne – entitled Copyright Future: Copyright Freedom about the law of copyright in the age of the internet I decided to try to turn those columns, particularly the latter one, into a more substantial paper.  Some academic stars were in attendance from around the world including Lawrence Lessig and it was a great conference.  Plaudits to the Fitzgeralds and others associated with it. One thing I really liked was the terrific way in which PhD students were involved, giving five minute talks on their research, being involved as discussants. They’re doing interesting things, and we were interested to hear what they were.  Still, I christened Brian “Brother Didactica” because boy did we have a meal to chew through – full on papers, comments, discussants, questions, slide shows, from 8.30 am till 6.30 at night.  Seventeen people wheeled on and off the stage efficiently before lunch!  And on it went.

I was one of the very few economists there, and was alarmed at how much of a meal lawyers can make of things that economists see as non-issues (like how to get the last penny of royalties to the copyright holders of ’orphan works’ – that is works that are not ‘public domain’ but for which rightful owners of copyright can’t be found.)  I was sitting in a lengthy session about this and other not dissimilar problems in amazement that no-one reached for an economic perspective on this stuff (even if they didn’t want to treat it as the final word).  I hope to blog about this. I wanted to say that there should have been more economists at the conference – which there should have been.  But I didn’t want to say that if only economists were in attendance it would all be sorted.  So if I get round to the post I have in mind I’ll spell out a little more about what I mean and explain where I think economists’ reasoning is strongest (something I’ve already foreshadowed above) and where I think economists don’t think particularly well, and where lawyers do a better job.

In the meantime, I thought I’d post my talk which is the ‘paper’ of the ‘column‘ as it were, which I was pleased to find Mark Thoma thought worthy of his fantastic site Economists’ view. Likewise Gavin Kennedy liked my earlier column about Adam Smith and mirror neurons. Gavin and Mark Thoma have also picked up Don Arthur’s post on Adam Smith on poverty.  Anyway, the paper of the columns is over the fold.  Here is the paper in pdf format and here are the slides to which it refers.  (Continued)