Book review: Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, by Charles W. Calomiris, and Stephen H. Haber.

This book start out with some fairly dull theory, then switches to specific histories of banking in several countries with moderately interesting claims about how differences in which interest groups acquired power influenced the stability of banks.

For much of U.S. history, banks were mostly constrained to a single location, due to farmers who feared banks with many branches would shift their lending elsewhere when local crop failures made local farms risky to loan to. Yet comparing to Canada, where seemingly small political differences led to banks with many branches, it seems clear that U.S. banks were more fragile because of those restrictions, and less competition in the U.S. left consumers with less desirable interest rates.

By the 1980s, improved communications eroded farmers’ ability to tie banks to one locale, so political opposition to multi-branch banks vanished, resulting in a big merger spree. The biggest problem with this merger spree was that the regulators who approved the mergers asked for more loans to risky low-income borrowers. As a result, banks (plus Fannie Mae and Freddie Mac) felt compelled to lower their standards for all borrowers (the book doesn’t explain what problems they would have faced if they had used different standards for loans the regulators pressured them to make).

These stories provide a clear and plausible explanation of why the U.S. has a pattern of banking crises that Canada and a few other well-run countries have almost entirely avoided over the past two centuries. But they suggest the U.S. banking crises should have been more unique among mature democracies than was actually the case.

The authors are overly dismissive of problems that don’t fit their narrative. Commenting on the failure of Citibank, Lehman, AIG, etc to sell more equity in early 2008, they say “Why go to the markets to raise new capital when you are confident that the government is going to bail you out?”. It seems likely bankers would have gotten better terms from the market as long as they didn’t wait until the worst part of the crisis. I’m pretty sure they gave little thought to bailouts, and relied instead on overly complacent expectations for housing prices.

The book has a number of asides that seem as important as their main points, such as claims that Britain’s greater ability to borrow money led to its military power, and its increased need for military manpower drove its expansion of the franchise.

Book review: Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty by Abhijit V. Banerjee and Esther Duflo.

This book gives an interesting perspective on the obstacles to fixing poverty in the developing world. They criticize both Jeffrey Sach and William Easterly for overstating how easy/hard it is provide useful aid to the poor by attempting simple and sweeping generalizations, where Banerjee and Duflo want us to look carefully at evidence from mostly small-scale interventions which sometimes produce decent results.

They describe a few randomized controlled trials, but apparently there aren’t enough of those to occupy a full book, so they spend more time on less rigorous evidence of counter-intuitive ways that aid programs can fail.

They portray the poor as mostly rational and rarely making choices that are clearly stupid given the information that is readily available to them. But their cognitive abilities are sometimes suboptimal due to mediocre nutrition, disease, and/or stress from financial risks. Relieving any of those problems can sometimes enable them to become more productive workers.

The book advocates mild paternalism in the form of nudging weakly held beliefs about health-related questions where people can’t easily observe the results (e.g. vaccination, iodine supplementation), but probably not birth control (the poor generally choose how many children to have, although there are complex issues influencing those choices). They point out that the main reason people in developed countries make better health choices is due to better defaults, not more intelligence. I wish they’d gone a bit farther and speculated about how many of our current health practices will look pointlessly harmful to more advanced societies.

They give a lukewarm endorsement of microcredit, showing that it needs to be inflexible to avoid high default rates, and only provides small benefits overall. Most of the poor would be better off with a salaried job than borrowing money to run a shaky business.

The book fits in well with Givewell’s approach.

Book review: How China Became Capitalist, by Ronald Coase and Ning Wang.

This is my favorite book about China so far, due to a combination of insights and readability.

They emphasize that growth happened rather differently from how China’s leaders planned, and that their encouragement of trial and error was more important than their ability to recognize good plans.

The most surprising features of China’s government after 1978 were a lack of powerful special interests and freedom from ideological rigidity. Mancur Olson’s book The Rise and Decline of Nations suggests how a revolution such as Mao’s might free a nation from special interest power for a good while.

I’m still somewhat puzzled by the rapid and nearly complete switch from a country blinded by ideology to a country pragmatically searching for a good economy. Coase and Wang attribute it to awareness of the harm Maoism caused, but I can easily imagine that such awareness could mainly cause a switch to a new ideology.

It ends with a cautiously optimistic outlook on China’s future, with some doubts about freedom of expression, and some hope that China will contribute to diversity of capitalist cultures.

Book review: Bonds That Make Us Free: Healing Our Relationships, Coming to Ourselves, by C. Terry Warner.

This book consists mostly of well-written anecdotes demonstrating how to recognize common kinds of self-deception and motivated cognition that cause friction in interpersonal interactions. He focuses on ordinary motives that lead to blaming others for disputes in order to avoid blaming ourselves.

He shows that a willingness to accept responsibility for negative feelings about personal relationships usually makes everyone happier, by switching from zero-sum or negative-sum competitions to cooperative relationships.

He describes many examples where my gut reaction is that person B has done something that justifies person A’s decision to get upset, and then explaining that person A should act nicer. He does this without the “don’t be judgmental” attitude that often accompanies advice to be more understanding.

Most of the book focuses on the desire to blame others when something goes wrong, but he also notes that blaming nature (or oneself) can produce similar problems and have similar solutions. That insight describes me better than the typical anecdotes do, and has been a bit of help at enabling me to stop wasting effort fighting reality.

I expect that there are a moderate number of abusive relationships where the book’s advice would be counterproductive, but that most people (even many who have apparently abusive spouses or bosses) will be better off following the book’s advice.

Book review: Value-Focused Thinking: A Path to Creative Decisionmaking, by Ralph L. Keeney.

This book argues for focusing on values (goals/objectives) when making decisions, as opposed to the more usual alternative-focused decisionmaking.

The basic idea seems good. Alternative-focused thinking draws our attention away from our values and discourages us from creatively generating new possibilities to choose from. It tends to have us frame decisions as responses to problems, which leads us to associate decisions with undesirable emotions, when we could view decisions as opportunities.

A good deal of the book describes examples of good decisionmaking, but those rarely provide insight into how to avoid common mistakes or to do unusually well.

Occasionally the book switches to some dull math, without clear explanations of what benefit the rigor provides.

The book also includes good descriptions of how to measure the things that matter, but How to Measure Anything by Douglas Hubbard does that much better.

I recently got Bose QuietComfort 15 Acoustic Noise Cancelling Headphones.

I had previously tried passive earplugs and headphones that claimed 30 dB noise reduction, and got little value out of them.

The noise cancelling headphones suppress a good deal more train (BART) noise, enough that I’m now able to read nonfiction while on the train.

It won’t help with the situations where noise bothers me most (multiple conversations nearby) because it mainly eliminates predictable noises. It makes speech sound more distant without affecting the speech volume a lot. But reducing the cost of train and plane travel is valuable enough that I feel foolish about not having tried them earlier.

Book review: How the West Won: The Neglected Story of the Triumph of Modernity, by Rodney Stark.

This book is a mostly entertaining defense of Christian and libertarian cultures’ contribution to Western civilization’s dominance.

He wants us to believe that the industrial revolution resulted from mostly steady progress starting with Greek city-states, interrupted only by the Roman empire.

He defends the Catholic church’s record of helping scientific progress and denies that the Reformation was needed, although he suggests the Catholic church’s reaction to the Reformation created harmful anti-capitalist sentiments.

His ideas resemble those in Fukuyama’s The Origins of Political Order, yet there’s little overlap between the content of the two books.

The early parts of the book have too many descriptions of battles and other killings whose relevance is unclear.

I was annoyed at how much space he devoted to attacking political correctness toward the end of the book.

In spite of those problems, he presents many interesting ideas. Some are fairly minor, such as changes in privacy due to the Little Ice Age triggering the invention of chimneys. Others provide potentially important insights into differences between religions, e.g. “many influential Muslim scholars have held that efforts to formulate natural laws are blasphemy because they would seem to deny Allah’s freedom to act.”

Alas, I can only give the book a half-hearted endorsement because I suspect many of his claims are poorly supported. E.g. he thinks increased visibility of child labor in the 1800s caused child labor laws via shocked sensibilities. Two alternatives that seem much more plausible to me are that the increased visibility made the laws feasible to enforce, and the increased concentration of employers into a separate class made them easier scapegoats.

Book review: The Depths: The Evolutionary Origins of the Depression Epidemic, by Johnathan Rottenberg.

This book presents a clear explanation of why the basic outlines of depression look like an evolutionary adaptation to problems such as famine or humiliation. But he ignores many features that still puzzle me. Evolution seems unlikely to select for suicide. Why does loss of a child cause depression rather than some higher-energy negative emotion? What influences the breadth of learned helplessness?

He claims depression has been increasing over the last generation or so, but the evidence he presents can easily be explained by increased willingness to admit to and diagnose depression. He has at least one idea why it’s increasing (increased pressure to be happy), but I can come up with ideas that have the opposite effect (e.g. increased ease of finding a group where one can fit in).

Much of the book has little to do with the origins of depression, and is dominated by descriptions of and anecdotes about how depression works.

He spends a fair amount of time talking about the frequently overlooked late stages of depression recovery, where antidepressants aren’t much use and people can easily fall back into depression.

The book includes a bit of self-help advice to use positive psychology, and to not rely on drugs for much more than an initial nudge in the right direction.

Folate

I recently tried larger-than-normal methylfolate supplements. I had known that my genes caused problems with processing folate (MTHFR T/T), but hadn’t noticed any effects from supplementing at 800mcg/day.

Due to a report that several milligrams/day helped with depression, I changed from 400mcg/day to 2mg/day. I felt like my mind started working better within hours (although I haven’t seen much change in behavior). I saw a clear and large improvement in my heart rate variability starting after one day.

I’ve experimented for 5 weeks randomly altering my dose from 1 to 3 mg/day. On the week when I switched from 3 to 1 mg, my mood slowly got worse. I felt much better withing hours of switching back to 3 mg. I haven’t noticed any clear difference between 2 and 3mg.