Tim Harford The Undercover Economist

Articles published in January, 2005

Is my husband cheating on me?

Dear Economist,

I am starting to suspect that my husband is having an affair – how can I find out?

Yours sincerely,

Mrs F., Oxford

Dear Mrs F.,

I recommend that you use an “information market”. These markets pay out if certain events occur, for example, if Tony Blair wins the next election. They have an excellent record, outperforming opinion polls when it comes to forecasting election results. Such markets work well because they allow different people, each of whom may hold some important piece of information, to register their view anonymously. Confident forecasters can make their views carry extra weight by betting more.

Companies such as Hewlett Packard have operated internal information markets to make sales and production forecasts – they work better than the bureaucratic method because they uncover hidden information in a situation where people may be afraid to speak frankly. You are in a similar predicament. Whatever friends tell you, you will find it hard to know whether it is the truth. But they may be more willing to let their wallets do the talking.

Practically speaking, you need to bet with people that your husband will not be proved to be having an affair by the end of 2010. Every month, use eBay to auction pairs of promissory notes: one that will pay £100 if your husband is caught, and one that will pay £100 if he is not. Advertise. If people are willing to offer only £5 for the “pay when guilty” note, the market believes your husband is blameless. If the “pay when unproven” promise sells for a mere fiver, you can conclude that somebody – maybe everybody – believes your hubby is a love-rat.

Of course, your husband may submit fake bids in an attempt to rig the market. But do not worry. Such rigging is virtually impossible in a liquid market, and it will cost that slimeball dearly to try.

29th of January, 2005Dear EconomistComments off

Moving on after a divorce

Dear Economist,

Two years ago my wife and I divorced on fairly amicable terms and I now live alone (with the cat) in our former home. The problem is my ex-wife is still present in that her stamp is still on the house – decor, furniture etc. I get hopelessly emotional if I want to change anything and I simply don’t have her talent for making a home. How can I move on?
— Mr B, West Country

Dear Mr B,
You should have no trouble hiring a designer or securing advice from friends. Your problem lies elsewhere. Essentially, you are trapped in a situation of time inconsistency: you write suggesting that you would like to rid yourself of the furniture your ex-wife chose, but admit that you don’t have the spine to go through with it.

Governments suffer similarly. They promise low tax rates to encourage businesses to invest, but nobody believes they will be able to stick to the promise, so they get the worst of both worlds: low taxes and low investment. If some binding commitment could be made, everyone would be better off. The clever leader writers of the FT recently compared such commitments to Odysseus’s idea of tying himself to his ship’s mast to listen to the siren song in safety.

You, too, could commit yourself by going on holiday and instructing a trusted friend to sell the contents of the house while you are away. But I have my qualms about helping one side of your split personality. Sometimes you wish to wipe the slate clean; at other times you want to preserve your memories. What business has an economist choosing one of these emotions over another?

Perhaps you just need to forget your obsession with interior design. Your inspiration should come from Alexander, not Odysseus. Cut through the Gordian knot: get out and find yourself a girlfriend.

First published at ft.com.

15th of January, 2005Dear EconomistComments off

Simple steps to protect the poor in Africa (Traders: African Business Journal)

Traders: African Business Journal have picked up my op-ed about the Doing Business project, but it’s not online.
You can read the original piece here instead.

12th of January, 2005Other WritingComments off

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