Paul Ormerod is a strikingly original thinker, among whose best known works was Butterfly Economics. His latest book, Why Most Things Fail (Faber, £12.99), explores the similarities in economics and evolutionary biology, looking at failure in particular. Most things fail, and progress comes about through selective extinction. Many biological mutations are sufficiently damaging to prevent survival; it is the same with economic innovations. One difference is that in biology the organism dies with its mutation, whereas in economics the entrepreneur can try again.

Ormerod notes the prevalence, indeed the ubiquity, of economic failure, and how short-lived is success. Most of the successful firms do not last. He opts for punctuated evolution, in which there are periods of rapid innovation and churn, corresponding to periods of rapid biological change. The more we experiment and innovate, the higher are the chances that some ideas will win through. We need to understand failure because it happens – to individuals, companies and governments.

The book has been extensively reviewed, including those in the New Statesman, Times, Telegraph, Independent, and Prospect Magazine.

Sir Samuel Brittan reviews Rich is Beautiful in the FT. The book by Richard D North is published by the Social Affairs Unit, and is a spirited riposte to all of the Kleins and Layards who regard capitalism as immoral or ineffective. Capitalism is good, says North.

Where it [Western life] fails, he says, it is because citizens fail in their manners and morals - they are not sufficiently grateful for the great advantages capitalism, industry, science and democracy have brought them.

Sir Samuel is himself a vigorous defender of capitalism and its advantages, as indeed are we. It is one of the most benign arrangements ever developed by humankind, having lifted millions from starvation and disease. It is still doing so, and well deserves the accolades of Richard North and Sir Samuel.

The review quotes North's opinion that happiness, despite Lord Layard, is not necessarily the major goal.

He notes that "people do not seek happiness. If they have any sense... they seek drama, risks, inner peace, success, applause, wealth, power, goodness". To oppose this "seems curiously life-denying".

Quite so. Lotus does not feature among my favourite dishes.

250 yeas ago Dr Samuel Johnson published his Dictionary of the English Language (April 15th 1755). It became the definitive English dictionary until the Oxford English Dictionary 150 years later.

Son of a small bookseller, and forced by poverty to leave Oxford without a degree, Johnson travelled to London from Lichfield to seek fame and fortune in 1737, riding on top of the coach as poor people did. With him on the top was young David Garrick. Johnson journeyed, he later said, "with twopence halfpenny in his pocket," and Garrick "with three-halfpence in his."

Johnson became one of the most celebrated writers of his day, and one of the greats of English literature. His friend David Garrick became the famous actor and theatrical producer after whom the Garrick Theatre and the Garrick Club are named. Johnson lives on vividly in the immortal biography of him by James Boswell. The poet and Oxford professor John Wain was brave enough to write a more recent, and very elegant, account of his life in 1974. Between them the authors recreate not only Johnson, but his age, which featured Smith and Hume, as well as Gibbon, Gray and Goldsmith.

Today Johnson sleeps in Westminster Abbey, about 150 yards from where I sleep somewhat less soundly. And Garrick, Wain tells us, who was beside him on that first coach trip from Lichfield, is beside him still.

The lives of both men show that then, as now, people with character and talent can come through adversity to win recognition and reward, and to make lasting and worthwhile achievements. Their success serves as an example and an inspiration to others.

Lord Rees-Mogg has a surprising suggestion to combat the unconscious socialism which he describes as "morally sympathetic, but intellectually mistaken."

My first thought, therefore, was that I might send a copy of The Wealth of Nations as an inaugural present to the next pope, whoever he might be.

"Smith," he says, "applied the liberal argument to economics, and thereby founded modern economic thought." He talks of "the link between Adam Smith's idea of free competition in trade, and Charles Darwin's more far-reaching discovery of free competition in the survival of species."

He surprisingly recommends two post-war papers which he thinks neither Pope nor Prince of Wales will have read. They are The Use of Knowledge in Society (1945) and Competition as a Discovery Procedure (1968), and he quotes Hayek:

"Competition is important as a process of exploration in which prospectors search for unused opportunities that when discovered, can also be used by others."

This might strike one as pretty heavy reading for popes and princes, but Lord Rees-Mogg's contention in that "Liberalism has changed the world because it works and socialism does not." Despite this, most world leaders have never studied the liberal argument, he says, including Blair, Schröder, Chirac and bishops of all Christian denominations.

It might be a good idea if they did, and after Locke and Jefferson, Adam Smith's Wealth of Nations is a good place to start.

Free Trade Today is a set of three lectures given by Jagdish Bhagwati at the London School of Economics. Bhagwati, a professor at Columbia University, was formerly Economic Policy Adviser to the Director-General of GATT. He now advises both the United Nations and the World Trade Organization.

The most interesting part of the book is Bhagwati's take on bi-lateral Free Trade Areas. He is not a fan. He prefers to call them Preferential Trade Areas, arguing that - with over 400 of them - they lead to a "spaghetti-bowl". The book includes a couple of diagrams to give the idea. He says that Preferential Trade Agreements lead to trade being misdirected from the lowest cost producers. Let's say that America can buy radios from two countries. It imposes the same tariff on each country's goods - a level playing field. Americans will most likely import radios from the cheapest country. But if America enters into a Preferential Trade Agreement with the more expensive of the two countries, the level playing field goes. Americans may now be able to buy radios most cheaply by buying from the more expensive country. So radio production changes from the most efficient producer to a less efficient producer. Thus, Bhagwati prefers multilateral and unilateral agreements (and opposes the idea of bilateral ones).

On the other hand, it is clear that those countries who form part of a Preferential Trade Agreement do better economically than if the trade agreement had not been created. Unilateral agreements are difficult to do politically, and multilateral agreements are much more difficult to achieve than bilateral ones. Bilateral agreements act as a healthy competitor to the WTO process, helping to keep the WTO on track. They also help resolve difficult issues before the WTO has to worry about them. In essence, Preferential Trade Areements help prepare the way for multilateral agreements. But if you can get a multilateral agreement, that's preferable to a bilateral one.

Sir Samuel Brittan, Financial Times columnist, advisor to different Chancellors, and leading economic thinker, has a new book this week entitled Against the Flow: Reflections of an Individualist. The Institute of Economic Affairs says of it:

Brittan has established a reputation for elegance of expression, trenchant analysis and tremendous range of reference. All three qualities are powerfully apparent in this collection, as he ranges over the arms trade and US military (which he opposes); the expansion of free markets and a basic income for all (which he supports), as well as the war on terror. The book also includes his pungent portraits of some heroes and villains, including Keynes, Milton Friedman & Rand. Taken together the pieces in ‘Against the Flow’ amount to a robust defence of classical liberalism.

There is a launch party on Monday Jan 17th from 6.30 – 8.30 pm at Pearson plc, 80 Strand, London WC2R 0RL, UK. Contact clarepierotti@groveatlantic.co.uk of Atlantic Books, or download an invite from the IEA site.

The "man of system" is described by Adam Smith in his Theory of Moral Sentiments, Part VI, Section III, Chapter II

He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it.

A Spanish edition of our book Hayek: A Commemorative Album has recently been published by Foment del Teball Nacional in Barcelona. This supplements Canadian, Italian, Korean and English editions. Here is part of the blurb from the back of the book (but translated into English):

This book illustrates the life and work of Freidrich Hayek, Nobel Laureate in Economics and the twentieth century's leading thinker on liberalism. In the book, John Raybold brings together for the first time a unique collection of photographs and documents from the Hayek family archives, many of them never before published.

I've just started re-reading John Stuart Mill's short book On Liberty. It is one of the most significant books of the 19th century. The central thesis of the book is known as the 'harm principle': that individuals should be free to do as they like up to the point where they harm others. He explains the idea in his first chapter:

The object of this Essay is to assert one very simple principle, as entitled to govern absolutely the dealings of society with the individual in the way of compulsion and control, whether the means used be physical force in the form of legal penalties, or the moral coercion of public opinion. That principle is, that the sole end for which mankind are warranted, individually or collectively, in interfering with the liberty of action of any of their number, is self-protection. That the only purpose for which power can be rightfully exercised over any member of a civilized community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant. He cannot rightfully be compelled to do or forbear because it will be better for him to do so, because it will make him happier, because, in the opinions of others, to do so would be wise, or even right. These are good reasons for remonstrating with him, or reasoning with him, or persuading him, or entreating him, but not for compelling him, or visiting him with any evil in case he do otherwise. To justify that, the conduct from which it is desired to deter him, must be calculated to produce evil to some one else. The only part of the conduct of any one, for which he is amenable to society, is that which concerns others. In the part which merely concerns himself, his independence is, of right, absolute. Over himself, over his own body and mind, the individual is sovereign.

On Liberty is one of those classics that everyone interested in public policy ought to read. The paperbook version from Penguin has a good introduction by Gertrude Himmelfarb running to about thirty pages. The book is also available online, courtesy of the Liberty Fund.

'Today, there can be no more important time to understand the United Kingdom's relationship with the European Union' reads the blurb on the back of The Essential Guide to the European Union. Indeed. So it's good to see a book that so usefully documents the European Union. To shrink-wrap this into a mere 194 pages is a bold achievement. Many would shirk away from attempting to unravel the plate of spaghetti bolognaise that is the EU. But this book succeeds, and it is a refreshing, comprehensive and substantial text that lays out each and every piece of European legislation, law, policy that has passed over this politically troubled continent.

Written by Ruth Lea, Director of the Centre for Policy Studies, the guide is critical of much of the centralist and bureaucratic approaches that infest the European Union way of thinking. But it is not a 'what should-be-done' manifesto. Rather, it charts the rise of the European Union from what was once, some might say, a pioneering force for free-trade and free-markets into a very different beast.

One of the way opponents of the market economy gain support is by using terms which make alternative positions more difficult to argue. Thus, opposing economic development in poor countries becomes 'sustainable development'. Who, after all, could be against being sustainable?

The Dictionary of Dangerous Words, published by the Social Affairs Unit, is a useful tool in fighting back. It takes words commonly used in the political arena, and gives their real meaning.

Here is an example. It defines 'social' as:

An adjective which automatically reverses the meaning of any noun to which it is attached. Thus a 'social market economy' is not a market economy, a 'social worker' is not a worker, 'social democracy' is not democracy, 'social theory' is not theory, 'social democracts' are not democrats and 'social justice' is not justice - indeed its pursuit involves and leads to injustice.

Mark Skousen's The Making of Modern Economics is an engaging account of the lives and theories of economists since the Adam Smith. The author, a free-marketeer, justifiably covers the Austrian and Chicago schools of economics with some considerable depth. Skousen's book acts as a counterbalance to plethora of leftist accounts of economic theory, and his book is not sympathetic to Karl Marx. At the same time, Skousen is fair in his assessments, and is quite prepared to be negative about those economists with whom he would naturally agree.

The central character of the book is Adam Smith. 'Our hero,' says Skousen, 'has gone through untold triumphs and tragedies in the unfolding of over 200 years of economic history. Sometimes he appears lifeless following the blows of his opponents. But he seems to have nine lives and always makes a recovery.'

The book is the winding account of how economic theory has moved away from the system of individual liberty put forward by Smith, and how it has meandered back again. It is clear that the Austrian and Chicago schools are responsible for rescuing us time and time again from the forces of big government. The explanations of theory are succinct and clearly written in the main, but the real beauty of this book is how it weaves in stories about each character. The history of the individuals is fascinating and insightful.

The book is clearly designed to look like a textbook rather than a history book, presumably because the author wishes it to be used by university economics departments. The result is that the text is broken up with lots of subheadings and boxes, helping to make it a very easy read.

I found The Making of Modern Economics impossible to put down and would recommend it to anyone interested in economic thought.

The BBC has its Big Read competition, so we've gone one better and launched a Right Read competition where you can nominate your favourite book (sound ones only, sorry).

Here are some ideas to get you thinking:

• Economic Laws of Scientific Research by Terence Kealey - debunks the myth that government-funded research is good for the economy.

• The Skeptical Environmentalist by Bjorn Lomborg - puts some balance in the environment debate. And he's giving an ASI lecture on 26 February.

• The Road to Serfdom by F. A. Hayek - why central planning also leads to the destruction of personal freedom, and why in socialist economies the worst always get on top.