Book Review: The Undercover Economist Strikes Back
In order to get an undergraduate degree from MIT, at least when I was there, you needed to take a certain number of humanities and social-science courses. This was to stop you from coming out a complete one-dimensional student; the idea was that rounding out your education with knowledge from other fields was good for you as a person, and also good for you as an engineer or scientist. (And yes, I realize that not everyone at MIT studied science or engineering, but those were the overwhelming favorites.) One of the most popular social sciences that people took was economics — which is a social science, although MIT’s version actually included a great deal of math.
At the time, I tended to be quite dismissive of economics. I didn’t think that it could possibly be interesting, or why so many of my friends were taking so many courses in that field. What insights could they gain?
And then, just before I graduated, MIT Press had one of its amazing sales on overstock books. I bought a book by a then-professor at MIT, named Paul Krugman, called “The Age of Diminished Expectations.” Reading this book was quite a revelation for me; I suddenly realized that economics was complex, fascinating, and described the world in all sorts of interesting ways. For years, I read and followed Krugman’s writing, in Slate and then (of course) the New York Times, gleaning what I could about economics. (I also happen to subscribe to many of his political views, but that’s secondary.) Whenever I could find an interesting and well-written book about economics, I would get it, because I found it to be so interesting and compelling.
Several years ago, a friend asked if I had read “The Undercover Economist,” by Tim Harford. I hadn’t, but decided that perhaps it was worth a read, and found it to be delightful, but in a different way from Krugman. Harford isn’t an economics researcher, but he knows just how to put economics research into words and a perspective that everyone can understand. His examples are often drawn from pop culture, and he’s able to distill the academic debates and intrigue to their essence. The fact that he’s very funny only adds to his appeal. I’ve since become quite a fan of Harford’s, listening (among other things) to the “More or Less” podcast from the BBC that he hosts, a sort of Mythbusters of statistics (Mathbusters?).
So it should come as no surprise that I ordered his latest book, “The Undercover Economist Strikes Back,” almost as soon as it came out earlier this year. I just read it cover to cover over the weekend, and came away delighted. As someone who has been reading Krugman’s work for years, and who also listens to NPR’s excellent Planet Money podcast, I can’t say that there was a huge amount of new information in this book. But it was written so well, and put things into such nice context, that this doesn’t matter.
Harford has a gift for making economics not only understandable, but also interesting and relevant to our own lives. In The Undercover Economist, he describes microeconomics, which describes how businesses and individuals respond to incentives. In this new book, he describes macroeconomics, which is a different kettle of fish altogether — it’s about how governments and economies work. If you think of macroeconomics as a complex system, then it’s no surprise that the aggregate behaves differently from its individual, constituent agents. (This, it took me many years to learn, is a much better explanation than what economics instructors tell their students, which is simply that “macro is different from micro.”)
The book talks about all sorts of great stuff, starting with recessions, moving onto unemployment, and covering a large number of topics that are in the newspaper each day, that affect each and every one of us, and which probably seem strange or detached from our reality, but which are actually quite important — particularly if you’re in a democracy, and need to separate real economics from crazy talk.
Harford includes a great definition and discussion of what money is, and brings up the famous story of the island of Yap, which used huge, largely immovable stones as money. He also introduces the different schools of thought on the subject, and where (and how) they differ — and how much of what politicians in the US and Europe have been saying and doing over the last five years has been foolish or misplaced.
The question-and-answer format in which he wrote the book is a little tedious, but much less than I expected it to be. Really? Yes, really.
In my mind, perhaps the topic that was most obviously missing from the book was a discussion of currency, and how that can affect an economy. If you live in the US, or even in England or Europe, you can largely ignore currency issues. Sure, there are exchange rates, and yes, they affect you to some degree, but it’s not a huge deal.
In Israel, by contrast, the exchange rate is a huge deal, because Israel imports and exports so much. The dollar’s rise and fall affects everyone, from high-tech software companies to people shopping at the supermarket. The ways in which the Bank of Israel played with exchange rates and buying dollars, just to keep things relatively stable (while claiming that they were doing no such thing) are impressive, and point to the sorts of challenges that small, trade-oriented economies have but that large ones don’t. I’m not sure if this was an omission due to time or space constraints, or if as someone living in England, Harford hasn’t had to think or worry much about currency issues.
I’ve changed my tune 100 percent since I was an undergrad; i now find economics to be totally fascinating, and very much enjoy reading the sorts of book that Harford has put out. If you’ve always wondered what macroeconomics is, or what the newspapers is talking about when they mentioned recessions, or whether the politicians suggesting budget cuts during the latest recession were saying the most obviously brilliant thing or the most foolish thing imaginable, Harford’s book is a fun, interesting read, and is highly recommended.