Tim Harford - The Undercover Economist Strikes Back!
A few weeks ago, I was relaxing in the departure lounge of Auckland airport waiting for a delayed flight when I overheard a robust conversation between two fellow travellers dissecting the recent books of Tim Harford. One of them wondered when Tim's writing would next hit the airport bookshelves? In my holdall I was carrying a pre-publication version of The Undercover Economist Strikes Back: How to Run or Ruin an Economy and, after several minutes, I could contain myself no longer. "Don't worry" I interrupted "a new book from Tim is out soon and it is all about macroeconomics."
My Antipodean companions looked disappointed. Macroeconomics? Isn't that the impenetrable, maths-obsessed area of economics that has become a dirty word? Not the best time perhaps to launch a book with much maligned macro at its core?
Fear not! When you read The Undercover Economist Strikes Back: How to Run or Ruin an Economy you will discover that "big picture" macro comes alive in the hands of one of our most gifted journalists and engaging story-tellers. I had the book read in one by the time the plane touched the runway at Wellington and was happy to savour it a second time a few days ago ahead of the UK launch. Tim has written another great book and it will be perfect enrichment reading for economics students taking tentative steps in a new subject when schools and colleges return for another academic year.
Indeed Economics at AS and A level is booming! Numbers opting to take the subject have more than doubled over the last six years and today I learnt of a highly successful sixth form college in Leicester that has enrolled a record 460 sixth-formers onto their Economics courses from September.
I have little doubt that Tim Harford's writing has done much to make our subject increasingly popular among new economists who are unencumbered by the inflexible thinking and out-dated doctrines that have plagued conventional textbook economics for too long.
In a fresh and fluent conversational style, Tim Harford makes it clear from the start that macro matters to all of us! We need credible strategies to control inflation, to improve the outlook for those looking for work and to build and sustain competitive advantage in a global economy whose centre of gravity is changing before our eyes.
Tim builds a convincing case for re-thinking narrow (and low) inflation targets and for making wider use of evidence-based policies to solve complex and protracted real-world problems such as getting the long-term unemployed back into work. He has a good stab at de-bunking some of the alternatives mooted to GDP when capturing changes in our welfare and he returns to some familiar themes from his last book "Adapt" when discussing policies for environmental sustainability and making the financial system more robust. We live in a non-linear world which is not necessarily amenable to policy driven by spreadsheets and mechanistic rules. What, for example, might the wobbly Millennium Bridge in London tell us about behaviours and outcomes?
The book is right up to date including ongoing debates over the size of fiscal multipliers and last year''s unexpected challenge from a frustrated post-grad student to the work of Reinhart and Rogoff on links between debt-GDP ratios and economic growth.
We touch base with the important research from Nick Bloom and John Van Reenen on the impact that management quality has on productivity, competitiveness and growth. And reading this book, we understand better the significance of psychology (from Robert Shiller) and search incentives (from Chris Pissarides) in shaping the choices and behaviours of million of people in product and labour markets.
Students with a genuine desire to explore further will love the links to fresh research on the web and teachers wanting to embed the ideas of many interesting and important economists into their classroom work and escape the absurdly narrow focus of the syllabus will have a field day!
As we have come to expect from Tim, there are some vivid portraits of those economists brave enough to challenge the conventional wisdom and help reconnect economics to the reality of our lives - after all, it ought to be social science that is fundamentally about people.
Foremost among them is the story of Alban William Phillips - better known to generations of students as the originator of the Phillips Curve. An engineer by trade and a constant tinkerer and innovator by inclination, AW Phillips spent much of the Second World War as an inmate in a Japanese Prisoner-of-War camp fighting for survival with his comrades in appallingly brutal conditions. He became an economist much later on in his life and his empirical work on the relationship between money wage growth and unemployment - which became the most cited paper in the history of macroeconomics - was according to Tim's story, an academic paper completed in a rush over a long weekend in a bid to placate demands from fellow academics at the LSE!
"Macroeconomics is hard. You've got ten billion products varieties, seven billion people, countless unobservable transactions. The economy is shaped by psychology, history, culture, unforeseeable new technologies, geological and climatic events, computer trades too quick for humans to perceive, and much else. It is a dizzying, imponderable problem. No wonder we struggle." (Tim Harford, The Undercover Economist Strikes Back)
The Undercover Economist Strikes Back opens at the birth of modern macro in the aftermath of the Second World War and takes us on a thoroughly enjoyable journey to the frontiers of complex research in agent-based models and system dynamics.
Day-to-day, the challenge of handling monetary, fiscal and supply-side policies in modern economies is hard; we live in a world of frequent shocks and deep uncertainty about whether we can return to an era of relative stability.
For students too - at the start of their work in economics - becoming accustomed to the basics of of macro can prove daunting; it takes plenty of time for the pieces of the jigsaw to fit together and make proper sense. Tim Harford's new book is pitch perfect to help students on this journey and they will have a lot of fun along the way.