The Undercover Economist: notes from Tim Harford’s 2005 debut

“Economics is about who gets what and why.”

It’s a fundamental part of how the world works, so everyone should better understand how an economy works. So argues business journalist Tim Harford in his 2005 debut book The Undercover Economist, informed by his syndicated columns. Published the same year as the breakout success Freakonomics, The Undercover Economist helped establish a category of pop economics nonfiction books to help explain the world. They’re heavily influenced by behavioral economics and mix in lots of real world examples. Harford was part of a wave of writers that brought in greater familiarity with otherwise arcane economics concepts, a trend that has only continued the last 15 years.

That’s fitting a trend to less academic and more practical uses of the field of economics. Keynes wanted economists to be not great theorists but “rather like dentists” to solve everyday problems. Harford has been part of the movement to make it so.

Below I share my notes from the book for future reference.

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Free to Choose: Milton Friedman’s 1980 defense of American capitalism

Capitalism exposes inequality. It doesn’t cause it.

That’s among the big arguments that influential free market economist Milton Friedman (1912-2006) made in his bestselling 1980 book “Free to Choose.” By 1980, Friedman was the best-known economist of his generation; In 1962, he wrote Capitalism & Freedom, in 1970 he introduced his influential case for shareholder value and in 1976 won the Nobel Prize in Economics.

The book was published in a period of increased government intervention in the economy, high inflation and economic stagflation in the United States. Friedman’s ideas were seen as a counterpoint to the dominant Keynesian economic policies of the time, and he was part of a wave that was epitomized by the so-called Regan Revolution. The book was also the basis for a ten-part television series of the same name that aired on PBS in 1980. The series and book were well received by the public and helped to popularize Friedman’s views on economics.

See my notes below.

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Capitalism & Freedom

Is capitalism the cause of differences or the reason why those differences are so small?

Influential Nobel Prize-winning economist Milton Friedman (1912-2006), who is a champion or a scourge depending on your political persuasion, long argued the latter. First published at the height of the Cold War in 1962, Friedman argued in “Capitalism and Freedom” that economic freedom is an essential component of political freedom, and that a capitalist system is the best way to promote both. This book serves as essentially the foundation of his status as a kind of public intellectual, though even his critics must acknowledge he went beyond punditry — he won the 1976 Nobel Prize in economics due to his scholarly work on monetary policy.

Attacks of capitalism often confuse what that economic system causes with what it exposes. As Adam Smith wrote and Friedman quotes: “There is much ruin in a nation.”

I read a 2002 edition, but when it was originally published the book was the beginning of a movement that led to Friedman’s bestselling Free to Choose (first published in 1980 alongside a PBS series of the same name) and is often associated with the Reagan Revolution. Friedman’s work heavily influenced conservative American politics.

In this earlier book, Friedman argues that government intervention in the economy, such as through regulation and redistribution, is detrimental to individual freedom and economic prosperity. He also advocates for the privatization of certain government services, such as education and healthcare.

The book was published during a time of Cold War tensions and the rise of socialist and interventionist economic policies in the United States and around the world. Friedman has lasting influence. For one, his description of monetary policy having “long and variable lags” has been often referenced to this pandemic era. In 1970, his ‘Friedman doctrine’ that companies existed to maximize profit for shareholders came to define the modern era, and experienced a revival 50 yers later.

Read my notes from the book below.

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The Value of Everything

The way we count how big our economy is gets determined by a set of changeable decisions. Those decisions have changed over time, and they can change in the future.

That is a major theme from the 2017 book The Value of Everything by economist Mariana Mazzucato.

Below I share my notes from reading the book, which are for my own purposes for review later.

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The Culture of New Capitalism

The digital economy encourages each of us to be further individualized, quantified and atomized.

That’s a big theme from the 2006 book “The Culture of the New Capitalism” written by sociologist Richard Sennett. The nature of work and the organization of companies was shifting for decades but he spotted a marked shift he called “new capitalism.” This new form of capitalism is characterized by a focus on flexibility, innovation and the constant search for new markets and technologies.

Though 15 years old, the book is still relevant and serves as a good landscape of the academic research and philosophy that underpins an understanding of where we are today.

He argues that this shift led to a culture in which individuals are expected to adapt and learn in order to succeed, and so longterm commitments and relationships are devalued. The book is critical of how this new culture shifts individual identity and community, and the impact it has on social and economic inequality.

Below I share my notes from the book for future reference.

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Opportunity costs: think of the big but not the small

version of this essay was published as part of my monthly newsletter several weeks back. Find other archives and join here to get updates like this first.

Economists love to review our decisions through the lens of opportunity costs. Each decision we make has the added cost of that which we did not do. 

When a big box-store clerk, paid hourly, volunteers to leave her shift early because foot traffic is particularly slow, she’s making a choice. She values what she does with that time more than the wage she would have earned. 

When an influential academic, evaluated by her published research, agrees to take on another young mentee, she’s making a choice. She values that relationship and the person’s development more than what she perceives to be the potential career gains she could have developed with more time in the lab.

I wrestle with this paradigm more often than I might want to admit.

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Economics terms that help me understand the world

Since my undergrad years, I’ve taken an interest in the pop science of behavioral economics. From books and articles and podcasts aplenty, I’ve found the shallow edges of the social science quite helpful for my worldview. (I also book a second-hand microeconomics textbook and dug in.)

The clearest result of that has been an entire set of familiar terms that help explain the world. These phrases have been valuable to me. I’d like to share them with you.

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Why 10 percent unemployment and worse is our future, unless we rethink our economy

People waiting in line for unemployment relief in Chicago in October 1960. Photo by Myron Davis for LIFE Magazine

Updated with more perspective on the job-crashing Internet here and more from Vox Media here. Also, though some think there is a mighty economic transition happening, many readers and friends have pointed that I didn’t properly address the ‘lump labor fallacy‘ here, in which I incorrectly assume there is a static number of jobs that are going away. I still think there is perspective worth sharing below. More comments welcome.

In the next 20 years, the United States and the broader global economy will either dramatically rethink its employment structure or a history-altering societal change will take place.

Of course, unemployment numbers are gamed by those who give up on looking for jobs, but the idea here is that it’s hard to understand why anyone seems to think that the overall unemployment numbers for our country will trend anywhere but upward.

Let me be clear, this is armchair commentary from someone with absolutely no background in economics or geopolitical, socioeconomic trends, so I am writing this hoping for outside insight because I can’t figure this out.

Below, I (a) outline the problem as I see it, (b) look at big economic drivers that seem to be chances for more problems, (c) list all the opportunities I understand that could reverse somewhat this trend and then (d) highlight some of the transformational changes that could lie in wait for the next generation, before offering some more reading and then waiting to get yelled at in the comments.

Continue reading Why 10 percent unemployment and worse is our future, unless we rethink our economy

“Understand what business you’re really in. That’s what benefit you provide customers. Not what product.”

The innovator’s dilemma: “Understand what business you’re really in. That’s what benefit you provide customers. Not what product.”

H/T Tech Dirt.

Economics of abundance: “Find the scarcity that abundance creates.”

All of this fits into the news (and many other industry) fracturing conversation. Which might have led leaders to take more serious predictions, like this prescient one from 1994 about the future of tablet computer.