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Book review  |   Bettering Humanomics by Deidre Nansen McCloskey

Financial Times |  27 May 2021

It is no secret that the glory days of the kind of economics many of us learned at university are long gone.

The mighty edifice of neoclassical micro erected by Samuelson, Becker, and Stigler – with its hyper-rational homo economicus operating within a crystalline architecture of preferences, incentives, and constraints – went first.   It disintegrated following sustained assault by the behavioural school of Kahnemann, Thaler, and Sunstein.  By the turn of the millennium, it was out with the hard-nosed regulatory economists of the 80s and 90s, and in with behavioural insights and Nudge Units.

As for traditional macro – whether of the Saltwater Neo-Keynesian or the Freshwater New Classical flavours – that flamed out in spectacular fashion in 2008 when, as the Queen herself famously observed, it failed to predict the biggest economic crisis in history.  It took a decade for policy-makers to desert the old doctrines explicitly, but there is little doubt today that the Biden administration’s lodestar is more MMT than JMK or RBC.

Yet are these revolutions really the answer to the shortcomings of Old School Econ 101?  For more than four decades, Deidre Nansen McCloskey – professor emerita of no fewer than six separate disciplines at the University of Illinois at Chicago, and a truly unclassifiable scholar who has made major contributions to economic theory, history, methodology, and statistics – has been arguing that the problems run deeper.  What economics needs to fulfil its unparalleled potential as the premier science of human progress, she insists, is the rediscovery of its origins as the discipline which successfully marries the methods of the sciences and the humanities.

Professor McCloskey explains why in her new book, Bettering Humanomics: A New, and Old, Approach to Economic Science. I reviewed it in the Financial Times on May 27, 2021. You can read my review here.

Book review  |   The World for Sale by Javier Blas and Jack Farchy

Financial Times |  2 March 2021

With the reflation trade suddenly ripping through the exchanges, a $1.9tn stimulus bill steaming through the US Congress, and “Dr Copper” bursting through $9,000 a tonne to prices not seen since the heady days of 2011, the commodity markets are headline news again.  Could there be a better moment for Javier Blas and Jack Farchy’s rollicking new account of those markets’ recent history to land on investors’ desks?

It’s as if the Bloomberg News reporters (and former FT journalists) have picked up not just a rich archive of ripping yarns from their years interviewing the industry’s leading traders — but some of their uncanny sense of timing too.

Commodities have not always been a hot topic. In 1998, I landed my first proper job, as bag-carrier to the head of the energy and mining department at the World Bank.  Back then, commodity markets seemed in terminal decline. The oil price had plummeted by 45 per cent over the previous 18 months. The mood in commodity-producing developing countries was apocalyptic.  

The Bank was on a mission to convince its clients that the good old days were not coming back: privatisation and reform were the only ways forward. At every meeting, we would pull out a chart of the real-terms price of oil over the previous nine decades. The boom times of the last two decades were a historical aberration, we would explain. Oil at $10 a barrel was here to stay.

We were of course spectacularly wrong. In December 1998, the oil price bounced, and then more than doubled in the next 12 months. It was just getting started. The 2000s witnessed a supercycle the like of which the world had never seen before — with the oil price topping out at $145 a barrel in June 2008. We had bottom-ticked the biggest commodity bull market in history.

At the core of The World For Sale: Money, Power, and The Traders Who Barter The Earth’s Resources is the story of how this historic boom catapulted a group of previously low-key international commodity trading houses — the likes of Cargill, Vitol, Trafigura, and Glencore — to extraordinary financial wealth and political power.

My review of the book was published in the Financial Times on March 2, 2021. If you have a subscription, you can read it here.

Book review  |  Under the Influence by Robert Frank

New Statesman |  18 March 2020

Behavioural economics – that branch of the subject which rejects the hyper-rational construct of homo economicus in favour of a more realistic understanding of human behaviour – is now so firmly a part of mainstream policy design that it seems hard to believe that two decades ago almost no one outside of the profession had heard of it.

That changed in 2002, when the Israeli psychologist Daniel Kahneman was awarded a Nobel Prize for his pioneering work with Amos Tversky on integrating the real-world foibles of human psychology into economic analysis.  Then in 2008, in their monster best-seller Nudge, the Chicago professors Richard Thaler and Cass Sunstein introduced the wonderful possibility that clever policy might actually subvert the innate cognitive biases identified by Kahneman and Tversky to achieve the Holy Grail of liberal government: getting people to make better choices of their own accord.

What is not widely understood, however, is that Thaler and Sunstein’s nudge theory was only one half of the behavioural economics revolution.  The other half has thus far made much more limited inroads into the public’s consciousness.  With any luck, however, that is about to change; because its story is told in Under the Influence – an invaluable new book from Cornell University’s Robert Frank, another of the founding fathers of behavioural economics.  If policy-makers have any sense, this book will be as important a manual in the 2020s as Nudge was in the 2010s.

You can read my review of Under the Influence for the New Statesman here.

Book review  |  More: the 10,000 Year Rise of the World Economy  by Philip Coggan

Financial Times |  14 February 2020

Adam Smith concluded the first chapter of The Wealth of Nations with an observation intended to shock his readers out of their complacency. So miraculous is the power of economic growth, he wrote, that “the accommodation of an European prince does not so much exceed that of an industrious and frugal peasant, as the accommodation of the latter exceeds that of many an African king”.

What was the magic formula that had allowed Europe’s economies to furnish even their poorest citizens with such unprecedented material comfort? Smith made this the ur-question of economic history — and in his masterwork, he supplied the ur-answer. The secret sauce is trade, and the division of labour which it permits. That led to his central policy conclusion: a liberal economic order that gives free rein to trade is to be protected at all costs from the partisans of protectionism and monopoly.

More, a lucid and wide-ranging new history of the global economy from Philip Coggan, is a book firmly in the Smithian tradition. Like Smith, Coggan — a senior Economist journalist and former FT columnist — is concerned that the sheer scale of what compound economic growth has achieved is not generally appreciated. Like Smith, he locates the roots of these tremendous improvements in the spread of markets and the growth of trade. And like Smith, Coggan’s ultimate goal is to defend the virtues of a liberal economic order in an age when those virtues are under siege.

You can read my review of More for the Financial Times here.

Book review  |  Sabotage by Anna Nesvetailova and Ronen Palan

New Statesman |  29 January 2020

Sam Mendes’s 1917 is the talk of Oscar season – but when I went to see it last week I was prepared to be disappointed.

My fears had nothing to do with the film’s cast or crew. The trouble is that the film’s subject matter is hardly virgin territory.  Make a film about the First World War, and you are pitting yourself against Renoir and Kubrick, to say nothing of Blunden, Sassoon, Junger, and Remarque – and that’s before you even get to the poets.  It is a high bar for any new artistic treatment.

I have to confess that I had a similar sense of trepidation when I began Anastasia Nesvetailova and Ronen Palan’s new book Sabotage: The Business of Finance.  As its title suggests, this is a book about what is wrong with finance and how to reform it.  Moreover, much of the evidence it adduces to answer these questions consists of case studies from the global financial crisis of 2007-09.

As Sabotage itself concedes early on, these are topics which by now been picked over in minute detail in a decade’s-worth of articles, books, plays and films.  Here too the bar for yet another effort is set high.  What new contribution, I wondered, can Sabotage possibly make to set itself apart?

You can find out in my review of the book in the New Statesman.

Book review  |  John Law  by James Buchan

Financial Times |  1 September 2018

Anyone who feels gloomy about the current state of the world’s advanced economies — with their public finances groaning and their policymaking paralysed by vested interests — should spare a thought for France in September 1715.

That was the month in which Louis XIV, the Sun King of Versailles, died after 72 years on the throne and half a century of near-constant war. He left behind a necrotic economy, a treasury on the verge of bankruptcy, and a system of state finance that depended on a vast class of rentiers virulently opposed to any kind of entitlement reform. Philippe, Duc d’Orleans, France’s newly appointed regent, was at a loss for what to do.

Into this desperate situation stepped one of history’s most extraordinary, versatile, and enigmatic characters, and the subject of James Buchan’s masterly new biography — a little-known Scots gambler, adventurer, and sometime economist by the name of John Law.

I reviewed Buchan’s John Law: A Scottish Adventurer of the Eighteenth Century in the Financial Times on September 1, 2018: you can read it here.

I explain in my review that my one regret is that Buchan does not explore Law’s actual ideas in more detail.  That is a pity, because in my view Law was a visionary theorist and policy-maker, many of whose ideas are even more relevant today than they were three hundred years ago.

I therefore strongly recommend that anyone interested in Law reads not just Buchan’s biography, but also Antoin Murphy’s John Law: Economic Theorist and Policy-Maker – which remains the gold standard on Law’s theoretical and practical innovations.

Book review  |  Unelected Power by Paul Tucker

New Statesman |  13 June 2018

A few weeks ago, President Erdogan of Turkey announced on the campaign trail that if he is re-elected later this summer, his first act will be to take control of interest rates back from the Central Bank of Turkey.

The currency markets were shocked: the Turkish lira promptly dropped by 10%.

The reason is that President Erdogan’s bold proposal flies in the face of what has been for forty years the modern consensus on the best way to conduct monetary policy.  Politicians, that consensus holds, will always be tempted to prioritise popularity at the ballot box over economic stability, resulting in boom-bust cycles ultimately detrimental to growth and employment.  The setting of interest rates should therefore be delegated, it says, to a technocratic central bank, which will have the political independence to take the longer term view.

President Erdogan, however, sees things differently.  “When people fall into difficulties because of monetary policies, who are they going to hold accountable?” he asked: “They’ll hold the president accountable.”  In a democracy, the President was arguing, it is not enough for those who make policy to be competent and effective.  When their actions determine who gets what and why, they have to have legitimacy as well; and democratic legitimacy is the one thing that technocrats, almost by definition, lack.

Who is right –  the modern consensus, with its emphasis on the need for expertise and independence; or the President, who says accountability and legitimacy should take priority?  The underlying issue is summed up in the title of this new book by Sir Paul Tucker – the former Deputy Governor of the Bank of England, and now a fellow at Harvard’s Kennedy School.  It is why, when, and how elected governments should entrust their capabilities to Unelected Power.

In my view, it is difficult to overstate the importance this question – and therefore how valuable and timely this book is.  You can read my review of it in the New Statesman magazine here.

Book review  |  The Great Economists by Linda Yueh

New Statesman |  19 March 2018

Is economics a science?  It’s an old question – and in my view, not a terribly useful one.  Yet there is of course a reason why it never stops being asked.

Physicists have discovered the universal laws governing energy and motion, and as a result can tell us with scarcely credible precision how to land a man on the moon.  Economists, by contrast, can’t even agree on why the last financial crisis happened, let alone what we should do to prevent the next one – and that’s despite the fact we wrote the rules of finance ourselves.  Real sciences make progress.  Economics, on the other hand, seems to go round and round in circles.

Needless to say, this embarrassing situation irritates economists more than anyone else.  As a result, over the past several decades, mainstream economics has attempted to assimilate itself ever more closely to the culture and methods of the natural sciences.  These days, self-respecting economists express their theories as mathematical models, not in words.  Advanced statistical techniques are deployed to test hypotheses and so resolve the answers to empirical questions.   If possible, experiments are designed and conducted.  A few of the most avant garde researchers have even gone so far as to rebrand their research groups as “labs”.

Whether these developments represent a long-overdue reform of the methodology of economics, or just the symptoms of a chronic inferiority complex, they have certainly dealt a mortal blow to one formerly central area of the economics curriculum: the history of economic thought.  If, after all, economics is a science, there is no more point in reading the economists of prior ages than there is in engaging with Aristotle on biology or mugging up the theory of phlogiston.

The publication of Linda Yueh’s The Great Economists: How Their Ideas Can Help Us Today is therefore a fascinating event for anyone interested in economics.  For this is a book which, as it title suggests, openly champions the value of studying the leading economic thinkers of the past.  You can read my review of it in the New Statesman here.

Book review  |  The Growth Delusion  by David Pilling

Financial Times |  10 January 2018

In the good old days before Brexit and the global financial crisis, politics was all so simple. The western liberal democracies had reached the “End of History”. So far as old conundrums such as ideology and identity were concerned, nobody really cared much any more. All that mattered now was to ramp up material prosperity. “It’s the economy, stupid”, as Bill Clinton apocryphally said.

It all sounds rather naive now, of course. Two and a half decades on from President Clinton’s bons mots, the world’s developed economies are wealthier than ever — indeed, more than 70 per cent larger in real terms than they were in 1992. Yet far from having achieved a nirvana of political stability, they are racked by a social strife and ideological conflict unseen in many decades.

Where did Clinton’s confident verdict go wrong? It is the Ur-question of our era, and the political convulsions of the past decade have ushered in a golden age of popular social and economic analysis intended to explain why an expanding economy is not by itself enough.

The Growth Delusion, a new book by the FT’s Africa editor David Pilling, offers a new and intriguing entry-point to this momentous debate.  You can read my review of it for the Financial Times here.

Book review  |  Capital Without Borders by Brooke Harrington

New Statesman |  11 October 2016

On April 2016, the International Consortium of Investigative Journalists published a vast cache of information leaked from Mossack Fonseca, a little-known corporate law firm based in Panama City. The “Panama Papers” revealed that this firm had for many decades specialised in devising schemes to enable clients from all over the world to hold their financial assets, often anonymously, in jurisdictions outside their home countries. In doing so, they shone a rare light on the secretive industry that is the topic of Brooke Harrington’s valuable new book, Capital Without Borders: the lawyers, accountants, tax advisers and professional trustees who collectively constitute the world of wealth management.

That world is, by definition, difficult to research. Previous studies have focused on the legal and constitutional anomalies represented by the so-called offshore jurisdictions where the corporate structures they build are incorporated: the British Virgin Islands, Mauritius, the Cayman Islands, and so on. What makes Harrington’s book unusual is that she chose instead to investigate the wealth management industry itself. There were no short cuts to doing so. Harrington went undercover as a trainee wealth manager for two years, living and breathing the profession. The result is an insight unlike any other into how wealth management works.

You can read my review of Capital Without Borders for the New Statesman here.

Book review  |  Money Changes Everything by William N. Goetzmann

New York Times |  24 June 2016

“The very rich are different from you and me,” Ernest Hemingway has F. Scott Fitzgerald write in the original version of “The Snows of Kilimanjaro.” “Yes,” comes the response, “they have more money.”

This famous (and wholly fictional) exchange is memorable because it captures so succinctly one of the great fascinations of finance, how it is at one and the same time something so completely mysterious and so utterly banal. It also poses an important question: Does having more money than someone constitute a difference only in quantity, or in quality? Does the increase of financial wealth just make for more of the same — or does it change people in a more essential way?

Hemingway was exploring these questions on the level of the individual. William N. Goetzmann, the Edwin J. Beinecke professor of finance and management at Yale, is shooting for bigger game in his new book, “Money Changes Everything: How Finance Made Civilization Possible.” His goal is to explore the consequences of the invention and growth of finance for whole societies. As his title suggests, his conclusion is that they are firmly positive. Financially advanced societies, he argues, are very different from financially primitive ones — and not just in that they have more money.

I reviewed Goetzmann’s fascinating book for The New York Times in its June 26, 2016 issue.  You can read my review here.

Book review  |  The Only Game in Town by Mohamed El-Erian

Financial Times |  22 January 2016

The US stock market has just endured its worst start to a year on record. The fear is that the US may be close to recession, with baleful consequences for the global economy – and still worse, that the world’s policy-makers are out of ammo with which to respond.

What better moment could there be for a book subtitled “Central Banks, Instability, and Avoiding the Next Collapse”? And who better to write it than Mohamed El-Erian – the man who captured the essence of the present era of low growth, low inflation and low investment returns better than anyone else with his memorable concept of the “New Normal”?

I reviewed Mohamed El-Erian’s new book The Only Game in Town in the Financial Times on January 22, 2016.  You can read the review here.

Book review  |  Other People’s Money by John Kay & Between Debt and the Devil by Adair Turner

New Statesman |  27 November 2015

That is the question at the heart of two books recently published by two of Britain’s leading economists: John Kay’s Other People’s Money and Adair Turner’s Between Debt and the Devil.

I reviewed both books in the November 27, 2015 issue of the New Statesman.  You can read my review here.

Book review  |  The Silo Effect by Gillian Tett

Financial Times |  29 August 2015

Specialisation improves efficiency – but it also leads to tunnel vision and blind spots.  This paradox at the heart of modern life, and how to resolve it, are the topics of Gillian Tett’s new book The Silo Effect.

I reviewed The Silo Effect in the August 29-30, 2015 edition of the Financial Times.  You can read my review here.

Book review  |  Pax Technica by Philip Howard

Financial Times |  20 May 2015

The subject of Philip Howard’s Pax Technica — the emerging “internet of things” — could not be more timely and important; and its central premise — that this new stage in the evolution of the web has political implications that will match or even outstrip its commercial ones — is both striking and convincing.

I reviewed Pax Technica for the Financial Times on May 20, 2015.  You can read my review here.

Book review  |  The Flat White Economy by Douglas McWilliams

Financial Times |  19 May 2015

I reviewed Douglas McWilliams’s new book, The Flat White Economy, in the latest New Statesman.  You can read my review here.

Book review  |  Mindful Work by David Gelles

Financial Times |  22 January 2015

David Gelles’ Mindful Work is a fascinating new book about the growing adoption of mindfulness and meditation by Western businesses as a tool, ultimately, to boost the bottom line.

My review of it for the Financial Times was published on January 22, 2015.  You can read the review here.

Book review  |  The Shifts and the Shocks by Martin Wolf

New Statesman | 30 October 2014

I reviewed Martin Wolf’s new book, The Shifts and the Shocks, in the latest New Statesman.  You can read my review here.

Book review  |  Bending Adversity by David Pilling

New Statesman | 6 February 2014

I reviewed David Pilling’s new book Bending Adversity: Japan and the Art of Survival in the February 6, 2014 issue of the New Statesman.

You can read the review here.

Book review  |  Economics After the Crisis by Adair Turner

New Statesman | 4 June 2012

I reviewed Adair Turner’s Economics after the Crisis: Objectives and Means in the June 4, 2012 issue of the New Statesman.

You can read the review here.

Book review  |  The End of Money by David Wolman

The Observer | 25 March 2012

I reviewed The End of Money: Counterfeiters, Preachers, Techies, Dreamers – and the Coming Cashless Society by David Wolman for the Observer.

You can read the review here.