An Economics and Evolutionary Biology Reading List

You'll find it here, via MR. I find it to be a fine yet incomplete list. A few additions. In terms of popular books, one commenter added Eric Beinhocker's Origins of Wealth. In my mind this would be the place to start. It's great and I recommend it strongly. It seems to me that evolutionary economics offers a less complete vision than complexity theory, and you get a lot of that in Beinhocker as well. Melanie Mitchell's book, Complexity: A Guided Tour, is a good companion to Beinhocker, though off our current topic.

If you want something on the academic side, works by Stan Metcalfe (1, 2) should be included and the Nelson/Winter treatise is canonical, yet missing. Really everything by Nelson. Start there, and then read Baumol's Microtheory of Innovative Entrepreneurship, or perhaps the gentler, The Free-Market Innovation Machine.

I am less qualified to offer recommendations on the biology side, though I found Stuart Kauffman's work to be uniformly excellent. His At Home in the Universe is an easier read than Origin of Order, but both are great and highly recommended. Not all of the conclusions are universally accepted, though epistasis and fitness landscapes (and Kauffman's NK model) should be important concepts in the social sciences. Ernst Mayr's What Evolution Is, is a fine introductory book written for non-specialists.

This is all tip of the iceburg of course, but it's nice to see so much new work in this field. Most of this remains outside the mainstream of economics, with the partial exception of Nelson/Winter and Metcalfe. In part this reflects a general wariness of evolutionary concepts, which have been grossly misused in the past. But it also reflects a desire by economists, in particular, to maintain their focus on equilibrium and optimization analysis, their two primary tools. An evolutionary perspective can be made to fit these tools, but it does present a challenge to them as well.

And it should go without saying that I'd recommend reading lots and lots of Schumpeter.

The Coming Prosperity

New book by Philip Auerswald, and the subtitle is: How Entrepreneurs are Transforming the Global Economy. You can preorder at Amazon. Doing so affects the publishers decision to print more or fewer copies of the book, so if you think it's interesting, order now.

Phil has started blogging the book. Here's one discussion on fear (Ch. 13), from his section on what's ahead for America.

Here's a talk he gave on the Hill, summarizing some of the main points behind his approach.

Handbook of the Economics of Innovation

A handy reference for innovation/entrepreneurship scholars. It is the latest in Elsevier's Handbook Series. The newly released two volume set is packed with great articles, but at almost $250 on Amazon, it's really suited for specialists in the field (those with lots of grant money). But look for it at your nearest university library, if it's not your immediate field and you have an interest.

It is edited by Bronwyn H. Hall and Nathan Rosenberg, two leaders in the field. Check it out.

Information Overload

Lots of wisdom in that FT piece. Here's a bit more (FT):

Those under 30 tend to consume media and entertainment in a different way to their older peers: they refuse to pay for content, they like interaction, and they use electronic screens rather than paper. They also use various devices at once, and they want everything accessible via their mobile.

And Tyler Cowen, writing for a special feature in The Wilson Quarterly about "The Future of the Book," touches on similar themes:

The arrival of virtually every new cultural medium has been greeted with the charge that it truncates attention spans and represents the beginning of cultural collapse—the novel (in the 18th century), the comic book, rock ‘n’ roll, television, and now the Web. In fact, there has never been a golden age of all-wise, all-attentive readers. But that’s not to say that nothing has changed. The mass migration of intellectual activity from print to the Web has brought one important development: We have begun paying more attention to information. Overall, that’s a big plus for the new world order.

It is easy to dismiss this cornucopia as information overload. We’ve all seen people scrolling with one hand through a BlackBerry while pecking out instant messages (IMs) on a laptop with the other and eyeing a television (I won’t say “watching”). But even though it is easy to see signs of overload in our busy lives, the reality is that most of us carefully regulate this massive inflow of information to create something uniquely suited to our particular interests and needs—a rich and highly personalized blend of cultural gleanings.

The word for this process is multitasking, but that makes it sound as if we’re all over the place. There is a deep coherence to how each of us pulls out a steady stream of information from disparate sources to feed our long-term interests. No matter how varied your topics of interest may appear to an outside observer, you’ll tailor an information stream related to the continuing “stories” you want in your life—say, Sichuan cooking, health care reform, Michael Jackson, and the stock market. With the help of the Web, you build broader intellectual narratives about the world. The apparent disorder of the information stream reflects not your incoherence but rather your depth and originality as an individual.

Empowering Women

Nicholas Kristof and Sheryl WuDunn write (NYT):

In general, aid appears to work best when it is focused on health, education and microfinance (although microfinance has been somewhat less successful in Africa than in Asia). And in each case, crucially, aid has often been most effective when aimed at women and girls; when policy wonks do the math, they often find that these investments have a net economic return. Only a small proportion of aid specifically targets women or girls, but increasingly donors are recognizing that that is where they often get the most bang for the buck.

The authors are promoting their new book, Half the Sky: Turning Oppression into Opportunity for Women Worldwide, due out September 8th. It includes generous coverage of Bill Drayton and Ashoka, and of the importance of microfinance. It should instantly become a must read.

The Limits of Control

Leonard Mlodinow's recent book, The Drunkard's Walk: How Randomness Rules Our Lives, is a look, as the title suggests, at how the mathematical laws of randomness affect our lives. It covers probability theory in the first half and statistical inference in the second, all while giving a whirlwind tour of the history of mathematical ideas. All of this is done with little actual math and at an accessible level. More important, the book is engaging and fun to read.

William Easterly dedicated several posts to the book, and in one he relayed this interesting story (aid watch):

Laboratory experiments show that rats outperform humans in interpreting data, which is why we have today the US aid agency, the Millennium Challenge Corporation. Wait, I am getting ahead of myself, let me explain.

The amazing finding on rats is described in an equally amazing book by Leonard Mlodinow. The experiment consists of drawing green and red balls at random, with the probabilities rigged so that greens occur 75 percent of the time. The subject is asked to watch for a while and then predict whether the next ball will be green or red. The rats followed the optimal strategy of always predicting green (I am a little unclear how the rats communicated, but never mind). But the human subjects did not always predict green, they usually want to do better and predict when red will come up too, engaging in reasoning like “after three straight greens, we are due for a red.” As Mlodinow says, “humans usually try to guess the pattern, and in the process we allow ourselves to be outperformed by a rat.”

Yesterday Mlodinow had an interesting blog post at the NYT's Happy Days blog about our need for control, especially during temultous times. It's worth a quick read. On a more offbeat note, Mlodinow, who is a physics professor at CalTech, was also a writer for Star Trek: The Next Generation. Here is a recent Newsweek article about that experience and Hollywood economics more generally.

Below is his book talk at Google:

Festschrift for Jane Jacobs

Sanford (Sandy) Ikeda is writing a short paper for a forthcoming Festschrift for Jane Jacobs. The following is the first paragraph of an extended abstract:

A city is not a man-made thing. Rather, it emerges from the actions of its inhabitants, who interact in unpredictable yet orderly ways. Under the right conditions – the right “rules of the game” – what arises is vital,creative, radically unpredictable, and profitable: the living city.

Source. Sandy wrote a nice remembrence for Jacobs in 2006 you can find here. I'll add info when we find out more about the forthcoming book.

Innovation Economics and Creative Destruction

In an earlier post I talked about a NYT article and excerpted a couple of paragraphs. The piece included a criticism of Amar Bhide by Robert Atkinson at ITIF. Now Atkinson has a piece in Fast Company devoted to Bhide's book, The Venturesome Economy, one of the best books of 2008. Atkinson writes:

Where we disagree with Bhidé is that we believe he presents a false choice between the importance of innovation production and innovation consumption, for there is no reason why the United States should not seek global leader­ship in both the upstream development of new tech­nologies and inventions by scientists and engineers and the downstream activities that realize effective com­mercialization of innovations. To simply write-off leadership in innovation production as opposed to its application is to miss the point; innovation production remains at least as important as innovation consumption. In fact, there’s more than a passing relationship between innovation production and innovation consumption. It is not coincidental that the United States leads the world in use of information technology and also its innovation of it. The twain are not mutually exclusive, and in fact operate complimentarily.

Ultimately, Bhidé—and others who view the increasing technological competitiveness of foreign workforces and countries as an unalloyed positive development for American prosperity, even if it means a loss of U.S. jobs—fails to recognize that there is a difference between creative destruction and simply destruction. Their neoclassical-like view holds that if Boeing, for example, goes out of business, as long as America maintains flexible labor and capital markets, these resources will flow into other industries, including into expanding or new firms and sectors. In such a market environment, policies are needed only to facilitate resources from losing to winning companies.

The first paragraph contains many good and fair points. The next paragraph worries me, however. The danger in not letting bad firms fail is that resources will not be directed where they are most useful and the role of prices in a market economy breaks down. I had a long discussion with one of Atkinson's staff about the proposals to bail out GM and the other American auto companies. You can make an argument that during a severe recession, like we're in now, the economy can't handle another negative shock and the accompanying loss of jobs and confidence.

However, I instead got a lecture on innovation economics and increasing returns. I'm no expert but I see nothing in Paul Romer's work that would merit assistance. Bankruptcy for the big three would be very difficult, but they would be stronger in the end, at least those that survived. So when Atkinson warns that sometimes we just have destruction and no creation, we should take him seriously. But be careful what others say, since this argument can quickly degenerate into a push for industrial policy, and the government's never been good at picking winners.

Best Books on Business and Innovation for 2008

Several lists abound, here are a few:

• The Economist's Books of the Year (Economist)
• BusinessWeek's 10 Best Books on Innovation and Design (BW)
• Business Pundit's 10 Best Business Books of 2008 (BP)
• Amazon's Best Science and Business Books of 2008
  

I do not understand why Nudge was not on everyone's list. In fact, it should probably be at the top of everyone's list, almost irrespective of category. Also, Richard Florida's Who's Your City came out in 2008 and certainly was one of the most important and best books of the year. It seems like a particularly egregious mistake to leave it off these lists. Amazon has Scott Shane's latest on their business list, but in general it did not receive enough attention. What other books were missing but deserved to be included?

Also of note, Thomas Friedman's latest, Hot, Flat, and Crowded is number one on Foreign Affairs bestseller list, but was snubbed on all of these lists. I don't have a problem with that, but it's interesting that something he wrote wasn't automatically hailed as a work of genius.

Revolutions and Innovative Organizations

Jessica Flannery, co-founder of Kiva, reviews Kuhn's The Structure of Scientific Revolutions in the Winter Issue of the Stanford Social Innovation Review. I thought this bit was good:

Thankfully, anomalies happen. We get shaken up, surprised, or just baffled by life. We get hints that the world might be different from what we'd thought. It's easy to shun these inklings and to tell ourselves, "No, that can't be true," or "I must be crazy," or "But that's just not the way things work." Sometimes, however, the anomalies are true, and we're nor crazy, and we've gotten a glimpse of something that could actually redefine the way things work. A well-timed, powerful new insight has the potential to shape an entirely new paradigm around it-shifting the scope of possibility in the world!

When I became an MBA student at the Stanford Graduate School of Business, Kuhn's ideas melded with my studies of innovative organizations and how these organizations create new products, new markets, and in a way, entirely new paradigms. Many begin with a bold, fresh insight about how things could be better-a kind of prescriptive anomaly. They then build themselves around this vision. Sitting in one of Professor Bill Barnett's strategy courses one day, I realized that this was happening with Kiva, then only a year old: We had seen before us the enormous untapped potential of entrepreneurs' stories to form connections and inspire action, and we had then used technology and microfinance to build the company around this insight.

The article is subscription only, but here is the current link anyway.

Update: For those that want to know more about Kiva, check out my earlier post about the other co-founder, Matt Flannery, Jessica's husband. My earlier post has a link to a piece about Kiva that Matt wrote for Innovations Journal. That article, Kiva and the Birth of Person-to-Person Microfinance is here.

David Brooks Reviews Outliers

Brooks disagrees with the notion that people are a result of the social forces around them, apparently a theme Gladwell pushes hard. I have not read the book, so I cannot say. Nonetheless, this part caught my eye (NYT):

Control of attention is the ultimate individual power. People who can do that are not prisoners of the stimuli around them. They can choose from the patterns in the world and lengthen their time horizons. This individual power leads to others. It leads to self-control, the ability to formulate strategies in order to resist impulses. If forced to choose, we would all rather our children be poor with self-control than rich without it.

It leads to resilience, the ability to persevere with an idea even when all the influences in the world say it can’t be done. A common story among entrepreneurs is that people told them they were too stupid to do something, and they set out to prove the jerks wrong. [emphasis added]

Book Clubs

We have a book club at my work and every once in a while I participate. I like the group and the selections are usually pretty good, but I am busy with school and work, and now this blog, so I rarely have time to get to the books with class in session. I still go to the meetings though. For the most part they run smoothly and we manage to agree on a book without much hassle. Last month we read Christopher Buckley's new book about the Supreme Court, Supreme Courtship - skip it. This month we are reading Against the Gods: Wendy's War - I'll say more about it in a future post.

The New York Times had an article about book clubs last week that a good friend passed along. I thought I would say a bit about it (NYT). The article discusses why people often have a hard time agreeing on what to read and also about the power structure of the clubs. This bit sums it up:

One member may push for John Updike, while everyone else is set on John Grisham. One person wants to have a glass of wine and talk about the book, while everyone else wants to get drunk and talk about their spouses. “There are all these power struggles about what book gets chosen,” Ms. Burg said. Then come the complaints: “It’s too long, it’s too short, it’s not literary enough, it’s too literary ... ”

The signaling effect is one reason book clubs often have trouble. Some people pick the right books in order to look smart and sophisticated even if they have no intention of reading the books. The goal here is to show that you are superior in some way, even if it is just your knowledge of 1960s Chilean authors.

This is also part of the reason people buy books without ever reading them. Some books just look good on the shelf and convey information. The most well known example of this is Stephen Hawking's A Brief History of Time. Supposedly something like 95% of the people that buy the book never read it. But it conveys information about taste that may be important in attracting others. The BBC reports on a new study about the signaling effect of books (BBC):

About four in 10 of the 1,500 said they had lied about what they had read to impress friends or potential partners - 46% of men and 33% of women.

Among teenagers, the figure rose to 74%, with most saying they would pretend to have read social networking pages or song lyrics.

One in five adults said they would read their chosen material whilst waiting for their date to arrive in the hope of making a good first impression.

A few thoughts. If you do participate in a book club with the intention of finding new authors or rediscovering old masters, make sure that your new friends don't all track the same sources you do. You want to use the group as an extension of your own book-finding algorithm. You may be very happy with a group that just reads Oprah's recommendations, but you can do that on your own and you must really value the social aspect to get much out of the club. If so, fine. But if not you should be wary of such groups.

Also be wary of groups that read the same authors. This was our 4th book by Buckley and many good recommendations (ahem, mine) were shot down. I recommended The Savage Detectives, among others, and despite wonderful reviews no one seemed too interested. That's a bad sign. You want your fellow members to have an openness to new books and new ideas. Hopefully they'll be the ones suggesting books that you've never heard of. Some of that happens in our work club, but we still have room for improvement.

At any rate, I'm off to dust off my copy of Hawking's book. I of course opted for his newer version, A Briefer History of Time, since his older version had too many pages and looked too hard.