Stephen Laniel’s Unspecified Bunker

John Maynard Keynes apparently had a life full of brilliant ideas, and the evolution from one idea to another is a brilliant story. I’m not quite sure how I know this, because the second volume of Robert Skidelsky’s Keynes biography doesn’t really convey it. But I do know it, somehow.

The main thing I’ve learned from this book is that I should go and read Keynes himself. Whenever Skidelsky quotes Keynes at any length, I breathe fresh air and I’m reminded that life can, indeed, be a wonderful place. For the remaining 95% of the book, I’m plodding through perfectly serviceable but unengaging prose. Skidelsky doesn’t explain Keynes’s economics well enough for intelligent non-specialists to really get the point. He explains Keynes’s social life decently well, but one can consume only so much about country vacations and “Bloomsberries” before mentally consigning the lot of them to an eternity of bad food and cattiness.

The jacket insists that Skidelsky has told an amazing love story, presumably the one between Keynes and Lydia Lopokova. I don’t know quite which biography that reviewer was reading. Certainly not this one.

I may be submitting to the sunk-cost fallacy , but I intend to finish this book. (I have maybe 200 pages to go.) I’ve invested a lot of time in it, and I’m aiming for a book a week this year. These are the sacrifices we make.

I’m told there’s a condensed version of the Keynes bio: one volume instead of three. That may be worth your time. It depends on what you want. The life of Keynes doesn’t actually seem all that interesting on its own — no more interesting than any other smart person’s life, and substantially less interesting than Russell’s (with whose life Keynes’s overlaps). As for the content of Keynes’s ideas, those certainly are worth the time, but I just can’t see that Skidelsky — condensed or otherwise — is the man to teach these to us.

Probably the best route is to read Keynes’s own Economic Consequences of the Peace, Tract on Monetary Reform, Essays in Persuasion, and General Theory of Employment, Interest, and Money. Cosma tells me that Alvin Hansen’s Guide To Keynes is how economists normally approach the General Theory, and my initial glance at Hansen’s book suggests that it’s a good start. I need more macro before I can really piece it all together, though; for that, a couple people have recommended the Krugman/Wells Macroeconomics.

If we believe Skidelsky, Keynes’s Treatise on Money is overlong, impenetrable, and notationally confused. I trust bad writers to spot their kin, so I believe him on this score.

What if Frank Gehry’s buildings were done at cost and were totally functional?

They wouldn’t be Gehry buildings. That’s like asking if Socrates were a jackass, would he be a great philosopher.

–in today’s /a>

The idea, it seems, is to focus on the role of expectations more than neoclassical economics had. If people expect that the economy is going to be in the tubes a year hence, they’ll postpone investment and instead put their money in savings. During a depression, says Keynes, savings and investment are disconnected: savings are high and investment is low. Society has all the resources it needs to keep everyone fully employed, but labor and capital aren’t getting properly matched up; resources are going underused.

As Skidelsky puts it (summarizing D.H. Robertson):

‘[I]nappropriate’ fluctuations are nevertheless endemic in a decentralised economy (even without money) for three main reasons: (1) the indivisibility of investment, (2) the interdependence of psychology, magnifying ‘errors of optimism and pessimism’, and (3) ‘the stress of competition, aggravated by the length of time which is required to adjust production to changing demand’.

I can’t perfectly articulate what the indivisibility part is, but I get it. It’s basically that investment is quantized: when you build a factory, that’s necessarily a large investment. You may feel confident enough in the economy to invest half a million dollars, but a factory costs a million. So instead you put your half-million in the bank and wait for conditions to improve. If someone could convince you that conditions would be better in a year, you might take that million out of savings and make a new factory out of it. This seems slightly at odds with the observation that society has plenty of capital and labor to go around. If that’s so, then you want to encourage production, rather than new-capital financing. I’m not sure if this distinction makes any difference for policy. In any case, you’re going to want to encourage industrialists and consumers to spend money.

It’s not entirely clear to me what psychological assumptions neoclassical economics made about consumer expectations. Did it just assume away expectations? Apparently Keynesian macroeconomics is famous, among other things, for helping to explain what money is. Money, said Keynes, was a subtle device to connect the present to the future. I’m not at a point yet where I can explain this.

Like I mentioned, I don’t think Skidelsky is an especially clear explicator. He quotes a longish passage from Keynes and Henderson’s article “Can Lloyd George Do It?” which I include below. It’s far clearer than anything Skidelsky himself has written. It conveys macroeconomic ideas clearly and stylishly.

Savings and investment will be different because people will dump money in the bank, and the bank will have no one to lend it out to: since fewer companies are making capital investments, there’s less to lend out. I’d expect neoclassical economics to say that if banks are lending out money at a low enough rate, someone will bite. The lumpiness of capital investments (i.e., that they’re quantized) is part of a response to that. And it may also be that banks would have to lower their rates to 0% in order for anyone to bite. It’s not clear to me when exactly this would happen.

If the Fed lowers the prime rate to 0%, banks will lower the rate at which they lend out. Hence they’ll also lower the interest rate on savings accounts and other savings instruments. If that rate is low enough, the rate of return on stocks may be higher, which drives people to invest in the stock market rather than in banks. But again we’re stopped by expectations: yes, the rate of return on the market may be decent, but all of that money may be going nowhere. Companies get money from the stock market and hoard it rather than investing it in plant and labor.

So then the challenge is to change people’s expectations. Keynes’s wish throughout the first two volumes thus far is to decrease the intensity of shocks to the market, rather than to focus on the quantity of money in the system. If you lessen shocks, people come to expect a better economy in the future, so they’re willing to invest more.

Of course I need to figure this out in more depth. Cosma reminds me that The Worldly Philosophers is a good introduction to many economic thinkers, including Keynes. I also know nothing about macroeconomics, so I need to pick up a macro textbook. Cosma and others have recommended Krugman’s macro textbook. Finally, I have Hansen’s A Guide To Keynes on hand, per Cosma’s suggestion. We’ll see if I get anywhere.

Below the fold, see the excerpt from “Can Lloyd George Do It?”

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The news that construction near Kenmore is going slowly reminds me: a while back I googled to figure out what’s happening at the Intersection of Main Street and Mass. Ave. in Cambridge. The MIT Tech tells me, in an article that they’ve ironically titled “Headline goes here”, that that intersection is called Lafayette Square. Says the article,

A surface enhancement project will change the face of Mass. Ave extending northward from MIT to Douglas Street. Bike lanes beginning at Memorial Drive will be added as well, and will connect to existing lanes on Mass. Ave which extend northwestward beyond Douglas Street.

In addition, a park is planned in Lafayette Square, at the intersection of Mass. Ave. and Main Street. The surface enhancement project is scheduled to start in the summer of 2000 and take approximately two years.

Plans also include construction of a storm drain that will run along Mass. Ave. from Douglas Street to Memorial Drive. According to City Engineer Owen O’Riordan, storm drain construction is planned to start in January 2000 and last approximately nine months.

So 2002 at the latest for everything to be finished. I believe it actually just started in the middle of this year.

If you’re interested, Cambridge describes the construction on its website. And the plan looks really nice.

To get an idea of the gap between conservative mythology and reality, let’s look at the best book published in America. It’s called The Statistical Abstract of the United States, and if more people would get into the habit of checking it, our politics would be utterly transformed.

– Paul Krugman

The Statistical Abstract is now available on the web. I spent many an hour poring over the book as a wee youth. Yes, that’s the kind of kid that I was.

Skidelsky should be less fascinated with Keynes. I don’t doubt that the man deserves an extensive treatment, but Skidelsky doesn’t know when to put the pen down. Many chapters — most that I’ve encountered so far, in fact – contain appendices explaining points of detail in Keynes’s philosophy or economics. Not only is this unnecessary, but it showcases a lack of discipline similar to David Foster Wallace’s footnote tic. If you have things to say, take the extra time to fit them into the main line of the text. In Skidelsky’s case, it’s not as though the appendices say anything especially technical; they just count as extra. In his case I think the guideline ought to be: if you think you need an appendix, you don’t.

I’m only 40% or so of the way through the book, but I read the first volume and the irritants are the same. If Skidelsky could have written a day-by-day chronology of Keynes’s life, he would have. As it is, he knew he couldn’t get away with that, so he resorted to the rather slack thing that I’m reading right now.

All that said, it’s a fine book — just not a masterpiece, and it doesn’t really justify its length.

In volume 1 of the biography, we met Keynes during his training at the knee of Alfred Marshall. He’s not really an economist in the modern sense by that point. Modern economists, and the later Keynes, are concerned with price theory, inflation, unemployment and suchlike. Marshall may well have been too, but his concern was more for the fundamental coordination problem: getting everyone to behave in such a way that the group outcome isn’t at variance with what all the individuals wanted. When the moral foundations of Western civilization — namely Christianity — have been cut out, what do we replace them with? At the end of Volume 1, Keynes is still a marginal voice whose Economic Consequences of Peace has just propelled him to the front pages. Apparently he had been a well-respected advisor at the Versailles peace conference, and had labored nonstop — and unsuccessfully — to go easier on Germany. Keynes saw the reparations for what they were: barbarous, symbolic tribal punishments. The Germans were never going to be able to repay the Allies, and at some level the Allied negotiators must have realized this. But the British people, and more especially the French, wanted blood. So they forced the Germans to pay their pound of flesh, and thereby set the stage for Hitler 20 years later.

That’s where we left off when Volume 1 ended. Skidelsky is at his best when he’s laying down the man’s philosophy and the context within which he wrote. In Volume 1 the context was all G.E. Moore. His ethics set the standard for all Cambridge dons in the early part of the century. Those things which were ultimately good were few: the appreciation of beauty, time spent in agreeable company, and so forth. Right action wasn’t the standard; right states of mind were.

That’s exactly the kind of philosophy that would appeal to Cantabrigians of independent means. If you have nothing to worry about, and you’re living a scholastic life, it seems perfectly natural to believe that the life of the mind is all that matters. Most of the first 2 volumes so far has shown what effect this has on the people who believe it. The Bloomsbury group, who live this ethic, couldn’t be more annoying. Virginia Woolf has appeared in these first two volumes through her catty letters about Keynes. I would prefer that she, Strachey and the rest would disappear. All the “Bloomsberries” live together in various houses around London, take vacations together, have sex with each other intermittently, swap houses, and bitch about the people they hate. None of them could stand Keynes’s wife, Lydia Lopokova. 1.4 volumes into the three Keynes volumes, I can’t stand the Bloomsberries. My only hope is that Keynes will jettison them as he becomes more important, as he becomes more settled in his life with Lopokova (whom he’s just married), and as the various Woolfs drown themselves.

Skidelsky wants to tell the complete life of Keynes, which means not only talking about his philosophy and his economics, but also about all those infuriating Bloomsberries. It means drawing out in fine detail every one of Keynes’s moods. It also means patching up all the holes in Roy Harrod’s official biography of Keynes. It seems that Harrod brought a Victorian mood to writing Keynes’s story. This particularly meant leaving out the sodomy. Harrod wanted to smooth over what looked like Keynes’s more objectionable sides, but Skidelsky believes that Harrod made him boring in the process. It’s Skidelsky’s job to make Keynes spiky again.

As for his economics, I finally understand why Keynes is famous for saying that “in the long run we are all dead.” Economics, he said, was too focused on long-term equilibrating. Economists go too easy on themselves if they only look to long-run success; the question is how well a policy works within a finite time horizon. Moreover, human beings do not have the capacity to predict very far into the future; if only from a policymaking perspective, our economics has to be focused on the near term. Keynes’s Treatise on Probability is an extended meditation on this theme.

I can’t really make head or tail of the macroeconomics thus far in Skidelsky — that is, everything in the Tract on Monetary Reform, Treatise on Money, and “Economic Consequences of Mr. Churchill.” Keynes rejected a return to the gold standard, on the grounds that Britain needed price stabilization and that gold, despite promising to bring it, failed to do so. I’m not exactly clear on why the gold standard wouldn’t do this; my sense is that gold is a much better tool for international exchange stabilization than it is for domestic price stabilization.

More to the point for those who argued against Keynes (and won — Britain returned to the gold standard when Churchill was Chancellor of the Exchequer, hence “The Economic Consequences of Mr. Churchill”), the gold standard ties politicians’ hands. If the government can’t muck with the money, it can’t massively deflate the currency as a political tool. Keynes seems to be arguing that this is irrelevant: in a world where finance is increasingly controlled by large banks, the gold standard is but one lever on the economy, and by far not the most powerful.

Skidelsky has the capacity to explain these things clearly. His explanation of Keynes’s philosophy is concise and powerful. For instance, I never knew that Russell, Ramsey and others weren’t so much responding to Hegel as they were to F.H. Bradley. Bradley’s misunderstandings of Hegel turned out, in Russell’s eyes, to be mere grammar problems. That led Russell on the path through “On Denoting” and logical atomism, and led a generation of philosophers to reject Hegel and metaphysics altogether. But Russell never meant to kill metaphysics, says Skidelsky. (The chapter on Hegel, and the one on “modern philosophy,” from A History of Western Philosophy, would beg to differ.) In essence they only meant to kill Bradley. It was their disciples who took it in the direction that they did.

It may be that my confusion in the face of Skidelsky’s economic presentation has to do with my limited exposure to macroeconomics, whereas I’m decently educated on Russell and the rest. Certainly that’s part of it. But I think the larger issue is that, in a biography like this one, it’s important to understand your subject’s intellectual evolution. So we dive into macroeconomics at a level of detail that’s confusing to the uninitiated. And Skidelsky is just generally too verbose. He doesn’t need to spend that much time on Cambridge metaphysics, so he leaves that brief and clear. The economics isn’t so lucky.

If there should be an appendix at all in this book, it’s on the macroeconomics. A little context would go a long way.

I still don’t get it.

I mean, I think I get it. A good example for me would be that under Blosxom, you could choose which “flavour” to use to display a given post; if you linked to postName.html, that would use the HTML “flavour”, whereas if you linked to postName.rss, that would render the post in RSS. (One of these days, I hope that browsers will support XSLT: the site will send down a blob of XML, and the browser will know how to render it as one thing or another.)

It sounds like http://example.com/postName here is the URI, whereas postName.html and postName.rss are the URLs.

Assuming I have that much right, I’m puzzled why they conclude that “More often than not, URI is the correct term to use when referring to the location of resources on the WWW.” Why wouldn’t I want to refer to the specific form of the linked object — i.e., .html or .rss?

I also want to know why this isn’t a purely academic distinction.

For whatever reason, I was just looking through the list of books I’ve read in the past few years. I spotted the Butterfield Origins of Modern Science book, and realized: I don’t remember a damn thing about it. Not a thing. Which is in stark contrast to all of the books in the immediate vicinity of Butterfield on that list. And it’s in stark contrast to virtually everything I’ve read in the history and philosophy of science, including Laudan, Kitcher, Kuhn, Popper, etc. This makes me sad.

The trouble is that I didn’t write down anything about Butterfield as I was reading him. I’ve only recently realized that I need to write book reviews if I’m going to remember anything about a book a couple years later. So when I write reviews on here, it’s mostly for my benefit. Though I hope you enjoy reading them too. (My uncle commented today that he reads my blog often, so that he can find reviews of books that he has “no interest at all in reading.”) I only really learned how to read well, that is, fairly recently.

My aunt and uncle were over today, and my uncle told us that in Alan Greenspan’s book, he says that productivity has not grown since the 1930’s. This struck me as wrong, since the accepted wisdom is that in the long term, wage growth tracks productivity growth. Real per capita hourly wages have grown substantially since the 1930’s, so I don’t understand how productivity could have remained stationary.

So first I tried finding the text of Greenspan’s book. Amazon doesn’t have that. (Here’s the place to note that books whose full text is not on Amazon are worth much less to me than books whose text is.) Then I did a series of Google searches, but they all tended to find Greenspan’s testimony from the 90’s.

Failing at the Greenspan hunt, I just tried searching for historical hourly productivity numbers. There I came up short, too. I’m just looking for per-capita GDP per hour of work. Why is that hard?

If anyone has better luck than me, I’d love to see the fruits of your labor.

Doesn’t Trying Leviathan just sound fascinating, if only for the extra layer it adds to Moby-Dick? I’ll be honest: I didn’t really get a lot out of Moby-Dick, whereas people whose taste I trust implicitly tell me that it was earth-shattering. I wonder if this would help me get more out of it.

I include the description from that link below. In that regard, I am slavishly aping Chris. Regular readers of his blog and mine will note that that’s par for the course — particularly my witty use of vowels.

In Moby-Dick, Ishmael declares, “Be it known that, waiving all argument, I take the good old fashioned ground that a whale is a fish, and call upon holy Jonah to back me.” Few readers today know just how much argument Ishmael is waiving aside. In fact, Melville’s antihero here takes sides in one of the great controversies of the early nineteenth century–one that ultimately had to be resolved in the courts of New York City. In Trying Leviathan, D. Graham Burnett recovers the strange story of Maurice v. Judd, an 1818 trial that pitted the new sciences of taxonomy against the then-popular–and biblically sanctioned–view that the whale was a fish. The immediate dispute was mundane: whether whale oil was fish oil and therefore subject to state inspection. But the trial fueled a sensational public debate in which nothing less than the order of nature–and how we know it–was at stake. Burnett vividly re-creates the trial, during which a parade of experts–pea-coated whalemen, pompous philosophers, Jacobin lawyers–took the witness stand, brandishing books, drawings, and anatomical reports, and telling tall tales from whaling voyages. Falling in the middle of the century between Linnaeus and Darwin, the trial dramatized a revolutionary period that saw radical transformations in the understanding of the natural world. Out went comfortable biblical categories, and in came new sorting methods based on the minutiae of interior anatomy–and louche details about the sexual behaviors of God’s creatures.

It turns out that the MBTA is aware of its failings in at least one part of its system. Adam will be happy to note that the Needham line’s delays are not figments of his imagination.

A couple quick notes:

In an interview, O’Leary presented several color charts that show a variety of reasons - some accepted by the MBTA, others not - for late trains. They include extensive track maintenance performed by CSX on the Worcester-Framingham line, mechanical and engineering problems, and bad weather. The celebration of the Red Sox World Series victory also hurt performance in October because so many fans crowded trains into Boston, he said.

I would like to say to O’Leary: This is your job. You knew what was coming long in advance. The Red Sox playoff schedule is a matter of public knowledge. You should have prepared for the possibility that they’d win the Series. Why didn’t you? If you needed to get extra trains into service, but couldn’t because of capital shortages, say so. But then the problem isn’t the Red Sox victory, but rather the budget.

Then:

But Grabauskas counters that O’Leary and his company knew what they were getting into when they signed the contract. O’Leary ran the MBTA from 1981 to 1989.

Do you smell politics here? I smell politics here.

Whoever notes the commuter rail’s failings will have to point out that the subway is also performing poorly. Ridership, I’m sure, is down, and fares are up. So it’s not just the commuter rail’s problem. I’d like the to explore that, as well.

The story is included below.

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A day begun with is better than a day not begun with I defy you to listen to “She’s Losing It” at reasonably high volume in a good pair of headphones and feel bad for 2 minutes and 22 seconds. It’s not going to happen, I assure you.

I finally got around to buying Belle and Sebastian and Feist, along with Sharon Jones’s album /a>. I saw Jones in concert at The Middle East a little while ago; she was amazing. I’d recommend seeing her at the earliest possible opportunity.

Frankly, I’ve been listening to MP3s ripped from my friends for so long that I’ve kind of distanced myself from the way that music distribution works nowadays. I was into Pandora a year or so ago, and thought it was cool, but the allure wore off pretty quickly (for reasons that I now can’t remember). It seems to have hit an inflection point; I hear a lot more people talking about it.

Amazon MP3s are pretty awesome, by the way. DRM-unencumbered MP3s. Maybe $8.50, on average, for an album. Feist, Belle and Sebastian, and Sharon Jones are all available.

It’s been clear for a long time that DRM was just not going to work. The cost of pretending that it works — all the little dances that Apple has to do to block out the latest piracy — is just prohibitive. Amazon’s solution, or something like it, is the answer. I wonder whether music distribution will ever move to a completely decentralized BitTorrentish model; how much of the cost of an MP3 reflects the expense of maintaining massive hard drives and high-bandwidth pipes?

Slowly but surely, I think the people who claim that openness is the inevitable direction of technology are being proven right. The next big monster to slay is the old Bell system. Tim Wu had an excellent piece on that war the other day; Google wants to kill them, and I want to help. I would gladly pay an extra $50 every month to help move telephones out of the stupid-devices age and into the computer age. Wu’s article is included below.

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Amazon Kindle looks pretty excellent; I’d definitely like to find one to play around with. But what I want to note here is that the digital paper inside of it is a product of the E-Ink Corporation, headquartered up Concord Ave. in Cambridge.

Yay for hometown pride. I love my town.

P.S.: Turns out that the Kindle’s main (only?) competitor, the Sony Reader, also uses E-Ink. Yay for hometown monopolies!

…including this latest piece by Krugman on how broken it is. So why isn’t it changing somehow? The took a step in the right direction when it started the Public Editor column. Others should follow along. But the whole tenor of political coverage is truly awful. It seems that every blogger, since the inception of the medium, has been talking about the failings of the mainstream media; if there’s anything on which left and right agree, it’s that the mainstream media do a terrible job.

So with all this input, and all this realization from so many sides, why doesn’t anything change? Do YouTube debates, or their non-stage-managed ilk, need to become central to the race before anything happens?

I love this post just so, so much. Shorter version: “Yes, yes, I think I know what the big liberal failures of government are supposed to be. Yes, I understand your reasons for thinking that well-intentioned government will necessarily backfire and make the world worse than letting the market steer its own course. But Republicans have made a career out of destroying government to prove that it fails. So who’s really to blame? And show me the actual liberal failings. What are they?”

The acid, erudite snark is just so dense and stabbing. Worth the 2-minute read.

Incidentally, a friend today recommended that I include something like Cosma Shalizi’s Attention Conservation Notices at the top of my long posts. I’ve generally been good about doing that in other venues; I’ll try to be good here, too.

Apropos of Micromotives and Macrobehavior, I should note another book I finished recently, centered around the same sort of topic. I didn’t realize how very excellent it was until I thought about it for a while and let its tastes stew together with those of the Schelling book. It’s Thráinn Eggertsson’s Economic Behavior and Institutions, which I read on Cosma’s advice.

I probably don’t need to add much to what I wrote about Micromotives to cover Eggertsson’s book, other than to point out its particular areas of focus. Its goals are modest: move beyond the neoclassical framework of perfect rationality and costless complete contracting, but only a little way beyond: assume positive transaction costs, and see what happens. It is a fine introduction to 40 or 50 years of transaction-cost economics, starting with Coase. Eggertsson shows us that the work of many economists can be made coherent in the light of transaction costs. Some examples:

• Akerlof’s market for lemons. If you didn’t need to spend any time investigating the quality of a used car before buying it, because the car’s quality was instantly apparent, there would be no market for lemons.

• Coase: corporations wouldn’t be necessary if contracting were costless. Corporations exist because buying all your industrial inputs, contracting for labor and so forth entail positive costs. There comes a point when it’s cheaper to forego the free market and bring all of this work in house. That point is where corporations spring to life.

• The principal-agent problem: in a world of perfect, costless information, shareholders would instantly know whether the executives they’ve hired to monitor a company are doing a good job; bosses wouldn’t have to do any work to detect shirking, and hence would lose much of their value; voters would know whether their elected representatives are doing what they were sent to do. Organizations like the ACLU that keep tabs on my senators when I don’t have the time to would cease to exist. What binds all these cases together is that there’s a principal (shareholders, bosses, watchdogs), an agent (executives, workers, representatives), and a conflict between the desires of the former and the desires of the latter. This conflict disappears in a world of perfect information.

• Most fascinating to me: money itself — that is, something like a dollar bill that is valueless on its own, but in which the value of all other goods can be expressed — is unnecessary in a world without transaction costs. If you wanted the cars that I sold and I wanted your grain, we would instantly know the quality of each other’s products, instantly trade, and be done. Why bother with all the costs involved in supporting a currency (among which is the cost of preventing counterfeiting) if you can barter costlessly? But of course you cannot: you don’t know that my cars are high-quality and I don’t know that your grain is tasty.

These are all stories, of course. Corporations could come about for other reasons, as could currency. But they’re good stories, and they’re probably falsifiable. Eggertsson doesn’t spend much time on the data itself; it’s almost certain, though, that the many authors he cites have spent that time. Economic Behavior and Institutions is valuable mostly as a pointer to further work in areas that might interest the reader. If you’re interested in basically any part of microeconomics, there’s something in here for you. Its reach even extends, as the examples above show, into regions like political science that might seem remote from economics. It’s a joy to read, and like Micromotives it shows what fun economics can be if handled right.

Thomas Schelling’s Micromotives and Macrobehavior shows what fun it must be to be an economist. More specifically, it shows what fun it must be to be Thomas Schelling. It’s not a book of high theory; it is a book of high particularity. A typical paragraph resembles this one:

Among the social sciences the one that conforms most to the kind of analysis I have been describing is economics. In economics the “individuals” are people, families, owners of farms and businesses, taxi drivers, managers of banks and insurance companies, doctors and school teachers and soldiers, and people who work for the banks and the mining companies. Most people, whether they drive their own taxis or manage continent-wide airlines, are expected to know very little about the whole economy and the way it works. They know the prices of the things they buy and sell, the interest rates at which they lend and borrow, and something about the pertinent alternatives to the ways they are currently earning their living or running their business or spending their money. The dairy farmer doesn’t need to know how many people eat butter and how far away they are, how many other people raise cows, how many babies drink milk, or whether more money is spent on beer than on milk. What he needs to know is the prices of different feeds, the characteristics of different cows, the different prices farmers are getting for milk according to its butter fat content, the relative costs of hired labor and electrical machinery, and what his net earnings might be if he sold his cows and raised pigs instead or sold his farm and took the best job for which he’s qualified in some city he is willing to live in.

When Schelling walks down the street, I imagine him with a giant grin or, barring that, a notepad in his hand to take down his thoughts on whatever he might be looking at; every last bit of the world must fascinate him. The great fun in economics, to me, is not what it has to tell me about optimal investment strategies — finance being only a small, if important, part of life — but rather what it has to say about human behavior, and particularly human behavior in the face of other humans.

There are some basic problems of arithmetic that our desires might well create; Schelling very charmingly entitles a chapter on this subject “The Inescapable Mathematics of Musical Chairs.” If we all want to live a solitary life in the country, we’ll all move to the country and find ourselves surrounded by the people we were trying to escape. We can’t all dispose of our Canadian quarters, says Schelling (clearly not anticipating a day when they’d be worth more than American ones): you pawn off your quarters on me, I pawn them off on my neighbor, and yet still the total stock of quarters is exactly where it was. This accounting for musical chairs gives economics much of its power. It’s what happens when you take your eyes off individuals for just a moment and think about their behavior in crowds.

What happens if no one in a university can stand being in the bottom 10% of his class? The bottom 10% will leave. Now 90% of the original class is left, and there’s a new bunch in the bottom 10%. They leave. And so forth. Eventually, if this process continues, the class will whittle down to 10% of its original size.

An unrealistic example, surely, but it’s illustrative. The most famous model of this sort in Micromotives and Macrobehavior is the segregation model. Suppose few people wish to live in a racially homogeneous community; everyone desires some integration. But suppose people don’t want to be too isolated: white people have no problem living with black people, so long as the white people aren’t the minority in their neighborhoods. What will happen to the racial composition of neighborhoods? Schelling simulates a small city on a standard 8×8 cheesboard, with nickels and dimes representing white and black people. The board starts out in one equilibrium where everyone is satisfied with his neighbors and no one is too isolated. Then there’s a minor shock to the system: a few people move away at random around the board. Suddenly black people have no neighbor on one side, and only white people on the other. What was a satisfying equilibrium before is now unsatisfying to at least one person on the board, so he moves to a neighborhood whose racial composition is more to his liking. This process continues until we’ve reached a new equilibrium. More often than not, this equilibrium involves massive segregation. No one desired that it be this way; people only wished that those near them looked somewhat like them.

A few questions naturally present themselves here. How many equilibria are there? How many stable equilibria are there? (Perfect integration was an equilibrium at the start of the experiment, but it was unstable in the face of mild shocks.) The convergence to segregation depends on how homogeneous people wish their neighborhoods to be; if everyone desires that 50% of his neighbors be like him, does that change anything? Also, do the conclusions change when we move from a small city modeled by an 8×8 board to a larger one? A paper that Cosma Shalizi linked to, entitled “Schelling’s Segregation Model: Parameters, Scaling, and Aggregation”, suggests that Schelling’s conclusions about segregation are purely small-city phenomena.

The thing is, Schelling may well have touched on these issues; Micromotives and Macrobehavior is the sort of book whose lessons are deep and actually rigorous, but don’t seem so at first. It wasn’t until I mulled it over that I realized how much he’d been saying.

One of the lessons has been well-rehearsed elsewhere (e.g., No One Makes You Shop At Wal-Mart): in many cases, the decisions that we make individually cannot be expected to result in outcomes that we all would have chosen had we coordinated. You don’t even need to look at the level of an entire society; Schelling has plenty of examples from everyday life. Maybe the easiest is something that happened to him while driving back from Cape Cod: a mattress had fallen off the roof of someone’s car and had snarled traffic for hours. If the driver of that car with the mattress could somehow have borne (in the jargon: “internalized”) the costs that he inflicted on everyone else, he’d probably have stopped his car, fetched the mattress, and saved everyone a lot of lost time. Or if all the other drivers could have coordinated somehow, they might have been able to get that mattress off the road and save everyone behind them the time that they all lost. Absent any coordination, though, that mattress might still be laying there.

This coordination doesn’t need to come in the form of an enforcer with guns, necessarily; social norms can do it. What if we’ve all been trained by our parents to feel great shame at not helping others? You can certainly imagine social structures in which people would fight others for the right to clear off that mattress. If it’s hard to envision this, suppose that selflessness were actually sexy.

The direction you turn from here is asking how societies solve coordination problems — how we encourage each other to behave in a way that helps out everyone. One set of tricky cases are ones like the mattress, where there’s no way for people to talk with one another and work out a solution ahead of time. Even if everyone could sign a contract agreeing to pick up any mattresses should they fall on the road, that contract is not self-enforcing unless we have police standing at every corner, ready to ticket anyone who fails to stop. (The ticketing solution, in any case, raises its own implementation difficulties: how large does the ticket need to be so that even wealthy people have an incentive to stop?) How do we construct self-enforcing structures to make people do the right thing?

Or how do you prevent fishermen from overfishing a body of water? If every other fisherman is a good boy and holds back on the fish he catches, it’s in my interests to fish more — assuming I won’t be caught. But then every fisherman behaves like I do, and the agreement falls apart; this is known as the Prisoner’s Dilemma. We want everyone to do the right thing even when we know that no one is watching. One frequently raised solution is to give everyone strong property rights: we auction off patches of water, and give you the exclusive right to fish there. If I can make a $100,000 profit every year from my patch of water, and you think you can make $200,000 (by either harvesting more fish or spending less money to do so), I’ll sell the rights in my patch of water to you. Eventually, as the patch of water changes hands, it’ll arrive at the person who can make the most profit off of it.

That assumes a bunch of things, and it’s one of the accomplishments of economics since at least Ronald Coase to have enumerated exactly what’s assumed. One assumption is that transaction costs can be ignored: I can sell you the rights to my patch of water for not very much money. That’s not right: I need to hire a lawyer to structure the contract, among many other things. And it’s not costless to hold onto the patch of water, either: if my rights in the water are exclusive, I have to pay to keep others out. Here “pay” doesn’t necessarily mean money; it could just mean that I have to spend part of my time patrolling my water to kick out interlopers. Enforcing my property rights incurs a cost.

Depending on the exact costs and benefits, it may be better for us to pool our resources, cooperate on fishing, and contract out the enforcement to a third party. That third party may develop an expertise at low-cost enforcement of contracts. It may be in the interests of many constituencies to hire the same enforcer. In time this starts to sound like a definition of “government.”

Strong property rights are maximally efficient (in the sense of maximizing total welfare) when contracting is costless, when a transaction can be completely contracted, and when I bear all the costs for everything related to the transaction. When a factory dumps smoke into the air or sewage into the water, it has just reduced my quality of life without incurring any costs to itself. When a United Airlines flight bombards my house with noise, United Airlines doesn’t pay me anything, and yet the value of my property may well be lowered. That’s an “externality” — a cost that has not been internalized into the cost of the plane ticket. It would be infeasible for the airline to contract with every house that it might inconvenience in its flight path; the Court in U.S. v. Causby declared that “common sense revolts” at the idea of such contracting. Before airplanes existed, the courts recognized a property right extending “to the periphery of the universe”; after airplanes, we needed to adjust our understanding of what a property right was, and temper our ideologies. The Randians, it seems, never caught up.

It seems to me that understanding the fundamental coordination problem — how to get people to act individually in a way that benefits everyone – requires us to dive into the irreducible particularity of the world. We can act like Rand-cultists and declare that Reason herself dictates the structure of the universe and the structure of human rights, but it isn’t so. Different situations will often (not always, but often) demand different solutions. Strong property rights entail their own costs; centralization entails its own. We use economics as a set of guideposts, and we use it to filter out arguments that are bad — not necessarily to filter in the truth. Economics might strongly militate a certain set of beliefs; it might establish that those possessing the information necessary to get things done right are on the “edge”, not at the center. So it might push us to shift decisionmaking out, rather than in. But my amateur’s sense of the thing is that we’re often going to need to confront individual cases, and that some economic principles will often conflict with others. The only way to resolve that conflict is to give due weight to each principle, and use scientific methods to do so. Let’s be Popperians rather than Rand-cultists. Our lives and our societies will be better for it.

My man Adam Gerard pointed me to a really excellent collection of Daily Show clips: “A Look Back At Jon Stewart’s Greatest Gay Moments“. The top video — Stewart’s interview with Bill Bennett — is an absolute classic:

That video alone makes me wish that Stewart would run for president. Seriously.

But the one I want to call attention to here is this one:

The little stunt with Inhofe’s 20 kids and grandkids … doesn’t it just make a mockery of the Senate’s pretensions? Many of them are just degraded ass clowns, no more or less worthy of respect than anyone else. (E.g., Senator Ted “Series of Tubes” Stevens.)

It’s worth checking out the whole series of clips. I love the niche Stewart has carved out. It’s not actually fake news. It’s more like “comedic op-ed,” and god bless him for it.

I direct your favorable attention to Is Equality Passé? Homo Reciprocans and the Future of Egalitarian Politics. It’s the first essay I’ve seen that very naturally connects morality, our responsibilities toward those less fortunate than ourselves, and (the prose version of) evolutionary game theory. It’s also an argument about the particular kinds of egalitarianism that we can expect to sell to our fellow-Americans. Well worth the 15 minutes or so that it’ll take to read it.

If you’re interested in that, I would, of course, recommend moving on to Microeconomics: Behavior, Institutions, and Evolution, Bowles’s magisterial textbook. It builds out the arguments from “Is Equality Passé” at a mathematically rigorous level. The book combines substantial empirical backing with ample theory; it’s more than sufficient to rebut the claim that neoclassical economics is the best we’ve got.

When you buy a commuter-rail ticket at an MBTA train station, it asks you whether you want a ticket for Zone 1A, Zone 2, … and so forth up to Zone 10. What if you only know that you’re going to Beverly, say, and not what zone you’re going to? You just have to guess. Either that or go and talk to an MBTA employee.

I’ll email the MBTA. We’ll see if that does any good.