BOOK REVIEW: THE ECONOMICS OF SMALL THINGS BY SUDIPTA SARANGI

Persuaded by a compelling marketing campaign, I picked up The Economics of Small Things hoping for a string of epiphanies. It claimed to have the answers to questions like, “Why are all the good mangoes exported from India? Why should we pay our house-help more? Are Indians hardwired to get grumpy at a peer’s success?” In answering those questions, the book attests that most of our ‘everyday behaviours’ have an economic grounding.

Devoid of jargon, this microeconomic book prides itself on not using a single graph or equation to get its point across. The writing style is consistently breezy, humorous, and sharp-witted. Its narration is a medley of illustrations drawn from behavioral psychology, culture, lived experiences, history – even the animal kingdom!

About the Author

Dr. Sudipta Sarangi published his debut book, The Economics of Small Things with Penguin, India, in 2020. As the Professor and Department Head of Economics at Virginia Tech, USA, Sarangi has written a vast swathe of academic literature. He specializes in Microeconomic Theory, Networks, Experiments and Development Economics. Additionally, he teaches a course called ‘Economic Puzzles in History, Literature and Movies’, an evident theme in his book.

Key Ideas

This edutaining book runs along with commonplace snippets of life:

·        A man sacrifices that last pizza slice for his co-workers.

·        A driver takes out a second to pray on passing a temple but doesn’t wear the seat belt.

·        A woman compensates her loyal employee with a little extra cash.

Sarangi alleges that all these anecdotes are characterized as “serious economic behaviours”. Throughout the book, he delves into the relevant economic concepts behind the everyday, seemingly esoteric tendencies.

Written as a series of bite-sized stories with an economic moral, the book’s chapters need not be read sequentially. Here is one such story. Nineteenth-century paleontologists would visit China and reward peasants who unearthed valuable dinosaur fossils. But this monetary reward depended on the number of bones instead of the size of the bones. Predictably, Chinese peasants exploited this loophole: they would break up the fossil into pieces in order to maximize their reward. “The point is that while incentives affect human behaviour,” Sarangi says, “large incentives can also really distort behaviour.”

Ideas like these form valuable lessons for the 21st century. For example, today’s economists put forward ‘moral hazard’ as the downside of Universal Basic Income’s (UBI) effect on the poor. Moral Hazard refers to the lack of incentive to guard against risk when people are protected from its consequences. The argument insinuates that when the poor are given an income no-questions-asked (i.e. a ‘large incentive’), it may cause them to behave more recklessly.

Before The Economics of Small Things, I knew Product differentiation as a marketing strategy used by firms to sell slightly differentiated products at higher prices. But I never realized that by enhancing my resume with infographics – pictures, coloured tables, and pie charts – I (the product) differentiate myself from the hundred other equally qualified applicants in a tight job market. This example made me reevaluate my understanding of Economics. As a student of traditional economics, I got so used to studying it in textbooks, journals, and articles that I stopped noticing it all around me. But thankfully, Sarangi allowed me to re-envision economics as the living, breathing discipline it is.

Sarangi’s book also focuses on what I call adversity economics. First, he empathizes with the poor, who are judged for their inability to make better life choices. But inferring from a study published in Science, Sarangi argues that experiencing poverty is the cognitive equivalent of a 13-point drop in IQ. He says, “Dealing with uncertain incomes and juggling finances to make ends meet is a difficult task, and the result is divided attention, which imposes a cognitive load, making it harder to concentrate and grapple with other issues in a successful manner.”

Another point worth extrapolating is that this self-aware book is very much “of its time”. Why? Published in November 2020, it does a fine job at covering issues related to the pandemic and racial justice (possibly influenced by the raging at the time Black Lives Matter movement). The chapter In Freedom Begins Responsibilities studies behaviour towards newfound responsibilities such as wearing masks at all times. Further, the book touches upon the economics of racial discrimination. Sarangi explores the Nobel Prize-winning theories of ‘Statistical discrimination’ and ‘Taste-based discrimination’. Giving credit where credit is due, this book brings systemic racism under the umbrella of economics – this, I commend. Other core economics books hardly engage with such social issues.

Distinct Indianness

Economics newbies venture in a sea of western-centric perspectives. In that case, the Indian take by Sarangi is refreshing.  His examples are characteristically Indian ranging from Ajay Devgan films to the Indian crab syndrome. The narration greets the reader with phrases like ‘Aam aadmi’ and ‘Mainu ki?’

Literary Criticism

I believe that each chapter makes for a great article. In fact, the author agreed in an interview that the first chapter P.G. Wodehouse, Futurist?, was written as an article. However, while the chapters are wonderfully succinct, the overall texture of the book is not. The independent, disconnected chapters don’t adhere to a singular genre and tone.

My issue is that the book has misused the broadness of the title to discuss everything under the economic sky – unfortunately-, rendering the book inconsistent. I also discern that the title “The Economics of Small Things” is not aligned with the content. It sets the false expectation of demystifying hidden factors in decision-making. Some may argue that it fulfils the said expectation. But, in my defence, relatable illustrations of elementary microeconomics are not exactly aha-moments. I will now make my case.

In the chapter The First Piece of Cake, Sarangi answers the question, “[when eating], why do we have to offer our guest the first choice?” even when this means going against our evolutionary instincts. The author offered two explanations. Firstly, letting the guest eat first is innately selfish as we humans get a “warm glow from doing our part to help others or being nice to them.” The ‘warm glow’ theory, propounded by economist Jim Andreoni, makes sense. It also explains why some Americans go thrifting, go vegan, or engage in charity to eliminate their “first-world consumer guilt”.

But just when it got interesting, Sarangi went on to trace the historical significance of the ‘Pehle Aap’ mentality. This was disappointing because Atithi Devo Bhava is not exactly news to Indians, his primary audience.

Secondly, while The Economics of Small Things is a refreshing read, its contributions to the academic community are far from ground-breaking. At specific points, the book gave strong impressions of imitating the 2005 book Freakonomics, a New York Times Bestseller. My instinct was only confirmed when its website claimed the book to be “a delicious mix of serious economics and pop culture” compared to Freakonomics’ famed tagline “melding pop culture with economics”. Although I must distinguish that while Freakonomics was statistics heavy, Sarangi’s work is more theory-rich.

Conclusion

Einstein said, “If you can’t explain it to a six-year-old, you don’t understand it yourself.” As it turns out, Sarangi knows his economics. In my opinion, this book is a must-read for high school students or just about anyone new to Microeconomics. Brownie points if this book is one’s first interaction with economics as a subject – for they will derive much value and joy from reading it.

To rightly summarize in the words of another reviewer, “[The Economics of Small Things is] One of those pop books that are self-aware and mentions assumptions, caveats etc. A good introduction (for anyone interested) to concepts in economics and well-curated references.”  On the whole, Sarangi attempted to view the world from an economic lens. In doing so, he made economics approachable.

I read in a New Yorker piece,Economics is at heart a narrative art, a frame across which data points are woven into stories about how the world should work.” If the saying holds, Sarangi is an artist and he takes this storytelling to the next level in his book The Economics of Small Things.

Harsheen Sahni is a second-year bachelors student at Jindal School of International Affairs. Her main interests include gender studies, international economics, and social entrepreneurship.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s