End of the business cycle? Revise your classics

As I read my way through the Deepak Lal book* I mentioned yesterday, I find an exposition on “The Classical Theory of the Business Cycle”.

Back to your classics

While many economists are on holiday, the debate rages on over the future of the profession.

In today’s FT, Robert Skidelsky contributes with a classic theme: the aloofness of perfect-equilibrium mathematical economics and all those models it produced.

Easter reading list

Whoever is wondering what good book to take home for Easter, a book with substance but that is not a dry academic treatise, maybe a few of the following recommendations might be of interest. I am not a person who is very good at keeping up with new book publications all the time, and who finds it important to catch up with old classics and books that are a few years old. The recommendations below reflect this.

Quote of the day – Basic thoughts on finance

I am currently reading Martin Wolf’s latest book, entitled, quite ambitiously, Fixing Global Finance. In these times of great financial and economic distress and loss of confidence in the global financial system, going back and think about the basics of what finance is all about can be useful. In this context let me quote two very useful and well written paragraphs (p.1o):

“Everybody loves to hate finance. The “speculator”, or worse, the bloosucking usurer, is a perennial villain. Not for nothing was Shylock – marked as an outsider by being both a jew and a moneylender – the villain of Shakespeare’s Merchant of Venice. But finance is also the engine of a sophisticated, open, and dynamic market economy. Finance allows people to set up businesses with other people’s money, to participate in the profits from other people’s ideas, to smooth expenditure over a lifetime, and to insure both lives and property. Finance gives individuals freedom and security and economies dynamism and flexibility.

At its most basic, finance provides a mechanism for shifting resources from those who own them but cannot use them productively to those who can use them but do not own them. It is, therefore, the engine of a decentralized market economy. Ideas without finance are sterile. The more flexible and responsive the financial system, the better any economy will work, for the larger will be the ranges of demands that will be financed and of ideas that will be exploited. The absence of finance is crippling.”

Wolf then adds:  “But when finance goes wrong, the consequences can be devastating.” Yep, that’s where we are now.

India – how gigantic is the new giant?

This book is the result of a fatherly injunction to “write a definite book on India”. Prof Arvind Panagariya’s “India, the Emerging Giant”, definitely is such a book. It will probably be an authoritative reference book for the next few years to come on India’s economy. The talk is of a giant, but India still only represents 1% of world merchandise trade, and 2.7% of its services trade. Yet the book is a very important contribution to the understanding of economic development and the policies that can lead to it – or not. The book traces India’s economic history since its independence and in particular links its growth performance with the policies undertaken by its successive governments. The author identifies four main phases:

Pop Politics from America

Paul Krugman changed my life. But I am now disappointed.

An eccentric’s* refreshing views on the international economic system (very slight ed.)

[One of the rare book reviews that do not fit the category “always late in my readings”….]

Razeen Sally – my former supervisor at the LSE, and the reason for my move to ECIPE – just published a small book at the Institute of Economic Affairs. It’s called pompously “Trade Policy, New Century. The WTO, FTAs and Asia Rising”. It’s downloadable for free here.

This book is a merger and compilation of various writings that had been accumulating over the last years. It is short, extremely well written, and refreshingly non-technical. Razeen Sally’s talent for writing is the icing on the cake of his ability to think big but keep it short. Despite many catchy phrases and formulations, it is a dense read based on solid facts and deepest theoretical understanding.

As usual, Sally turns out to be once again highly provocative.

Good sense into the climate change debate

This is a document that inspired me so much that my announced blogging pause will have to do away for now. At an international think tank forum in Atlanta, USA, this week-end, I grabbed a few publications on display for visitors, and must say I was gripped by one in particular: the Civil Society Report on Climate Change, published in November 2007 (I am posting this in my “Always late in my readings category ;-))by a coalition of 41 international free market and free society think tanks. Finally, some reason into the climate change debate! Neither denial of the fact of climate change nor Al Gore style alarmism and new-wave Bali five-star hotel bigotry.

What it says is basically the following: Kyoto-type protocols are not going to solve the problem. Imposing emission targets, as the current protocol does, will cost too much and contribute to impoverishing the world. At the same time, given the projected changes in temperatures, the targets imposed by Kyoto are largely insufficient.

Bothering to actually read Hayek

It took me years to get there…. I just finished Friedrich von Hayek’s famous “The Constitution of Liberty” (1960). I decided I would publicly admit my shame at doing the job I am doing and not having come round to read this book directly, and not simply about it in secondary sources. But I decided that I am certainly not the only one (am I wrong, dear reader?), and it is always good to share information and ideas. So here a quick, short, spontaneous review, appropriately saved under the the “Always late in my readings” category in this blog….

Chatty book commentary: for a concentric, fuzzy, and differently democratic European Union

2007, to which we are now saying good-by, celebrated the 50th anniversary of the Treaty of Rome, the founding document of the European Union.

2007 was a year of crisis for the EU: it needed to find a way out of the impasse created by Dutch and French no-votes to the Constitutional treaty back in 2005. With the entry of very poor and still deeply corrupt Romania and Bulgaria in the same year 2007, this foreign-policy-bureaucratic, foreign-investment-economic-convergence machinery called Enlargement has been called into question. Enlargement fatigue is prevailing…. But now, in December 2007, the gloom slowly starts dissipating.