Monthly book roundup – October

Books finished in October:
(Warning: reviews are unpolished and quickly written.)

David and Goliath: Underdogs, Misfits, and the Art of Battling GiantsReviewed before.

The Darwin Economy: Liberty, Competition, and the Common Good by Robert H. Frank. Recommended.

Robert Frank contends that in a hundred years from now, economists will have recognized Charles Darwin as the most important economic thinker. Darwin was influenced by Adam Smith, but had a wider conception of competition. A key distinction is between traits that are beneficial for an individual and the species, and traits that are beneficial for an individual but not the species. An example of the latter is the horns of the bull elk, featured on the cover. The horns are an asset when fighting for females, but not when trying to escape predators. Frank believes that had the elks had the opportunity to vote to downsize all the horns, they would have done so unanimously, like hockey players when considering the mandatory use of helmets.

Frank believes such head to head competition is important for humans as well, as much of what we care about is “graded on the curve”. He starts with the example of competing to have the best/most expensive suit. This may seem trivial, but he follows up with more important cases, most importantly of how people overinvest in houses, both because of trying to keep abreast of one’s neighbors and because school quality is related to certain areas. Cars and parties are other goods that make people try to outcompete each other, to the detriment of the common good. As people compare themselves with those slightly higher on the curve, “expenditure cascades” result.

Since we have these strong positional concerns, one’s consumption imposes a negative externality on others, and should be taxed like other externalities. The way to do this is by way of a progressive consumption tax – take income minus savings, and tax that at a progressive rate. This avoids the negative effects of income and payroll taxes (on saving and job creation). And in the long run, everyone will be richer as a result of the increases investments. This seems like a good idea regardless of what one believes about expediture cascades.

I find Frank’s thoughts very appealing. One difficulty is that many types of expenditure can be seen as investments. If I pay for education rather than saving, should that be treated as consumption? I am not sure how one would deal with that and other similar issues. But the book is definitely recommended.

Hits to both the left (tax rather than regulate; there is no conspiracy among capitalists) and right (public spending is too low, we should increase it by taxing harmful activities).

The Invisible Gorilla: How Our Intuitions Deceive Us by Christopher Chabris and Daniel Simons. Recommended.

Popular, yet rigorous, science. The care the authors take not to overstate their claims or their generality stands out in this book by experimental psychologists Christopher Chabris and Daniel Simons. The book is organized around six common cognitive illusions: 1) Attention (just because we are paying attention does not mean we notice everything); 2) Memory (memories are fragile, impacted by beliefs, perception and other things, and may be misleading); 3) Confidence (confidence is not necessarily related to skill, feedback is essential for improvement); 4) Knowledge (we believe we know more than we do, e.g. do not really know how things, machines, markets, etc work); 5) Cause (correlation is not, we see patterns and make predictions); 6) Potential (not everything have a quick and easy fix).

A very good book, though times it goes through things in too much detail, and the authors sometimes assume too little sophistication about how “we” interpret things, at least when writing about how we infer causal relationships. They also say that we have no way to know about cause-effect in the absence of an experiment, however there are other ways of identifying causal effects.

The purported cognitive benefits of su-doku, crossword puzzles etc, classical music have not shown up in rigorous studies. Research on the benefits of more advanced games have so far produced ambiguous results.

Fluency can be misleading. The book ends with a plea for thinking things through and being way about intuitions. But do look for the gorilla, it may be that we do not see one because of the illusions.

The Honor Code: How Moral Revolutions Happen by Kwawe Anthony Appiah. Appiah tells the stories of three once-pervasive but now abandoned customs – the duel in aristocratic England, foot-binding in China, and slavery – and one that is still alive – honor killings of women in Pakistan. He notes that the abandonment of these practices did not result from moral arguments alone, as they were always put forward long before. At the same time, it is not simply legislation that caused the revolutions. Collective action among families apparently was important in ending foot binding. The account the working class supporting the abolition of slavery because it degraded manual labor is very nice, but I wonder what historians think. At the end of the book I am not too much wiser on how they do happen, as the stories are quite different for the different cases, although it has to do with shifting codes of honor. I reviewed a couple of Appiahs book last month, I liked those better.

Scarcity: Why Having Too Little Means So Much by Sendhil Mullaainathan and Eldar Shafir. In contrast to other popular science books, here for once is one that acknowledges that there are trade-offs in the world-more of everything is not necessarily better. Much is quite standard for an economist used to thinking about scarce resources, here attention. The novel point is that scarcity itself is costly. Scarcity reduces “bandwith”, like a computer overloaded with running programs. An experiment with random assignment of rich and poor show how scarcity itself can be stressful and thus important beyond having fewer resources. Planning ahead is important for success-is there a difference between long-term thinkers and others? Maybe not, since find many who do not think ahead among students at good universities and other resourceful people. But there really are differences among, I would object, the question is what trait or combination of traits is more fundamental. Everyone tunnels, but it is a good idea to structure incentives well inside the tunnel. The authors recognize that we need to prioritize what to incentivize the poor to do, since every activity taxes bandwith. Effects on bandwith are important to consider and also to see as an outcome. E.g. helping a poor mother with full-day child care so she does not have to juggle so many arrangements. Allocated bandwith more important than number of hours, ref Ford and efficiency wages.

Mathletics: A Scientist Explains 100 Amazing Things About the World of Sports by John Barrow. Ok. In most cases too many simplifications or not too illumating.

Ratings and additional books are in the library.

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