Your summer books for 2006!!

I'm really looking forward to reading that Warsh book.

I myself have been reading a not fresh off the presses book at a sedate rate (mostly from only reading at meal times and on the train), Schama's _Embarrassment of Riches_. It started out slow, but his recounting of the tulip mania is really something, in fact, I'm thinking I'll go find the Posthumus article from 1929 that Schama recommends just to read more about it.

Here is an interesting review of Deepak Lal from the Indian Express, July 2, 2006. Mostly on target.

Ghost of Adam Smith
Pratap Bhanu MehtaPosted online: Sunday, July 02, 2006 at 0000 hrs Print Email

Disciples of great masters are often more dogmatic about the ideas of their masters than the masters themselves were. This remark would not be entirely inappropriate for Deepak Lal?s vigorous, erudite but ultimately contentious defence of classical liberalism. Like Adam Smith, Lal firmly believes in a strong but minimal state; he believes that a system of natural liberty is more likely to produce prosperity and raise the condition of the least well-off; like Smith, he believes that the state needs to be protected from the power of interested oligarchies of all kind, including those of Capitalists and intellectuals. Much of the book is devoted to answering critics of classical liberalism with a mass of historical and empirical evidences.

The storyline here is simple: Open economies will do better than closed ones, any attempts by the state to regulate the economy, even with the best of intentions, will produce sub-optimal outcomes, and any state-induced welfare or redistribution is likely to hurt productive efficiency and welfare. Relying largely on Surjit Bhalla?s work, he argues that globalisation has not only not increased poverty, it has reduced inequalities considerably. Lal marshals an impressive array of arguments to show that detractors of classical liberalism, who support more state control over the economy, are flat out wrong.

What is interesting and contentious is that his list of the controls that do damage is not just the familiar one: Industrial licensing or trade barriers. On these, his case is quite robust. But he wants to extend the list to include unbridled movement of capital and is against all capital controls; he is deeply sceptical of global warming and dismissive of any serious environmental challenges where collective action might be required; he thinks, following Richard Epstein, that those who lose out in the process of globalisation should not be compensated in any respect, that almost all welfare functions should be privatised. There is an admirable toughmindedness about Lal?s arguments, but one suspects that the self-congratulatory toughmindedness gets the better of good judgment, and exaggerates a powerful argument to the point where it risks being a caricature of itself.

Adam Smith was not only sceptical of state power, he was also sceptical of any concentrations of power. The Wealth of Nations, while it is a powerful defence of an open commercial society, has nothing good to say about Capitalists; in fact, its concern for labour is far more pronounced. After all, he could write: ?When regulation is in favour of the workmen, it is always just and equitable; but sometimes it is otherwise when in favour of the masters.? Perhaps Smith was over optimistic about the actual functioning of labour regulation, but he had no doubt that labour would require serious protection.

Lal is curiously silent on the asymmetries of capital and labour, especially when it comes to moving across the globe. It is worth remembering this because classical liberalism had three aspects, two of which Lal completely ignores. The first, which he concentrates on, was a defence of an appropriately minimal state, so that the state itself does not become a predator on society. The second was a theory of historical change, which emerged from the very same sceptical premises that grounded suspicion of state power. On this view, establishing a system of natural liberty would be a slow and perhaps even accidental process; converting it into a single-minded project would licence the very concentrations of power that classical liberals would be wary of. It is not an accident that Smith was the fiercest critic of imperialism whereas Lal strongly endorses Empire as a mechanism for securing markets. Lal is no classical liberal in this respect.

And third, classical liberals had a better sense of political judgment, of the range of values that needed to be kept in mind when determining policy. So, for instance, on capital controls, whatever the theoretical arguments in favour of removing them, there are questions of country-risk that are not entirely irrelevant. No wonder, even Jagdish Bhagwati, who knows his Smith, would be more wary than Lal of an unbridled movement of money. No wonder, even Hayek, who knew his Smith and Hume better than Lal does, could contemplate a serious role for the state in health care.

Lal?s criticisms of the detractors of liberalism are great fun, full of incidental insights and politically brave remarks; it exposed the hypocrisy and cant of the critics of liberalism with great fervour. But the book overdoes it by refusing to engage with the more sober evidence that might cast some doubt on some of Lal?s more extravagant claims. He acts more like a spokesman for George Bush than a disciple of Adam Smith.

I thought Fukuyama's book was really bad I have to say. I hope you aren't disappointed with it but I imagine you will be...

you mentioned a while back that you had the book "why europe will run the 21st century". Did you read it? Did it have any merit?

I thought A Long Way Down was more of a downer - the main theme is rather depressing. It certainly had its funnier moments, but don't go in expecting it to be primarily amusing. I do especially appreciate the B list.