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Sunday February 24, 2008

Everyman’s economist

For those who are still suffering from nightmares about Economics in school, there is a cure. And, not only is it painless, it is downright pleasurable.

WHEN I was in school, I was hopeless at Economics. You’d have better luck making me solve a complex mathematics problem than getting me to read Adam Smith’s Wealth of Nations.

“Accidental economist’ Tim Harford relishes challenging conventional wisdom. – Photo by FRANK MO

But Tim Harford’s The Undercover Economist and his latest book, The Logic of Life, cured my phobia. After all, who wouldn’t want to know answers to urgent questions like, “Is divorce underrated?” or, more importantly, “Why is your boss overpaid?” Apparently, economics can be entertaining stuff.

“Economics is not just about the study of commercial transactions but about the way we make choices, especially hard choices – choices about voting, crime, alcohol or the response to racial discrimination,” London-based Harford explained via e-mail. (The very busy author typed his response during his “tenth flight in 10 days” as he toured the United States.)

The busy economist

The Undercover Economist made economics a subject everyone can relate to, not just stockbrokers and finance managers. His reader-friendly prose is full of fascinating case studies and characters, and it’s no wonder that the book has been translated into more than 25 languages and has sold above 600,000 copies worldwide.

Besides being the author of a bestseller, Harford is the economics leader writer for Britain’s Financial Times and writes two columns for the paper: the Undercover Economist and Dear Economist, a “problem page” where he uses economics to find an answer to people’s personal problems. (The strangest question he has ever received: “Should I get a bikini wax?”)

Plus, he was a presenter for the BBC show Trust Me, I’m an Economist (and is in talks to do a second TV show) and is currently presenting a BBC radio show called More or Less.

But Harford nearly didn’t become an economist. He tried philosophy but realised that he wasn’t very good at it. Then he discovered that economics was far more enjoyable because “economists will never accept the conventional wisdom”.

Despite his enthusiasm for the subject, Harford had low expectations for The Undercover Economist.

“I didn’t expect it to be published. When it was published, I told myself that if it sold 7,000 copies I would be happy. In 2008 it is likely to pass 700,000 copies,” he says, saying that he was amazed that the book became so popular.

Life and economics

On the heels of the success of Undercover Economist, comes The Logic of Life, a book he had wanted to write for several years.

“Whenever I came across a new idea, research paper, newspaper article, anything that was relevant to the book, I put it in a crate. When the crate was full I got another crate. When I was ready to write, I started by digging my way through the crates to remember my thoughts and inspirations. It was a very important part of the writing process,” he says.

In The Logic of Life, Harford tackles prickly issues like prostitution, gambling, racism and crime. He couldn’t resist writing about them, he says.

“The ideas I was reading about in the latest journals, discussing with the top economists and writing about in the Financial Times, are so compelling that the decision made itself,” he says.

Economics is sometimes called “the study of scarce resources”, something Harford believes to be a narrow definition.

“But even that definition recognises that girlfriends and boyfriends are scarce, nice neighbourhoods are scarce, and positions high up the corporate ladder are scarce,” he says.

Both The Undercover Economist and The Logic of Life focus on real, practical problems people face every day.

“But The Undercover Economist looks at commercial issues: how shops cleverly set their prices to get us to pay more, for example.

The Logic of Life looks instead at social issues such as marriage and divorce, discrimination, politics and what makes cities work well or struggle,” he says.

The challenge was deciding what to leave out because there was such insight coming out from the field, and there are so many “astonishing stories and larger-than-life characters”.

“It wasn’t a challenge to write the book but a pleasure. But in the end, you can’t include everything. I left out a chapter about virtual worlds online – it’s a great subject but in the end, I felt better leaving it out of the book,” he says.

His favourite chapter is the second chapter, Las Vegas, where he visits the desert entertainment city to observe its denizens.

“I meet a poker professional called ‘Jesus’ who used economic theory to become world champion, and an economist who advised John F. Kennedy how to avoid nuclear war. The characters and the stories are amazing. But my wife tells me that it’s ‘a boy chapter’ and that the chapters on love and on office politics are better,” he says.

The subject of politics was, however, more difficult to tackle.

“The simplistic position that many economists take is that it is not rational to vote because you will not, as an individual, alter the result of an election. But that is obviously naïve and not a good description of what people do,” he says.

Harford realised that he had to be “more sophisticated and realistic”, and discovered something powerful while writing about the subject.

“It explains why we vote so much based on personalities rather than policies; it also explains why some lobby groups have lots of influence while others, equally rich, do not,” he hints enticingly.

But can everything be explained by economics?

Not really, he admits candidly. Economics can tell us about issues, but it does not tell us everything, he says.

“Economics can tell us about how coffee is priced, but not why coffee tastes good. Economics can tell us how we compete to get a husband or wife. It does not tell us why we love our partner. Economics is everywhere, but it is not everything,” he says.

A normal life

Harford has another radio series to do and he has signed a contract to write two more books.

Despite all this, he insists that his life has not changed much since the success of The Undercover Economist.

“Nothing important has changed,” he says. “My wife and I discussed the night before The Undercover Economist was published, ‘What if this book is a total failure?’ and ‘What if this book sells a million copies?’. And we decided that nothing would really change, either way.”

Harford still lives in the same two-bedroom house, for one.

“I am very lucky that I get to write books for a living and do other interesting things – make TV shows, present a radio series, travel the world – but that is not the most important thing. My home, my family, my job, hasn’t changed,” he says.