Friday, 11 August 2017

Three excellent economics books

The prospect of some long distance air travel prompted me to reach for something big and chunky from one of the many books on my bookshelf I've always meant to get round to. Eric Roll's A History of Economic Thought and George Sabine's A History of Political Theory - both unfinished since my undergraduate days - were in the frame, but I eventually settled on Robert Skidelsky's one-volume biography John Maynard Keynes 1883-1946: Economist, Philosopher, Statesman.

Eight hundred and fifty three pages later, I'm glad I did. It's a great book: intelligent, comprehensive, balanced. You'll know before reading the book that Keynes was right on two big things - German reparations after the Great War, 'Keynesian' demand management to avoid slumps - and instrumental in creating two institutions (the IMF and the World Bank) desperately needed post World War Two. These are well covered, as are other good calls (eg on the UK's poor decision to go back on to the gold standard in 1925) but you'll also discover that Keynes could be wrong on a lot else. He was, for example, as prepared to resort to protectionism in the Depression as the justly maligned Smoot and Hawley, and supported cartels as a device to prevent deflation (as did Roosevelt's 'New Deal'). His speech in Dublin in 1933 to the assembled Irish worthies pandered to their nonsensical 'self-sufficiency' programme. In a way, though, that reflected another of his great abilities: his willingness to adapt his message to the audience made him a formidable player of the British and international civil servant game, prepared to compromise and adjust to get the core of what he wanted through an often ignorant and hostile policy process.

A big theme of the book is his outstanding intelligence (albeit too often deployed in a brutal take-no-prisoners style): Bertrand Russell said in his autobiography (and requoted in the book) that Keynes' intellect was "the sharpest and clearest I have ever known. When I argued with him I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool". Others recognised it, too. At the formal dinner ending the Bretton Woods conference which created the Fund and the Bank, "as he [Keynes] moved slowly to the high table, stooping a little more than usual, white with tiredness, but not unpleased at what had been done, the whole meeting spontaneously stood up and waited, silent, until he had taken his place. Someone of more than ordinary stature had entered the room".

Another excellent book I've finished is the second edition of Economics for Competition Lawyers, by three of the people at Oxera, Gunnar Niels, Helen Jenkins, and James Kavanagh. For all I know, this is already the established font of all knowledge for lawyers required to come to terms with the black arts of competition economics, but if it isn't already, it ought to be: it's an absolutely first class textbook. It goes out of its way to make the economics accessible to non-specialists, and even economists will get a lot out of it. I wish I'd had it to hand sixteen years ago when I was first appointed to the Commerce Commission, and I'd say that every other Commissioner appointed since then would have felt the same way. Very few of us came to the Commission with a deep knowledge of the area - the economists tended to have serviceable general purpose economics rather than a specialty expertise, and the non-economists had little or nothing - and a comprehensive guide like this one is exactly what we all needed.

It covers everything you'll need to know, from the absolute basics of supply and demand through the core areas of market definition, market power, abuse of dominance, cartels, vertical restraints, and mergers to the design of remedies (often overlooked) and the quantification of damages, and finishes with a very useful chapter on 'The use of economic evidence in competition cases'. I found myself agreeing with virtually everything they said, with the exception of what I thought was an over-charitable view of 'pay for delay' agreements (where patent-holding pharmaceutical companies pay producers of much cheaper 'generic' drugs not to produce). There may well be cases, as they say, that are genuinely welfare-enhancing, but as I've argued before, it's generally not the way to bet.

But that's a minor quibble: this is a highly practical guide to a wide and complex field that takes you from ground zero to close to the cutting edge, and is thoroughly recommended. New Zealand, by the way, gets the odd look in: two cases are cited, Oh Bloody Eight Six Seven in the context of what the Baumol-Willig rule is all about, and Air Cargo (where the authors acted for the Commission) on the geographical dimension of market definition. If you missed it, by the way, the very last act in the Air Cargo market definition bunfight has just played out in the Australian courts.

There's a school of thought that says too much choice can bamboozle consumers, who'll resort to rules of thumb (possibly missing out on their best options) when confronted with menus that are too big to come to grips with. I'm not a great fan myself, but I saw the point when I got into Powell's City of Books in Portland, Oregon, the world's largest bookstore. Before my faculties melted down completely, however, I did manage to buy Niall Kishtainy's new book, A Little History of Economics. Kishtainy, a lecturer in economic history at the London School of Economics, has done a very clever thing: produced a 'what is economics all about anyway' book through the medium of a history of economic thought. It works a treat, and is also handsomely produced. If you wanted to get someone interested in economics, this should be high on your list.

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