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November 4th, 2012

Feature Essay: The books that inspired John Van Reenen: “I think I always enjoy reading Conservative thinkers more than leftist ones. It’s much more fun to have books that really challenge your positions rather than confirming your prejudices”

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Estimated reading time: 10 minutes

Blog Admin

November 4th, 2012

Feature Essay: The books that inspired John Van Reenen: “I think I always enjoy reading Conservative thinkers more than leftist ones. It’s much more fun to have books that really challenge your positions rather than confirming your prejudices”

5 comments | 1 shares

Estimated reading time: 10 minutes

John Van Reenen, Professor of Economics and Director of the Centre for Economic Performance LSE, talks us through the must-read comics that first inspired his interest in science and technology, the books he would recommend for a non-economist, and why everyone should read Milton Friedman’s Right to Choose.

 

Beginnings

Like most people I never consciously chose a career, let alone God help me in economics. When adults would ask me “what will you be when you grow up” my usual reply was “bio-chemist”. This had the intended effect of killing off further questions and wasn’t a complete lie. Naturally I hadn’t a clue what a bio-chemist was, but I did know it was the chosen area of study of my hero, Spider Man. Or more accurately, his alter-ego Peter Parker. All us geeks loved Peter – bullied at school, no girlfriend, etc. I was fortunate enough to read the first issues of Spider Man courtesy of the “Mighty World of Marvel”, cheap British reprints of the American originals. I would recommend reading the first 20 or so issues of the “Amazing Spider Man” by founder of Marvel comics Stan Lee and crazed artist Steve Ditko. The series was revolutionary in the early 1960s and broke the mode of clean cut heroes like Superman to appeal to. Peter had real life problems. Spidey and the low grade villains he foiled were surreal and compelling. Interested readers might like Essential Spider Man Volume 1Other must-read comics would include Alan Moore’s Watchmen, From Hell and the V for Vendetta (forget the lousy film); Neil Gaiman’s Sandman and Frank Miller’s Dark Night.

Real Science

Science was great as a way of understanding the natural world, but what I really wanted to get to grips with was how societies were sustained and evolved. As with nature there seemed to be so many regularities across history in terms of laws, families, taboos, cities, religions, states, nations, work and exchange. The cliché that “everyone is different” was trivially true, but profoundly false. Yes people vary but economies seemed more stable.

I was motivated by the desire to understand, to analyse, but also to change things. The disparities of power were everywhere – in the school yard as well as the rich and poor parts of the globe. I was a teenager in the late 1970s and early 1980s when everything seemed to be falling apart in Britain. I wanted to analyse what was happening in order to change this for the better.

Technology and Power

I liked economics because it focuses on material interests as a driving force of human behaviour. We might not like the fact that incentives matter a lot, but it’s true. As Adam Smith said “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. A good way to start off with analyzing any situation is to ask cui bono – who benefits? Or more felicitously “follow the money”. Pretending that people are angels generally makes for poor policies and the idea of treating people as rational agents interacting to produce often unexpected equilibria is a very powerful method. Smith’s Wealth of Nations has most of economics nailed.

My father was a sociologist and this lead me to Karl Marx. Marx had this vaulting ambition to understand history and human societies and I think the most succinct expression of this is the Introduction to A contribution to the Critique of Political Economy.

The best attempt to make Marxism coherent and self-consistent as a theory is the truly brilliant Making Sense of Marx by Jon Elster. This book manages to show what makes sense from an analytic perspective and what does not. The ambition of understanding social change and history is extraordinary, but by clarifying makes clear the many ways in which Marx was fundamentally wrong. The key notion is the interplay between the exogenous driving force of history of technical change (“the productive forces”) and economic classes. This interaction between technology and power remains in my view the key to understanding economy and society. So although Marx wasn’t right he was looking in the right place.

My favourite book by Marx is the 18th Brumaire of Louis Bonaparte, which is a great example of his historical journalism. It shows how when he came to analyse an actual historical event, economics, politics, ideology and luck all blend together in a heady and compelling concoction. Most Marxist writing is dry and confused beyond belief. But one book that I loved was Harry Braverman’s Labor and Monopoly Capital. It is also a wonderful book showing how the causality does not all go from technology to class relations –  Powerful interests shape the ways in which technology is introduced.

Disturbing Philosophies

At Cambridge, I worried a lot whether the idea of social science even made sense. I read a lot about the theory of knowledge which gave me few answers but helped a lot in recognising poor arguments and sharpening my analytical ability.

I think the book Reasons and Persons by Derek Parfitt is a real classic and good introduction to different notions of what the self is (e.g. Humean vs. Kantian). Properly understood, it should make everyone feel deeply queasy about what it is to be an individual, perhaps little more than a collection of correlated experiences.

Irritating Politics

Thomas Hobbes’ Leviathan just about has everything about the foundations of politics that one needs to know. Skip the religious tripe where Hobbes tries to dodge the fact that his bleak vision is deeply secular. The work is essentially a game theoretic analysis of why in a modern economy with a division of labour requiring large number of basically anonymous people living together, one needs a strong state. Anarchist fables are blown apart without mercy as the “State of Nature” is memorably described as “nasty, brutish and short”. Rational people will not end up co-operating freely and it is in the best interests of all to desire a (Hobbes thought strongly authoritarian) body with a monopoly of the means of violence. John Dunne and Quentin Skinner have good introductions to Hobbes.

I have always located myself on the centre-left, but even in my strident student days I was seen as an incorrigible reactionary by my mainly anarchist friends. Such disdain encouraged me even more into reading Hobbes, Locke, Smith and classical liberal thinkers.

Perversely, I think I always enjoy reading Conservative thinkers more than leftist ones. It’s much more fun to have books that really challenge your positions rather than confirming your prejudices. Everyone should read Milton Friedman’s Right to Choose and Freidrich Von Hayek’s The Constitution of Liberty. Roget Scruton’s character assassination of our intellectual heroes in Thinkers of the New Left was a particular delight. Maybe like surreptitiously reading the free Daily Mail on the plane.

History

I admire historians and their patience for intricate detail. But my favourite historians have the grand sweeping view of humanity that is so intoxicating. So Eric Hobsbawm, David Landes, Barrington-Moore and more recently Jared Diamond are more my cup of tea. And the new wave led by Daron Acemoglu and Jim Robinson (Why Nations Fail) is of this ilk.

I reviewed Claudia Goldin and Larry Katz’ wonderful The Race between Education and Technology last year and I would strongly recommend this. It gives the best story of why America rose to become the most powerful nation in the world through investing in education, while we elitist Old Worlders were convinced that the lower classes would never benefit from anything more than basic schooling (a familiar refrain). But it also shows how the US lost its way in the last quarter of the twentieth century, allowing education to stagnate and inequality to take off.

Back to Economics

The clarity and beauty of economics won me over from all the other social sciences. It cuts through so much sloppy thinking and hand-waving theorising; it is a breath of fresh clean air to anyone who has read the turgid ramblings of too much social and political theory, even those like Jurgen Habermas or Antonio Gramsci for example, who are obviously brilliant.

This is clear from any basic micro-economic textbook (like Hal Varian’s, now better known as Google’s Chief Economist).

But if I was honest about which books most made me want to be and stay an economist, it would be an odd mixture. Despite my love of micro-economic, being forced to read Keynes’ General Theory again and again at Cambridge has been a great boon. Just about everything required to understand the current crisis is here, as Paul Krugman’s wonderful polemic End This Depression Now! makes clear. Start with Krugman and then go back and read Keynes. All the arguments and counter-arguments are there.

My own research work has most been influenced by empiricists. When I did a master’s at LSE I read Freeman and Medoff’s What Do Unions Do which was a revelation. The standard approach we learned as undergraduates was to incorporate “institutional distortions” like unions into a simple competitive model and use this to make qualitative predictions (which were always pretty bad). Richard Freeman could do this of course, but when you apply any economic theory to the real world it is generally ambiguous, at least away from the world of perfect competition. The book therefore focused on empirical tests of what unions actually did do: to wages, jobs, inequality, profits and above all productivity. Using a mixtures of careful statistical techniques the book showed that on average unions increased wages, reduced inequality and profits and could even have positive effects on productivity (through encouraging workers to have a “voice” rather than simply “exit” the firm).

The book’s findings have held up pretty well over time. But for me the excitement was that the main questions we asked as economists could be tackled by creatively using data and econometric techniques rather than just theory (which told you the answer in advance).  And the answers were highly relevant for policy.

Another example of this type of inspirational work on the impact of labour institutions is Myth and Measurement by David Card and Alan Krueger (the head of Obama’s Council of Economic Advisors). They did things like looking at the impact of a minimum wage rise in New Jersey fast food outlets compared to similar ones in Philadelphia. Contrary to our basic economic models they found no big falls in employment after the passage of the wage hike.

Alongside my supervisor, Richard Blundell, Richard Freeman and David Card are my gurus of economics. All three do careful empirical work with painstaking attention to data in order to address vital policy questions. When I started my career I thought being a social scientist would be about grand theories and probing the secrets of the economic universe like Stephen Hawking does for physics. In fact, as David Card once said to me, it’s more like doing the plumbing. But plumbers are thoroughly good things to have.

To round things off, here are a few of the books in recent years I would recommend reading for a non-economist.

  • Dubner and Levitt’s Freakonomics. This is a continuation of the natural experiment approach of Freeman and Card, but in new directions. The message: incentives matter even in places you wouldn’t expect, like crack gangs and sex workers.
  • Adapt by Tim Harford which shows the importance of encouraging experiments and learning from failure.
  • Fault Lines by Raghuram Rajan which is fantastic on the crisis. I would like to believe his explanation that the growth of inequality generated the policies underlying the crisis, but I don’t think it quite works.

I think I will start reading these all over again.

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John Van Reenen is the Director of the Centre for Economic Performance (CEP), Europe’s leading applied economics research centre. He is also a Professor of Economics at the London School of Economics and Political Science. He has been a senior policy advisor to the Secretary of State for Health, Downing Street and many international organisations. In 2008-2009 he was the Denning Visiting Professor of Global Business and Economics at Stanford University. He has published widely on the economics of innovation, labour markets and productivity. Professor Van Reenen received his BA from the University of Cambridge, his MSc from the London School of Economics and his PhD from University College London. He has written over 100 articles and book chapters and frequently appears in the media. He has been a CEPR Research Fellow since 1997. In 2009 he was awarded (jointly with Fabrizio Zilibotti) the Yrjö Jahnsson Award.

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