Extreme Economies

"This book is a series of rip-roaring tales about what you might classify as ‘informal’ economies in different contexts and the way that some of them work really well and some of them work really badly. The compare and contrast gives you real insights into what perhaps makes a formal, official economy work very well or very badly. Richard Davies spent many months travelling around the world to visit all these different places. For example, he goes to two refugee camps for Syrians, one of which is a thriving economy and the other of which isn’t, and looks at what the difference is between them. I was also really gripped by the chapter on Angola, the prison in the southern United States, and how, despite the constraints on the inmates, they manage to make some kind of economy function that allows them to satisfy certain needs. It’s in one sense not a very helpful takehome, but equally a very important one, which is that sometimes government is the solution and sometimes government is the problem. What that tells you is that it’s really hard to get government policies and regulations right. It isn’t the kind of takehome that you can go away and apply quickly. That’s a very good lesson for economists: that the specific, cultural and historical context really matters for the kinds of policies you might want to prescribe. We’re heading into uncharted waters, because economic growth has always gone hand-in-hand with population growth. And, of course, there’s been per capita growth too. I don’t know whether you can have economic growth with a shrinking population. Modern economic growth theory suggests you can’t, because the role of people in spreading and sharing ideas is such an important driver of what we think of as growth. I find that quite a sobering chapter, because there’s nothing obvious you can do about it. I would also say about Extreme Economies that it’s a great book for students as an insight into the interesting questions to ask about any economic environment, about how markets work and how policies work. It’s a great introduction."