Saturday, 22 March 2008

Have all the good economics stories been told?

I've just finished Steven Landsburg's book, More Sex is Safer Sex. I guess I had been led into an expectation of what popular economics books are like, by Freakonomics and by Tim Harford's two recent books, The Undercover Economist and The Logic of Life. And my expectations may not be a good basis on which to judge a book. Still, I suspect many readers may have a similar measuring stick. So I expected a series of unexpected results based on interesting research by contrarian economists.

But perhaps the well of real experiments has run dry. Because what we get instead is a lot of thought experiments. The economic theory is mostly conventional but Landsburg takes it to its logical (and unconventional) conclusion by advocating fully free market solutions for many social ills.

Amusing and thought-provoking to an extent, but ultimately I'm left with the feeling of having consumed a calorie-free intellectual meal. We know very well that few of these solutions will ever be adopted in the real world, so ultimately what are we left with?

The book is intellectually honest and there's a good couple of chapters where Landsburg examines two areas of uncertainty. First in "Go Figure", a series of areas where economics does not yet give a good explanation for outcomes. For example, why have shopping carts continuously got bigger over the last thirty years? Second, "Things That Make Me Squirm", about several phenomena where analysing the economic incentives implies answers at variance with conventional free-market beliefs. These are a lot more stimulating - perhaps because they leave room for a variety of answers - than chapters on how the justice or political system would work better if people were given new financial incentives for different kinds of behaviour.

Not that I object in principle to the answers Landsburg comes up with in these other chapters, but somehow they come across as more smug, and less interesting, than those where he genuinely allows for answers that contradict his own intuition.

However the most intriguing chapter for me was "The Central Banker of the Soul", a good summary of arguments and questions about the time-inconsistency problem. Disregarding all my comments above, this chapter got me thinking about its theoretical content regardless of the writing style. That is probably the best gauge of the quality of a book and I'll be writing more soon on what I've developed in that area.

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