Category / Books

by Andrew

Rocket scientists, secret cities and runaway brides: the stories behind the one-child policy

mei-fong-one-child

Congratulations to my old friend and colleague Mei Fong, whose new book One Child is out just in time to mark China’s transition out of the one-child policy era into the new two-child policy. It’s not a dry piece of demographic analysis, but has vivid and heartfelt reporting that digs out the many fascinating stories behind the slogans. The rocket scientists who designed the policy, the town where a two-child policy was pursued in secret, the personal stories of officials who enforced the policy–it’s all here. Plus there are close-up views of the complexities of sex, fertility and family in today’s China: we see rural villages empty of women, visit sex doll factories and hospices, meet surrogate mothers and adopted children. The ebook is out now, print edition coming in January.

by Andrew

What if innovation requires irrationality?

I recently finished The Knockoff Economy: How Imitation Spurs Innovation by Kal Raustiala and Christopher Jon Sprigman, as part of my periodic attempt to educate myself on productivity issues. I decided to tackle to my to-read list from the bottom rather than the top for a change, and since this book had been sitting there for at least two years, it was the winner. It’s very good and clearly written, and a lot of their arguments have become more mainstream since it was published in 2012.

There are many interesting tidbits throughout, but one I found very intriguing came at the very end, in a coda not closely related to the main substance of the book. Here is an excerpt of the relevant section:

Conventional thinking about innovation and IP relies on the concept of a rational innovator. It assumes that innovators calculate, either explicitly or implicitly, the cost of creation versus the size of the return they will likely enjoy. A writer might anticipate a certain advance from her publisher; a musician might estimate the sales of a new song. This expected return shapes how much effort they pour into creation and what kinds of creation they pursue. Abundant research in economics and psychology, however, suggest that their judgments are often likely to be wrong—and systematically so.

As many studies have found, individuals are very bad at assessing their own future prospects. They have a pronounced optimism bias. They think they will succeed where others have not, and they heavily discount the prospect of failure. Nearly all newlyweds, for example, believe they will not get divorced, when in fact a large minority will—and often within a few years. Likewise, students wildly overestimate their likely grades, even in the face of stiff competition. Like the residents of Lake Wobegon, we all want to believe we are above average. … Optimism bias, in short, leads many innovators to think they will gain a greater return from their intellectual creations than they actually do.

Why is this important to understanding the interaction between copying and creativity? Because optimism bias likely acts as a subsidy for innovation. Creators who have an unduly strong belief in their ultimate prospects for success should be willing to invest more in their creativity. And this increased willingness to invest is likely, in turn, to lead to increased creative output as compared with a world in which creators rationally calculated the odds—odds that may include expected losses from copying.

There is another important, and related, factor that skews how innovators assess their expected return on innovation. Many contemporary markets for creative goods are what economists call “winner take all” or “tournament” markets. In these markets, a huge reward goes to a few at the very top—the superstars—while much less goes to those just below them. This dynamic is easy to see in areas like professional sports: just think about Major League Baseball, where the very best players receive enormous salaries, while those who are merely excellent languish on AAA farm teams, earning a tiny fraction of what the true stars do.

Tournament markets amplify small differences in performance into enormous disparities in reward. Given this basic dynamic, we might expect people to shy away from competing in markets like these—the risk of failure is great, competition can be very intense, and the difference between success and failure hard to determine until years of effort have been invested. Yet we see large numbers of individuals competing to become a sports star, a national politician, a CEO, or, most important for our purposes, a musician, writer, or inventor of the next huge Web concept. Many markets for creative goods are tournament-like. A hit song can yield huge sums for the right creative artist. Yet the vast majority of songs go nowhere, commercially speaking. Likewise, books and screenplays can rake in enormous revenues if they are truly successful, but New York and Los Angeles are awash in the tens of thousands of authors who tried and failed. …

Like optimism bias, tournaments induce more investment than is rational. So both optimism bias and tournament markets push innovators toward high levels of innovation. …The important point is that both of these effects exaggerate anticipated benefits. And it follows that exaggerated expectations of benefit will tend to keep innovation buoyant, beyond what a rational calculation of return would predict.

In other words, pursuing innovation to some extent depends on having irrational expectations about the future. To me, this ties very neatly into David Graeber’s bureaucratic theory of technological stagnation: he argues that the more research is driven by corporate bureaucratic practices that require precise estimation of the outcomes and benefits of said research, the less innovation actually happens. This contention directly challenges William Baumol’s idea of the “free-market innovation machine”: that sustained rapid economic growth is possibly precisely because innovation can be turned into a routine organized activity, and does not have to depend on random flashes of insight.

It does seem clear that once innovation becomes a routine corporate activity with a budget and cost-benefit analysis, then that cost-benefit analysis should be more accurate than what individual people do in their heads with all the usual cognitive biases and errors. But if the incentive to innovate depends on systematically over-estimating the potential benefit of innovation, then doing an accurate cost-benefit analysis will not in fact be a good thing. It may lead to less wasted effort at the individual or firm level, but could also mean less innovative activity in aggregate.

To be clear, this is not at all what Raustiala and Sprigman argue–to the contrary, they think that the irrationality of innovation in fact makes it more resilient to bad regulation or intellectual property-rights violation, and therefore is a reason to be more not less optimistic about the future of innovation. And I don’t completely believe the bureaucratic theory of technological stagnation either (Baumol is a genius and more likely to be right than Graeber). It is worth thinking about though.

by Andrew

The Russian origins of Chinese economic reform

DXP   

One of the more interesting arguments in Pantsov and Levine’s new biography of Deng Xiaoping is that China’s post-1978 economic reforms should be understood not as a rejection of Soviet-style Communism, but as a development of a different tradition of economic thought within Communism. Specifically, they argue that many of the features of the 1980s reforms were directly inspired by the “New Economic Policy” practiced in Soviet Russia in the mid-1920s. Here’s what they say in the introduction:

The theory of reform and opening that Deng developed several years after Mao’s death, in the late 1970s and early 1980s, did not originate with him. It was rooted in the Russian Bolshevik Nikolai I. Bukharin’s interpretation of Lenin’s New Economic Policy aimed at developing a market economy under the control of the Communist Party. Deng studied this concept in the mid-1920s in Moscow during his sojourn as a student at a Comintern school and began implementing it as soon as he solidified power.

The central idea of the NEP, so far as I can make out, was to back away from full-scale state ownership and planning, and allow market transactions and some private enterprise in the context of an economic system still dominated by the Communist Party. This is indeed pretty much the formula that Deng pursued after he came to power. And of course Deng, who studied in Moscow during the period of the NEP, would have been well aware of these ideas. He even mentioned the NEP in passing in August 1985 in a conversation with Robert Mugabe:

What, after all, is socialism? The Soviet Union has been building socialism for so many years and yet is still not quite clear what it is. Perhaps Lenin had a good idea when he adopted the New Economic Policy. But as time went on, the Soviet pattern became ossified. We were victorious in the Chinese revolution precisely because we applied the universal principles of Marxism-Leninism to our own realities.

Pantsov and Levine somewhat misleadingly paraphrase this quote as Deng saying that “he openly acknowledged that ‘perhaps’ the most correct model of socialism was the New Economic Policy of the USSR.” Part of what Pantsov and Levine are trying to do with this, as in much of their book, is to counterbalance some of the hagiography of Deng and cut his historical status down to size. But I’m not sure how much difference it makes to our evaluation of Deng where he got his ideas from–everybody gets their ideas from somewhere, and we usually expect national political leaders to be good decision-makers rather than original intellectuals (that’s a staff job). And it was common for many of China’s early economic reforms to be justified by references to canonical Communist texts (here’s another example), which made them easier to digest.

Nonetheless, it is clear that there was a groundswell of interest in Bukharin and the NEP during the early reform period, an interesting phenomenon of which I was previously unaware:

In 1981 Chinese scholars began publishing their own articles on Bukharin. Over a period of two years, no fewer than thirty-six articles appeared in various PRC journals on his life and works. One of the first articles, by the historian Zheng Yifan, a 1959 graduate of Leningrad University, which was published in the first issue of Shijie Lishi (World History), caused quite a stir. Zheng flatly stated that Bukharin was a Marxist theorist and economist, and that everything Stalin had said about him was false. In this connection, he noted in particular the truth of Bukharin’s slogan addressed to Russian peasants: “Enrich yourselves, accumulate, develop your farms.” Understandably, he did not compare this slogan with Deng’s well-known idea that it was good to be rich, but everyone knew what he meant. Naturally, the majority of articles addressed Bukharin’s economic views. Chinese social scientists recognized that they “were relevant today.” They appreciated Bukharin’s acknowledgment that socialism in the USSR was “backward in form,” his defense of prosperous peasants, his insistence that the growth of industry directly depended on the growth of agriculture, his support of the harmonious combination of planned and market regulations, and his recognition of the important role of the law of value in commodity-financial relations under socialism.

This context also I think helps us better understand the changing ideas about the economy in the first half century of the People’s Republic. The long struggle over economic policy in China was clearly not one between proponents of the planned economy and backers of a Western market economy. It makes much more sense to see it as a battle among Communists over competing interpretations of Marxism-Leninism.

Andrew Walder’s recent book China Under Mao: A Revolution Derailed, which I highly recommend, argues that Mao’s economic policies in the 1950s were based on an early and extreme interpretation of Marxism-Leninism. But Mao’s ideas were already viewed as outdated by other Communist states, who were already moving toward a less rigid version of the planned economy. Deng Xiaoping, and other figures such as Chen Yun, were clearly part of a different tradition within Communism that was less strictly ideological and more concerned with improving living standards. Deng and other reform-era leaders were not Western liberals in disguise working secretly within the system; they were committed Communists who argued for the superiority of their version of Marxism.

by Andrew

W. Arthur Lewis on stagnation, slowdowns and traps

The case for pessimism about sustained fast growth in any economy has rarely been so well put as in the following passage, one of my favorites, from Lewis’ 1955 book The Theory of Economic Growth:

“There are thus many pits into which a country may fall, as a result of prolonged growth: it may weary of material things, its entrepreneurs may behave less competitively, its public may create barriers to change, the distribution of income may alter unfavorably, it may exhaust its natural resources, it may lose its place in international trade, or it may run out of innovations. In addition, it may be a victim of natural disaster, or it may be ruined by war, by civil strife, or by misgovernment.

None of these is inevitable. On the other hand, when there are so many pits into which a country may fall, it is not in the least surprising that countries have fallen into one or more of these pits in the past. One cannot predict when the rate of investment in any particular country will begin to slow down–whether it will be after decades or after centuries. But the expectation that a long period of growth is in due course succeeded by slower growth, by stagnation, or even by decline seems fairly well supported by the little we know of the economic history of the past four thousand years.”

The passage comes from the section on secular stagnation in the book, a concept that is obviously having something of a renaissance these days. Lewis is mostly known today for his model of how labor in a poor country moves from a traditional to a modern sector, a concept many people feel captured something fundamental about how China and other developing nations work. But this book is not referred to much these days, though you can read a quite favorable recent overview of the whole thing here. I confess I have only dipped around in it–the prose style is not always invigorating–but each time to my benefit.

I like this passage because of the way it makes clear that economic growth is not easy and that lots of things can go wrong with it. It’s a simple point, but it’s basically why I’m never been that enamored of the concept of the middle-income trap. In its original formulation, it was the idea that middle-income countries tend to stop growing because their exports get squeezed between low-wage competitors and high-wage innovators. Sure, there are things that can go wrong in middle-income countries so that they fail to maintain fast growth–but lots of things can go wrong besides export competitiveness, and things can go wrong at pretty much any income level, not just the middle.

What’s interesting is to figure out what might be going wrong in each individual case (though I’m still waiting for an actual example of a nation that became “weary of material things”). It is indeed not surprising that a country may fall into a pit, but we still want to know which pit it is and why it fell, and not assume it’s always the same pit. As I’ve argued before, it’s not clear for instance that the middle-income trap model of declining export competitiveness is really the best explanation of what’s happening in China right now.

by Andrew

The concept of progress: appreciating Ted Gioia’s History of Jazz

Somewhat against my better judgment, I’ve been desultorily reading Ted Gioia’s History of Jazz. These kind of books are dangerous, to me anyway, because in the minutes it takes to read a few pages you can come up with many, many hours of new stuff to listen to. But it has already inspired me to go back and listen again to some great early jazz recordings which have not been on the playlist for many years–in particular, rediscovering the sprightly chamber jazz of Joe Venuti and Eddie Lang has been a real treat. And passages like this one lift the book far above the ordinary:

From its earliest days, jazz had been a forward-looking art, continually incorporating new techniques, more expansive harmonies, more complex rhythms, more intricate melodies. Sometimes this ideology of progress was stated explicitly, as in Beiderbecke and the Chicagoans’ oft-spoken praise of Stravinsky and other contemporary classical composers; in other instances, no words were necessary, as with the implicit modernism of Armstrong’s breakthrough recordings of the 1920s. But whether they expostulated about the future of music or merely announced its arrival through the bells of their horns, the leading musicians of early jazz were modernists in the truest sense of the term. They were admired—or chastised, as the case may be—as daring exponents of the new and bold.

It is easy to lose sight of just how remarkable this modernist bent was, given its context. The concept of progress has played a modest role in most ethnic music traditions. Those who draw connections between jazz and African music miss this important difference. The griots of West Africa, for example, aim to preserve their cultural legacy as it is handed down to them. This is not a mere aesthetic choice, but a cultural imperative: they are the historians of their society and must maintain the integrity of their precious musical heritage. …

Almost from the start, jazz players embraced a different mandate, accepting their role as entertainers and pursuing experimentation with an ardent zeal. This created a paradoxical foundation for jazz, one that remains to this day: for the jazz musician soon proved to be a restless soul, at one moment fostering the tradition, at another shattering it, mindless of the pieces. Even more striking, this progressive attitude of early jazz players came from members of America’s most disempowered underclass. Recall that this music was not only viewed with apprehension by much of the ruling class but was often belittled and derided even within black America’s own ranks. In the face of this hostility, simply preserving the African American vernacular music heritage—saving the legacy of a Buddy Bolden or King Oliver from the oblivion that obscures the early history of most traditional forms of music— would have been a major achievement. But advancing the jazz idiom to produce an Ellington or Armstrong was nothing short of miraculous—and all in the span of a single generation. One searches in vain through all the countries of the world to find another example of such a rapid and dramatic transformation from folk music to art music.

Books like these are a huge organizational challenge because the material can be approached so many different ways: chronologically, biographically, thematically. Gioia has done a good job of using all three approaches; the frame of the book is chronological, but when he introduces each figure they get a full biographical treatment, even when that requires going well outside the chronology of the rest of the chapter. For instance, the xylophonist Red Norvo is discussed early on for his 1930s recordings, but Gioia also assesses his 1950s work with Mingus and other later recordings (the treatment of Norvo is also a good example of Gioia’s generous approach to “minor” figures outside the standard jazz pantheon).

He is also, by the way, an excellent guide to more recent music: his annual best-of lists are wonderful, eclectic and huge.

by Andrew

Are African economies doing better or worse than we thought?

I did not find myself with a clear answer to that question after reading Morten Jerven’s new book Africa: Why Economists Get It Wrong, which I picked up in hopes of adding to my very scanty knowledge about the region. About three-quarters of the book seems to be arguing that Africa is doing better than than many people thought, as it criticizes a whole swathe of economic research about a supposed “chronic failure of growth” in Africa. Here’s a sample:

The simple point I am making is that, in contrast to what the growth literature tells us, the African growth experience has not been one of persistent stagnation. According to GDP data in international prices from the Angus Maddison dataset, the African GDP per capita in 1960 was about one-sixth of world GDP per capita. This remained true until 1977, after which the gap widened, and by 2000 the African GDP per capita was less than one-tenth of world GDP per capita. The African growth shortfall is thus a more recent phenomenon: before 1977, African economies were not lagging behind significantly in terms of growth rates.

A lot of his effort goes into attacking growth regressions that ignore both the historical trajectory of the growth data and take a simplistic view of the social and institutional factors supposedly related to growth. I am very sympathetic to these criticisms, but even after accepting his arguments it’s not clear that we are left with a very positive growth picture for Africa. So it’s not true that African economies have never experienced economic growth; on the other hand, it still looks like the growth data are pretty poor for a good three decades or so.

In the last quarter of the book Jerven then switches to arguing that Africa is in fact doing worse than some people think. He reviews some of his previous work on African GDP statistics to tackle the opposite side of the growth stagnation argument, and argues that the optimistic “Africa Rising” story of recent years is also overwrought and undersupported:

It is likely that very recent growth data are overestimating economic growth. First, for some economies – and Ghana is the best example – the growth figures are higher because there was a recent large upward revision in GDP levels. When the time series is smoothed out across the 2000s in light of these new data, it shows an exaggerated acceleration in growth. Second, for those economies that have very outdated base years, the GDP level is most probably underestimated. This has two effects. One is obvious: when the base is too low, growth estimates are too high. … A second effect results from statisticians and consultants adding to the GDP measure to make it more exhaustive by revising current and previous GDP estimates upward as they go along.

Jerven does not spend much time building up a new narrative about Africa to replace the two that he demolishes. But when he is describing Africa itself rather than people’s arguments about it, the description is not terribly positive: African governments for instance are “relatively fragile and particularly vulnerable to economic downturns and temporary fluctuations.” Such weak governments are unlikely to be able to replicate the kind of “developmental state” policies that have been successful in Asia (the best recent summary of this strategy is Joe Studwell’s How Asia Works). And nothing in this book challenged my naive understanding of most African economies as being heavily reliant on agriculture and exports of raw commodities, and therefore unlikely to generate the kind of sustained growth seen in the more successful examples of economic development in Asia and the European periphery.

I tend to agree with the Financial Times review that the book tends to skate over some rather obvious facts in its mission to show that Africa’s situation is more complicated than many theories allow. On the whole I felt that too much of the book is devoted to internecine academic warfare, and not enough to developing a coherent narrative about African economic development for the general reader. I am still in the market for one of these, so suggestions would be very welcome.

by Andrew

Style is a special case of technique

That line is from one of the better passages in Philip Glass’ new memoir, Words Without Music. The point is as true of writing as it is of music of course, and it’s interesting that the memoir itself demonstrates it. What I mean is that the memoir does not have much style, because there is not much writing technique in it–a sharp contrast to the very distinctive Glass musical style. Most of the book’s charm comes from how artless it is; often it really does sound like a guy just telling you stories about his life (a guy who happens to be a famous artist). Of course that works better when you are sitting with the guy over a beer. It can get tiresome on the printed page, and there are definitely some longueurs in the memoir. But the occasional insights are still interesting, and the account of his musical education with Nadia Boulanger is clearly very heart-felt:

We sat quietly for only a moment and I understood, suddenly, that somewhere along the way, she had changed the point of the exercise. I had thought she was teaching technique— the how you “do” or “not do” in music. But that was over. She had raised the ante. Now we were talking about style. In other words, there could be many correct solutions to a musical problem. Those many correct solutions came under the rubric of technique. However, the particular way a composer solved the problem, or (to put it another way) his or her predilection for one solution over several others, became the audible style of the composer. Almost like a fingerprint. Finally, to sum this all up, a personal style in a composer’s work makes it a simple matter for us to distinguish, almost instantly, one composer from another. So we know without doubt or hesitation the difference between Bach and Bartók, Schubert and Shostakovich. Style is a special case of technique. And then, almost immediately, we know that, beyond a shadow of a doubt, an authentic personal style cannot be achieved without a solid technique at its base. That in a nutshell is what Madame Boulanger was teaching. Not as a theory, because theory can be debated and superseded. She taught it as a practice, a “doing.” The realization came through the work. Her personal method was to just bang it into your head, until one day, hopefully, you got it. That’s how, in the end, I understood my work with her.