Is This the Best Book Intro Ever?

I would like to thank you for buying this book, but if you’re anything like me you haven’t bought it at all. Instead, you’ve carried it into the bookstore cafe and even now are sipping a cappuccino in comfort while you decide whether it’s worth your money.

This week, while wondering around my office either procrastinating on work or a problem set (I don’t remember which) I picked up Tim Harford’s book The Undercover Economist. (It’s fun to work in a building entirely filled with other students of economics, because there are books like this lying around everywhere.) It’s a book that’s been on my radar for a while, but for one reason or another I’ve yet to pick up. I sat down at my desk and started reading the introduction. Which continues:

This is a book about how economists view the world. In fact, there might be an economist sitting near you right now. You might not spot him–a normal person looking at an economist wouldn’t notice anything remarkable. But normal people look remarkable in the eyes of economists. What is the economist seeing? What could he tell you, if you cared to ask? And why should you care?

You may think you’re enjoying a frothy cappuccino, but the economist sees you–and the cappuccino–as players in an intricate game of signals and negotiations, contests of strength and battles of wits. The game is for high stakes: some of the people who worked to get that coffee in front of you made a lot of money, some of them made very little, and some of them are after the money in your pocket right now. The economist can tell you who will get what, how, and why. My hope is that by the time you finish this book, you’ll be able to see the same things. But please buy it first, before the store manager throws you out.

Your coffee is intriguing to the economist for another reason: he doesn’t know how to make a cappuccino, and he knows that nobody else does undercover-economist-covereither. Who, after all, could boast of being able to grow, pick, roast, and blend coffee, raise and milk cows, roll steel and mold plastics and assemble them into an espresso machine, and, finally, shape ceramics into a cute mug? Your cappuccino reflects the outcome of a system of staggering complexity. There isn’t a single person in the world who could produce what it takes to make a cappuccino.

The economist knows that the cappuccino is the product of an incredible team effort. Not only that, there is nobody in charge of the team. Economist Paul Seabright reminds us of the pleas of the Soviet official trying to comprehend the western system: “Tell me…who is in charge of the supply of bread to the population of London?” The question is comical, but the answer–nobody–is dizzying.

When the economist drags his attention away from your coffee and looks around the bookstore, the organizational challenges are even greater. The complexity of the system that made the store possible defies easy description: think of the accumulated centuries of design and development, from paper upon which the books are printed to the spotlights that illuminate the shelves to the software that keeps track of the stock, not to mention the everyday miracles of organization through which the books are printed, bound, stored, delivered, stacked, and sold.

The system works remarkably well. When you bought this book–you have bought this book by now, haven’t you?–you probably did so without having to give instructions to the bookstore to order it for you. Perhaps you did not even know when you left your home this morning that you were going to buy it. Yet by some magic, dozens of people took the actions necessary to fulfill your unpredictable desires: me, my editors, marketers, proofreaders, printers, paper manufacturers, ink suppliers, and many others. The economist can explain how such a system works, and companies will try to exploit it, and what you as a customer can do to fight back.

Now the Undercover Economist is gazing out of the window at the traffic jam outside. To some people, the jam is merely an irritating fact of life. To the economist, there is a story to tell about the contrast between the chaos of the traffic and the smooth running of the bookshop. We can learn something from the bookstore that will help us avoid traffic jams.

While economists are constantly thinking about the things going on around them, they are not limited to discussing local matters. If you cared to engage one in conversation you might talk about the difference between bookshops in the developed world and libraries Cameroon, which have eager readers but no books. You might point out that the gap between the world’s rich countries and the world’s poor countries is huge and appalling. The economist would share your sense of injustice–but he could also tell you why rich countries are rich and poor countries are poor, and what might be done about it.

Perhaps the Undercover Economist seems like a know-it-all, but he reflects the broad ambition of economics to understand people: as individuals, as partners, as competitors, and as members of the vast social organizations we call “economies.”

This breadth of interest is reflected in the eclectic tastes of the Nobel Prize committee. Since 1990, the Nobel Prize in Economics has only occasionally been awarded for advanced in the obviously “economic” things, such as the theory of exchange rates or business cycles. More often, it has been awarded for insight less obviously connected with what you might have thought was economic: human development, psychology, history, voting, law, and even esoteric discoveries such as why you can’t buy a decent secondhand car.

My aim in this book is to help you see the world like an economist. I will tell you nothing about exchange rates or business cycles, but I will unlock the mystery of secondhand cars. We’ll look at the big issues, such as how China is lifting a million people a month out of poverty, and the little ones, such as how to avoid paying too much money in the supermarket. It’s detective work all the way, but I’ll teach you how to use the investigative tools of an economist. I hope that by the end of the book, you’ll be a more savvy consumer–and a more savvy voter too, able to see the truth behind the stories politicians try to sell you. Everyday life is full of puzzles that many people do not even realize are puzzles, so above all, I hope that you will be able to see the fun behind these everyday secrets. So let’s start on familiar territory by asking, who pays for your coffee?

Needless to say, I bought the book. Used. For a penny. Plus shipping and handling. From someone somewhere (and anywhere) in the world. Amazing!

Links I Like [7.14]

1. The implications of Complexity for Development
I’ve been banging on about complexity for quite a while now. This is an, as they say, oldy but goodie. Owen Barder, one of the only people who actually justifies the title “expert”, runs through the implications of complexity for development. (Seriously, Owen Barder is so good, Francisco Toro of Boring Development asks the rhetorical question, “Why do people spend thousands of dollars on degrees in International Development when they could just download Owen Barder’s podcasts for free?) The policy implications are important: resist engineering, avoid isomorphic mimicry, resist fatalism, promote innovation, embrace creative destruction, shape development, embrace experimentation, and act global. The ultimate conclusion, however, is perhaps the most important: be humble!

2. 25 Thoughts on the 25th Anniversary of the ‘Seinfeld’ Premier

3. God Loves Cleveland
I’m only slightly ashamed that LeBron news breaks into this list, but this article is really great. Sports are an important part of life and LeBron might be the most important athlete in professional sports right now.

4. Daron Acemoglu and James Robinson on Why Nations Fail Blog have been writing a series of posts on James Scott’s book Seeing Like a State. They are all worth a read:

Prelude to Seeing Like a State
Images of the State
Seeing Like a State
The Art of Not Being Governed
An Application of the Art of Not Being Governed

Needless to say, I’ve recently purchased Scott’s book.

5. Tyler Cowen on Global Inequality.
This is the best summary on what we know (and don’t know) about income inequality, broadly speaking.

The Scrabble Theory of Economic Development

Complexity is an idea I’ve been thinking a lot about ever since reading Aid on the Edge of Chaos. Since then I’ve been discovering the rich learning being done in this area, and specifically as it relates to how countries develop. Before this discovery (or should I say recognition) of complexity thinking, stating the fact that the world is a complex place was where my conversations and thinking ended. Now, more and more, this is where I start my mental analysis.

Scrabble Pieces

In my investigation into the existing literature of studying complex systems, I came across the work of Ricardo Hausmman who is a complexity scholar and the director of Harvard’s Center for International Development. Here’s a video of Hausmman giving a short (30 minute) presentation speaking about the puzzle of development, the implications of economic complexity, and the Scrabble theory of economic development. It is really important (and fascinating) stuff for anyone working with the goal of developing economies. I’m begging you, PLEASE WATCH, for the good of humanity!

For even more on complexity and development listen to Owen Barder.

“Faith and Business on the Razor’s Edge”: Some Post-Op Notes

During the past year I’ve had a distinct pleasure hanging out in Kenya working with Churches that work with businesspeople. Lately, the concept of integrating religious faith into business has been somewhat of a headline topic.

Yesterday, I had a piece run in the CRCNA’s Do Justice Blog, a publishing site (presumably) for members of the Christian Reformed Church in North America. The site is maintained by sub organizations the Center for Public Dialogue and the Office of Social Justice. Here are a few notes to supplement the reading:

The piece kind-of dances around the always-entertaining experience of driving in Kenya. I’ve written about this in more detail previously on this blog.

One of the important paragraphs talks about the complexity imbedded in simply warming a piece of bread to a crisp:

There are over 400 components that make up a toaster. These components are all made out of a number of different materials: copper, iron, nickel, plastic, and a few others. Of course none of these materials are used in the toaster as they are found in nature. Iron, copper, and nickel all need to be smelted and plastic (usually) is made from oil. Keep in mind that a toaster, which remarkably costs only the equivalent of roughly an hour of work, is just one product. Most estimates claim that at any given time there are upwards of 10 billion products available in our economy.

Here is the full video of the embedded link. Watch for the full story of the toaster along with much much more:

The whole point of sharing the story about the complexity inherent in a simple toaster is to show how incredibly complex we have made our modern world. The seemingly odd and sort-of funny thing about this is that my piece was tagged in the category “simple living”. I think simple living is something we should all strive for, but we must recognize how extraordinarily complex even the simplest life is in our modern reality.

Admittedly the piece comes off as a little vague, but that’s entirely the point. The world is so complex that if you’re certain what is best to do, then you’re probably not in a position to make any sort of decision with significant impact. I’m reminded again of one of my favorite movie quotes, “Certainty, as it turns out, is a luxury for those on the sidelines…” I’ve written about the call of a Christian being specifically vague before, this oxymoronic phrase somehow is the best descriptor I’ve come across.

Finally, I’m a little surprised none of my economist (or soon to be economist) friends have recognized the reference in the title to the Harrod-Domar growth model. The analogy is a bit nerdy, so I’m really not overly surprised. I really expected at least one shout out.

How to Write About Africa [An Example]

One of the cool parts about my job is I get to read. A lot. When I see anything that I think may possibly have something beneficial to contribute to my research, I place it in my ‘to read’ queue.

Most of what I end up reading, especially policy reports from think tanks, are interesting and informative but ultimately will not directly contribute my current research. Every once in a while, however, I come across a report that is different. The most recent East Africa Prospects report providing An Update on the Political Economy of Kenya, Rwanda, Tanzania, and Uganda by the Overseas Development Institute (ODI) is one of these unique reports.

Continue reading