The Sifted Books of 2011: Rethinking Economics

I don’t have a book-review strategy on the Sift. In deciding what to read and what to write about, I usually just follow my nose and figure out later what it all means. So I don’t know why I reviewed exactly half as many books in 2011 as in 2010: 8 instead of 16.

In retrospect, it’s interesting to note that more than half of the 2011 books were about economics: Debt: The First 5,000 Years by David GraeberThe Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler (reviewed in two parts: firstsecond), Why Marx Was Right by Terry EagletonThe Lights in the Tunnel by Martin Ford, and Consumed by Benjamin Barber.

There’s a strong contrast here with last year’s economics books. Then I was often telling you about books by economists from the liberal mainstream, like Robert Reich and Paul Krugman. But these five are more radical start-over-from-scratch books.

In retrospect, here’s what I think that means: For a long time now, I have doubted the conservative conventional wisdom that the market can solve any and all problems. But lately I’ve also begun to doubt the liberal conventional wisdom that we can achieve a fair and vibrant economy by tinkering with interest rates, regulations, and government spending. This year’s books reflect my search for a new way of thinking about the economy.

Both Graeber and Mosler are telling us that money isn’t what we think it is. Mosler’s book examines the nuts-and-bolts of how the banking system creates money, while Graeber takes a long anthropological look at where this whole idea of money comes from and how it changed society.

Eagleton challenges the capitalism-has-won narrative of the post Cold War world, and shows how our “victorious” capitalism is displaying the flaws that Marx predicted a century and a half ago. And Ford goes back to the Luddite claim that machines destroy jobs, arguing that even if it wasn’t true then, it is now.

Barber’s book is on the boundary between economics and politics, arguing that if capitalism is allowed to run wild it will destroy democracy. Consumer and citizen are two very different roles, and the more we identify with our consumer role, the less we will be able to perform our duties as citizens.

Barber presents a different side of the scene portrayed by Ford. I summarized Barber’s point like this:

The root of the problem Barber presents is capitalism’s success in satisfying all the genuine needs of people who have money, creating a situation in which “the needy are without income and the well-heeled are without needs.”

Here’s the Ford/Barber connection: In our mechanized world, the one thing the well-heeled don’t need is more labor, which is all the needy have to sell.

Given this theme, there are two books that I should have written about but didn’t. Race Against the Machine by Erik Brynjolfsson and Andrew McAfee, and the 1944 classic The Great Transformation by Karl Polanyi. Both are woefully short of effective prescriptions, but they add important ideas to the diagnosis.

Brynjolfsson and McAfee bring in this arresting image from a book I haven’t read, A Farewell to Alms by Gregory Clark: In 1901, the British economy found jobs for more than 3 million horses. All those jobs are done by machines now, and horses are purely recreational.

There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.

How many human workers will go the way of the horse?

Polanyi’s book is a hard read, but fascinating. He tells the story of how the market economy was created in the 1800s. That statement is already radical, because so many people believe that the market economy is natural and goes back into deep antiquity.

In fact, Polanyi says (and Graeber agrees), markets used to be only a small part of the economy. In order to have what we now think of as a market economy, markets had to be created for what Polanyi calls the three “fictitious commodities”: labor, land, and money.

Labor is only another name for a human activity that goes with life itself, which in its turn is not produced for sale but for entirely different reasons, nor can that activity be detached from the rest of life, be stored or mobilized; land is only another name for nature, which is not produced by man; actual money, finally, is merely a token of purchasing power which, as a rule, is not produced at all, but comes into being through the mechanisms of banking or state finance. None of them is produced for sale. The commodity description of labor, land, and money is entirely fictitious.

My hunch is that the re-thinking of economics has to start there.

A related question is why our political system can’t adjust to our new economic realities. That led me to look at So Damn Much Money by Robert Kaiser, which is a history of lobbying.

The possibility of another way of functioning entirely led me to Reality is Broken by Jane McGonigal. McGonigal starts with the observation that the multi-player computer games like World of Warcraft and Halo soak up vast amounts of human time, effort, and ingenuity. What makes these invented worlds so much more engaging than reality?

Part of the answer is that successful games appeal to aspects of the human character that have been left out of the homo economicus model of human nature. In other words, we aren’t all trying to get as much stuff as we can for as little effort as possible — at least not all the time. Sometimes we want to achieve self-respect and honor even if it costs us effort and money.

McGonigal describes the widespread perception among gamers that their game persona is a better human being than their work persona. Something can be done with that. (One fictional view of how that could work is the Daemon/Freedom™ series by Daniel Suarez.)

Another book I should have reviewed made a similar point looking backward rather than forward: The Honor Code by Kwame Anthony Appiah. Major social changes, he claims, come not from self-interest but from a sense of honor. Society changes because our ideas about what is honorable change.

Appiah looks at societies that ended dueling, slavery, foot-binding, and honor killings of sexually activity female relatives. In each case, he finds that the cause is not economic and not fundamentally rational; in fact, the rational arguments against the practice were well known long before they became convincing. Instead, change happens via an invisible shift in the community’s honor code: Practices that once defended honor suddenly become dishonorable.

Two books I should have reviewed that deserve more than a paragraph here are 23 Things They Don’t Tell You About Capitalism by Ha-Joon Chang and The Myth of Individualism by Peter Callero. Maybe next year.

The one book I reviewed that doesn’t fit this pattern is The Hour of Sunlight by Sami al Jundi, which is one Palestinian’s attempt to envision peace between his people and the Israelis. Interestingly, that review was an afterthought: The article I wanted to write fell through at the last minute, and I needed something to fill the space.

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  • By Two Observations on the Robot Menace « The Weekly Sift on December 10, 2012 at 11:04 am

    […] of Race Against the Machine and The Lights in the Tunnel, two books I already told you about last year. But this week the topic got hot again. Kevin Drum worried about it. And Matt Yglesias said, […]

  • […] of limited skills may have nothing they can offer the economy. (In A Farewell to Alms Gregory Clark makes a scary analogy: In 1901, the British economy provided employment for 3 million horses, but almost all those jobs […]

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