Economics for Storytelling

Tim Harford in his book employs an exciting and interactive technique of questions, follow-ups and answers, thus making it seem like a conversation the reader might have with him, giving concise explanations about economic policies and issues. This book is just a lead to my idea of economics being made accessible. Author Tim Harford says in the book,  “Economics is about people – something that economists have done a very bad job at explaining.” Though I agree, I would rather say, the economists themselves are clueless about how to explain something which isn’t subjective and constantly changing!

There are few questions related to economics which are always debatable — Is Globalisation good for the poor and the environment? Or how to get an economically ideal healthcare system which would make people pay most of their medical expenses but would insure them against catastrophic medical disasters? In emerging economies, such as China, sweatshops beat the available alternatives. Economics is not a dismal science, because it is about making people better off and giving them more choices. How to try and ensure that everyone has a choice when it comes to their choices financially? Is it possible to predict or prevent an economic crisis? How does scarcity determine pricing power and how abundant goods are cheaper?

These were few of the questions in my mind, as well as the author’s, that arise from reading the book The Undercover Economist Strikes Back: ‘How to Run or Ruin an Economy’ by Tim Harford. This summary talks about how economic thinking works, how to look at everything in economic terms, from your morning coffee to a trip to the supermarket to the significant issues of international trade and why economics is personally meaningful to you. If for example, the coffee prices are low, and coffee growers are poor because it is easy to grow coffee in many places, so growers have no scarcity power and, thus, no pricing power. A free market reveals the truth about supply, demand and cost. However, markets are often not perfect. Sometimes they fail to consider the needs and preferences of people who are not directly involved in a transaction. 

A microeconomist in nature, Tim Harford’s The Undercover Economist Strikes Back: ‘How to Run or Ruin an Economy’ strives to explain macroeconomic workings. In this witty and insightful read, Harford puts the reader “in the driver’s seat”, putting us in control of the situation, i.e., the economy. The chapters in the book primarily deal with macroeconomic theories, with just a touch of microeconomics in some cases. These concepts include Inflation, Output Gaps, Unemployment, Recessions, GDP, Management, Disparity, Measuring happiness and its relation to the economy and ‘The Future of Macroeconomics’. Harford, in all these cases, explains to us — the controllers of our savings — how these situations (inflation, unemployment, recession, etc.) occur, their effects on the global economy and how to cure it, i.e., implementation of credible strategies. He teaches the ideas of the famous John Maynard Keynes like ‘magneto trouble’ and others like Milton Friedman, Bill Phillips, etc. 

A significant chunk of his explanations involve the Keynesian economic theory, which explains the development of macroeconomics. He also uses classical economists to add another lens to view a failing economy from, i.e., “exogenous shocks” or external strikers that can be good or bad for the economy. Although Harford brought in many other concepts, the meat of his book lies in his chapters on recession and the occurrences in the modern economy. This book was first published in 2013, which was not too far from the Global crisis of 2008, and thus, the concepts are very relatable. 

Under this umbrella of ‘Recession’, he brings in two situations where the causes of recessions differ. The first is the ‘Babysitting Recession’, which occurred because of a lack of demand, and the second is the ‘Prison-camp Recession’, which occurred because of deficiency in supply. These situations stimulate readers to ask whether a recession occurs due to a lack of demand or a lack of supply, which Harford tackles using the ‘short-run’ and ‘long-run’ economic theories and also addresses the question on how to cure a recession. 

The book includes the use of some real-life, non-economic concepts to understand Harford’s argument like the action of dating to understand job-hunting, etc., which makes it easier for us to relate to and understand the situations. He also uses excerpts from some non-economic sources like Dr Strangelove or: How I Learned to Stop Worrying and Love the Bomb (1964). It is a fantasy/comedy film about an American Brigadier who puts the world on the verge of a nuclear catastrophe, as he deploys a B-52 bomber on the Russians, without informing his superiors in the first place. This film example, used at the beginning of the chapters, helps provide a context for the explanation that follows. It also makes a convincing case to increase inflation to help the economy and use subsidies, which is not what one would expect an economist to advise. 

Additionally, there are fascinating questions about the topics, of which some that stand out are: “Did the macroeconomists, in the long run, did not see the 2008 crisis coming?” and “How much inflation is ‘enough’?”

Books like this are several recent attempts to popularise economics or make economics more accessible to non-specialists or ordinary people. Several other publications like Undercover Economist are, Freakonomics-A Rogue Economist Explores the Hidden Side of Everything by Steven Levitt and Stephen J. Dubner, The Logic of Life by Tim Harford again, Discover Your Inner Economist by Tyler Cowen, The Economic Naturalist: Why Economics Explains Almost Everything by Robert H. Frank and more. All these books come under the Genre of popular economics written for the layman’s version, presenting economics as offering simple but powerful academical imagery through literary expression. I might as well quote here what Uskali Mäki in his paper ‘On the philosophy of the new kiosk economics of everything’ has to say. He says, “the accessible and entertaining writing in kiosk economics may pave the way for further imperialistic achievements in the academic sphere (e.g. by providing an encouraging model for economics students.)”

On this note, though this is an excellent read for a general macroeconomic lesson, the title seems to be misleading as the ‘undercover economist’ does not strike back in any situation! There is no retaliation on the writer’s part to the existing economic conditions. Harford himself admits that the complexity of population and culture of a country makes it virtually impossible to forecast, which brings to our minds, how then can we prevent the economy from crumbling? One aspect that significantly stands out in this book is that after making his claims and substantiating it with evidence, he does not offer his opinion on how to run the economy. He provides several perspectives to control and regulate it and leaves it to us, i.e., the drivers, to make a choice. 

Harford assembles the basic concepts of macroeconomics under one roof and manages to make the reader understand how the economy works in the present day, surprisingly without inserting a single mathematical equation. This text is highly recommendable for those who wish to understand and question the working of a global economy and have little or no previous knowledge of economics, like me. This explanation technically answers the question of how economics should be made easy!   

I, Bhavya Vemulapalli am a third-year student of O.P. Jindal Global University studying Journalism and Media Studies.

 

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