The Core of Economics Is How You See People, Not Money | Some Good Books

Over this year's National Day holiday, QDaily asked eight young authors to recommend books they think are worth reading. Each has made a name in their own field, and each is glad to share new knowledge and new thinking. This is the seventh, Xiaoyu Lu.

It's book-recommendation season again.

This time last year, QDaily asked a number of interesting people from the biggest accounts on Weibo, WeChat, and Zhihu to recommend us a batch of books. They included Zhihu founder Zhou Yuan, Guokr founder Ji Shisan, Zhang Wei, founder of the WeChat account "Shixiang", Wu Miao, founder of the WeChat account "Leviathan", and screenwriter Shi Hang. The request back then was simple: recommend a book from the past year that you think is good — one that may have helped your career, or one that is just good. Chinese or English, either was fine.

This year we decided to change the format a little.

In any era, expert readers are a scarce resource. Their judgment about which books to recommend and review can be an important guide when we choose what to read — and sometimes the review itself becomes a book worth reading, the way Tony Judt's Reappraisals does.

Of course, not every author we invited broods over 20th-century history the way Tony Judt does in that book. These people are younger, more interesting, sharper-eyed, and they are not professional writers — but each carries some influence in their own field, and each is glad to share new knowledge and new thinking.

We want to introduce them to you through a format of book recommendations plus a long review, as a small guide to the modest business of reading.

Because everyone's experience differs, the books and reviews each person offers differ in style too, and puzzling out those differences is itself rather interesting. From October 1 to October 8 we will publish one author's reading list and review each day. We hope you find it useful. If you know of any good expert readers around you, leave us a comment; you may see their piece here before long.

This is the seventh, Xiaoyu Lu.

Xiaoyu Lu is a PhD candidate in politics at Oxford University, and the founder and a contributor of the academic group Consensus Society. On his personal WeChat account "Xiaoyu's World Picture," he says he wants to turn deep ideas into stories that are good to read. Most of what follows is serious material on politics and economics, but we think these books will give you the pleasure of thinking and the pleasure of reading at once.

Book Recommendations

By Xiaoyu Lu

Give a Man a Fish: Reflections on the New Politics of Distribution

Author: James Ferguson

Publisher:

Duke University Press Books

Year: May 2015

Once, in a class on poverty relief, I muttered that all these programs seemed pointless — why not hand the money straight to residents, who understand their own needs best? The moment I said it, a classmate studying economics tore the idea apart. Now, at last, I have found vindication for that amateur opinion in a new book by the Stanford anthropologist James Ferguson.

Ferguson's early work studied Zambia's Copperbelt Province, and this new book still looks at the political economy of Africa. What caught his attention is a new model of social welfare in the developing world. Next to traditional poverty-relief measures, the model is blunt and simple: give money straight to the poor. It first appeared in Latin America and came into its own in South Africa, where 16 million people — nearly a third of the population — now benefit from it.

Does this unorthodox way of fighting poverty work? Yes. Between 2002 and 2012, the share of South African households going hungry fell from 29.3% to 12.6%, and schooling and health improved as well — all of it demonstrably tied to the cash payments. Ferguson reads this as a sign that the economic system and the way it distributes are both changing. Whether that change will bring a revolution in governance itself — even, as Foucault once imagined, a socialist form of governance built on experiment — is the question Ferguson leaves us to think about and hope for.

Everything Was Forever, Until It Was No More: The Last Soviet Generation

Author: Alexei Yurchak

Publisher:

Princeton University Press

Year: October 2005

Strictly speaking this is no longer a new book, but it is one of the finest works of political anthropology in recent years. In it, Alexei Yurchak of UC Berkeley answers a question that bothered me for a long time: why, before a political system collapses, does collapse seem unimaginable — and why, the moment it happens, does everyone treat it as though it could not have gone any other way?

The Soviet Union and late socialism are that contradiction in concentrated form: why did the system look so deeply rooted on one side, and so brittle and so jumpy about threats from within and without on the other? Working from years of first-hand material, Yurchak comes at the question through the daily life of the last Soviet generation — those born between the 1950s and the 1970s — and tries to explain where the contradiction comes from. My advice: skip the discussion of ideological theory and go straight to the description and analysis of late-Soviet daily life. It reads as intimate and remote at the same time.

History's People: Personalities and the Past

Author: Margaret MacMillan

Publisher:

House of Anansi Press

Year: October 2015

While writing a paper I read her book on the 1919 Paris Peace Conference. It read like a novel, and I remember thinking, with some awe, how can she write historical events as though they were happening in front of her? Only later did I learn that she is the great-granddaughter of David Lloyd George, Britain's prime minister during the First World War. Later still she became the warden of my college; she is like her books — approachable, and never less than elegant.

Taking traits such as persuasion, vanity, courage, and curiosity as her themes, MacMillan folds together historical figures who appear to have nothing in common. The political bearing of Margaret Thatcher, Richard Nixon, and Stalin sits beside the lives of the philosopher Montaigne, the explorer Samuel de Champlain, and the travel writer Edith Durham. The whole book turns on this crowded cast of individuals, digging for the traits of character behind the acts that shaped the world.

The book is written for a general reader, which spares it the sometimes excessive fact-picking of serious scholarship; small entertaining stories keep it lively, and it still goes deep on its large themes. But its greatest achievement is to pull history's famous names down out of the air and back onto the ground, so that you can stand just behind them, look across on the level, and feel in your bones that they too were ordinary people like you.

The Myth of the Strong Leader: Political Leadership in Modern Politics

Author: Archie Brown

Publisher:

Basic Books

Year: April 2014

Democratic or authoritarian, every political system wants strong leadership. But does strong leadership always produce good politics? The Myth of the Strong Leader is an answer to that question. Archie Brown — an Oxford professor who made his name studying the Soviet Union and served as a senior adviser to the British government — brings the double view of the historian and the political participant to his analysis of different leadership styles and what they produce.

Comparing cases across the United States, Britain, China, the Soviet Union, and elsewhere, Brown finds that a strong leader does not necessarily produce good politics. Good decisions often come out of "collective leadership," and leaders who look weak — Harry Truman, say — reach good policy outcomes precisely because they take advice and are good at persuading. As the author puts it, the book gathers the best of his "fifty years of political research." Isn't that reason enough to buy it?

A Turbulent and Mighty Continent: What Future for Europe?

Author: Anthony Giddens

Publisher: Polity

Year: November 2013

In 1946, Winston Churchill gave a speech in Switzerland calling for a "United States of Europe," so that the people of the whole continent could live in peace and freedom. Seventy years on, Europe has a community called the European Union, and that community is stuck in a crisis without precedent. This recent book by the sociologist Anthony Giddens does more than describe how deep the crisis runs; it proposes a way to hold the European community together.

I have to admit that when I bought the book last year it left me cold — I even thought the old man had run dry. Reading it again this year, it works as a warning worth heeding. The EU's sprawling, slow-moving organizational frame and the power struggles among the big states behind closed doors make up two parallel decision-making tracks inside the EU system, and the crisis has laid bare the risk of a system so far from ordinary people.

Giddens still refuses the story of European decline. He believes the present crisis will strengthen the sense of a shared fate, which will in turn push the system to adjust itself. Whether by handing over more sovereignty or by replacing multiculturalism with interculturalism, only time will tell whether Europe can get back on its feet.

Who Governs Britain?

Author: Anthony King

Publisher:

Pelican

Year: September 2015

There isn't much to say about this one: a popular introduction to British politics. The author, Anthony King, is a leading authority on contemporary British politics, and the book sets out the country's system of government from top to bottom. The language is plain and the examples come easily. Whether you love British political culture or simply grew curious about the island after the referendum, this is a book worth keeping on the desk at home.

It belongs to Pelican, Penguin's line of popular titles, which to my mind is a little better than Oxford's Very Short Introductions. The two have similar aims, but Pelican is clearly better at making hard material plain.

Book Review

Who Cooked Adam Smith's Dinner?

Author: Katrine Marçal

Publisher:

Pegasus Books

Year: March 2015

Who Cooked Adam Smith's Dinner? — Notes From Feminist Economics

By Xiaoyu Lu

In 2010, Christine Lagarde, then France's finance minister, said that if Lehman Brothers had been Lehman Sisters, the financial crisis might not have looked the way it did. She had grounds for saying so. Audur Capital, an Icelandic private investment firm run entirely by women, was the only such firm in the country to walk away from the crisis unhurt. Plenty of psychological studies show that men and women differ in how they handle risk. Follow the logic, and a world led by women might be more peaceful and more stable.

Leave aside for now the argument these claims have caused; every point above rests on a hypothetical. Lehman Brothers could never have been Lehman Sisters, and today's world is not led by women. We cannot rewrite history. But we can think again about the present and offer a new future. The Swedish writer Katrine Marçal starts from exactly there: she lays out the fatal flaws in received economic thinking, and then, from a point of view we usually ignore, redraws the possibility of another kind of economic life.

Adam Smith's Dinner

She begins with the founding father of modern economics, Adam Smith. Picture the moment his dinner is set in front of him: what is he thinking? That dinner was made by a whole chain of individuals — the farmer who grew the grain, the butcher who dressed the meat, the merchants and peddlers selling along the street, and so on. Each of them was tied to the others and none could be spared, and only so did Adam Smith go to bed fed. So what was it that bound the people of a society together so tightly?

Plainly, nobody in that chain was supplying goods or services willingly and for free. The one reasonable explanation seemed to be self-interest. The instinct to seek gain is the engine that keeps this economy moving. Love and good will, by comparison, are scarce social resources. So the foundation of Adam Smith's classical economics is to economize on people's love and cultivate their rational pursuit of gain.

This view of people as economically rational has stayed at the center of economics ever since. After the Cold War, the idea of the market economy ran out in front and became the basic rule societies everywhere accepted. As Margaret Thatcher said: there is no alternative. Only with the economic crises of recent years have people begun to ask why the market economy has not delivered the wealth and equality it promised, and has produced unfairness and crisis instead.

More striking still is how far economic thinking has spread. It has worked its way into daily life until it forms the basic logic of our thought. With economics in fashion, everything is read through economic rationality. Political developments, social change, even falling in love — economics is behind all of it. We are happy to take the small details of life and run them through this kind of thinking, analyzing them rationally. It has made society more and more grasping. We assume everyone else is rationally chasing gain, and to avoid being knocked out of a fierce competition we pay more attention to short-term returns. A teacher's focus shifts from spreading knowledge to raising test scores; a CEO's gaze shifts from long-term growth to short-term arbitrage.

To Marçal, this is what set off the financial crisis. She uses a real case to make the point. Rock fans have probably heard of David Bowie, the legend. In 1997 Bowie badly needed cash. He was in no way poor — royalties from his songs flowed into his pocket year after year. But he wanted a large sum at once. So he put a product on the market: his future. Anyone could buy a stake and take a share of what his songs earned from then on. He gave up that future income, but he got what he wanted in the short term: in that one round he cashed out £87 million (roughly 870 million yuan).

The banks before the financial crisis were doing the same thing. Lending brings a bank a steady return year after year. But profit like that comes too slowly. So they sold the loans on to other institutions, telling them: you will collect the loan and the interest later. That way the principal and part of the interest were cashed out fast. But the investors who bought into Bowie in 1997 did not foresee what online music downloads would do to royalties, and the financial world did not foresee the blow of 2008.

Rationality Isn't the Only Answer

If a way of thinking runs into trouble in practice, does that not suggest a flaw inside the thinking itself? Look again at the assumption of the rational actor. Psychologists ran an experiment on children, handing out items to a group of five-year-olds and a group of seven-year-olds. While the five-year-olds grabbed for themselves, the seven-year-olds had already begun to worry about whether the distribution was fair. This tells us that the rational pursuit of gain is only part of human nature, and that a sense of justice and other values take shape as we grow up. Yet the modern economic model keeps asking us to stay five years old.

The economist John Maynard Keynes made the same point long ago. He held that economic rationality was only a transitional stage of human nature, and that once material needs were met people would turn to other values. His prediction did not come true. Having reached a prosperity without precedent, developed countries are troubled by obesity as a social problem, while more than half the population of the less developed world still goes hungry. Economic rationality has not passed at all; it has become a truth held almost sacred.

When love, fairness, and justice were ruled out of economic principles, one enormous group was ruled out with them: women.

Go back to Adam Smith's table. Anyone who knows his life knows that the father of economics never married and lived most of it with his mother. Even when he was appointed a customs official, his mother moved with him. She spent nearly her whole life caring for her son. And yet, when Adam Smith thought about where his dinner came from, he left her out.

Why? Because we do not consider raising children, cooking, and housework to be economic activity, and we do not count them in GDP. But imagine: without those activities, could the whole economic system keep going? If women did not go out early to buy food and cook it, the economic chain of the farm trade could never close. Yet the time and effort women spend on the road and at home is never counted. It is simply treated as a "natural resource."

At the same time, women are cast as caregivers, required to be loving and kind. In practice, the moment a woman shows greed or selfishness it is treated as a warning sign. So "economic man" means just that — a man — and even today's professional women are asked to behave like men. Love and women were pushed to the margins at the very start of economic theory, and today's neoliberalism is not describing a natural state of affairs; it is teaching us to take an unnatural one for granted.

An Economics With Love

Economics is not a way of thinking about money. At its core it is a way of thinking about the human animal. Adam Smith's economic principles were born after Newton's physics, and they set out to find something like universal gravitation in economic life. Physics moved on; economics is still under Newton's sky. Speaking of his own work, Einstein once said: "I want to know whether God had any choice in creating the world." In other words, we should always be looking for another possibility.

Back to the present: is there a way to change this economic model and the crisis it has brought?

Nancy Folbre, a well-known feminist economist, tells a story. Picture the countries of the world as runners at the Olympics. The first country might urge its people to run flat out, leaving children and the old behind. In time the runners in front tire, and nobody is coming up to take the baton. The second country tries something else: young men run first, while the women bring up the rear with the children and the old. At first the arrangement works, but friction builds — the women feel their contribution equals the men's, that they could run just as fast without the old and the young on their hands, and the men keep refusing to admit it. The argument drags on, and that country slows down too.

Then there is a third country. It does not move fast — its members walk together and look after the weaker among them — but it moves steadily, and in the end it wins this long race.

An idealized story, admittedly. But it tells us at least this: human motives have always been mixed. There is no need to treat love and money, men and women, as fire and water. Economics could try to bring loving, caring work into its serious categories, and to treat women as equal economic actors.

Look at the real numbers on women's housework. Statistics Canada ran an analysis showing that counting unpaid labor in GDP — much of it women's work at home — would add 41.4% to existing GDP. What does that mean? It means nearly half of a country's economic activity is not counted as an economic contribution at all.

Worldwide, women are now more than half of all migrants, and in some regions 80% to 90%. Most of them work long hours for low pay. Is there a way to use that labor efficiently and to join their economic activity to human kindness?

One example Marçal gives is the care industry. What was once charitable work done by women has become one of the most promising businesses around. Worldwide, the care industry cannot meet demand. In the Philippines, 3,500 doctors retrained as care workers between 2000 and 2003, because a care worker there can earn four to six times a doctor's income. In the United States, the care industry is set to be short 400,000 to 800,000 workers over the next 15 years. What does that mean? It means a person can show kindness and care and earn money at the same time — quite a lot of money.

This is only the tip of the iceberg, of course. What matters most is a change in how we think. Care is part of human nature, running alongside the rational pursuit of gain. It can also be a way of creating wealth — one that puts women on equal terms inside the economic life we already have, and turns the economy toward love.

Money need not be a synonym for selfishness. People can still love. Marçal goes so far as to quote Laozi's Dao De Jing on the way yin and yang complete each other and never stop changing.

The economy is not a matter of numerical principles. People made the economic system, so people can change it. That change takes all of humanity; no single group can do it alone, and no group should leave itself out of the process either.

As the book says at the start, feminism has always been about economics. Virginia Woolf wanted a room of her own — but that took capital too.

(This piece first appeared on the author's personal WeChat account "Xiaoyu's World Picture" on October 29, 2015.)

Cover image from: mises