Economics in Two Lessons is coming out in the US next week. That gives me an excuse to share some of the nice things people have said about it. I’m particularly pleased with this one from Jacob Hacker, whose own work I admire very much.
With apologies to Isaiah Berlin, Quiggin is a foxy hedgehog: He knows two big things, and these twin lessons—about the virtues and limits of markets—sustain a pioneering, persuasive, and even passionate case for democracy and the mixed economy. Make room for two lessons in your mind, and on your bookshelf.”—Jacob S. Hacker, coauthor of American Amnesia: How the War on Government Led Us to Forget What Made America Prosper
Two big pieces of news for me today. This morning I got the first physical copy of my book Economics in Two Lessons.
Then, I got the news that, for the first time in my career, I’ve had an article accepted in Econometrica, the top theoretical journal in economics. It’s full of arcane maths, drawing heavily on the expertise of my co-author Ani Guerdjikova, but the key implication is simple. If people aren’t equally good at predicting movements in asset prices, restrictions on the set of assets available to them may improve economic welfare. This undermines the general presumption that financial deregulation will be beneficial.
The concept of opportunity cost “The opportunity cost of anything of value is what you must give up so that you can have it.” is the central theme of my book Economics in Two Lessons, due out in the US on 19 April and hopefully in Australia soon after that. My central claim is that two lessons based on opportunity cost and their relationship to market prices provide a framework within which almost any problem in economic policy can usefully be considered.
That’s not the way economics is usually taught (opportunity cost gets a brief nod before the focus moves on to supply and demand). So, I was impressed to see Bill Shorten use the term in relation to climate change inaction. Not only that but he used it correctly! Here’s Bill, quoted in the SMH
Opposition Leader Bill Shorten defended the new policy by urging voters to consider the cost of inaction on climate change, saying “There is a huge opportunity cost when we don’t take action,”
Perhaps I shouldn’t be surprised. Labor’s Shadow Assistant Treasurer is Andrew Leigh, a fine economist who has had nice things to say about my book. And Labor has been listening to Richard Holden, who is, I think, the brightest young economist we have right now.
Surprising or not, it’s great to see a return of economic literacy to public debate, after years dominated by vapid slogans.
I’ve just heard from Princeton University Press that Economics in Two Lessons will be translated into Chinese. The publisher is Ginkgo (Beijing) which has had some big successes with recent translations.
Apparently, the book was well received at the London Book Fair, which is a trade event focusing on deals like this, so there may be more translations coming.
PUP has offered me the option, when the translation is prepared, to look at a sample. If there are any readers of this blog who are also readers of Chinese (it will be in Simplified not Traditional characters), I’d welcome an informal evaluation
I’ve just published a piece in Aeon (an excellent and free online magazine) drawing on the analysis in my (about to be published) book Economics in Two Lessons. I make the case that carbon pricing, whether through a tax of an emissions trading scheme, is the most cost-effective way to stabilize the global climate. Moreover, it’s straightforward to offset any adverse effects on low-income earners, displaced workers and others.
That raises the obvious question: if carbon pricing is so good, why is it so hard to implement, compared to less efficient alternatives like mandatory renewable targets. One factor, which I discuss, is that the creation of property rights over previously open-access resources creates obvious, and often powerful losers.
I was limited by space, so I couldn’t discuss the more puzzling problem of why regulations are more politically salable than prices even in the absence of income effects.
Two hundred years after the birth of Karl Marx and fifty years after the last Western upsurge of revolutionary ferment in 1968, the term “monopoly capitalism” might seem like a relic of outmoded enthusiasms. But economists are increasingly coming to the view that monopolies, and associated market failures, have never been a bigger problem.
and the conclusion
The problems of monopoly and inequality may seem so large as to defy any response. But we faced similar problems when capitalism first emerged, and Western countries came up with the responses that created the broad-based prosperity of the mid twentieth century. The internet, in particular, has the potential to enhance freedom and equality rather than facilitate corporate exploitation. The missing ingredient, so far, has been the political will.
Today I sent off the corrected proofs of Economics in Two Lessons to the publishers, Princeton University Press. They won’t look at it until New Year, but it doesn’t matter. The book is done, and I can sit down to Christmas dinner with the family knowing it’s off my hands.