Tim Harford The Undercover Economist

Articles published in February, 2005

Green London

Dear Economist,

I am worried about the damage we wreak on our planet, and I want to do my bit to reduce my personal environmental impact. I was thinking of moving to the country and living a more self-sufficient life. But is there a better way?
— Jocelyn Hathaway, London

Dear Jocelyn,
You should ask yourself, rather, if there is a worse way. London may not appear to be the model of sustainable development, but it is an organic commune compared with what would happen if the other seven million inhabitants selfishly decided to move to the country.
Tightly packed, rich cities such as London are easily the most environmentally friendly way to enjoy modern life. Wealthy people squeeze into cosy apartments. Cocktail bars and sharp suits are green ways to spend cash compared with maintaining an extensive garden saturated with fertilisers and pesticides.

Denser cities mean more efficient transport. Compare the commuting patterns of London with the sprawling city of Atlanta. Even before the congestion charge, only 10 per cent of commutes into central London took place in cars. In Atlanta, 90 per cent of commutes were in cars, three-quarters with the driver unaccompanied.

Manhattan, the densest and richest city of all, was recently described in The New Yorker as “a utopian environmentalist community” and is vastly more energy-efficient, per person, than any of the 50 American states.

All this without requiring anyone to eat lentils or live like a pauper.

My advice to you is to forget all this self-centred nonsense about moving to the country. Instead, put double-glazing in your flat, travel to work by bike and relax in the smug knowledge that you are living in one of the greenest cities on the planet.

First published on ft.com.

26th of February, 2005Dear EconomistComments off

Reverse parking

Dear Economist,

I have a long-running argument with my husband. He always reverses into parking spaces. I prefer to drive in forwards and reverse out. Who is correct?
Yours sincerely,
Maddie French, Cirencester

Dear Maddie,

Your question takes us into deep waters. Start by observing that it is, presumably, easier to drive forward than to reverse. Your husband is therefore delaying gratification while you are delaying difficulties. Mainstream economic theory is perfectly clear on this point: your husband is being silly. It is pain, not pleasure, which should be delayed, if for no other reason than we are all mortal.

But our analysis must go further than this. If you park for an hour, even a slight difference in ease of reversing in versus reversing out should swamp any benefits from delaying the difficulty. For example, if it is just one-tenth of one per cent harder to reverse out than to reverse in, then you should reverse in. If you preferred to delay the pain by an hour, bear in mind that one-tenth of one per cent per hour compounds to a substantial annual interest rate: around one-third of a million per cent. To drive in forwards and reverse out would show either impatience verging on insanity or a staggering incapacity to predict the near future.

There is another consideration: you are trading off reversing under conditions of certainty versus reversing under conditions of uncertainty. You do not know what the car park may look like in an hour, whether it will be crowded, or whether you will be in a hurry. Having to reverse out under adverse circumstances is a low- risk but high-impact event. My advice is position yourself ready to leave at a moment’s notice: the car park at Safeway can be an unpredictable place.

First published at ft.com.

19th of February, 2005Dear EconomistComments off

Dear Economist goes global

Dear Economist appeared in the international editions of the Financial Times for the first time today. (In FT Weekend, page 3.) It’s an exciting step – and not just because I’m currently based in the States and it’s nice to be able to read what I write.
With a bit of luck this will also improve the reliability of FT.com’s coverage of Dear Economist.

19th of February, 2005Dear EconomistComments off

A Decent Proposal

Dear Economist,
I’ve been seeing my girlfriend for the past three years, and we’ve been living together for the past 18 months. I just can’t decide whether to propose to her this Valentine’s Day, or wait until next year. What would you suggest?
Yours sincerely,
Mr C. Johnson, Bristol

Dear Mr Johnson,
Evidently you intend to marry this lucky girl eventually, since your question implies that whether you propose now or later, the expected net present value created will be positive.
As the poet Andrew Marvell once explained, value-creating moves usually should be made sooner, rather than later, since time’s winged chariot hurries near. But Marvell failed to anticipate advances in real option theory which demonstrate that it can be worth delaying decisions to obtain more information. You need to weigh up the cost of delay against the value of waiting to gain new information.

The cost of delay is small if you are young and patient. The value of waiting is large if you have the kind of exciting relationship where every day you learn something new about your belle. This is why young people are often counselled against rash betrothals.

On the other hand, you’ve been living with the girl for a while. Perhaps another year is unlikely to bring important information. If so, what are you waiting for? This reasoning has served your correspondent very well.

There is another important consideration: the window of opportunity for exercising an option can slam shut, in which case the option value is zero. There is no point learning everything you need to know to propose, if on Valentine’s Day 2006 your girlfriend is dating somebody else. Before you decide to wait another year, it might be wise to be sure that she will wait too.

First published at ft.com.

12th of February, 2005Dear EconomistComments off

Somalia: Anarchy gets business going

Business in Africa have published my editorial with Tatiana Nenova about Somalian entrepreneurs thriving in very difficult conditions. It’s not online, but it’s a summary of our short paper.

11th of February, 2005Other WritingComments off

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