30/1/2008 “THE UNDERCOVER ECONOMIST” by Tim Harford
This was a new style of book for the Monthly Book Group, which, while attracting mixed reviews, inspired a particularly spirited discussion.
Introducing the book, the proposer said he had chosen it because his wife was buying a book for a rail journey, and, as there was a two for one offer at the station, he chose this. No, despite the analysis of railway station coffee outlets in Harford’s opening chapter, he had not also succumbed to the temptation to buy an expensive coffee. (He had been brought up to believe that food and drink was something to be consumed at home, not purchased at inflated prices outside the home, a view of continuing disappointment to his wife).
The book had intrigued him, being an interesting and enlightening review of a wide range of subjects, even if it rather skimmed over some of them. Despite his business background it had shed new light on a range of commercial practices. It was amazing that a cheaper HP printer was the more expensive one slowed down (and another member of the group with an electronics background could confirm a similar example of pricing practice for calculators with almost identical circuitry).
All agreed it was written in engaging and eminently readable prose - with many entertaining anecdotes - despite dealing with a wide range of complex subjects. Most had enjoyed and welcomed the attempts to simplify economics, and found it persuasive on non-political microeconomic matters such as retail practice. It was also a pleasant change that here was an economist who offered firm views, rather than the normal “On the one hand, on the other hand”.
However – as with attempts to write popular science books – it proved very difficult to treat complex issues satisfactorily in a simplistic, easy-reading style. And it was the big issues tackled in the second half of the book – political issues such as health care, failing countries in Africa, climate change, road pricing, and the need for more free markets – that proved red rags to some of our bulls.
Or, more precisely, blue rags, to those brought up in the twentieth century Scottish tradition of distrusting the free market. What about the need for regulation of the free market – why did he not bring that out more strongly? Didn’t the book lack balance – no mention here of Union Carbide in Bhopal! Was the cult of the free market not passing its zenith, as demonstrated by the current meltdown in the financial markets?
Yet, for others, Harford’s recommendations were uncontroversial. The points he was making about the role of the market in encouraging the more efficient use of resources and economic growth were widely accepted by economists. Climate change and excess traffic were indeed better tackled, in the main, by economic instruments, with regulation only forming a small part of the policy mix, as the recent UK Stern report on climate change had concluded.
The difficulty was in persuading democratic governments and legislators of this, and it did not seem likely that Harford’s book was going to make it any easier. His dumbed-down versions of the theory of comparative advantage, of Ricardo on rent, of supply and demand, and of marginal decision-making were not going to make people leap to accept his later analyses of a random set of big policy issues.
Indeed, it turned out that no member of the group had changed their mind about any of the political issues he discussed as a result of reading his book. Perhaps a rather less dumbed-down version – making more of use of graphs and numbers - would have had more impact. (And many big issues in economics – such as monetarism and supply side economics – were not touched on at all). But maybe we had all such fixed views on political issues that we were impervious to other opinions. “Freakonomics”, the similar book by Steven Levitt, was less political, more original, and perhaps more successful in making you look at issues differently.
Yet for everyone who disliked a particular chapter, it turned out that someone else really liked it. His analysis of why China had succeeded where Cameroon had failed annoyed several – for example because he had not brought out fully that China’s was a planned capitalist economy, or explored the one child policy, or acknowledged the scale of investment that might be needed in Cameroon. Yet others were big fans of this section of the book, including a recent visitor to the failing economy of Burma who could recognise most of what Harford had found in Cameroon. Some thought his analysis of the health sector and insurance issues impeccable, while others strongly disputed it, and so on.
Most found something intriguing in the book – such as the discussion of game theory – but what was new for one was old hat for another. And at times it seemed that we had been reading different books – some felt he failed to bring out the importance of the rule of law for allowing capitalism to work effectively, whereas others felt he brought it out particularly well.
An oddity that everyone noticed was his tendency to write at some times as if he were American and addressing an American audience, and at some times as if he were British and addressing a British audience. This might reflect his own career background and the markets he hoped to sell in, but it produced a disconcertingly schizophrenic effect. How many Tim Harfords were there? And it aggravated the feelings of those who felt he was already overly pro-American in his policy prescriptions – no mention, for example, of the indifference of the US Government to that country’s massive impact on climate change.
But, reader, do not assume from the above that we had a calm, rational and well-structured discussion. The reality was a pinball-machine discussion, ricocheting violently between the price of tomatoes and democracies’ ability to tackle climate change, luridly illuminating Civil Service corruption and the failure of Russian capitalism, and then crashing from irrational packaging taxes to the Rangers/Hearts semi-final via education in India. Occasional efforts to refocus the discussion on the book were brushed aside as we plunged into highways and byways, and as serial shoppers revealed that their supermarket loyalties were of even greater importance than their loyalties to capitalism or socialism.
Finally, however, we did reach two points of consensus. One was that structuring governments around legislatures – whether in Scotland, the UK, or the EU – produced an insatiable and undesirable urge to legislate and regulate.
The other was that more of us were now looking for own brand bargains on the bottom shelf of supermarkets. Not perhaps as world-changing an outcome as Tim Harford was hoping for from “The Undercover Economist”, but a more tangible product than from some other books…
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