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Friday, November 10, 2006

Comments

Lafayette

"The economics profession is in such a dynamic stage of rapid growth, as made clear by the interviews in this book."

If it took a book to tell us that, and it was not self-apparent, then I suggest that economic research is not getting the credit it deserves.

Or the book is exaggerating ...

historyofeconomicthought

The great Paul Samuelson rightly laments the decline in the study of the history of economic thought.

Three cheers if 'Inside the Economist's Mind' can help to rectify this!

There's another valuable addition to refreshing the history of economic thought just out - Donald Markwell's 'John Maynard Keynes and International Relations: Economic Paths to War and Peace' (Oxford). It's a useful reminder that great economists (not narrow specialists) have had much to say - and do - about the economic causes of war, and economic means of encouraging peace, which is again highly topical.

Lafayette

"about the economic causes of war"

Like, "War is good for business, invest your son"?

don markwell

The last two comments relate to my recent book:

Donald Markwell, 'John Maynard Keynes and International Relations: Economic Paths to War and Peace', Oxford University Press, 2006.

With thanks also to the blogger on another site who has raised aspects of the contemporary relevance of Keynes's thought - it seems to me that these sorts of questions arise:

Does free trade promote peace? This was widely believed by 19th and early 20th century liberals, and was what Keynes believed for much of his life. This argument is again being made in the current American debate - very live in the wake of the congressional elections - between economic nationalism and free trade. That debate is hugely important for the world as a whole.

Is globalization good for peace? Would the kind of trade liberalization Gordon Brown and others are pushing - reviving Doha, etc - help to make the world a more peaceful place?

What kind of international governance of the global economy would best promote political harmony between countries as well as other objectives? This question was important to Keynes's thought over many years, especially from 'The General Theory' to Bretton Woods and beyond.

Does capitalism cause war? This is what many 1930s socialists believed. (There are again today some who argue that American war decisions are too much affected by American economic interests.)

As shown in my book, Keynes's passages in 'The General Theory' about the tendency of his new economics to promote peace was a response to the belief that capitalism causes war. 'It doesn't have to, if it is properly managed, domestically and internationally, so as to promote economic stability', is in effect what he said.

How to reconstruct the international economy after a world war to reduce the chances of there being another one? This was a key question that Keynes and other economists engaged with during and after both world wars. Robbins, Meade, Beveridge, Hayek, Viner, Harry Dexter White, et al., all gave attention to this. Much of what Bretton Woods was about was creating an economic pillar for a peaceful world order coming out of a world war that was itself, in part, the product of a depression.

Was it the development of a European common market that finally ended the great 'European civil war' that had erupted into world war in 1914 and again in 1939?

What part do policies to promote economic prosperity have to play in post-conflict reconstruction in, say, Iraq or Afghanistan or East Timor or Sierra Leone or (sadly) too many other places, to try to ensure there is not a descent back into civil or international conflict?

In this context, it is worth considering the path of Vietnam from war devastation to a high economic growth trajectory, membership of ASEAN, entry to WTO, and - in a few days - hosting the APEC (Asia-Pacific Economic Cooperation) summit.

Given the connections Keynes identified between economic crises and war - if Sir Nicholas Stern is right, and global warming unchecked might produce a massive economic crisis, what kind of threats to peace might flow from that economic crisis?

So 'the economic causes of war' (e.g. economic nationalism? competitive struggle for markets? economic crises? excessive population growth?) and 'economic means of encouraging peace' (e.g. free trade? internationally-coordinated domestic policies for full employment?) are worth the attention of economists, students of international relations, and others again today, as in Keynes's day.

And the study of the history of thought about such issues is a good place to start. I should make clear that my book is a historical study, but one which appears to have considerable contemporary relevance - which it is good to see being discussed by others.

Don Markwell

Lafayette

"And the study of the history of thought about such issues is a good place to start."

Frankly, I think your questions are of no consequence. They remind one of questions posed in final exams at a university course on international relations - useful to provoke student rumination on a subject, but of no real import.

Leaders of countries cause war by a desire to impose their will on another nation. Asking silly questions as to whether "capitalism" or "global warming" causes war is irrelevant.

War in history has been employed to expand the territory of one population (Rome is a prime example) in order to better their lot. Rome's dependence upon slaves, the prime source of manpower to build its wonders, is only one example. The Greeks "colonized" the Mediterranean basin for the same reason, to expand their culture and develop trade.

The world has thankfully progressed from a primitive concept of expansion (to increase national benefit) towards one in which trade (and comparative advantage) bring the sought enhancement in well-being. The principal concern nowadays is that global commerce should sustain economic growth.

If peace is the absence of war, then economics is central to peace. In this context, national production must generate sufficient economic activity to employ the active population (and support the inactive population). Without durable employment, the social fabric of a nation unravels and internal strife is sparked. This provokes immigration, more than it promotes wars.

There has been no "war" of any truly international consequence since WW2. Korea, Vietnam and Iraq are all local conflicts, brought about not for national expansion but for local consolidation (of a political current). The "Cold War" was a journalist euphemism for the contention between two economic concepts, Capitalism and Communism. But, that difference did not provoke an international war over the half century that it endured, even if it sparked local strife.

The reasons for this have nothing to do with international trade or the lack of global warming (or the price of beer in China, for that matter). It is due simply to the fact that there has been a sea-change of mentality as regards international relations.

When Bush the Father wanted to redress a situation that was menacing the supply of a strategic resource, he made his arguments within an international forum (the UN) and found the necessary response. When Bush the Son wanted his revenge on the head of a state, he simply invaded a country in flagrant disrespect of the rules of engagement of the UN Charter (which forbids a member country from aggressing another member country, which was the justification for Bush the Father's Gulf War).

The outcry was highly vocal as the world tried to make Americans understand that unilateral intervention is simply NOT ON. The response to international aggression must come with the benediction of the UN. This represents a significant change in thinking as regards the justification of war.

But, to attribute the cause of war to a political current or business operations or climatic conditions (or whatever silly nonsense one would care to evoke) is the wrong debate.

The debate, to my mind, is this: If the UN is the arbiter of international conflict, who is the judge of internal conflicts (revolution, genocide, etc.) when condoned by the principle of "national sovereignty" - but the cause is a ruling clique maintaining absolute power over its citizenry.

Let's figure that riddle out first. In the above context, who is charged to prosecute the illegitimate use of force to subdue (or murder) a people? The International Criminal Court? A UN police force? Who?

jon livesey

The cold war didn't produce an international war in the half century it endured. That's quite true. But can we seriously attribute this "simply" to "a sea-change of mentality as regards international relations".

Amd here was me thinking that MAD had something to do with it.

Lafayette

"That's quite true. But can we seriously attribute this "simply" to "a sea-change of mentality as regards international relations"."

Tell me why not? What did MAD achieve? It forced contention into the public sphere, meaning the UN, and off the warfronts.

I suggest that the remaining "problem" is that of national sovereignty, which allows tyrants like Hussein of Kim Il Sung to get away with bloody murder ... legitimately, since there is no prosecuting agency willing to bring them before a tribunal. (Of course, to do so might provoke a wee little war ...)

The point is simple: Before wars were made on a whimsy without regard for the consequences. Nowadays an ethic is evolving that countries should first take their differences to the UN before unsheathing their swords.

I maintain that this is a great achievement that can and will prevent war. Of course, if people want to believe a Hollywood scenario that global warming will have us at each other's throats fighting for remaining water supplies, that is their business. And Hollywood's. It should make a good movie. ; ^ )

Maybe Iraq will be the last time that a jerk American PotUS will think that he can get away with an illegal war. Let's hope so, because the Yanks have a bad habit of starting them. It's great for business.

MaxC

Whether war or peace results from a dispute will depend on many factors. Those already mentioned include:

- whether there is a rule of law between and within countries, upheld by the UN or similar, as Lafayette has suggested

- whether there is a balance of power, of which mutually assured destruction is a form, to which Livesey drew attention

- a variety of economic factors such as those listed by Markwell.

In amongst everything else he says, Lafayette says that 'economics is central to peace' and that 'The principal concern nowadays is that global commerce should sustain economic growth'.

This really brings us back to the importance of economic factors (both short and long term) affecting war and peace, directly or indirectly, both historically and for the future - the kinds of questions Markwell raised, in relation to the contemporary relevance of Keynes' thinking.

This is not to say that other factors are not important in causing and preventing wars, or that any one factor operates in isolation.

During phases of the cold war, various western powers tried to supplement MAD at times by enmeshing the Soviet bloc in a web of economic interdependence, and at other times to influence it through economic sanctions.

Economic factors (such as the great depression) were significant in leading to the failure of efforts to create a rule of law through the League of Nations.

What happens in the future if global commerce does not sustain economic growth?

And, I'm quite sure that those killed in conflicts (wars, civil wars, invasions) in Korea, Hungary, Czechoslovakia, Vietnam, Cambodia, Afghanistan (remember the Soviet invasion?), Angola, Nicaragua, etc during the 'cold war' didn’t think that it had produced no war worth noticing.

Lafayette

"What happens in the future if global commerce does not sustain economic growth?"

Global commerce does not sustain economic growth per se. It can add to it. GDP is the principal indicator of economic growth and when it falters, and then internal factors are brought to bear. Unemployment is the usual consequence. This typically does not mean war, however. It usually means that the smarter people immigrate.

Global commerce can diminish the chance of war since the principal of comparative advantage allows all countries to participate, to the extent they can, in international trade. In most cases, this enhances total output of a nation and therefore plays in favour of employment.

The world is beset by numerous local conflicts. But, unless anyone can see how North Korea or Iraq or any of the African conflicts will spark conflagration on an international scale, well, that is difficult to imagine (except perhaps in Hollywood).

As people become aware that the product of their work is destined for foreign markets they come to understand that they are implicated in international commerce. More so, they come to also understand that war can easily affect that commerce and therefore indirectly thier livlihood. There is an increasing consensus therefore that war should be avoided at all costs - which is why there was such an outcry when the Nerd from Texas invaded one of the most sensitive areas of this planet (given its stranglehold on petroleum).

Any morally responsible person believing in the rule of law cannot abide genocide. Why the world caters to such disreputable people such as Saddam Hussein is unfathomable. But, Kim Il Sung and Roger Mugabe will likely die in their sleep, long after thousands will have perished resulting from their mismanagement.

This dilemma was at the heart of matter of Iraq. How can we tolerate a tyrant guilty of genocide, but the leader of a major petroleum producer?

The UN has no charter whatsoever to interfere in internal matters of a nation. But, there is another imperative, more important than "national sovereignty" and it is the right to life. So, it is for humanitarian reasons, based upon international law, that the UN should be given the means to address the harm done by a relative few who cause others to die.

MaxC

Lafayette gives a nice answer to some of Markwell's questions about economic factors contributing to war or peace - 'global commerce can diminish the chance of war'.

I also think he makes a powerful case for a serious international rule of law that prevents, or at least responds quickly and effectively, to genocide and maybe other humanitarian disasters.

But there are other interesting and pertinent issues resulting from Markwell's discussion of Keynes. I think that the long term economic risks (and so in time the international political risks) of global warming are serious and cannot be taken lightly. And, what about food and energy security?

What Lafayette says about global commerce has a long and distinguished lineage: Cobden and Bright, Cordell Hull, and Keynes for at least part of his life, etc.

This inevitably takes us back to where this discussion started: Paul Samuelson on the importance of reviving the study of the history of economic thought.

Both the books mentioned in this discussion look as though they will be helpful in this - Samuelson and Barnett's Inside the Economist's Mind: Conversations with Eminent Economists, and Markwell's on Keynes and International Relations: Economic Paths to War and Peace and I look forward to reading both of them.

BTW, it's interesting to note that one of Samuelson's first contributions to economic discussion was on the transfer problem, which arises, for example, with reparations payments - the very issue that shot Keynes to international stardom after WWI.

William A. Barnett

This exchange is productive and very interesting. But I'd like to point out to those who may not yet have seen Inside the Economist's Mind that what it contains is much more than history of thought. From the time that I began this project about 10 years ago, what I did was to arrange with the two publishers involved (Cambridge U. Press and Blackwell) that interviews be viewed as quotations and thereby not subject to any kinds of copy editing or refereeing by referees, editors, or publishers. In usual peer reviewed publications, even the most famous Nobel Laureates do not have the freedom to say whatever they want without required revisions (i.e., censorship). This book's conversations, from their first publication in the CUP journal that I edit, to their current appearance in this Blackwell book, have permitted eminent economists to "let loose." It became difficult to maintain that degree of freedom, when one of the participants (David Cass at the U. of Penn.) used the four letter f--- word to refer to a former dean by name. But I stuck to my original commitment and made that commitment known to all participants, including the great Paul Samuelson. As a result, in this book you will find revelations that will astonish you about such topics as economics, politics, governments, religion, oppression, assassinations, discrimination, wars, kings, presidents, the stock market, communism, fascism, and globalization, and often from first hand sources. I was myself amazed by what came out in these conversations, when the participants recognized that they could say anything. Although the book can be ordered from Blackwell, the book will not be widely available in bookstores until December. You will find statements in that book that could motivate astonished bloggers for months.

Lafayette

I don't wish to make a reflection on your book, Mr. Barnett, but I would rather see the "illustrious" descend into the arena with us. Free speach is permitted and I, for one, promise not to blanch at the F-word.

Regardless, I doubt we shall ever see them. 'Tis a shame.

William A. Barnett

Perhaps they will. But there is a need to speak the "same language." Once this book is in the bookstores so you can see it, discussion will be easier.

Even many of the photos in the book could motivate some unexpected discussion. But you'll need to see them first to see why. I'll be back online about this on this blog and on the book's own blog, once those in the "arena" can see for themselves what is in the book.

Anything said now by Samuelson, or me, or by any of the others in the book could appear to be little more than self-serving advertising.

Lafayette

WB: "But there is a need to speak the 'same language'."

I beg to differ. There is a need to speak MY language.

IMHO, the challenge of modern economics is to descend from its Ivory Tower and get into the field. Economists have been contemplating their navels far too long.

Yes, it is interesting to understand the contextual aspects of their work and often revealing, as you claim ... but I suggest it is, at best, anecdotal. And, that is largely because they are mostly academics who have practiced from the insulation of an academic institution. This is particulary true for the field of micro-economics.

By no means am I denigrating their work. I am not competent to do so. "Peer level review", however, is a necessary evil, because it often leads to navel-gazing whereby the many question innovations of the few courageous enough to claim that the emperor is .... er, bare-assed. (Excuse the analogy, which is obviously … exaggerated.)

William A. Barnett

Since these comments seem to have been motivated by the New Economist's admirable post about the book, "Inside the Economist's Mind," it is possible that some of you may wish to post something about statements that are in the book. If so, I'll pass those posts on to the relevant person in the book, and he may wish to add something to the discussion here online. That is why I said "Perhaps they will."

When I mentioned the "same language," I meant discussion that might induce someone in the book to post here. At present, only advance copies of the book sent to the media are widely available. Until the book is in bookstores, I don't see how I'm likely to find discussion here that would motivate a reply from those who participated in the discussions in the book. This has nothing to do with "ivory tower" language.

For example, if I were to pass on one of the above posts to Paul Volcker, Paul Samuelson, or Milton Friedman for comment, he would likely say, "why did you pass this on to me? Does this have something to do with what I said in the book about Richard Nixon, Bill Clinton, Arthur Burns, John Kennedy, Joseph McCarthy, Benito Mussolini, or what?" As I've said, I'll look here again in about a month, to see if there is anything I should pass on for comment to those in the book.

I don't think it is appropriate for me to do otherwise.

Lafayette

WB: "I don't think it is appropriate for me to do otherwise."

Quite right.

We are getting a bit off-subject. Still, the question of whether the names you mentioned should descend from the heights to discuss economic matters on a blog is pertinent.

Frankly, if my name were well known in economics, which is not the case, I doubt I would care to blog about the subject. The rules of the game in the academic/political world are quite different from those of the blogosphere, simply because in the latter pseudos are employed.

Ideas, here, must stand on their logic and not the name behind them. Besides, this media is too restricted to develop points-of-view to any depth.

Bupa


Lafayette: "Frankly, I think your questions are of no consequence."

Welcome to the Lafayette school of strong opinions, let history and science be damned!

Lafayette then asserts war is only caused by “Leaders of countries…desire to impose their will on another nation.” He then thoughtfully goes on to refine this one and only cause of war “War…[is] employed to expand the territory of one population in order to better their lot.” Then our thoughtful leader reconsiders the evolution of the cause of war and notes profoundly that war is not necessary because “trade (and comparative advantage) bring the sought enhancement in well being”.

Now readers don’t be fooled into thinking this has anything to do with Markwell’s uselessly academic question “Does free trade promote peace”. Don’t be fooled lazy readers! Lafayette already declared Markwell’s questions are useless. Therefore, the apparent relationship between Lafayette’s profound analysis of war and trade should not be taken as an answer to Markwell’s question.

But enough about war. Lafayette then announces that “economics is central to peace”. Dear reader, do not be confused. This is not an answer to Markwell’s questions: “What part do policies to promote economic prosperity have to play in post conflict reconstruction? And “how to reconstruct the international economy after a world war to reduce the chances of there being another one?”

The esteemed Lafayette then explains that the Cold War did not “provoke a major international war” because of a “sea change of mentality as regards international relations.” Apparently “Dubya the Decider” (whose powerful intellect in many ways resembles the Lafayette school of strong opinions, let history and science be damned!) violated this “sea change in mentality” by declaring an illegal war of aggression.

So our brilliant leader, Lafayette, concludes definitively “to attribute the cause of war to a political current or business operations or climatic conditions (or whatever silly nonsense one would care to evoke) is the wrong debate. The debate, to my mind, is this: If the UN is the arbiter of international conflict, who is the judge of internal conflicts (revolution, genocide, etc.) when condoned by the principle of "national sovereignty" - but the cause is a ruling clique maintaining absolute power over its citizenry.”

So you see, dear reader, it is a useless waste of time to read the history of economic thought in the context of war and peace. One would think with such a virtuoso performance no human would dare challenge his logic.

Other’s later make the unenviable mistake of trying to challenge our fearless Lafayette. He swats them away with lines like: “I beg to differ. There is a need to speak MY language.” Ah, well said. (Yes only when Samuelson, Friedman, Volker and their ilk speak the same language as Lafayette will the world be a livable place).

Oh there’s more: “the challenge of modern economics is to descend from its Ivory Tower and get into the field. Economists have been contemplating their own navels far too long.” Now dear reader, don’t get confused and interpret this comment as a recommendation of the books under review, nor all those uselessly academic questions raised by the hapless Markwell nor the lowly editor Barnett.

Kindly, Lafayette explains that he is not “denigrating” their books (which he hasn’t read, true to his school of thought of holding strong opinions without evidence!).

Bupa

I am sad to learn just moments after using Milton Friedman's name in a satire of Lafayette, that the old professor passed away earlier today.

Bupa

I am sad to learn just moments after using Milton Friedman's name in a satire of Lafayette, that the old professor passed away earlier today.

don markwell

The passing of Milton Friedman is profoundly sad news.

His own writings show the relevance to contemporary issues of the history of economic thought with regard to war and peace.

In ‘Free to Choose’ (1980), Milton and Rose Friedman wrote:

‘International free trade fosters harmonious relations among nations that differ in culture and institutions just as free trade at home fosters harmonious relations among individuals who differ in beliefs, attitudes, and interests. …

The century from Waterloo to the First World War offers a striking example of the beneficial effects of free trade on the relations among nations. …

In the modern world, tariffs and similar restrictions on trade have been one source of friction among nations. But a far more troublesome source has been the far-reaching intervention of the state into the economy in such collectivist states as Hitler’s Germany, Mussolini’s Italy, and Franco’s Spain, and especially the communist countries, from Russia and its satellites to China. … Trying to use trade as a political weapon or political measures as a means to increase trade with collectivist countries only makes the inevitable political frictions even worse.’

In the same book, the Friedmans also described Keynes as ‘one of the great economists of the twentieth century’.

After youthful enthusiasm for free trade as a policy for peace, Keynes came to think the issues more complex than that – and more complex than the Friedmans later presented them. For example, he pointed out that the great age of free trade had not prevented the First World War – though he also said that the rise of economic nationalism in many countries had helped to create the poisoned atmosphere in which it arose.

Keynes came, in ‘The General Theory’ and beyond, to develop a theoretical framework and then, during the war-time economic negotiations that led to and beyond Bretton Woods, to create an institutional and policy framework in which free trade could come into its own again and be an agent of peace. It was in the kind of institutional and policy framework they thought appropriate that he and Milton Friedman were most likely to differ - though not as much or as starkly as many over-simplifiers of Keynes might have us believe.

Keynes was more optimistic than Friedman appears to have been that economic sanctions could have beneficial political effects.

Rest in peace, Milton Friedman, undoubtedly also ‘one of the great economists of the twentieth century’.

Don Markwell

MaxC

I would also like to pay my respects to the late Milton Friedman.

It’s interesting that this weekend the top economics ministers and central bankers of the G20 countries (together with the heads of the IMF, World Bank, etc) are meeting in Melbourne, Australia.

The Australian Treasurer (= Chancellor of the Exchequer/Treasury Secretary) Peter Costello, who is hosting the meeting, has written this week with regard to the G20 agenda and anti-globalization protesters,

“Some critics don’t believe in open trade between countries. But trade between countries, particularly since World War II, has been a major factor in raising living standards. It was the effort to close markets, seize resources and block other countries from using them that increased tensions, led to blockades and contributed much to war in the Pacific during the last century.”

He also wrote,

“An open economic system helps countries develop.”

And, “Opening to trade with the world and opening to economic development is the best course for a country to develop, it is the best course for global prospects, and it is the course most likely to avoid international tensions and clashes over resources. This is truly of global importance.”

Sounds as though he has been reading Friedman and Keynes (and maybe even parts of this blog!)

It’s also interesting that the G20 agenda includes energy security, global warming, reform of the Bretton Woods institutions (IMF and World Bank), and trade liberalisation.

Some of this will also feature in the APEC summit in Vietnam, including the American initiative for an Asia-Pacific free trade area as a means of revitalising moves for a global trade liberalisation.

No doubt many of those pushing this believe that it would promote harmony between countries, and help avoid the “international tensions and clashes” that Costello mentions.

Arthur Eckart

History of Econ Thought is still a required course in conventional undergrad and grad econ schools (along with Macro, Micro, Econometrics, and Math Econ). It's also a narrow field. You can find politics, environmental studies, international relations, etc. in other courses. Yes, Milton Friedman made great contributions to society. Economics remains a live field with much to discover.

Lafayette

A homage to Friedman:

Friedman was born of Hungarian immigrants in New York City.

Immigrants are those who are courageous enough to uproot themselves to pursue another way of life. It takes some bravery to embark on a new course far from the original hearth and home and family.

It may be that his cultural context induced within him the notion that freedom is a matter of individual choice and the ability to formulate one’s destiny by means of choice.

Once set in that framework, the rest of his thinking never wandered. Of course, the bedrock of American culture is individual freedom, so Friedman's thoughts found ample room for expression in his native land.

In other words, his work is testament to freedom of thought and its benefits when nurtured and left unbound.

If his parents immigrated to the US it was to better their lives. Globalization is simply an economic means of assuring that people, wherever they may be, need not do that in the future. Whether the political will to nurture globalization is there to follow is another question. (Leaders are sometimes less courageous than immigrants, which is why they rarely immigrate?)

Lafayette

DM: "such collectivist states as Hitler’s Germany, Mussolini’s Italy, and Franco’s Spain, and especially the communist countries, from Russia and its satellites to China"

I must take exception to your usage of the word "collectivist". Collectivist is not a new word in the sociological dictionary, but neither is it a common attribution.

From Wikipedia: "Collectivism is a term used to describe any moral, political, or social outlook, that stresses human interdependence and the importance of a collective, rather than the importance of separate individuals."

Nazism was totalitarian but was it collectivist? France and Germany today are not totalitarian, but are they collectivist?

My short answer: No to the first, yes to the second. The Nazis permitted private enterprise (whilst the Communists did not). France and Germany today are not totalitarian, but they may be considered collectivist.

I cannot accept your attribution of collectivist societies as being automatically totalitarian. I will accord, however, that whereas collectivist societies do demonstrate a heavy state hand in determining the lives of their citizens, if democratically elected, then this is obviously a manifestation of the citizens’ free will.

Collectivism is a political mind set where the needs of the community (or nation) prevail over those of the individual. Individualist countries are the opposite. Both sociological attributions manifest themselves in political institutions and state policies that the institutions implement. (Again from Wikipedia: "Individualism is a term used to describe a moral, political, or social outlook, that stresses human independence and the importance of individual self-reliance and liberty.")

Anglo-Saxon countries tend to show more individualist types of social behaviour (see Geert Hofstede for his work in the cultural attributes of different nations at : www.geert-hofstede.com/). From Hofstede's work, European countries are considered more collectivist in the attitudes of their people.

But, these are not definite categorizations. The social attributes of many modern societies are dynamic and can change historically. I suggest that European societies are tending towards more individualism as their people find that looking to the state to assure their well-being, and particularly their livelihoods, is wishful thinking in this modern age of globalization. Times change, people change.

Even the most collectivist cultures, those of the Far East for instance, are showing signs of more individualist tendencies.

But, by no means am I promoting the virtues of an individualist culture. The empirical evidence to date shows that in such countries, where the primacy of the individual is far too exaggerated, the distribution of wealth created economically is grossly unfair.

So, I suggest that a middle-ground is perhaps most appropriate. Admittedly, what I think is personal. Whereas, how citizens chose in a voting booth is far, far more relevant.

Fascinating subject, I find, and a point at which sociological and economic factors intersect.

don markwell

Thanks to MaxC for mentioning the link between the weekend’s G-20 and APEC summits in Melbourne and Hanoi and discussion of the contemporary relevance of Keynes’s thinking about the economic causes of war and economic means of promoting peace.

It was particularly interesting that ‘energy security’ – and the need for open markets for energy and minerals – was important in both summits, and was perhaps the centrepiece of the G-20 meeting.

The G-20 host, Peter Costello, is reported as saying ‘that shutting countries out of energy markets could threaten world security’, and that an important aim for G-20 was to begin finding ways to avoid a ‘jostle for resources’.

A leading economic commentator, Saul Eslake, is quoted as saying, with regard to the G-20 discussion: ‘The question of access to resources raises potentially significant geopolitical risks over the next two decades … the scramble for energy and resources is a potential cause of conflict in the next 20 years: it is therefore better that they are talking than sparring.’

Eslake referred to colonial land grabs creating tensions that contributed to causing World War I, and said that Japan became an enemy of the West, leading into World War II in the Pacific, ‘in part because Western countries sought to block its access to the world’s resources’.

It has been suggested that the focus on open markets for energy and other resources may have been one of the most significant outcomes of the G-20 meeting in Melbourne.

Thanks also to Lafayette for his questioning of the word ‘collectivist’. In fact, this word was not mine, but was contained in a quotation from Milton and Rose Friedman, also on economic causes of political conflict between countries.

It may be that, as Lafayette suggests, they used the word in too sweeping a way. I have no doubt that Milton Friedman would see open markets for energy and minerals as just one case of the general propositions that free trade encourages peace, and that exclusionist economic practices are liable to lead to conflict.

Lafayette

"A leading economic commentator, Saul Eslake, is quoted as saying, with regard to the G-20 discussion: ‘The question of access to resources raises potentially significant geopolitical risks over the next two decades …"

No doubt, but when one says "resources", the thought provoked is "oil".

I suspect that the world has awoken finally to the fact that dependence upon the Middle East for the well-being of a nation (in terms of energy supplies) is not a good idea. The next question is "What to do about it?" The Republican administration's response was "Drill for more oil". Yeah, right.

The only viable alternative to petroleum based energy generation is nuclear energy over the next two decades. All the rest, whether tidal or aeolian or geothermal or solar panels, cannot suffice. (Though, the fact that most people do not know sufficiently well is that at a meter below ground the earth's temperature is a nearly constant 18°C, making an "old technology", the heat pump, a viable solution for modern home heating. This was true thirty years ago, but is more relevant today with oil at ten times the price.)

The most developed countries are bound to adopt solutions that free them from the carbon molecule as regards energy needs and, given the venture-capital going into even the craziest solutions, the R&D will accelerate surely.

Frankly, I don't care to believe the Cassandras. The alternatives are there, but the political will to implement them is not always at the same rendezvous. Europe is far ahead of the US in its commitment to alternative energy means. (In France, the cost of geothermal heating is offset somewhat by a tax credit, bringing the amortization down by half - from seven to four years.)

History repeats itself, but rarely in the same way. Army generals are renowned for making the same mistake, that is, "Fighting the present war with tactics learned in the last one". As regards the energy war, we should try to avoid that mistake, which means that finding new technologies, as yet unproven, must provide the answer. And, there is good reason to believe they can and they will.

William A. Barnett

Another commentary on Inside the Economist's Mind has just appeared. It is in the November 19'th article in David Warsh's economicprincipals.com. The direct link to it is: http://www.economicprincipals.com/issues/06.11.19.html

Among its observations (it is a long article) are the following:

"This is as close as anyone in economics has come to the interviews with influential writers for which Partisan Review was famous ...Thus Janos Kornai’s thesis defense in Budapest, on the eve of the Revolution in 1956, attracted an audience of several hundred people. But its appearance as a book, Overcentralization, got him fired (while, for other activities, a close friend was executed). Robert Lucas turned down George Shultz’s offer of a job in Washington and Arthur Laffer was hired instead. Jacques Drèze, the Belgian polymath who founded CORE (the Center for Operations Research and Econometrics) at the Catholic University of Louvain and turned it into a world-class incubator of new ideas, started adult life in London representing his father’s small-town bank in 1949. Before long he was representing most of the other businesses in his little Belgian hometown: selling sterling forward on behalf of wool washers, bartering pig iron to Finns in return for textile machinery, raising equity capital and mediating labor agreements. The book is full of illuminating personal stories like these."

William A. Barnett

European press release to be sent out from Oxford office of Blackwell next week. It is online as a gif at
http://econ.tepper.cmu.edu/barnett/UK_press_release.html

Scroll to bottom for link to better quality pdf version.

William A. Barnett

The San Diego Union-Tribune has just selected I.T.E.M. as one of its five best book picks for the holidays. You can find the article online at:

http://www.signonsandiego.com/uniontrib/20061203/news_lz1b3oshaugh.html

Oh, but regarding the conclusion --- yes, I do still have some hair left.

Anyway, here is what appears about I.T.E.M.:

"If you would like to buy a financial title for the holidays, here are my [five] picks:....This is an insightful book for anyone who would like to know what the nation's leading economists are thinking, without plodding through peer-reviewed journals or textbooks. In nugget-sized servings, the book contains interviews with 16 economists, including eight Nobel laureates, who reflect a panoply of views. Freed from the constrained environs of professional journals, these prominent economists were able to talk freely and let their hair down. At least those who still have any left."

William A. Barnett

The book still has not arrived at bookstores in the US. Maybe the shipment from the UK was hijacked by the Grinch Who Stole Christmas. But the book has been available in the UK for over two weeks. In Scotland, Brown Books, which discounts books and provides all profits to charity, is already listing the book as one of its 10 best sellers in economics. I wonder whether some of the copies purchased in the UK have been finding their way to the Texas firm, Metro Books, which is selling the $29 paperback in the US for $173.34.

Blackwell is being bought by Wiley, so in a few months the book will be printed in the US, rather than in Oxford. I can hardly wait.

Lafayette

I think I'll wait for the film ... ;^)

Wishing you nonetheless a great success with the book!

William A. Barnett

Hi, Lafayette. I'll be in the UK next summer. Perhaps we can cast you in a role for the film? What part would you want to play?

Lafayette

"What part would you want to play?"

Lafayette, of course.

Had he survived to our age, he'd have a fine idea of how economic principles, notions and ideas have evolved along two very different courses in both Europe and the US over the intervening centuries.

He'd also be very attracted to the historical fact that some of the better ideas that have reached down through the centuries were originally not of "Economists" but "Philosophers". As they were called at the time.

And, it is just this attribute that, I feel, is lacking in current economic thought. It is difficult to insert (and defend) a moral value in economics in a world dominated by financial pragmatism, regression analysis and ... er, get-rich-quick hedge funds.

I would be particularly keen to "interview" Lafayette on his notions regarding today’s political economics (as the subject is called in French). He was a country gentleman (and minor noble) who, having helped give birth to a democracy, then also tried to save a kingdom (and a King who had tried to prevent him from going to America). Interesting dichotomy, that, I should think.

William A. Barnett

I knew I had asked the right question, and I like your suggestion; but unfortunately Lafayette is not mentioned in the book. We could try to cast you as Jacques Drèze in Louvain-La-Neuve, Belgique, but I don't think that would work too well. How about János Kornai in Budapest? I think you would be outstanding in that role, if you could acquire a Hungarian accent in time for the filming.

Lafayette

Yes, of course, neither should he be mentioned. He was no Political Philosopher.

But, a fictionalized debate between the great philosophers of yore, written by some Cambridge economic historian ... why not? The DVDs would fly off of Amazon's shelves to economics classrooms around the world.

Your book is achieving the success it deserves. It was a fine idea to interview these "greats" of modern economic science. Now, juxtapose their thoughts with those of the greats who founded the philosophy of economics, from a moral point-of-view.

That p.o.v has gone missing. It’s there and its time to bring it back into perspective with the other notions that prevail in modern economic thought.

NB: Also, read this week’s Economist with an interesting article on the “economics of happiness”. After all, American forefathers put that word into the declaration of independence. They did not write, " ... life, liberty and the pursuit of a megabuck in Net Assets".

William A. Barnett

The following interesting post just appeared (December 31, 2006) in Brad DeLong's influential "Semi-Daily Journal" blog:

"When Nixon himself became president in 1968 and had the opportunity to appoint a new Chair for the Federal Reserve in 1970, the man he turned to was the same Arthur Burns who had advised him to ease up on monetary policy prior to the 1960 election. Milton Friedman offered these impressions in a 2000 interview that is included in the book Inside the Economist's Mind:

From the moment Burns got into the Fed, I think politics played a great role in what happened. So far as Nixon was concerned, there is no doubt, as I know from personal experience. I had a session with Nixon sometime in 1970-- I think it was 1970, might have been 1971-- in which he wanted me to urge Arthur to increase the money supply more rapidly [laughter] and I said to the President, 'Do you really want to do that? The only effect of that will be to leave you with a larger inflation if you do get reelected.' And he said, 'Well, we'll worry about that after we get reelected.' [page 116]."

Arthur Eckart

William, do you ever wonder why there are money supply easing and tightening cycles in the short-run and do you recall the 1970 recession that lasted a whole year?

William A. Barnett

Arthur, I was on the staff of the Federal Reserve Board in Washington, DC from July 1973 - December 1981. Suffice it to say that there are many things worth "wondering about." In fact when I resigned from the Board for my first academic position (an endowed chair at the University of Texas at Austin), I was threatened with legal harassment, if I ever were to become known as a critic of Federal Reserve policy .....

In fact I very much admire this New Economist blog for its openmindedness in wondering about such things.

Arthur Eckart

William, short-run easing and tightening cycles seem to be something major to wonder about. It may be inflation is purely a monetary phenomenon in the long-run. I can't criticize Fed policy either :)

Lafayette

WB: "In fact I very much admire this New Economist blog for its openmindedness in wondering about such things."

The fact that politicians have manipulated central banks is no wonder to anyone. The examples are abundant. What you have shown is the direct testimony of an economist who was involved in one such attempt.

What surprises me is that the Fed (and the ECB) is supposedly a council of decision makers ... but somehow the Chairmen seem to wield unbridled power to do as they see fit. Have we forgot that such positions have been "insulated" from political control for some very cogent reasons? (Chairmen supposedly report to both the PotUS AND to Congress in the US. Trichet has similar reporting responsibilities in Europe .. but, like the Fed Chairman, he is free to make decisions that often disappoint politicians - a case of which happened just recently in fact.)

This means that we should not be waiting decades for such "tales" to come into print. Meeting minutes should be made public within at least 6 months of the meeting.

That might prevent trite comments, such as "exaggerated exuberance", from Board Chairmen who may be trying to signal a sentiment to the general public. Of course, making the meetings public would not prevent the minutes from being cosmetically altered to please the Board Chairman ...

The problem with most political positions (either elected or appointed) is that the holders become tributary to influence, either by superiors or by lobbyists … or by their spouses. The failing is all too human.


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