Book review: economics made accessible

Review of The Undercover Economist Strikes Back by Tim Harford.

The Undercover Economist Strikes Back by Tim Harford.

The 19th-century Scottish essayist Thomas Carlyle once famously dismissed economics as “the dismal science”. Having stuck my nose into one or two economics textbooks over the years, I’ve got to say he had a point.

Tim Harford is one of a growing number of writers such as Steven Levitt and Steven Landsburg attempting to make the science less dismal for everyday readers like you and me.

His first book, The Undercover Economist, gave an introduction to microeconomics through the lens of real-world examples such as fair trade coffee, second-hand cars and how supermarkets set prices. The book was a runaway success, and has sold more than a million copies worldwide.

In The Undercover Economist Strikes Back, his fifth book, Harford widens his gaze to examine the nuts and bolts of actually running an economy, in what he describes as “a determined and practically- minded poke around under the bonnet of our economic system”.

The book is a gentle stroll through the basic considerations of running an economy from the top down, such as how to measure GDP, managing the supply of money, the importance of keeping inflation low, the challenges of unemployment, income inequality, and so on.

Harford’s book is no economics textbook, for which the likes of you and me should be thankful. His tone throughout is playful, patient and enjoyable to read, with concepts and theories always accompanied by examples to keep the book rooted in reality.

Based in Oxford and a columnist for the Financial Times, Harford inevitably dwells overwhelmingly on western economies such as the UK and US, although Asian economies such as China are briefly touched upon. Perhaps inevitably, some of the larger challenges facing some Middle Eastern economies, such as mass youth unemployment and economic diversification, are not touched upon.

This is a minor quibble, however. The Undercover Economist Strikes Back is an engaging read for those wanting a basic introduction to macroeconomics, or those who have some knowledge and are looking to go deeper. At just short of 300 pages, the book is ideal holiday reading for those seeking something more educational than the latest footballer autobiography.

Q&A: money to burn it would seem

What is the economic impact of burning a sack full of banknotes?

This is the question Harford asks at the start of his chapter on the nature of money, its role within an economy and the danger of printing too much of it.

But no one would be so stupid to do such a thing, right?

Actually, no. In August 1994, two retired British musicians – Bill Drummond and Jimmy Cauty - travelled to the island of Jura, off the west coast of Scotland, and proceeded to burn£1 million (Dh5.9m) in cash of their own money.

Why?

An artistic statement apparently. No, I don’t really understand it either ...

Wasn’t burning all that money pretty irresponsible? Couldn’t it have been given to charity?

It could, but Drummond made the point that if they had spent the money on swimming pools and fancy cars, no one would have given the matter another thought. It was just paper that had been burnt, not apples or bread, and the cost of reprinting the notes was only about £2,000.

As Harford explains, what they had destroyed was not one million’s worth of society’s resources, but one million’s worth of their individual purchasing power.

Still seems an odd thing to do. How did it affect the economy?

If anything, it actually lowered prices (almost imperceptibly, mind) by reducing the supply of money in the economy at the time. As Harford notes: “Instead of being outraged, people should have been thanking them.”