Knowing and Making

Some recent interesting articles: A Physicist Turns the City Into an Equation is a description of an ambitious project by Luis Bettencourt and Geoffrey West at the Santa Fe Institute to develop mathematical models of the behaviour of cities (and earlier, of the physiology of living organisms). They claim to have found some strong correlations in both cases. For instance, a city that doubles in size increases its productivity and economic activity per capita by 15%. And animals that grow larger become more efficient users of energy. However, it's not clear whether they have a real model which explains these phenomena, or just some statistical correlations. Paul Mason went to the LSE and conducted a whimsical interview with the ghost of John Maynard Keynes. As fits someone who changes his mind with the facts, he has grown out of Keynesianism and is seeking a new model which can handle fiat currencies and global finance. An excellent challenge. Another challenge comes from Tyl...

You've heard it before, in one variation or another: there are only so many stories in the world. Sometimes it's six, sometimes twenty - sometimes just one - but the idea is always the same: there's a limited number of ways a plot can turn out. A few years ago, Christopher Booker picked up this idea, analysed it to death and produced an excellent book called The Seven Basic Plots . He picked out seven common story structures which, he argues, include all successful stories (others are possible but he suggests that they result in unsatisfying outcomes which do not ring true for us). His proposal comes down to psychology in the end - he makes a convincing case that specific kinds of story fit with our view of how the world should be, and therefore create a satisfying structure. It all comes down to our desire - and expectation - that people should get what they deserve. His thesis applies to works of fiction and not to real life, of course. Real life doesn't behave accord...

Paul Mason points out that world trade (more precisely exports from the developed world) is down by 40% on an annualised basis. We can imagine rational reasons for people to trade less with each other - for example an increased desire for saving reduces the resources available to devote to the slightly risky activity of exchanging with distant parties. But what appears at first sight not to be rational is the distinction between local and foreign trade. Trade within the UK, for example, is certainly not down by 40%. Of course the idea of "trade" within a country is not a very well-defined concept - one could perhaps look at interstate trade in the US, but I assume that such data is not collected comprehensively. But if we generalise to the idea of economic exchange in general, then GDP is essentially the measure we are looking for. And GDP, of course, has not fallen by 40% or anywhere close. So why has international trade fallen so much more? There are several proximate reas...

Robert Peston is revisiting the argument for the Bank of England buying shares in private companies - proposed by me in December and (the slightly more eminent) Roger Farmer in January. He points out that the Hong Kong government did this in the late 1990s, during the Asian financial crisis, and succeeded in both supporting the market and making a big profit when they resold the stakes a couple of years later. Stephanie Flanders has a good piece about Tim Geithner's position and particularly about the IMF and other possibilities for fiscal burden-sharing between G20 countries. Meanwhile Paul Mason has an excellent summary of the issues to be dealt with by the G20 conference in a few weeks: Far from the emergence of a harmonised and increasingly unified world economy [globalisation] has produced a lopsided and malformed structure that is now falling apart. The low paid worker in Detroit cannot buy his new pair of trainers unless the low paid worker in Shenzhen a) makes them, b) d...