GDP: A Brief but Affectionate History -- Good history, short on the alternatives.

I read Stiglitz and Sen’s “Mismeasuring  Our Lives” a while back, and I bought their arguments that GDP was itself defective and overly reductive and measured some of the wrong things. They proposed a dashboard of stats that would better measure wellbeing than GDP does.

Coyle does not think this is necessary. After going through a history of GDP, she concluded:

GDP does a good job of measuring how fast (or not) the output of “the economy” is growing. And GDP growth is closely linked to social welfare. GDP struggles with measuring innovation, quality and intangibles, but it does a better job than any currently available alternative. (136)

And then she proposes some tweaks to GDP to better work in the information economy.

Overall she does a good job outlining the history.  It is accessible to everyone with some background in national accounting (even if just econ 101).  My only issue is where she looks at possible alternatives to GDP.  I kept waiting for her to really get into the Sen/Stiglitz study, and then she did. For one page (118). Then where she lost me, was her paragraph dismissal of the Bhutaneese metric of “Gross National Happiness”  (112). I am a fan of trying to track flourishing, even if that makes me “Grotesque”  by her words without much justification. These parts are all too short and come across as dismissive, even in a brief, affectionate history.

Quick thought on: A People's History of the United States: 1492 to Present by Howard Zinn

Reading this book can be a chore. It takes some time, and is kind of dense.

The down side is that if you read this book at the right time of your life it can change your worldview. That's not without its problems. You have to take down your 80s posters with pictures of fast cars. You have to throw out your Ayn Rand books. You'll no longer be welcome at the Von Mises institute,

But here's the plus side. There's never a wrong time to read this book.

The rent is too damn high: not as bad as you might think.

My normal position on Matt is that he needs kicked in the teeth.  I know him as the economics blogger at slate.

You know he "only" has a BA in philosophy.  Sure, sure, it's from "Harvard". But that really means it was taught by advanced grad students.  My state degree came from actual "Doctors".

And his Slate stuff was insufferable.  I don;t think it was his fault though. He has to spill a lot of content.

I really thought he was an insufferable writer, but then I read this.

Matt shows how current zoning is bad for both left and right reasons. Maybe we should allow better and smarter zoning so that more dense development is allowed where the market asks for it. If the measure of a book is that is convinces a reader of the writer's position, this book works (in spite of my preconceived notions of Matt's writings).

The only issue, as it remains with all public policy books, is the "What is to be done" section. I have an appreciating piece of land in an inner-ring suburb of Chicago. Why would I accommodate what he wants?  Otherwise, go Matt, I might want to learn how to spell "Yglesias".

Michael Lewis’s Flash Boys: Who Plays Brad Katsuyama in the Movie?

Michal Lewis is a national treasure.  He is able to take complex things and make them accessible to people like your mom – if you want to be condescending to your mother. In a way, he is one of the best nonfiction writers in English working today. I’d put him up there with Bill Bryson. But you know that already.  This is a Michael Lewis book. You know: the guy who wrote Liar’s Poker, Moneyball, The Big Short, and that other book you like.

What Lewis does is take a look at an issue, but he does this thing where instead of boring you with a lot of details, he tells the story of a person  (For real – this book has no index, no endnotes) and the problem they face and the cool things they do.  The person isn’t really usually that far removed from what we imagine ourselves to be, but perhaps a better version than the self we really are.  In Flash Boys, that person is Brad Katsuyama.  Katsuyama was a worker on the exchange for the Royal Bank of Canada. He noticed that there were issues with trading. Namely that the trades that his traders were trying to make basically disappeared in front of him when they tried to execute them.

This lead the reader to go on a journey led by Lewis as the reader follows along with Katsuyama as everyone learns what the issue was and why those trades were disappearing. Mainly the story is computers, software, and companies using their smarts to insert themselves in the middle of a trade.

Eventually Brad and the reader learn all about this and is disenchanted with the system as it exists so he sets out to change this. His mission is to create a new exchange that disarms the smart “High Frequency Trading” and levels the playing field for everyone.  It’s a good story, and Lewis tells it well.

My issue with it is that with the structure of the story, where it focuses on Katsuyama and his team, is that it is one-sided.  The implicit message is that they are the good guys and the HFT guys are the bad guys.  If you don’t know much about the world that Lewis describes then you take it for granted that he is right.  The last third of the book becomes an advertisement for the exchange that was started.  It has started a lot of conversations amongst finance and economic people about the value of HFT, but that is nowhere in the book. Does it help price discovery; does it provide liquidity; does it make trading more efficient ? Or is HFT just predatory; is it pure rent as Lewis quotes someone  “The market is all about algos and routers. It’s hard to figure this stuff out. There’s no book you can read .” (209)? I don’t know, but thankfully this book is bringing those issues.

Ultimately, I have to hoist a footnote that Lewis writes that sums up the whole book for me: “’Glitch’ belongs in the same category as ‘liquidity’ or for that matter, ‘high frequency trading.’ All terms used to obscure rather than to clarify, and to put minds to early rest.”(203).  Lewis lets in his editorial voice come in to show that even though he has written a whole book there is an inexactness to defining what HFT is – you have to get to the nitty-gritty to really know (He recommends a couple of books in the text but I didn’t highlight them). Because in the end, this book is only tangentially about HFT. It is really about Brad Katsuyama. All I wonder is who is going to play him in the movie

The Up Side of Down by Megan McArdle: a good writer who I don’t hate anymore

My first encounter with McArdle’s work was in the Atlantic, when she was the business editor. 

I hated her work for the Atlantic. It was, in fact, a major reason I stopped my subscription (That and a lack of editorial consistency with a redesign every year. Say what you want about Harper’s, at least they’re consistent).  Mainly I hated that the magazine that was so progressive in so many ways both currently and historically would employ a libertarian to do their business and economic coverage.

I like her a lot more now.  I think perhaps our economic and political positions have come closer together through mutual moderation.

I like this book, though it is a bit uneven.  The ostensible thesis is that we need to be able to fail better, so that our outcomes are more like those of a forager, who shares his/her individual bounty with the group and less like the farmer who fails alone (50). I support a libertarian coming to terms with the need for collective solutions, and I was shocked to even see McArdle call for something like the WPA (186) even if she does spend considerable time bashing unions and government investment in green technology (130).

The thing is, though, the best written, and the most interesting parts of this book are not the ones that speak directly to the thesis. In a somewhat divergent structural method from a lot of social scienc book, McArdle speaks about her life a lot.  She has come face to face with relative failure, spending two years unemployed. These are the best parts of the book, and the most well written. Though theoretically building her ethos, they work independent of the thesis and would be interesting to see as a stand-alone book. (It does complicate my own priors about her. She speaks of her childhood in NYC Private Schools, her University of Chicago MBA, and when she was unemployed and changing jobs, the first job she got in journalism was with the Economist. That kind of failing up can make it easy to hate her in the jealously envious sort of way).

So, yeah,  read the book.  McArdle is a good writer who I don’t hate anymore. 

One last note: this being a book that covers social science, the Marshmallow Study has to get mentioned.  In this case, McArdle leaves it be until page 223 of 268 pages.  Therefore it gets a Marshmallow Index score of 1.2.

Michael Lewis is a National Treasure: Reading "The New New Thing"

Here’s the thing.  The book “The New New Thing” isn’t in fact a new thing.  It appears to come from a time in Michael Lewis’s life where his books didn’t automatically go into a paperback pressing.  It took me a while to figure this out.  I was at my library looking at the new shelf, and there on the shelf was this book.  I had to look, since I had not heard of the book at all and thought that it was weird that it bypassed my attention.  I cursed Amazon’s bots for not recommending this to me the first time around. Briefly, I thought their technology had failed.

So it is not a new book, but the words are fresh and come off the page as only Lewis can make them.  He is perhaps one of the better story-tellers around, so he is a bit of a national treasure.  What’s weird is that the book is basically just a long profile of Jim Clark, a dot-com (and earlier) superstar who was good with hardware and smart enough to glom on to the right software guys.  I may be part of the wrong circles, but I had never heard of the man before the book (meaning I don’t know what his last 15 years or so have been like) but the book covers an exceptional time in Clark’s life which also corresponds with the  tech bubble.  It is of a piece of the tech bubble in another way – of the five or so companies that Clark has a hand in during the book, only one at this point is immediately recognizable: the now defunct browser company Netscape. (The book did make me want to find what had happened to the company, merged into AOL and wound down around 2008 but the tech lives on in firefox)

There’s also a whole lot about Clark’s attempt to build a giant automated sailboat.  Lewis is on the not-entirely-successful maiden voyage.  Clark seems to have been of his time but also ahead of it. This makes the book interesting, but more so as an artefact of the time than of anything else. It is to be read if you’re a Lewis completest, but passable otherwise.