On Quantitative Thinking in Economics, Gustav Cassel, 1935, Oxford University Press.
I am currently fascinated with the risks and rewards that countries and nations can realize with respect to trade, and specifically the ongoing and perpetual tension between market forces seeking a point of equilibrium, and politicians who seek to circumvent that force. I might call this a fascination with global monetary systems, The fundamental use of currency and value (i.e. purchasing-price parity) and the forces that drive divergence or convergence are massive, untamed, and only partially understood, let alone explained. Such disequilibria are at the heart of the financial crisis that emerged once the U.S. housing market blew up and the euro crisis and the economic stresses and differences between the profligate southern/Mediterranean states and the export/reserved conservatives in the north. The same forces of disequilibria are seen in the figures building continuously in Japan’s incredibly large public sector debt (just waiting for interest rates to blow the lid off of debt servicing), and Chinese excessive holdings of U.S. federal debt while the U.S. is a net importer.
So after reading Cassel’s Downfall of the Gold Standard, I just had to read more of his work. Little did I real use how useful this book would be. He explains, for example, the difference in price and value (something my peers who focus on information value should review) and how price and scarcity are related. Of course this is a refresher, but his criticism of some of the then classical models is excellent. He relates his theory of social economy to trade, production, productivity, marginal theory, and finely monetary systems. This helped me round out my thinking and at the same time gave me some new fodder for work when thinking of his to explain and express the value of information. His simple exploration of the classical production function is simple and easily shows how math can so easily be assumed fact, when in reality simple observations show otherwise. Soothing thoughts in this digital world we live in, surrounded by metrics and analytics.
Lastly I had not twigged that Gustav Cassel is the originator of the purchasing-power parity concept. I found the idea simple and valuable years ago, and watch with anticipation the periodic Economist review using the global price of a Big Mac. The concept is not necessarily used as much as it should be, and it can help explain the size of the disequilibria across counties, their currencies and real value (using a standard, of course). So given that, I gave no choice but to read Cassel’s, “Money and Foreign Exchange after 1914”. My “Downfall” and “Quantitative Thinking” are first edition original prints. Unfortunately I could only find one of those on-demand reprints of the “1914”. Shame. Anyway, before this book I have to read a little more Napoleon.