Econ 1: UC Berkeley: Spring 2012: Why We Read Partha Dasgupta: "Economics: A Very Short Introduction"
‘The extent of the market’ is limited not just by transport but by trust: [T]here is also a feeling that some of the [recent] best-sellers have trivialised economics, titillating the reader with sex and drugs while neglecting the more important insights of the discipline. Nobody could accuse Partha Dasgupta of deepening this rut. In this Very Short Introduction, he has taken as his theme the original mystery of economics: the nature and causes of the wealth of nations. And he motivates the study not with unadorned GDP statistics but by comparing the lives of two young girls: Becky, who lives in an affluent American suburb, and Desta, the daughter of Ethiopian farmers. Why do two children, born so much alike, live such different lives?
The question is compelling, and presents an opportunity to explore many branches of economics, in a concrete and relevant way. Unfortunately… [w]hile there are many references to ‘Desta’s world’ and ‘Becky’s world’, these are too often brief appendages to abstract discussions of agents A, B and C and factors X, Y and Z. At times one could be reading a textbook, except there are no problem sets, fewer graphs, and the pictures are in black and white.
This is a great pity, because there is a deep, coherent and insightful argument at the core of the book.
One might begin with the proposition: wealth depends on the division of labour, and the division of labour is limited by the extent of the market. But the extent of the market is not limited only by transport and taxes. It is limited also by trust: by the rules and expectations that allow cooperation for mutual gain between people who do not know each other. And these rules and expectations, particularly the expectations, are hard to build but easy to destroy. In the worst case, not just the extent of the market but its very existence is threatened.
The logic for this argument is provided by game theory. Economic life, and indeed social life more generally, depends on trust… that most people will keep their word most of the time. But even this modest level of trust cannot be gained just by wishing for it. People must believe that the long-run benefits from successful cooperation outweigh the short-term gains from cheating. And they must believe that other people think the same….
If prospects for the future become less bright, or if confidence in the other party is reduced, even for trivial or fallacious reasons, the balance may tip from cooperation to conflict very quickly. This has become a cliché in Yugoslavia, Rwanda and Iraq: political uncertainty resurrects dormant divisions and peaceful neighbours become killers.
Less dramatically, such calculations may just restrict the number of people any individual can trust…. The ‘community’ is a natural boundary: any group which people are born into (and with no easy, voluntary exit) and must deal with repeatedly for their whole lives makes the penalties for cheating higher and more certain. The family is the ultimate example….
Yet… families… are small… limit the division of labour…. Markets… overcome these problems by allowing much larger numbers of people to cooperate. But these large numbers cannot rely on personal ties, so establishing the necessary trust is much more difficult….
While consideration of trust, and its implications for communities, markets, households and firms, is the key content of the book, other subjects are considered. It begins with a brief consideration of the history of economic growth, contains an interlude on the contrasting incentives and institutions in science and technology, and concludes with chapters on sustainability and democratic decision-making….
The Very Short Introduction series is advertised as being for ‘anyone wanting a stimulating and accessible way into a new subject’. Stimulating, yes. Accessible? I am not so sure. Popular economics is supposedly aimed at the whole literate population, or at least the university-educated, newspaper-reading part of it. Partha Dasgupta seems to equate them with his fellow Cambridge professors and their brightest students. And it is a shame, because the intellectual content of the book, combined with the Becky/Desta device, had the potential for a truly great and accessible introduction to economics.
This is a game theorist's short introduction to economics. It focus on on: individual goals, individual opportunities and constraints, individual incentives, strategies, exchange, trust, and equilibrium outcomes. It is, of course, greatly concerned with wealth and poverty--that is, after all, the point of the discipline of economics: it is an inquiry into nature and causes of the wealth of nations. You won't find lots of practice figuring out how price and quantity change in response to demand shocks or calculating multipliers. What you will find is the logic and rationale for why figuring out how price and quantity change in response to demand shocks or calculating multipliers is a worthwhile thing to do.
Definitely five stars.
This is probably not the best intro to economics book (i.e. it is a little too concise in places), but I liked it nevertheless. Overall, the author did do a great job explaining ideas…. The main drawback is that there's little to no iteration i.e. I usually learn by being exposed to a concept or term several times but in this short book there's no room for that - you're told about a concept once…
If you want a textbook, get something else...
The strengths of this book are: it avoids the trap of doing a developed-world only description, it really allows you to appreciate how economists think, it ties economic concepts to concepts from other disciplines. It can get technical sometimes for the least mathematical readership, but still a must read.
Chapter 5 alone justifies buying the book (Science and technology as institutions).