My current nonfiction writing project, which I have been working on for some years, is pretty close to complete—with luck I will be sending it to my agent by the end of the semester. That raises the question of what I should do next. One possibility is a second edition of either Hidden Order or Law's Order. Another is fiction–I have partly written sequels to both of my novels, one of them pretty far along.
But there are two other book ideas that I have played with, and this post is mostly to see if any of my readers can offer suggestions for one of them: a collection of works of literature that teach economics.
So far I know of only two such works. One is a science fiction story, "Margin of Profit" by Poul Anderson. Its central point is that in order to make someone stop doing something you do not want him to do it is not necessary to make it impossible, merely unprofitable.
The other is a poem, "The Peace of Dives" by Rudyard Kipling. Its point is that economic interdependence produces peace, since nobody wants to kill his customers or destroy his own property that happens to be located in someone else's territory. The poem was written in 1903, so arguably turned out to be somewhat optimistic, but it is still an interesting and important idea.
I want more. I want readable works of literature, prose or poetry, that demonstrate economic ideas and get them right. Any suggestions?
My other book idea, for which I could also use suggestions, would be titled "Bad Economics." It would consist of advertisements, quotes from the speeches of politicians, bits from textbooks written by people who don't understand economics, each accompanied by an explanation of why it is wrong. A simple example would be one of the radio advertisements I have heard that offers listeners an opportunity to speculate in heating oil futures, on the grounds that winter is coming. A somewhat less simple example would be almost any statement by almost anyone about the distribution of the burden of taxes, since such statements usually take it for granted that what matters is who actually hands over the money to the government.
44 comments:
There is a prominent Subreddit called /r/BadEconomics that is basically what you describe
http://www.reddit.com/r/BadEconomics
It's mostly graduate students. You should post there, Dr. Friedman.
We, The People by Jack C. Haldeman II is a short sci-fi story about people choosing where their taxes go. It was written in the 80s. The economic idea that it demonstrates and gets right is the value of actually knowing the demand for public goods. Or... the value of knowing how many other people are in the same boat as you.
Coincidentally, the other day I wondered what would have happened if Adam Smith had collaborated on a book with the best fiction writer of his time. My conclusion after copious amounts of research (5 mins) was that Daniel Defoe was born too early and Edgar Allan Poe was born too late.
I was thinking about it because just recently a list of books for kids was ordered by the Invisible Hand. As far as I know it's the first and only list in the world that's ordered by the Invisible Hand. Which boggles my mind given that Smith published his book when America was founded. I guessed that writing well and understanding economics are mutual exclusive. And by "writing well" I mean that it doesn't take over 200 years for your concept to be obviously applied. Brains that are well-suited for understanding can't also be well-suited for articulating... and vice versa.
Xerographica:
Some years back, the American Economic Review published a clever article by a very smart economist. It was reinventing an idea that appeared in Ricardo's Principles,--in a less plausible and much less important context than Ricardo's version. I sent the Journal a brief note pointing out the fact.
http://www.daviddfriedman.com/Academic/Ng_Ricardo/Ng_Ricardo.html
I'd start with the "bad economics" idea 1st that sounds like a fun book to read and if done right a good primer for people to dip a tow into economics. Just absolutely skewer Bernie and Trump and their protectionism.
The Discworld novels (Terry Pratchett) are packed with all sorts of economics. Including some lovely inversions and send ups of things. Making Money is particularly good with the hydraulic computer of the economy (drawn from the real world one of course but when the get the model right, finally, then it makes things happen in the real world). Dan Klein's just published a paper using Leo Rosten's stories to illustrate economics so that's been done.
On the bad economics side how about the plot line of absolutely ever financial thriller ever? You get to the big reveal about what the goal or demand is and it never does seem to be something that's worth getting excited about. Along the lines of Dr Evil asking for a million $ sorta thing.
Mandeville's The Fable of the Bees might be a borderline case- fable, fiction, nonfiction?
And chunks of the Bible. The bruised reed.
Murder at the Margin, Marshall Jevon's
https://en.m.wikipedia.org/wiki/Murder_at_the_Margin
Ken Follet's "World without End" and "The pillars of the Earth" include subplots dealing with the use of futures, the advantages of currency over payment in kind, the advantages of letting the tenant farmer (rather than the feudal lord) decide on the use of the leased land, rent-seeking/monopoly and cost of opportunity.
You could probably include 'The Moon is a Harsh Mistress' on the list teaching ideas of economics. I would think that the concept of TANSTAAFL is pretty much a core idea of economics.
Russ Roberts of the Hoover Institute has published a work of fiction with the explicit intention being to teach economic ideas, the benefits of free trade in this case. This example might be too explicit though!
See http://yudkowsky.net/other/fiction/dark-lords-answer/ for a fantasy novelette that explicitly tries to teach economics
"The Cambist and Lord Iron", a short story by Daniel Abraham. The eponymous cambist — moneychanger — is posed three questions about the value of some unusual goods, and resourcefully finds answers to all of them.
https://en.wikipedia.org/wiki/The_Cambist_and_Lord_Iron
http://www.freesfonline.de/content/Abraham1.pdf
Neil Stephenson's Baroque Cycle teaches some finance and economics in a 17th century context.
With regard to Murder at the Margin ...
First, it's a novel, and I want things short enough to I can have a book with lots of them.
Second, it's not a very good novel.
Third, the solution hinges on economics I have serious doubts about--the "shipping the good apples out" argument depends on a particular assumption about the utility function
Fourth, it violates a fundamental rule of the genre--that the reader could have figured out the solution for himself.
Fifth, the portrait of a brilliant economist is wrong--the examples given are trivial ones, not the sort of ideas that such a person actually comes up with.
My review of the book is in Public Choice Vol. 34, No. 2 (1979), pp. 233-236. It was probably part of the inspiration for my project. I thought a first rate writer who happened to understand economics was more likely than a good economist who happened to be a first rate writer.
Tura:
Many thanks. It's a good story, although I'm not sure I am convinced of the middle case.
Here is an idea which I drafted over 20 years ago but never followed through. Something like an annotated dictionary, an A to Z listing of bad things all of which could be blamed upon government. Each entry would explain how this bad thing had come about because of the influence of government. There could be hundreds of thousands of entries, each explained with maybe 20–300 words.
I drafted of around 130 entries, enough for a first draft of a minimally sized book. To give the feel, here is a selection of my entries:
Absent fathers
AIDS
apartheid
...
pavement
peanut prices
pileups
...
vacancy
vacuum of law
vengeance
violence
Waco
...
zero sum economics
ZIP codes
I had two prospective titles:
Government Haters’ Handbook for marketing to angry right wingers, or
Gifts from Government for kinder gentler classical-liberals.
I offer the idea to you. All I ask is 10% of sales above the first million.
Whoops. I failed to proofread carefully.
...
There could be hundreds or thousands of entries, each explained with maybe 20–300 words.
...
I drafted around 130 entries,
...
Lliam said...
Neil Stephenson's Baroque Cycle teaches some finance and economics in a 17th century context.
I was going to post this suggestion as well. Unfortunately I would argue that it doesn't actually pass the "readable" criterion.
Russ Roberts has at least two novels that do that - they're novels, but maybe you could excerpt a relevant bit? They are:
Invisible Heart: An Economic Romance, and
The Price of Everything: A parable of Possibility and Prosperity
From the blurb for the latter: "Stanford University student and Cuban American tennis prodigy Ramon Fernandez is outraged when a nearby mega-store hikes its prices the night of an earthquake. He crosses paths with provost and economics professor Ruth Lieber when he plans a campus protest against the price-gouging retailer--which is also a major donor to the university..."
David Friedman, that gold/scarcity government revenue concept is blowing my mind. Imagine you went on Reddit and created a subreddit for Ricardo's "Principles of Political Economy". Members of that sub could submit passages from that book and vote them up or down. Then the most popular passages would be at the top. The passages in the book would be ordered by the Democratic Hand. As opposed to? As opposed to the passages in the book being ordered by the Invisible Hand. Out of sight, out of mind... no more?
Here's something else that's blowing my mind. Let's say that the DebatePolitics Forum started charging members $1 dollar/month. But... members could elect one person to decide how to divvy up all the fees among the different threads/topics. Pretty much like how our government works. Except, unhappy members could so easily foot vote for other websites. If there was a mass exodus, what would this say about the social contract?
It's bizarre that economists generally don't use community websites to test economic systems. I've failed to convince a dozen forums to implement our government's system.
One last thing... according to most economists... the free-rider problem is a bad thing while consumers surplus is a good thing. I derive value from reading your blog but I've never made a donation. My valuation is greater than my payment. My payment is suboptimal so your incentives are suboptimal so the supply of your blog entries will be suboptimal. But if it would be optimal for my payment to equal my valuation, then how could consumer surplus be a good thing? So it should really be called the consumer surplus problem... and it's a continuum that ranges from the payment being (valuation - $.01) to $.00 cents.
One last last thing. Ever heard of spending money being referred to as nonverbal communication? For some reason this dawned on me for the first time last week. Why didn't it dawn on me before? Spending money is communication... and it's definitely not verbal communication... which leaves nonverbal communication. Who typically studies nonverbal communication? Sociologists? Except, they "can't" study spending money because that's the domain of economists.
With economics spending money is about maximizing benefit. But with communication the issue is accuracy. How accurately are my words conveying my info? Consumer surplus might immediately maximize your benefit, but what you're communicating isn't accurate. If you deceive (misinform) producers then you're going to derive less benefit from their behavior.
Charles Stross, Neptune's Brood, is science fiction, but the plot revolves around the economics of money-transfer latency.
TANSTAAFL was a Robert Ruark phrase before Heinlein and Pournelle. The free lunch was offered by bartenders before Prohibition raised beer prices and made drinking less sociable. The Old Man and the Boy. Sentimental nonfiction.
After our first was born my wife joined a baby-sitting circle. She was given 20 plastic tokens, worth 1 hour before midnight and half an hour after midnight. The circle included women who loved baby-sitting but never went out - so they accumulated tokens that were effectively taken out of circulation. Then there were women - such as my wife - who were always going out so quickly ran out of tokens. These women started issuing IOUs to each other. So, the women who needed tokens didn't have any and the women who didn't need any had them all.
So, you could write a book about baby sitting. You would need to make it a lot more complex, by introducing a central bank, loan facilities, taxation etc, etc.
That was a silly idea but what about.......
A story that borrows from Gulliver's Travels or the three ghosts in A Christmas Carol. First we visit a land where there is no money so everyone lives in large extended family groups that have to do everything for themselves: make clothes and shoes, build houses, cut logs for fires, manage the fields and the animals, cook the meals. Then we visit a land where money, and so trade, has been invented but a few greedy people have most of the money: they live in vast houses and have fabulous balls whilst the rest of the people live in poverty. Then we visit a land, where there is money, but is run by benevolent elders who make sure that everyone has plenty. And so on and so on.
Peter:
I'm not proposing to write a book, but to put together a collection of things other people have written that make economic points.
I would buy the bad economics book.
On an unrelated note, that you are probably not interested in (but I am here so why not?) Reason.com used to have a good community of commenters but in the last few weeks most of them left and stated their own site, http://glibertarians.com/. As a libertarian forum it has great potential and it needs content.
Henry Hazlitt wrote a novel called Time Will Run Back in which a socialist leader rediscovers the value of price signals. A lot of this involves Socratic dialogue and talking through thought experiments, one of which might make a good excerpt.
Thank you David for repeating: "I'm not proposing to write a book, but to put together a collection of things other people have written that make economic points."
I had been confused on reading your first mention of "a collection of works". I believe now that what you are asking for pertains, not to the whole book, but to those shorter works of literature that you would gather together into one book.
I am thinking the "bad economics" book, with an explanation of why things are bad, might work in much the same way as How to Lie With Statistics (a really good book even today).
I have always had the title "The Economics of Villainy" in my head as an idea I wish to pursue or see someone else thoroughly pursue. I imagine it as a number crunching exercise as much as anything. How many henchman are running around the evil compound at any given point in time and (when the motivations are clearly money or power, which realistically they always truly are) how much are they being paid? How much do they really stand to gain and at what risk? Hazard pay for such highly skilled individuals must be very high. Sauron's armies might not have been paid but let's say they win-- they conquer the whole middle earth-- what do they do then? In order to get the most out of their lives and provide for their offspring they would need to specialize in labor and create a system of free trade and in reality would need to become just like the races they defeated. They would stomp out the last of the hobbits in the shire, eat what was left on the table and in the stores, and realize they needed to become their own version of the hobbits just to have food to eat. In a few generations they'd all be laughing and drinking mead around a campfire.
More or less the central idea being that the laws of economics are the best protection against super villainy as evidenced by a thorough analysis of their operations.
This may not quite be what you're looking for because it is explicitly didactic -- about a much broader array of topics than just economics -- but Eliezer Yudkowsky's "Harry Potter and the Methods of Rationality" covers a number of economic theories. it will b ea bit hard to dive into if you don't know any of the relevant canon, but in this chapter http://www.hpmor.com/chapter/33, the prisoner's dilemma is explained in great detail. In this chapter, http://www.hpmor.com/chapter/79, the protagonist quotes " Tom Smith and His Incredible Bread Machine."
Peter, funnily enough the babysitting vouchers thing is a well-documented problem http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html
In one of the classic Asterix comic books, "Obelix and Company", the Romans' latest dastardly plan to pacify the unruly Gauls involves a speculative bubble in the menhir trade. The comic can be read online here.
Sorry, the correct link for that comic is this one.
The growing popularity of Bernie Sanders brand of socialism should tell you the importance of the bad economics idea. There are too many Choskys and Klein clones mixing well with our current group identity grievance based form of politics.
We need your brand of soap to clean the collective mind of my millennial generation.
I would argue that you look at Garet Garrett. I liked his book, The Driver. The book is a celebration of capitalist achievement and tells the story of a Wall Street investor, Henry Galt. Galt is a very persistent individual who sees that the country is still in decent shape during the Panic of 1893 and chooses to invest all that he has to gain control of a failing railroad. (If the story seems familiar, Galt is based on James J. Hill, the man who built the Great Northern Railway.)
Galt's knowledge of the true value of the assets and his superior ability to forecast and plan, allows him to earn extraordinary profits. Garrett is quite good at showing what it takes to be a successful entrepreneur and businessman, and how intellect, persistence, and ability can be the primary drivers behind a business. He also shows how businesses and government can conspire to stop him from competing by using antitrust legislation and accuse him of exploiting the general public and his investors. Politicians see extraordinary success as something that is suspicious and dangerous.
You can find a copy of the book on the Mises site. It can be converted from the PDF format into a Kindle or ePub version by using Calibre or something similar. Garrett has other books with economic themes on the site. You may wish to have a look at them.
Second the comment to look at Yudkowky's works (not just HPMOR).
Liked the Kipling, that wasn't in my Kipling collection as a child. (Kipling didn't allow for Satan's tool of central banking ;)
Rather than a book, have you considered a video with some SCA friends in costume?
A fun little read, and it's even online: And Then There Were None, Eric Frank Russell.
http://www.abelard.org/e-f-russell.php
G. Dirk Mateer is a professor with a great many economics references from all sorts of entertainment media. He wrote this--but his personal trove contains more than movies.
https://www.amazon.com/Economics-Movies-Access-Card-Mateer/dp/0324302614
Someone should have already suggested "Business as Usual During Alterations", by Ralph Williams
Hostile aliens try to destroy our economic system by eliminating scarcity with a matter-dupliator device. It doesn't play out as intended.
Eric:
Many thanks--that's a great one that I hadn't thought of.
There might be more, besides BAUDA, in this anthology _Tomorrow, Inc._. http://www.isfdb.org/cgi-bin/pl.cgi?51980
The only other one that comes to mind is "Owe Me" about an inventor who finds a way to profit from his inventions than suits him better than the usual route. If I recall correctly, that is.
Anthologies that contain BAUDA might also be good places to look. My quick skim in ISFDB didn't turn up any, though.
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