Ross Gittins has a very nice piece in the SMH today, with some kind words about Economics in Two Lessons which he recommends as “the best book to introduce you to economics”. Ross says that the crucial concepts in economics are: Opportunity cost (of course!), the Invisible Hand (roughly, my Lesson One), imperfect competition, market failure and externalities (the microeconomic component of my Lesson Two).
His final para gives the lie to those who imagine economists oppose action to save the global enviroment
As for external costs (“negative externalities”), Quiggin notes that the leading British economist Lord Nicholas Stern has described climate change as “the biggest market failure in history”. So now you know why so many of the nation’s economists are appalled by Morrison’s dereliction.
With much of Australia suffering catastrophic fires and the beginning of a new war with Iran, lots of people are thinking about the idea that such disasters are good for the economy, because of the work generated in rebuilding homes, producing war materials and so on. In my book Economics in Two Lessons, I explain why this is wrong (this is one point where I agree with Henry Hazlitt’s Economics in One Lesson. Here’s a link to Chapter 6: The opportunity cost of destruction
US President Eisenhower got it right when he said
Every gun that is made, every warship launched, every rocket fired, signifies in the final sense a theft from those who hunger and are not fed, those who are cold and are not clothed.
And the same is true for the destruction visited on us by Morrison, Trump, Murdoch and the rest of the global denial industry. The workers who will be needed to rebuild homes, farms and infrastructure could instead be employed producing useful new things. Those forgone alternatives are the opportunity cost of destruction
I did an interview about Economics in Two Lessons with Brisbane based economist Gene Tunny. You can listen to it here.
I’ve started writing a regular column for Independent Australia (every two weeks), and my first column has just gone up. It’s a response to Nick Dyrenfurth and David Furse-Roberts, Australian advocates of Maurice’s Glasman’s Blue Labour ideas in the UK (apparently Glasman visited here for a few months. The central point is that, far from offering a policy alternative to the political right, Blue Labor is all about a specific kind of identity politics, focused on stereotypical male manual workers. These workers assumed to be socially conservative and economically aspirational, but to vote for Labor because they don;t like the silvertails on the other side, despite sharing all of their views.
It took me a while to write this, and several other people came out with very similar analyses in the meantime, notably including Jeff Sparrow. Dyrenfurth responded, complaining “I doubt Jeff Sparrow has read my book instead of relying upon selective media reports and a book extract comprising less than 3% of the book’s contents”
I have (almost) zero sympathy for this. If you can’t summarize your book in 700 words without giving readers a radically wrong impression of your central idea, you shouldn’t publish a summary at all. The only criticism of an extract I would regard as unfair is of the type “Quiggin doesn’t mention topic X or qualify the argument with reference to Y”. In this case, it’s perfectly legitimate to point to the fact that these topics are in fact covered in the book, but not in the extract/summary.
Almost invariably, this rhetorical move involves backing away from the core message presented sharply in the extract/summary, and pointing to the more nuanced presentation in the full length version. On this score, I can only appeal to my Crooked Timber co-blogger Kieran Healy (NSFW title)
Another review of Economics in Two Lessons has come out. It’s by David Henderson and appears in Regulation, published by the Cato Institute (link to PDF). There’s a blog post with extracts here.
Unsurprisingly, given the source, it’s mainly critical of the analysis, but still has some kind words about the book. This para gives the flavour
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Quiggin is a good writer who lays out much of the economics well. His analysis of rent control and price controls in general is a thing of beauty. Along the way, though, he makes small and big mistakes. He also shows by omission that the book, to be complete, badly needs a third lesson, on why government works so badly even when it intervenes in cases where markets work badly.
Paul Norton has alerted me to a new book by Michael Thompson, published by rightwng outlet Labor’s Forgotten People: The Triumph of Identity Politics It appears to be a rehash of Thompson’s Labor Without Class which I reviewed back in 2000 (reprinted over the fold).
One point mentioned in the review was a positive blurb from Martin Ferguson, who was clearly well on the path to his current position as a rightwing mining company hack, but still managed to pass himself off as a Labor stalwart for another decade or more.
The blurb of Forgotten People states that “this title is sure to cause a stir within the Labor Party membership”, and I’ll confine my remarks to the title. The idea that the left had an excessive focus on identity politics was popular, and not entirely baseless, back around 2000. But it’s been obvious for years that it’s the right that is dominated by identity politics.
More precisely, it’s what might be called “default identity politics”, the idea that “real Australians/Americans/Englishment” are white (more specifically Anglo-Celt) heterosexual Christians, working in private sector jobs, and living in rural and regional areas. The policies of the right don’t actually help people like this (their benefits are directed to high-income earners and wealthy retirees), but attracts their vote by reassuring of them of their superiority over urban “elites”
Labor without Class was wrong in all important respects, but at least it was up with the times. Thompson’s latest is an absurdity in the era of Trump, Johnson and Morrison.
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A couple of reviews of Economics in Two Lessons have come out, from opposite ends of the political spectrum. The more interesting is Max Sawicky’s in Jacobin.
Sawicky does a great job in summarising the key ideas in the book. His is probably the best review so far for non-economists to get an understanding of the main themes.
Given the Jacobin audience, the key question is “Why should a socialist read a book about markets?” As Sawicky observes, the answer is easy for socialists in the Bernie Sanders mould – I share their views, a fact that is obvious to readers of this blog.
Quiggin’s deconstruction of Hazlitt’s “Lesson One” provides a lesson in “know your enemy” for anyone left of center. If your only instruction in economics was a principles course, this book provides an essential completion of the basic story.
More generally, Sawicky says
If your hostility to markets runs more deeply, then the mainstream theory elaborated by Quiggin provides a useful challenge.
What becomes deemphasized, when it is not glossed over entirely, is, on the one hand, the proliferation of “externalities” that bind together the interests of ostensibly disparate individuals, and on the other, our capacity (historically demonstrated) to respond effectively on a cooperative, collective level.
Economics as practiced by progressives pursues these insights, but, as I think Quiggin would agree, it has further to go. His “second lesson” is a crucial step in this journey.
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I’m very grateful for this review, which gives me food for thought as I think about my next big project.