Book reviews

Spending time on the beach in Greece is a great opportunity to read books. Last week, I managed to read two.

The first one is Identity Economics by Akerlof and Kranton, which, while summarizing the duo’s research, makes the case for adding an identity component to economics’ utility function. It argues that we humans take decisions and set objectives based on who we want to be. Failing to reach such identity results in utility loss. Hence, better stick to who you really are to maximize your utility. Whites should not try to act black. White men can’t jump and end up unhappy.

The authors claim that this new tool explains a wide range of phenomena, such as gender and racial discrimination, which traditional economics had left unanswered.While their ideas are good, their bold statements of a new paradigm are quite annoying. Nothing in the book is really illuminating. All in all, Identity Economics provides an interesting framework to analyse economic phenomena but a boring read.

The second book I read was Natural Experiments of History, a volume edited by Jared Diamond and James Robinson. As natural experiments always make an entertaining read in economics articles, I thought this volume would provide many such insightful stories from historians and anthropologists looking at Polynesian islands, settler colonies, banking system evolutions etc…

But again I was a bit disappointed. Non-economists write to describe, not to test a hypothesis, which makes it hard to follow their reasoning. The chapter by Diamond turns out to be material from Collapse. The 3 chapters written by economists, i.e. Nathan Nunn’s on Africa’s slave trade (see graph below), Acemoglu’s on the spread of the French revolution, and Banerjee’s on colonial institutions in India, are more interesting but are just remnants of their published papers.

The book aims at convincing historians to use comparative methods, i.e. natural experiments, instead of focusing on just one topic when doing research. This might actually work. For the uninitiated reader, this book provides many enlightening stories.