Cafe Hayek

Blowing My Own Horn (or Kazoo)

What you'll get in return for paying $44 for my book Globalization looks better and better (at least according to this short review)!

Even More Consumer Surplus!

Happily I inform you that Amazon.com just cut the price it charges for my book Globalization by a whopping 20 percent -- from $55 to $44!!

While a bargain at any price, you'll now want to buy countless copies for yourself, loved ones, friends, neighbors, your mailman, and pets.

A Review of Globalization

I've always admired the judgment and insight regularly displayed by John Tamny over at RealClearMarkets.  Proof that my admiration is well-placed is supplied today by John's review of my book Globalization.

Misbehaving Amazon? Or Misbehaving State?

In his 2002 book Creative Destruction, Tyler Cowen explains "How Globalization is Changing the World's Cultures" -- for the better.

The government of France, however, seems to be intent on slowing this process of improvement for its citizens.  Check out this post by Nate Anderson over at Ars Technica (HT Konstantin Medvedovsky):

Did you hear the one about Amazon? It offered free shipping in France, got sued for it by the French Booksellers' Union, and lost. Now it's choosing to pay €1,000 a day rather than follow the court's order. Ba-da-bing!

No, it's not funny, but that's because it's not a joke. The Tribunal de Grande Instance (a French appeals court) in Versailles ruled back in December that Amazon was violating the country's 1981 Lang law with its free shipping offer. That law forbids booksellers from offering discounts of more than 5 percent off the list price, and Amazon was found to be exceeding that discount when the free shipping was factored in.

Thwarting the ability of ordinary French citizens to get good deals on books makes books more difficult for French citizens to get.  France's cultural richness is less than it would otherwise be.

Some commentors to this post take issue with identifying firms protected by the government from competition as disreputable.  I'm in the camp whose members - finding nothing especially magical, glorious, magnanimous, informed, or trustworthy about the state or political actions - hold that hiring the state to forcibly stop people from patronizing competitors at mutually agreeable prices is no different morally than hiring a street gang or your brother-in-law to do the same.

George MacDonald Fraser, RIP

George MacDonald Fraser, author of one of my favorite series of novels, died yesterday.  (HT Beth Hoffman)

In the early 1990s, my friend George Selgin introduced me to Fraser's Flashman novels.  I read the first one and was hooked.  They're enormously entertaining and filled with lots of sound military history.

Globalization

Yesterday's mail brought copies of my new book, Globalization (Greenwood Press, 2008).  (It's not only "my new book"; it's my first book.)  It's now out and in-stock.  Globalization makes a great Christmas gift for all those nerds and anti-globalists on your shopping list!

Quite seriously, I wrote the book so that it can be understood by non-economists.  I did my best to minimize the use of jargon, and to explain globalization -- its whys and its consequences -- as clearly as my modest talents allow.

Shocking!

Even though her latest book was reviewed in the "Economics" section of last-week's Washington Post Book World, Naomi Klein's books are to economics what Spiderman comic books are to arachnology.  Here's a letter that I sent last Sunday to Book World.

In her new book, Naomi Klein reveals what she sees as a smoking gun in the hands of the late Milton Friedman.  It's true that Mr. Friedman wrote that "only a crisis - actual or perceived - produces real change" ("Doing Well by Doing Ill," November 25).  From these words Ms. Klein draws the fantastically mistaken conclusion that Mr. Friedman was summoning capitalists to wreak havoc upon an unsuspecting world.  Unfortunately, reviewer Shashi Tharoor's defense of Mr. Friedman - that he should not be read literally - also misses the point.

Ms. Klein's mistake is the sophomoric one of confusing description with prescription.  Mr. Friedman's claim was descriptive.  It is of the same genre as the claim made to my family years ago by a physician who shared our frustration at my overweight father's refusal to eat a healthier diet: "It'll likely take a heart attack to convince him to eat less and exercise more."  If Ms. Klein had heard this statement, I suspect that she would have warned us that my dad's doctor was prescribing for him a heart attack!

Sincerely,
Donald J. Boudreaux

Concise Encyclopedia of Economics, 2nd Edition

One of the most useful resources that I've taken advantage of during the past 15 years is David Henderson's Concise Encyclopedia of Economics (originally the Fortune Encyclopedia of Economics).  Its entries are written in crystal-clear language and, together, they cover an impressively large range of topics.

The first edition remains online here; I just discovered that the second edition has just been published by Liberty Fund.  I'll order mine now.  I encourage each of you to order a copy.  It's a genuine gem.

"Christ, Marx, Wood, and Wei Led Us to this Perfect Day"

Ira Levin died on Monday.  One of his least-known works is one of my favorite novels: This Perfect Day, first published in 1970.  It's in the same genre as Orwell's 1984 and Animal Farm, and Huxley's Brave New World.  In my opinion, This Perfect Day should be ranked with these three important classics that do so much to make readers feel in their guts the dangers of collectivism.

Cowen (and Manne) on Klein (and Stiglitz)

Tyler Cowen's review, appearing in today's New York Sun, of Naomi Klein's book Shock Therapy is outstanding -- quite the opposite of the ridiculously favorable review by Joe Stiglitz.

Stiglitz's review truly is appalling.  I might write more about it in a few days.  In the meantime, Geoff Manne effectively unmasks many of the flaws that infect Stiglitz's "review."

Tyler's New Book

I highly recommend Tyler Cowen's new book, Discover Your Inner Economist.

Here's one of my takes on it.

Schumpeter

I'm fifty pages into Prophet of Innovation, the bio of Schumpeter by Thomas McCraw, preparing for a podcast with McCraw. Enjoying it very much so far. McCraw claims that the marginalism insights of the Austrian School were a genuine intellectual revolution that paved the way for business to lower price in hopes of exploiting lower marginal costs due to economies of scale. Not sure it's true but it's an interesting claim. Looking forward to the discussion of the role of entrepreneurship. The interview is about two weeks away, so feel free to read the book in advance and send me any questions you might for McCraw. Here is McCloskey's thoughtful review (HT: Greg Mankiw).

Shocked!

Among the nice perks of blogging here at the Cafe are the several offers of free books that come my and Russ's way each year.

With that background, here's a letter that I just sent to the Marketing Director at Henry Holt, publisher of Naomi Klein's latest book, The Shock Doctrine; this gentleman e-mailed me this afternoon with an offer of a free copy of this book.

Dear Mr. Rhorer:

Thank you for your e-mail offer of a free copy of Naomi Klein's latest book attacking capitalism.  I accept.

I note, though, that Ms. Klein's previous best-seller, No Logo - which you call "groundbreaking" - was praised by the PBS show Frontline as "an impassioned critique of marketing's effects on culture and citizenship."  Is Ms. Klein aware that the major American corporation publishing her new book is trying to drum up sales with mass e-mails from - of all people! - its director of Marketing?

Sincerely,
Donald J. Boudreaux

Nation-States and Foreign Direct Investment

Here's my review -- appearing in The Independent Review -- of Nathan Jensen's useful book, Nation-States and the Multinational Corporation.

Title Search

I learned a lot from all the comments and suggestions I've received about the title for my next book. (Comments are now closed on those posts). One substantive thought. A number of you liked The Spontaneous Symphony. It's a great title but I won't end up using it for the same reason that I try not to use spontaneous order to describe self-organizing systems. The word spontaneous has a number of meanings in everyday language. Here are the first two from the Merriam-Webster online dictionary:

1 : proceeding from natural feeling or native tendency without external constraint
2 : arising from a momentary impulse

The first one is good for our purposes. The second is not so good. It suggests something that happens suddenly out of the blue. In everyday language, the word comes up most often in that second meaning, as in, let's go to the beach instead of spending the day working on the lawn as we'd planned. Let's be spontaneous! The second association most people have with the word is spontaneous combustion. That really uses both meanings—a sudden fire that isn't intended by anyone.

The other problem with any of the titles that use the word "symphony" is that symphonies are orderly in very particular ways. It's a pretty good metaphor for the orderliness of the economy but it leaves out the role of improvisation. Jazz, as I think one commenter mentioned, is a better metaphor, and in an earlier draft, I compared the division of of labor that goes into making a pencil to jazz musicians improvising in different locations yet making music that is still harmonious. But The Secret Jazz Combo or Jazzonomics or Improvonomics or The Jazz of Our Economy don't grab me. Plus the symphony metaphor doesn't tie in with the plot of the book.

But your comments have inspired me to search for a better metaphor that I might put in the book and that would make an evocative and poetic title. I think I've got it. I'll chew on it for a few days and see if it works. Thanks again for your efforts. I will keep you posted.

The challenge of the title

I want to thank everyone who commented on the recent post asking for reactions to potential titles for my next book. Here I'd like to tell you a little bit more about the book and try out some new candidates and get your reaction again.

The challenge is that the book is both a novel and a primer on a variety of economic topics. So a title that describes the plot of the book, The Prince and the Provost, say, tells you nothing about what you might learn.  A title that describes the economics the book will teach you tells you, How Prices Sustain and Expand Our Standard of Living (to highlight one of the main themes) doesn't alert you to the book being a novel and maybe a little more pleasant than your standard non-fiction treatise.

My last book, The Invisible Heart, had an ideal title. It captured the economics (that the invisible hand is more compassionate than you might think) and a key part of the plot--that one of the main characters, Sam Gordon, is actually a pretty decent guy even though he's a believer in capitalism and markets.

So let me give you the basic outline of the plot of this book and then you can react to a few more titles. In laying out the plot, I'll mimic what the back cover blurb might look like. Dashes indicate where the title would go:

Tuesdays with Morrie meets The Wealth of Nations in this offbeat novel by economist Russell Roberts. In the spirit of his first two books The Invisible Heart and The Choice, —————— is the story of Ramon Fernandez, a Cuban-American tennis prodigy on scholarship at Stanford University. Ramon is having dinner with his girlfriend when an earthquake shakes the campus knocking out power for hours.  Finishing their dinner by candlelight, they set off in search of flashlights, batteries, milk and ice, but everyone is sold out, save one giant retailer that is fully stocked but is charging double their regular prices. Outraged at this gouging, Ramon finds himself involved in a campus protest against the retailer, a significant donor to Stanford. Ramon's involvement in the protest draws the interest of the Provost, Ruth Lieber, who is also a professor of economics at the University.

For reasons Ramon cannot understand, the Provost starts finding him on campus and engaging him in conversation about economics. Along the way, Ramon (and the reader) learn about about spontaneous order and the role that prices and entrepreneurs play in creating and sustaining our standard of living. Ramon learns about the marvel that is the market and how our choices can seamlessly merge with those of our neighbors without anyone being in charge, creating the endless possibilities our lives can embrace. Ramon is surprised to discover that economics is as inspiring to the soul as it is to the pocketbook, but it is only at the end that he and the reader discover just what is motivating Ruth Lieber's interest in him. Part primer, part drama, and part tribute to the power of teaching ------- is the story of a teacher, her student and what we all can learn about the hidden order that surrounds and sustains us.

The best titles capture the essence of a book and are easy to remember. The challenge of this title is that I hope that the book is more than a dry treatise on economics and that the fictional element gives the economic lesson a poetry that it might not otherwise have. You want the title to convey more than just that the book's about economics. That is what is missing or at least partly missing from The Price of Everything. (BTW, right now there is a chapter with that title where Ruth tries to answer the charge that economists know the price of everything and the value of nothing.) There are two other attributes of an ideal title. When you finish the book, you come to understand a deeper meaning of the title. It enhances the satisfaction you get from the book. And finally, the ideal title, helps you, the reader of the book who I hope will love it, get a friend to read the book who might not otherwise pick it up. So imagine finishing the book I've described above and telling a friend about it. "You should read it," you explain. "What's it called," your friend asks. "_______" you reply, "it's about ......" The title should help you finish that last sentence in a way that makes your friend want to read the book. So here are some more candidates (including some from the last round). Please use the comments to vote or make other suggestions. Remember, there can be a subtitle that talks about the economics or the fiction depending on which is emphasized in the main title:

The Price of Everything
How Little We Know
The Goose that Lays the Golden Eggs
The Uncharted Journey
The Sum of the Parts
Consider Her Ways, Be Wise
The Rest of the Picture
A Price Too High
The Prince and the Provost
The Poet of Possibility
The Poet of Prosperity
The Secret Symphony
The Secret of the Unconducted Symphony
The Tree of Knowledge
The Untold Story
Endless Possibilities

A title for my next book

I'm finishing up my next book and I'm struggling with the title. Like my first two books, it's a novel that conveys economic ideas. I'd like the title to convey something of the substance of the book, it should be easily remembered and it should look intriguing if you picked it up in the bookstore, heard about it from a friend or or heard it mentioned on the radio. It should also be somewhat easy to remember. Without knowing anything about the content, which of these titles grab you? You'll have to imagine an evocative and attractive cover. Imagine hearing from a friend, "I'm reading this great book, it's called ————" Which of these titles would you like to hear filling in the blank?

How Little We Know

The Price of Everything

Unscripted Life

The Silent Symphony

Silent Harmony

The Ties That Bind

Let it Grow

The Garden of Prosperity

The Poet of Prosperity

The myth of the rational voter

I just interviewed Bryan Caplan on his new book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies, for an upcoming EconTalk podcast. The podcast should be released on June 25. I'd encourage you to read his book in advance of the podcast if you have the time. It is fascinating, provocative and very well-written. Bryan argues that the bad policies we get aren't because special interests have hijacked the political process but rather because democracy works too well—it gives irrational voters what they want. The logic is relentless. He will make you think.

The Information Stream

I'm reading Everything is Miscellaneous by David Weinberger, scheduled for an upcoming podcast. The book is about how we try and create order out of the disorderly world of information and some of the differences between ordering the physical and digital worlds. Fascinating, so far. Some nice facts on the Library of Congress:

The Library of Congress owns 130 million items, including 29 million books on 530 miles of shelves. Every day, more books come into the library than the 6,487 volumes Thomas Jefferson donated in 1815 to kick-start the collection after the British burned the place down.

The Reality of the Influence of 'The Myth'

My brilliant younger colleague Bryan Caplan is making quite a splash with his new book, The Myth of the Rational Voter.  It is, in my opinion, the most important book on the economics of politics to appear in the past decade.

Today's New York Times Magazine (p. 18) features a favorable discussion, written by Gary Bass, of its theme.  Here's a whiff:

Now Bryan Caplan, an economist at George Mason University, has attracted notice for raising a pointed question: Do voters have any idea what they are doing? In his provocative new book, “The Myth of the Rational Voter: Why Democracies Choose Bad Policies,” Caplan argues that “voters are worse than ignorant; they are, in a word, irrational — and vote accordingly.” Caplan’s complaint is not that special-interest groups might subvert the will of the people, or that government might ignore the will of the people. He objects to the will of the people itself.

Ten Really Good Books

My latest column in the Pittsburgh Tribune-Review discusses ten of my favorite economics books, aimed at a general audience, written in the 20th century.

The Truth of the Rational Scholar

Of all the books that I've read in the past 15 years (which is about equal in number to the books that Tyler Cowen has read in the past 15 weeks), the one that has had the biggest impact on my view of the world is Democracy and Decision, by Geoffrey Brennan and Loren Lomasky, published in 1993 by Cambridge University Press.  This book provides key insights for public-choice scholars - key insights that were largely unknown before this book's publication.

And now, taking Brennan and Lomasky to the next, higher level is my colleague Bryan Caplan's first book, The Myth of the Rational Voter (Princeton University Press, 2007).  I will bold but sincere in my praise: persons who do not grasp the lessons in Bryan's book cannot understand politics as well as persons who do grasp those lessons.

Buy a copy.  Read it.  Ponder it.  Learn.

Express Intelligibly

One of my favorite lines in Will Durant's The Story of Civilization appears on page 564 of Volume 8 (The Age of Louis XIV).  More specifically, it is the concluding line of Durant's discussion of Thomas Hobbes -- a philosopher who, for all of his faults, wrote clearly.  Hobbes's clarity of expression inspired Durant to write that

every art should accept the moral obligation to be intelligible or silent.

Boaz on Leonhardt on Doherty

New York Times reporter David Leonhardt reviews, in today's NY Times Book Review, Brian Doherty's new book, Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement. 

Leonhardt's review, alas, is seriously flawed.  The Cato Institute's David Boaz unveils these flaws. 

Creating Value

There are two kinds of people in the world.  Members of the first group think of jobs as being rather like boxes, each of which has a monetary figure on it as well as a set of levers inside.  A job-holder occupies a box, yanks on the box's levers, and in return receives pay in the amount of the prescribed monetary figure.  Lucky workers are those who land in boxes paying big money and whose levers are easy to manipulate; unlucky workers are those who find themselves in boxes paying little money and whose levers are difficult to manipulate.

The second group of people in the world understand that real jobs are a matter of creating value for buyers.  The greater the amount of value I create for others, the better -- or, at least, the higher-paying -- is my job.  In markets, your job isn't a box that you get assigned to; your job is an opportunity to perform, to help improve the lives of others and, in return, to persuade these others to help you improve your life.

And one of the most important of these performances is corporate management -- the ability to coordinate large amounts of resources, time, and workers in ways that create large amounts of value for others and that makes it easier for those of us with less vision and administrative ability to find jobs that maximize the value that each of us, individually, creates for others.

Charles Koch, CEO of Koch Industries -- and author of the just-released The Science of Success -- is one of our era's great entrepreneurs and managers.  (He is also a stalwart supporter of economic education and classical-liberal values.)  Washington Times columnist Richard Rahn has this nice overview of Charles Koch and his book.

Our Books

We've added a new feature in the right hand margin, a list of our books. Coming soon, Don's book on trade and my book on prices, prosperity and unmanaged order. The version of The Choice that's there is the new edition, the third. It's almost $10 cheaper than the last edition and I've added new chapters on outsourcing, manufacturing jobs, the IMF and the World Bank, and tightened the writing throughout. You can read the first three chapters of the new edition, here (along with the opening chapters of The Invisible Heart, as well.)

Hardy Free Trade

One of my favorite novelists is Thomas Hardy.  He was no one's idea of a capitalist's lackey; more importantly, he was certainly no lackey for protectionists.

In the Preface to his 1886 novel, The Mayor of Casterbridge, Hardy felt obliged to help his readers understand the precarious economic conditions of rural England in the early 19th-century, where the story is set.  He began:

Readers of the following story who have not yet arrived at middle age are asked to bear in mind that, in the days recalled by the tale, the home Corn Trade [grain trade], on which so much of the action turns, had an importance that can hardly be realized by those accustomed to the sixpenny loaf of the present date, and to the present indifference of the public to harvest weather.

And what accounted for the ordinary Briton's happy ability, by the late 19th century, to enjoy a reliable supply of inexpensive bread?

Hardy knew an important part of the answer: "the repeal of the Corn Laws" - Britain's great step, taken in 1846, toward free trade.

Blind Side

Just finished (in half a day) Michael Lewis's Blind Side, the story of...lots of things—the hidden side of football, race and class in the South, an inner-city kid's journey, how market forces move things in unexpected ways. It is not as analytical as Moneyball but the underlying story is more dramatic and it's very well told by Lewis. Along with all of the above, the book captures the poetry of athletic excellence, the sheer magnificence of the outlier—the man playing a boy's game. It reminds me a bit of The Courting of Marcus Dupree, an under-appreciated gem and the movie The Scout, Albert Brooks's offbeat portrait of the baseball scout who finds a player too good to be true.

Fans of economics will love the way Lewis talks about the evolution of football and how what fans see and often respect is only part of what is really going on. You'll also like how Lewis understands and explains how competition in the free agent market makes left tackles on the offensive line the second most highly-paid players in football. Who knew? These themes are the framework for the human drama that Lewis portrays and that makes up most of the book—the tale of an inner-city black kid who finds himself taken under the wing of a rich, white, emphatically Christian, driven, sports-loving family. If you like football at all, you will not be able to put this book down.

Stampeded by Sheep

I've looked forward to the publication of few books with as much enthusiasm as I now look forward to the publication of Bryan Caplan's The Myth of the Rational Voter.  It's due out from Princeton University Press in April -- but you can now see its cover here.

Faulkner vs. King and Irving

Faulkner once described the process of writing as following your characters around and writing down what they say and do. He presumably meant that even a book of fiction was not totally under the control of the author and that there was a certain organic inevitability once you created a character as to how the character talks and behaves. King and Irving evidently have a different model of how to write.

John Fowles, 79

John Fowles is dead at 79.  NYT obit (rr) is here.

Maybe I will go back and read The French Lieutenant's Woman and The Magus.  In my twenties, I thought they were marvelous.  His collection of short stories, The Ebony Tower, is masterful and chilling.

The Naked Dictator

The NYT's Book Review has a rave review of Mao: The Unknown Story, a bio of the great swimmer and murderer.  The reviewer, Nicholas Kristof, is a little surprised to discover that Mao may have been bad from the start:

Mao's sins in later life are fairly well known, and even Chen Yun, one of the top Chinese leaders in the 1980's, suggested that it might have been best if Mao had died in 1956. This biography shows, though, that Mao was something of a fraud from Day 1.

Why is this surprising.  When it was "discovered" that Stalin was an evil murderer, the friends of communism argued for Lenin's righteousness.  But it turned out he was a nasty fellow, too.  When the avuncular Castro dies, we'll discover he was a monster from Day 1, too.  One reason for this bizarre romantic view of murderers is that until the murderer dies, those who know the truth are reluctant to speak out.  But part of it is simply romanticism about charisma.  No one who aims to rule China is going to be a normal person.  We may long to view him as one of us or just a normal Joe or even Zhou, but the aspiration to rule a nation tells us he isn't normal.  Such folks have very large egos and getting power is unlikely to be a healthy food for those egos.  Instead you get the macro—the murder of millions, and the micro—the brutal treatment of those around you:

Some of the most fascinating material involves Zhou Enlai, the longtime prime minister, who comes across as a complete toady of Mao, even though Mao tormented him by forcing him to make self-criticisms and by seating him in third-rate seats during meetings. In the mid-1970's, Zhou was suffering from cancer and yet Mao refused to allow him to get treatment - wanting Zhou to be the one to die first. "Operations are ruled out for now" for Zhou, Mao declared on May 9, 1974. "Absolutely no room for argument." And so, sure enough, Zhou died in early 1976, and Mao in September that year.

Maybe the book will get some restaurants renamed.

Then again, according to Kristof, even Mao's legacy has a bright side.

I agree that Mao was a catastrophic ruler in many, many respects, and this book captures that side better than anything ever written. But Mao's legacy is not all bad. Land reform in China, like the land reform in Japan and Taiwan, helped lay the groundwork for prosperity today. The emancipation of women and end of child marriages moved China from one of the worst places in the world to be a girl to one where women have more equality than in, say, Japan or Korea. Indeed, Mao's entire assault on the old economic and social structure made it easier for China to emerge as the world's new economic dragon.

Yes, he was good for women.  Unless you were one of the 35 million or so women who he killed directly or indirectly.  Other than that, he was really good for Chinese women.  And take a nother look at that last sentence:

Indeed, Mao's entire assault on the old economic and social structure made it easier for China to emerge as the world's new economic dragon.

That's like saying, true, he broke a lot of eggs.  But the Chinese people got an omelet!  It was a bad deal.

It Was Sixty Years Ago Today...

... that George Orwell’s Animal Farm was published. There’s no better satire of the pretensions and hypocrisy of power.

Another Self-Indulgent List

Whenever I listen to Tom Palmer lecture – as I did last week in Romania – I’m impressed with how many books I should have read that I have yet to read. So here, in my chagrin, I submit to the world my current list of the top ten books that I should have read by now in my career but that I haven’t yet read:

10. Erasmus’s In Praise of Folly

9. Boswell’s Life of Johnson

8. Alfred Marshall’s Principles of Economics

7. Cervantes's Don Quixote

6. Eli Heckscher’s Mercantilism

5. Aristotle’s The Nicomachean Ethics

4. The Odyssey

3. The Iliad

2. The King James version of The Bible (cover to cover; I’ve read large chunks of it)

1. Gibbon’s The History of the Decline and Fall of the Roman Empire

Twelve Articles

Larry Ribstein, over at Ideoblog, wonders why I didn’t mention Ronald Coase’s collection of essays – The Firm, the Market, and the Law – in my list of the baker’s-dozen books that most influenced my thinking.

I actually thought of doing so, but because that book is a collection of Coase’s brilliant articles all of which I read separately, I left it off of my list.  But Larry’s blog-post gives me one more opportunity for self-indulgence – namely, listing the dozen articles that most influenced my thinking.

Compiling this list is orders of magnitude more difficult than compiling the list of books.  Undaunted, though, I offer the following:

1. F.A. Hayek, “The Use of Knowledge in Society.” (1945) Although included in Hayek’s Individualism and Economic Order, the influence of this article on my thought runs so deep that I must list it here, in first place.

2. Ronald H. Coase, “The Nature of the Firm.” (1937) I wrote my doctoral dissertation on the theory of the firm, a research agenda invented by Coase and still dominated by his fundamental insights.

3. Ronald H. Coase, “The Marginal Cost Controversy.”  (1946) Nothing like informed and wise common sense to see clearly the weaknesses of abstract theory too long detached from empirical reality.

4. James M. Buchanan, “Order Defined in the Process of Its Emergence.” (1982)  I didn’t truly appreciate the spontaneous order until I read this very short, brilliant essay.

5. Harold Demsetz, “Toward a Theory of Property Rights.”  (1967) A seminal article on property rights – for many people, not just me.

6. George Bittlingmayer, “Decreasing Average Cost and Competition: A New Look at the Addyston Pipe Case.” (1982) A tightly reasoned and well-researched article that promotes understanding of competition as a process rather than as a state of equilibrium.

7. Thomas J. DiLorenzo, “The Origins of Antitrust: An Interest Group Perspective.” (1985) This is the first serious research done on the origins of the Sherman Antitrust Act that (1) looks at economic data of the period, and (2) does not simply assume that the Sherman Act was meant to promote competition.

8. Armen A. Alchian, “Costs and Outputs.”  (1959) Since first studying this much-underappreciated article, I no longer take seriously the standard analysis of production and costs routinely taught to economics students.  This article, if read more widely and digested, would revolutionize microeconomics.  Among other benefits, it would pretty much eliminate the nitwitted notion of “predatory pricing.”

9. Kenneth Arrow, “Toward a Theory of Price Adjustment.” (1959) An indispensable article for fully appreciating the model of perfect competition.

10. Armen A. Alchian, “Some Economics of Property Rights.” (1965)  Insights on every line.

11. Ronald A. Heiner, (1983) “The Origin of Predictable Behavior.”  An ingenious and useful framework for understanding the virtues of rule-following behavior.

12. Kenneth G. Elzinga & David E. Mills, "Testing for Predation: Is Recoupment Possible?" (1989)  This article asks the right questions about allegations of predatory pricing.

And to make a baker’s dozen:

Robert D. Tollison, “Rent Seeking: A Survey.”  (1982) A crystal-clear introduction to the important literature, circa 1982, of rent-seeking.

Twelve Books

A Café Hayek reader – Ken – flatters me by asking what are the “dozen or so most influential books” I’ve ever read.

I take a stab here at listing these, even though doing so is self-indulgent – and, in fact, very difficult.  (Total influence is almost impossible to disentangle from influence at the margin.)  But here goes.

The first one is easy:

1. F. A. Hayek, Law, Legislation, and Liberty, especially Volume 1 (“Rules and Order”)  Where to begin?  Hayek’s elaboration of the distinction between law and legislation is of signal importance.  This book’s influence on my thinking is so deep and wide that I’m intimidated at the prospect of trying to list even just the major ways it has shaped my world view.

Selecting the remaining eleven books is more difficult:

2. Leonard E. Read, I, Pencil -- This is a short monograph rather than a book.  But it’s profound.  So much wisdom extracted from something seemingly so mundane.

3. F. A. Hayek, Individualism and Economic Order – The included essay “The Use of Knowledge in Society” is of special importance, but, in addition, the essays “Individualism: True and False,” “The Meaning of Competition,” and “The Facts of the Social Sciences” are also especially influential to my thinking.

4. Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, Part II (“Can Capitalism Survive”) – I read this book early on after reading Benjamin Rogge’s brilliant essay entitled “Can Capitalism Survive?”  While the bulk of Schumpeter’s book has since faded in my memory, Part II is etched deeply and sharply, especially Schumpeter’s unparalleled discussion of competition as rivalry and his knocking the false god of “marginal cost pricing” from its pedestal.

5. Richard Dawkins, The Blind Watchmaker – Evolutionary thinking at its finest; scientific writing at its finest.  Never again, after reading this book, do I flatter myself that my subject (economics) is too deep or difficult to explain in clear and accessible language.

6. Julian L. Simon, The Ultimate Resource 2 – I can’t describe how much this book changed my view of the world and of economics.  Human creativity and effort, simultaneously unleashed and channeled by the market, as the ultimate resource.  What a deep, profound, and indispensable realization!

7. James M. Buchanan, What Should Economists Do? – Public choice, yes, but so much more, including much methodological wisdom.

8. David Friedman, The Machinery of Freedom – To put it bluntly, this book made me an anarchist.

9. Milton Friedman, Capitalism and Freedom – Practical policy advice combined with a passionate and principled commitment to individual freedom and other liberal values.

10. Frederic Bastiat, Economic Sophisms (and here) – Unmatched persuasive writing, as well as unsurpassed insights into the nature of trade.

11. Fernand Braudel, The Structures of Everyday Life – 600+ pages of clear and objective descriptions of the lives of misery led by our pre-industrial ancestors.

12. Harold Berman, Law and Revolution – Law is no imposition of a sovereign ruler, and freedom is no gift of Great Men perched atop rearing horses or lecturing in stentorian tones before rapt assemblies.  Law – true law – and freedom both grow only when power is decentralized and besieged.

I treat myself to offering a baker's dozen:

13. Geoffrey Brennan & Loren Lomasky, Democracy and Decision -- This spectacular volume opened my eyes to plain reasons why people behave so intelligently in some domains of life (mainly private ones) and so stupidly in others (mainly political ones).

Easterly on Sachs

Jeffrey Sachs wants to save the world.  He basically wants to mobilize the West to save the rest of the world from poverty.  It's a nice idea. If I thought it would work, it would be a crusade worth joining.  William Easterly explains why it won't in a review of Sachs's new book in today's Washington Post.  Read Easterly's book, The Elusive Quest for Growth, instead.

Learn a New Word, and Re-enforce a Principle

Case Western Reserve Professor of Law and of Economics, Andrew Morriss, sent along this wonderful quotation from Anthony Trollope:

A faineant government is not the worst government that England can have.  It has been the great fault of our politicians that they have all wanted to do something.

    -- Phineas Finn

Wharton Understood the Margin

In Edith Wharton’s The Age of Innocence, protagonist Newland Archer is impressed with the influence upon New York high society exercised by the van der Luydens. Henry and Louisa van der Luyden are elderly, stately, proper, rich, and dull. They almost never leave home, and seldom entertain. Nevertheless, their opinions matter to everyone who is anyone in New York City, circa 1870. Here’s a conversation between Newland Archer and the free-spirited Countess Ellen Olenska:

‘The van der Luydens,’ said Archer, feeling himself pompous as he spoke, ‘are the most powerful influence in New York society. Unfortunately – owing to her health – they receive very seldom.’

She unclasped her hands from behind her head, and looked at him meditatively.

‘Isn’t that perhaps the reason?’

‘The reason – ?’

‘For their great influence; that they make themselves so rare.’

.........

This is a fine example from fiction of the margin at work.  Were the van der Luydens more free with their opinions, the value of each expression of their opinions would be less.  Their influence, at least at the margin, would be lower.