#6 Douglass Cecil North: The Big-Picture Thinker

There is no economist who has been more useful to me as a teacher of institutional economics than Douglass North. This is because he is the main provider of a unified and consistent conceptual framework for the study of institutions and their effects. Using the Coasean concept of transaction costs, North understands institutions as the main influence on overall transaction cost levels in specific societies.

North’s starting point is that institutions constrain human behavior, which reduces uncertainty and thereby transaction costs, which in turn explains long-term processes of economic development. And institutions do not only refer to the formal codified rules of the game as embodied in legal and political systems; they also refer to various cultural norms and habits that act as informal constraints on human action. On the basis of this conceptual framework, North studied the comparative institutional frameworks of England, the Netherlands, Spain, and Portugal as a means of explaining the long-run economic performance not only of these societies, but also of their colonial offshoots in North and South America.

The main conclusion of his analysis is that institutions that promote well-defined property rights and free trade generate higher long-term growth than unstable institutions and barriers to economic or political entry that protect a dominant rent-seeking elite. North’s analysis thereby illuminates the “macroeconomic” framework that supplies the rules of the game for firms and other organizations. The organizational analysis of Oliver Williamson and others can thus be seen as the microeconomic counterpart to North’s analysis within the research program that has become known as the New Institutional Economics.

North belongs to a select group of economists whose theorizing is constantly evolving, unlike most economists who keep repeating the same basic theory with few changes except for some minor theoretical or empirical details. It is therefore not the case that the reader of North’s work confronts a situation of rapidly diminishing utility when consuming an increasing quantity of his output. In his early work, the approach is much more neoclassical than later on. After about 1990, North has seemed increasingly disillusioned with the maximizing assumptions of mainstream models. As a result, he has come to rely to an increasing extent on the results of cognitive science and tends nowadays also to refer to the “non-ergodic” economic environment (which brings to mind some of the more heterodox Post Keynesians and Austrians).

He has also recently written about the effects of the long-term evolution of the human brain on economic outcomes, referring repeatedly to the transition from primate to human communities and from pre-literate to textual societies. So while he was always more of a big-picture guy than the average economist, he is perhaps now the biggest-picture economist ever, surpassing even Hayek in this respect (who tended to avoid discussing other primates than homo sapiens).

As an octogenarian, North has yet again developed a new framework for analyzing economic development, this time together with the political scientist Barry Weingast. The main idea is that the state arose to suppress violence among contending groups, and that these contending groups form a sometimes divided elite in what North and Weingast call “limited-access orders.” Such orders are essentially rent-seeking coalitions that enforce limited access to sources of economic and political power (i.e. they exclude most of the population). All states before 1800 and most states today are limited-access orders, which is why North also calls them “natural states.”  A few dozen countries are however open-access orders, where the rule of law guarantees more-or-less equal rights to entry into markets and politics for all citizens. Certain preconditions (rule of law for elites; elite organizations with perpetual life; centralized control of violence) have to be met for a limited-access order to make the transition into an open-access order, and these preconditions are not always achieved, nor do they automatically lead to a successful transition. (One might add that even after a successful transition, problems with rent-seeking interest groups and discretionary market distortions may persist, although not solely for the benefit of a small power-wielding elite). All in all, the natural state framework is quite depressing, but nevertheless mostly persuasive.

As should be evident from this brief overview, Douglass North has been a major supplier of intellectual nourishment for the past 50 years.

#7 Brian J. Loasby: The Eclectic Subjectivist

I discovered Brian Loasby by accident as I was browsing the shelves of a college library. Being generally interested in institutions and evolution, I was attracted by the title of his 1999 book; “Knowledge, Institutions and Evolution in Economics.” It turned out to be a challenging read. Indeed, this book is the only one I have read four times. Nowadays, I assign it as one of twelve books in my Ph.D. seminar course, and students tend to find it much more difficult than the two books that precede it (Schumpeter’s Theory of Economic Development and Kirzner’s Competition and Entrepreneurship). Loasby’s texts are not only difficult because of their density of ideas; they are also difficult because they combine ideas that are not usually combined.

It goes without saying that  Loasby does not belong to any single school of thought. And yet his thinking is remarkably consistent in its subjectivism. While radical subjectivism is usually associated with Ludwig Lachmann and George Shackle, I would argue that Loasby’s subjectivism is at least as radical. Sometimes I even find him too extreme (and being criticized by me for being too extreme a subjectivist is quite a feat). For example, Loasby has stated that policy implications offered by economists are almost always unfounded. I’m not at all convinced by this, but maybe the difference between me and Loasby is that I believe that institutions stabilize expectations to a greater extent than he thinks they do (he is more Shackleian — institutions make people march together in an arbitrary direction – while I am more Hayekian — some such institutional directions are more likely to spread because they promote survival and material accumulation).

In spite of this reservation, I wholeheartedly recommend Loasby for providing numerous insights. His discussion of economists’ conventional treatment of evolution deserves to be considered a classic (Alchian made some minor mistakes which led to greater mistakes by Friedman and even greater ones by Becker). His notion that the history of economic thought is not a history of continuous progress but rather a sequence of confused detours down blind alleys punctuated by the occasional brilliant insight is spot on. And his analysis of entrepreneurship is a very creative combination of ideas from Schumpeter, Kirzner, and Popper.

Indeed, it is in his wide-ranging knowledge of economic ideas that Loasby’s thought becomes most challenging, since the reader is not likely to be as erudite as the author (I assume here that I’m a typical reader, which is not necessarily true). A typical paper by Loasby may discuss topics as different as Adam Smith’s observations about the development of astronomy, Menger’s view of the emergence of money, Marshallian economics, Hayekian psychology, the philosophies of Popper and Ryle, Penrose’s resource-based view of the firm, Chamberlin’s theory of monopolistic competition, and Shackleian surprise functions. His criticisms of various economists may not even be noticed by the uninformed reader, since they often take the form of understated but nonetheless lethal asides. His endorsements are also somewhat vague, and can usually only be identified as such by an absence of parenthetical observations that subtly undermine the theory in question. Loasby’s own conjectures and hypotheses are similarly elusive: he has a penchant for what I would like to call “carefully considered and precise imprecision.”

The conclusion is that reading Loasby can be a very rewarding experience, but only if one is patient and shares some of his disillusionment with mainstream economics. In particular, I would recomment the above-mentioned book as well as his book dealing separately with a number of prominent economists; “The Mind and Method of the Economist.”

If my interpretation is correct, Loasby has a generally favorable view of A. Smith, Menger, Marshall, Chamberlin, Coase, Hayek, Popper, Ryle, Penrose, Richardson, and Lachmann. But he seems closest to Shackle. He is mostly critical of another almost equally prominent group of economists: J. Robinson, Alchian, Friedman, Becker, Lucas, Baumol, and Williamson. I have still not figured out his overall views of Schumpeter, Keynes or Kirzner, even though they figure prominently in his narratives. The resulting fusion in terms of new ideas is perhaps best described as “an evolutionary radical subjectivism which is powered by entrepreneurial imagination and cumulative knowledge.”

#8 Ronald Harry Coase: Economy of Expression

Ronald Coase, who will be celebrating his 99th birtday the day after tomorrow, is perhaps the best living exponent of the principle that ideas impress more when they have not been designed to impress. Unlike many contemporary economists, Coase was never interested in developing mathematical models. Unlike most sociologists, he did not have a penchant for impossible-to-understand words. He simply wrote about his ideas in the most intelligible way possible. But his ideas had consequences.

In “the Nature of the Firm,” Coase attempted to explain why firms exist, and also to offer propositions for why firms stop expanding after a certain point. This paper laid the foundation for the development of the huge literature on transaction costs and governance costs by economists such as Douglass North and Oliver Williamson. What I find especially impressive about this paper is its apparent simplicity. Using everyday language, North explains seemingly self-evident phenomena in terms that are accessible to the general reader. But in spite of being obvious as well as important, transaction costs had not focused anyone’s attention before the publication of the paper in 1937.

His other well-known paper – “the Problem of Social Cost” – is similar: seemingly simple and obvious. But that didn’t stop those economists who were driving at high speed down the cul-de-sac of equilibrium theorizing from misunderstanding Coase . The explicit conclusion of the paper is that externalities don’t matter in a world without transaction costs. Since the typical equilibrium model does not contain transaction costs, equilibrium modelers concluded that externalities don’t matter. But the real conclusion of Coase’s paper was the opposite one: because transaction costs are pervasive, externalities do matter. The paper even had an important policy implication: vague and uncertain property rights are associated with high transaction costs, and thus with big externality problems. Consequently, the best way to deal with both externalities and transaction costs is to strive for less ambiguous and more predictable property rights.

Coase also made other contributions to our understanding of the world. In his historical investigation of the organization of lighthouses along the British coast, he showed that public goods can be provided by private organizations. Again, Coase was prescient: there are now numerous studies that show how the old assumption of “public good = public sector” may ultimately lead to the socialization of almost everything.

All in all, however, Coase’s substantive contributions consist of a few articles that together make up a relatively thin book (his “greatest hits” have been published as “The Firm, the Market, and the Law”). But these papers are among the most cited papers of all time. Interestingly, Coase has said that he never submitted unsolicited papers to journals. He only wrote because he was asked to do so or because a certain subject took his fancy. This laid-back attitude to publishing is evident in the quirkiness of some of his non-seminal papers. As an example, the title of one paper is “Alfred Marshall’s Mother and Father.”

In any case, Coase is living testimony that the publish-or-perish mindset may not be the optimal strategy, either socially or individually. Reaching an age of at least 98 years and 363 days and receiving a Nobel Prize for one’s contributions is an indication that economizing on one’s intellectual resources may yield both a few path-breaking papers and a long life.

#9 Joseph Alois Schumpeter: The Creative (but Destructive) Genius

If Schumpeter should be summed up with one adjective, “creative” is the most suitable one. And this is why he ranks higher than Kirzner in my view. While Kirzner is by-and-large right about most things, his creativity is more incremental and his interests more limited.  Schumpeter, on the other hand, was wrong about a lot of things, although sometimes it is difficult to tell whether he was just plain wrong or if he drew erroneous conclusions for ironic purposes.

I think that what most characterizes creative people is their ability to combine apparently distant ideas, theories, or approaches. Schumpeter was a master of such creative combinations. If one looks at his two most famous works-The Theory of Economic Development and Capitalism, Socialism, and Democracy – it is clear that there are four recurring components that are combined in different proportions in Schumpeter’s thinking: dynamic Austrian economics; Walrasian equilibria; Nietzschean notions of ubermenschen; and Weberian sociology. To this stew, Schumpeter added his own brands of ironic pessimism.

Needless to say, I’m skeptical – to say the least – about some of these components. But all are actually needed to produce a coherent theory. Without entrepreneurial heroes, it is difficult to see how the “circular flow” can be rescued from the destruction of a continuous swarm of local entrepreneurs; it is also difficult to see how anything approaching equilibrium can ever be approximated in an industrialized economic system. Likewise, the supposed “efficiency” of bureaucratic, large-scale entrepreneurship depends on the existence of a superior class of innovating supermen who can be put in charge of corporate decision-making.

But even though I don’t believe in supermen or circular states (in a post-agricultural economy) or share the Weberian faith in bureaucracy, I still think that Schumpeter’s contributions represented real progress. He was the first one to give us a coherent theory of entrepreneurship, where entrepreneurs are (correctly) understood as the creative-destructive agents that cause economic development and introduce innovations into the economy. The theory is both evolutionary and based on the implicit recognition that individuals have to interpret economic data; they are not simply given as unambiguous and universally recognized bits of information. Indeed, it is Schumpeter’s focus on innovation and suboptimal equilibria – rather than arbitrage and optimal equilibria – that makes his theory more satisfying than Kirzner’s later attempt, in spite of also having more blatant shortcomings.

Another fascinating aspect of Schumpeter’s writings is that he reveals himself both as a conservative and as a pessimist. His most well-known conclusion is that socialism is inevitable. But unlike socialists with this belief, Schumpeter thought that the inevitability of socialism is as inspiring as the inevitability of death. The historian Jerry Z. Muller (The Mind and the Market , 2002, p. 294) points to Pareto’s influence on Schumpeter:

“In attempting to account for the appeal of socialism, Schumpeter … borrowed from … Pareto. Pareto’s 1901 essay … conveys two themes to which Schumpeter would return time and time again: the inevitability of elites, and the importance of nonrational and nonlogical drives in explaining social action. Pareto suggested that the victory of socialism was “most probable and almost inevitable.” Yet he predicted [that] the reality of elites would not change. It was almost impossible to convince socialists of the fallacy of their doctrine … since they were enthusiasts of a substitute religion. In such circumstances, arguments are invented to justify actions that were arrived at before the facts were examined, motivated by nonrational drives.”

Schumpeter considered the capitalist system superior to its alternatives, as Muller (2002, p. 306) also explains:

“Schumpeter was skeptical of …  antitrust … What those who criticized monopoly in the name of free competition failed to understand was that it was in the very nature of dynamic capitalism to produce high, “monopoly” profits for those who were the first to innovate successfully, [thus] large firms had to continue to innovate or face decline …. the interpretation of the Depression by intellectuals had led to a “radicalization” of the public mind in the United States, which in turn had resulted in policies that left capitalism in shackles.”

A very interesting assertion of Schumpeter’s was that even if the proponents of capitalism manage to succesfully defend capitalism against one of the charges raised against it – for example that decentralized planning is less efficient than central planning – it is inevitable that the critics will find some other argument that becomes as important as the refuted argument had been previously. According to Schumpeter, the fact remains that intellectuals and many others do not like capitalism on the basis of their unexamined and irrational subjective judgments.

Although I am not as pessimistic as Schumpeter, I think we can now agree that he was prescient about the difficulties faced by the defenders of free markets. There is now a general agreement that markets work better than Soviet-style central planning. But there is no shortage of people who (erroneously, in my view) believe that the current financial crisis was caused by free markets rather than government regulations and subsidies, and an even greater number of people who think that markets are bad for the environment (in spite of the positive correlation between air/water pollution and the absence of clearly defined private property rights).

#10 Israel Meir Kirzner: A Gateway to Economic Sanity

I start the countdown by selecting Israel Kirzner as my 10th favorite thinker. I do not think that he is right about everything, but it is hard to overestimate his ability to make the reader (i.e. me) think.

When I first read his most well-known book, Competition and Entrepreneurship, it was akin to a revelation. My vague dissatisfaction with mainstream theory seemed explained and solved: the source of the problem is that there is no entrepreneur in contemporary neoclassicism, because end-state equilibria assume that the entrepreneurial problem has already been solved.

This had the effect of making me a downright “Kirznerian” for a while (my paper “The Spatial Nature of Entrepreneurship” is almost as Kirznerian as Kirzner himself). But then I became increasingly skeptical, and in my later writings I have spent more time criticizing than defending Kirzner’s conception of  entrepreneurial “alertness,” “discovery” and so on. But this does not mean than I don’t like his theory. I think we should all be grateful to Kirzner for having articulated an extraordinarily consistent, thin, and elegant theory.

The reason I call Kirzner a gateway to economic sanity is that he is sufficiently grounded in the neoclassical tradition to be taken seriously by the more open-minded of mainstream economists, yet he explains some of its most serious flaws in a way that is more likely to keep such economists reading than more heterodox or less polite critics of the received view.  In other words, Kirzner’s work is a sort of “gateway drug” to the even more mind-altering substance of, say, “The Economics of Time and Ignorance” or “Knowledge, Institutions, and Evolution in Economics.”

Unfortunately, the neoclassical sponge has lately had a tendency to integrate the form of Kirzner’s theory while draining it of its substance. In the expansive field of “entrepreneurship studies,” Kirzner is often referred to but seldom understood. Contrary to superficial interpretations, Kirzner’s theory is not a theoretical foundation for empirical studies of small business formation, unless it’s understood that business formation is only a minor subset of profit-yielding human action.

An attractive aspect of Kirzner’s work is that he never emphasizes the policy implications of his theory, which are numerous. While these implications are largely pro-market of the classical liberal variety, policy advocacy never seems to be his main objective. He is first and foremost an economist, who will occasionally provide the reader with understated observations regarding the benefits of free markets, but it’s mostly left to the reader to draw their own conclusions. I think this style is much to be preferred over more passionate policy advocacy (I don’t mind passion, but I think someone who gets passionate about tax rates has got his priorities jumbled up; surely there are other things that should be more likely to excite the passions of homo sapiens).

Israel Kirzner has an interesting background. While he was born in London, he has lived in New York for many years. When listening to a recording of one of his lectures, I was struck by his unique brand of spoken English: an idiosyncratic mixture of British intonation and two types of American pronunciation (New York and standard American).

Another unusual aspect is that he is not only an economist; he is also an Orthodox rabbi and scholar. Indeed, one might even call his style of economic analysis “rabbinical.” And it is perhaps this other occupation that explains his relative lack of passion when he does discuss economic policy choices.

Top Ten Countdown of My Favorite Thinkers

I have decided to reveal my intellectual preferences by doing a countdown of my 10 favorite thinkers. Given my educational background, this will be a very subjective list and limited to economics and adjacent disciplines. I will also attempt to motivate my choices, and  give an indication of what I like and don’t like about each individual (obviously, the pros will have to outweigh the cons). I haven’t decided the exact ranking yet, but I have a general idea about who will be included. Watch this space.

Wuhan: The Real Deal

Last week I visited Wuhan for the first time. For those who don’t know, Wuhan is the largest city in China’s Hubei province with a population of more than 10 million. So it’s up there with London, Paris, Istanbul, and Bangkok.

People sometimes ask me which cities I like the most. I think that’s an irrelevant question. What really matters is this: which cities provide the most value for money? The former question may cause lots of people to reply Paris, Venice or New York. The second – more interesting – question would (at least in my case) elicit responses such as Bangkok, Penang and – yes – Wuhan.

What then is so great about Wuhan? Well, first of all it is and has always been an economic center. This means that it has none of the sterile feel of cities that were designed from the top down, and none of the artificial geographical features of cities that are located according to the whim of an emperor or president rather than according to transportation convenience. This is one of the reasons why I don’t like Beijing: a communist reinterpretation of a centrally planned imperial city utterly devoid of natural advantages such as a coast or a river. Of course, Shanghai is a spontaneously evolved economic city, but then Shanghai is expensive for someone like me (someone with either no expense account or one that has been severely constrained by university administrators).

So if there is only one place you should visit in China, and if your subjective preferences are similar to mine, Wuhan is the place to go. It is neither north nor south, and neither west nor east. Indeed, it is the place where China’s main east-west and north-south railroad lines intersect. I was also told that it is the only place in China where they like food from all parts of the country. Having said that, I think that Hubei food represents Chinese food at its very best: lots of chilli and garlic but very little sugar or salt. It’s like a subtle and more varied version of Sichuan cuisine. Best of all: restaurants – and they are everywhere – have a fantastic size-to-price ratio. It’s the opposite of Tokyo: American portions at Thai prices, which is a lot better than the reverse combination.

It helps to know some Mandarin if you go to Wuhan. Mandarin is actually the local language, although the local accent is very strange. Not to worry: people will adjust immediately to standard Putonghua once they find out that you are from somewhere else (this is so different from Beijing where people seem to believe that they already speak with a standard accent; the fact is that most Beijingers also have a heavy local accent). And they are a talkative lot: I spent two or three hours talking to various taxi drivers, and they were the ones who got the conversation going.

Speaking of taxis, they illustrate the value-for-money aspect of Wuhan perfectly. A two-kilometer ride will set you back 6 renminbi (less than US$1) in Wuhan, compared with about 25 renminbi in Shanghai. Also, Wuhan cab drivers sometimes will round down (!) the fare, something that I had previously only encountered in Taiwan.  Another illustration of the price level is that it is possible to find an adequate (clean, air-conditioned etc.) hotel room for under US$30, and that you can get a simple but filling and tasty meal at a hole-in-the-wall restaurant for about US$1.

What is there to see in Wuhan? Well, Wuhan has its own version of the Bund: a road along the Yangzi river which is lined with western banks and office buildings from the treaty port era. They come in a variety of styles, reflecting the simultaneous presence of British, French, German, American, Russian, and Japanese traders in the early 20th century. On one such building, an inscription read “First National City Bank of New York,” although it was now the branch office of some (probably mismanaged) Chinese bank.

Behind Wuhan’s Bund, there is a warren of narrow alleys that brings to mind the dense neighborhoods of Macau. Even further north is where Wuhan’s version of the ”new China” is located: skyscrapers, shopping malls, Carrefour, Walmart, and Starbucks. Proceeding north again, one gets to yet another city: this time gray, dilapidated, and rather drab.

All of the above describes Hankou, which is one of three originally separate cities (the others being Wucheng and Hanyang). On the other side of the imposing Yangzi River (Changjiang) is Wucheng, which has a totally different character. Wucheng is home to two of China’s main universities: Wuhan University and the Huazhong University of Technology. I visited the campus of the latter, which resembled a separate city more than a regular campus. It’s enormous and houses about 50,000 students and a permanent population that I would guess is only slightly smaller. Since university salaries are low as well as standardized in China, some universities compete for faculty by offering on-campus fringe benefits. In the case of Huazhong, this includes subsidized housing, kindergartens, and restaurants, as well as the less tangible benefits of  lower noise levels and better air quality.

Another attraction in Wucheng is the East Lake, which is much larger than the average urban pond. In fact, I found out that the lake is actually larger than the entire territory of the Macau Special Administrative Region. And there is Wuhan’s most famous landmark: a pagoda dating back to the 3d century AD, but since reconstructed on numerous occasions.

This is not to say that Wuhan will be to everyone’s liking. For people who can’t stand pollution, congestion, or chaotic traffic, Wuhan is better avoided. And personally I wouldn’t want to live there, but that’s primarily because of my opposition to all kinds of government suppression of civil liberties.

Possible Correction (Hong Kong Is Probably Not That Strange)

Looking at the database of the World Values Survey again, I’m beginning to suspect a coding error. Why?

In China, 94.3% don’t want to have drug addicts as neighbors (row 1), while in Taiwan the corresponding percentage is 97.6%. But according to the data, only 12.3% don’t like drug addicts in Hong Kong.

Proceeding to row two, the percentages that don’t want people of another race as neighbors, yields 15.9%, 8.2%, and 86.3%, respectively.

This must be a mix-up. I’m prepared to bet US$1,000 that 12.3% of the Hong Kong sample did not want a neighbor of a different race, while 86.3% didn’t want drug-addicted neighbors. So I’m going to delete the earlier post and post a new one.

My Kind of Liberal

I came across an outstanding passage about what true liberalism should be about, although it’s not necessarily true of people who like to call themselves “liberals.” The following excerpt is from “I am a Liberal,” a blog post by Don Boudreaux, who is Professor of Economics at George Mason University:

“[T]he world is bigger than economics; economics does not explain everything. Human values are among the values that matter far beyond gains from trade and economic efficiency. … One of the great tenets of liberalism — the true sort of liberalism, not the dirigiste ignorance that today, in English-speaking countries, flatters itself unjustifiably with that term — is that no human being is less worthy just because he or she is outside of a particular group. Any randomly chosen stranger from Cairo or Cancun has as much claim on my sympathies and my respect and my regard as does any randomly chosen person from Charlottesville or Chicago. … For the true liberal, the human race is the human race. The struggle is to cast off as much as possible primitive sentiments about “us” being different from “them.” … [T]he liberal points out, as occasions permit, that what matters is that people be free to associate as much as possible as they voluntarily choose without being constrained by culture or force to associate on different terms with foreigners than with fellow citizens.”

I think this passage is downright inspiring. I also think that Boudreaux has pinpointed the source of why I – and I hope many others – came to the conclusion that illiberalism — whether it calls itself cultural conservatism, social engineering, or communism — is incompatible with most of the things that are inspiring about the world, such as individual integrity, tolerance, a cosmopolitan outlook, or peaceful interactions with anonymous others.

The quotation does however allude to a dilemma for modern democracies. Such states are usually based on accidents of birth or heritage, and are not very representative of the small — but rapidly growing — number of people whose interpersonal networks and location trajectories pay no regard to political boundaries. Nor does it take into account that most people affected by certain policies — such as the foreign policy of the United States — have no influence on the outcome of the elections that in the end determine whether policy x or y will prevail. And unfortunately, a lot of people seem to accept the fiction that it is natural and desirable for the link between, say, Boston and Anchorage to be stronger and more “patriotic” than the link between, say, Detroit and Windsor or Copenhagen and Malmo. Fortunately, markets, science,  and civil society are eroding the “nation-centeredness” of social life to some extent. But will these countervailing pressures be enough to set us free from nationalism, patriotism, and ethnocentricity?

Venice (Venezia)

I have just returned from Venice, where I spent one day at a conference and two days walking the alleys. My subjective evaluation of the place:

Pros

• Venice is architecturally one of the most attractive cities anywhere. But this is of course common knowledge. However, a Chinese conference participant told me that most Chinese would not consider Venice beautiful: no skyscrapers or shopping malls.
• Venice is much more attractive in January than in August (the timing of my last visit 20 years ago). In some squares and alleys, I was the only one around.
• Its public places are surprisingly clean and trash cans are abundant (Venice is not Naples).
• Everything was aesthetically satisfying: the shops, the restaurants, the facades, and even the coats that people were wearing.
• The quality of the bread, cheese, and pasta is high absolutely everywhere. The coffee is good too, but very strong.
• There are no motor vehicles anywhere. This is the aspect of Venice that I personally like the most: it’s a high-density city which is almost as quiet and tranquil as a mountain retreat.

Cons

• Public transporation is expensive (6.50 euros for a regular “water bus” ticket)
• The food is expensive (20 euros for a regular lunch, and 30-40 euros for a basic dinner)
• Hotels are expensive (at least 80 euros per person)
• January is only a good time to visit if you don’t pay any attention to the weather. Except for the first day (sunny and +7C) it was cloudy, windy, and cold or snowy, windy, and cold.
• Cafes are only attractive if you’re prepared to stand at the bar, which is what the locals do. A coffee is about 2 euros if you stand; 4 euros if you sit down at a table, and even more if you sit down outside, which is of course not an option in January. It is even more expensive around St. Mark’s square: avoid! While I was checking in, the receptionist at my hotel said that she only had one piece of advice: while in Venice, “don’t sit.”
• There is a lack of regular stores in central Venice – everything seems to be geared to well-heeled tourists.

Altogether, Venice is good, but not good value unless you’re rich.