The Ascent of Money by Niall Ferguson

Money allows us to move value, especially the value of our labor and perishable products, across space and time. Banking allows us to move money across space and time. Bonds and stocks go beyond banks and allow us to finance longer term investments, an essential component of economic progress and wealth creation; of course, they also allow us to gamble with both our own and other people's money. Betting on the future is risky, which is why we have insurance markets; and few bets are as important for both financial health and living standards as betting on houses. All these components come into play in the global financial history Niall Ferguson weaves together in The Ascent of Money.

The book was written as the financial panic, housing bust, and global recession of 2008 were still snowballing. Ferguson offers a historical perspective on what he considers the key markets influencing the unfolding crisis. From the clay tablets of Mesopotamia to the silver mines of Cerro Rico to the international exchange machinations of George Soros, the book walks a sweeping path through thousands of years to the first few months of that fateful year.

The style of the book is, unsurprisingly, a bit rushed, but generally enjoyable. Ferguson freely bounces between the ludicrously anecdotal and the abstractly mathematical. Consider this passage, introducing the founders of the Scottish Minsters' Widows' Fund (now the insurance & pension fund Scottish Widows):

We tend to think of Scottish clergymen as the epitome of prudence and thrift, weighed down with an anticipation of impending divine retribution for every tiny transgression. In reality, Robert Wallace was a hard drinker as well as a mathematical prodigy, who loved to knock back claret with his bibulous buddies at the Rankenian Club, which met in  what used to be Ranken's Inn. Alexander Webster's nickname was Bonum Magnum; it was said to be 'hardly in the power of liquor to affect Dr. Webster's understanding or his limbs'. Yet no one was more sober when it came to calculations of life expectancy.

With my Presbyterian background, I had to chuckle; I'm like to think that Ferguson, himself a Scot, must have done so when he wrote it.

On the whole, I was quite pleased with the book. I actually assigned it as required reading for my money and banking students before I had finished it, and am looking forward to in-class discussion on it in a few weeks. On the other hand, I also learned that there is a 6-hour BBC miniseries version, so a number of students might not read it at all. I'm still undecided if that's a bad thing or not.

I recommend the book to anyone who wants a broad historical background to understanding either the recent recession or modern finance. There are other sources with more detail and more focus, and as I mentioned earlier, the flow suffers a bit from trying to release the book in medias res. But I get the sense that this is Ferguson doing what he does best, and he's quite good at it.

Theories of International Politics and Zombies by Daniel Drezner

When I heard about this book, I was convinced it was something I needed to read, but had no idea when I'd have the time or funding to do so. Fortunately for me, my friend (and now soon-to-be military chaplain) Matt Moynihan decided to buy the book and give it to me. Thanks, Moyni! My review falls after the jump break.

Doctor Who, the Popular Musical

Below the fold (jumpbreak? I never know what to call it...) are some videos featuring one of my current favorite shows and a couple of my current favorite bands.

Reading Scripture and the Conservative/Liberal Divide

My wife provided a link to this article at Christianity Today, which discusses some new research on the relationship between regular Bible reading on whether the reader leans conservative or liberal on various topics. Some of the key findings (find more at the link):

Frequent Bible reading has some predictable effects on the reader. It increases opposition to abortion as well as homosexual marriage and unions. [...] But [...] For each increased level of Bible-reading frequency, support for the Patriot Act decreased by about 13 percent. [...] As might be expected, respondents who were more politically liberal were prone to disagree with the statement, "The government should punish criminals more harshly." Unexpectedly (at least given the conservative stereotype), the more frequently people read the Bible, the more they too are prone to disagree with the statement. [...] the more someone reads the Bible, the more likely he or she is to believe science and religion are compatible.[...] contrary to liberal media stereotypes, those who are most engaged in their faith (by directly and frequently reading its source material) are those who are most supportive of social and economic justice.

The article interprets this as causal: more frequent Bible reading makes otherwise conservative Christians more liberal. I think there is some sense to this interpretation. It's hard to read large segments of the Bible and think of it as more about rules and instructions than stories and people. And it's very hard to read those stories and still think of people as either good guys who follow the rules or bad guys who bring God's wrath upon them. The Bible doesn't really have many black hats, and even fewer white hats.

But it sounds like the study doesn't actually pin down the direction of causation in this way, I can think of good reasons it could go differently. In particular, if you're a slightly more liberal person in a conservative church environment, you will more frequently leave a sermon wondering "but does it really say that?" This provides motivation to read the Bible for yourself rather than just taking a pastor or teacher's word for it.

So my instinct is that sorting out the degree of cause in each direction is far from simple. Nevertheless, it's an important correlation, and one that holds even after controlling for a number of other important relationships. What do you think? Does reading the Bible regularly moderate your views? What about other people you know?

Matt Yglesias Is Right and Wrong

As Matt Yglesias discussed a few days ago, he has a problem with public choice economics:

While of course I agree with many of the specific observations made under the banner of public choice (public officials often do corrupt and self-interested things), I don’t really “get” public choice and think I never will. The basic theory [...] seems to go like this:

1) Spread cynicism about public officials.
2) …
3) Libertarianism!

The psychological and sociological links here seem clear enough. Both libertarian political ideology and spreading cynicism about public officials serve to raise the status of businessmen and lower the status of politicians and bureaucrats. But as a political agenda it doesn’t work at all.

He goes on to provide plenty of good reasons why cynicism is problematic as a guiding principle for political decisions. He's right.

But he's completely wrong in thinking that what he's talking about is public choice economics. Perhaps a trip to Wikipedia could have cleared this up. Public choice is not a political agenda. It's descriptive, applying the analytical tools of economics to the decision-making process of political bodies. It's core premise is that politicians are no less (and no more!) oriented toward their own best interests than any other human being.

It's true that public choice is often used as a part of the case for libertarianism, but only because advocates all too often assume that politics has the uncanny ability to attract only the most altruistic idealists into its ranks. Public choice makes the case, rather, that political institutions can just as easily attract those seeking economic rents... or at the very least those whose motives look very like the motives of any other consumer or firm manager.

So Yglesias is right that if we are trying to tell political figures how they can look out for the well-being of society we shouldn't expect public choice economics to give us the answers. But then we wouldn't offer advice on generating bigger externalities to polluters, either. If we want to be able to predict how the political system will deal with something, though, we might want to model the actual decision-makers, and public choice provides an under-utilized means of doing that. For that matter, if we want to construct institutions that limit the ability of politicians to indulge their self-interest, public choice can help us there, too, although it will also tell us why such institutional changes are difficult to achieve.

In the end, it seems like what Matt Yglesias doesn't really get is the difference between prescriptive policy and descriptives science.

And by 'Life As Usual' I Meant...

... that I'll be on hiatus for the next four months. Apparently.

Not to go all Randy Quaid in Independence Day on you, but:


Yep. The plan is to post on a semi-regular basis, probably only about once a week.

So what's been keeping me busy this whole time? Well, let's see:

• My family and I have moved to California
• I am now a full time faculty member teaching three different courses
• So my time has been pretty full with teaching, evaluation, and settling into life on the west coast
• Also, I have a two-year-old daughter and an amazing and creative wife, so why wouldn't I be keeping busy?

I'm hoping to continue living up to the blog's tag line of "exercises in self-awareness," but I will probably be keeping it simpler overall. I'll be commenting on items from the Internet that get me thinking, posting links and videos, and with any luck I'll be putting some book reviews up as well!

Thanks for continuing to hang around even though nothing's been happening. Feel free to post requests or ideas in the comments. You can also look me up on Twitter or the Google+.