Tim Harford The Undercover Economist

Articles published in January, 2017

Undercover Friday – Lies and Statistics

A friendly guide to fake news…

Since this seems as topical as ever, a few interesting titbits. Here’s an attempt by two economists (Gentzkow is widely admired, haven’t encountered Alcott before) to quantify the electoral impact of fake news stories circulating through social media. Here’s the wonderful Maria Konnikova on “Trump’s Lies vs Your Brain” – although it’s not going to cheer you up.  William Davies takes a step back and asked where statistics originally came from, why we no longer seem to trust them, and what comes next. And here’s a brilliant-looking reading list from two academics at the University of Washington on “Calling Bullshit” in the modern age. And my own feature article – almost a year old now, dated in some ways and horrifyingly relevant in others, is “How Politicians Poisoned Statistics“.

Musical recommendation

Try Jimmy Scott, “Holding Back the Years”. (UK) (US) A sublimely restrained cover of Nothing Compares 2U and much else.

Books

I’ve been reading Daniel Levitin’s “A Field Guide to Lies and Statistics” (UK) (US) – so far does what it says on the tin. Clearly written and explained although these will be familiar ideas to many readers of this blog.

Or why not build your own Brutal London? (UK) (US) A papercraft kit of London’s best hunks of concrete.

Discovery of the week, though, is the Alan Moore classic “The Ballad of Halo Jones” (UK) (US). It’s weird and sprawling and flawed and I loved it.

My own book “Messy” is now out and available online in the US and UK.

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27th of January, 2017Other WritingComments off

Brexit as a game of Chicken

At times such as these, I wish I could hear what Thomas Schelling had to say. It might be too much to claim that Schelling was one of the most intriguing characters of the 20th century but he was certainly one of the most interesting economists. He began his career working on the Marshall Plan before advising the administrations of Presidents Kennedy, Johnson and Nixon on nuclear strategy.

As well as studying deterrence, segregation and addiction, he was one of the first economists to ponder climate change. In 2005, he shared the Nobel Memorial Prize in Economics. Schelling died in December 2016 at the age of 95. Schelling was one of the fathers of nuclear non-proliferation, and I think I know what he might have made of Donald Trump apparently welcoming the idea of a new nuclear arms race. But it’s Schelling’s insights on the Brexit negotiations that I’d really like to have.

In his absence, I’m going to have to guess.

First: to be an effective negotiator often means accepting some risk of disaster. The simplest model of this is the game of “Chicken”, in which two leather-clad rebels get into their cars, and drive towards each other at a furious pace. The first one to veer off the road loses his dignity, unless neither of them swerve, in which case both of them will lose a lot more than that.

Chicken is an idiotic game, whose players have little to gain and much to lose. But Chicken teaches us that you can gain an advantage by limiting your own options. Imagine detaching your steering wheel and flamboyantly discarding it as you race headlong towards your opponent. Victory would be guaranteed. Nobody would drive straight at a car that cannot steer out of the way. But here’s a worrisome prospect: what if, as you hurl your own steering wheel out of the window, you notice that your rival has done exactly the same thing?

All this matters because both the UK and the EU are doing their best to give the impression that they’ve thrown their steering wheels away. Control of immigration is non-negotiable, says Theresa May. Fine, says the EU — in that case membership of the single market is out of the question. Fine, says May: we’re out. Don’t let the door hit you as you leave, says the EU.

It’s easy to see why both sides are behaving like this — it’s the logic of Chicken. But the eventual result may be something no sane person wants: a car crash. In May’s recent speech, she set out her willingness to risk such a crash by saying she might walk away without a deal. That does make some sense: it’s how you act if you want to win a game of Chicken. But there are games of Chicken that nobody wins.

That leads to a second insight from Schelling: the difference between deterrence and what he called “compellence”. Deterrence dissuades action, but compellence means persuading or threatening someone so that they do act. In his 1984 book Choice and Consequence (US) Schelling pointed out that deterrence is easier. A deterred person does nothing, so need not admit that the deterrence worked, but a compelled person must visibly acquiesce.

Unfortunately, the process specified under Article 50 leaves the UK in the awkward position of trying to achieve compellence. The default option is the car crash, a disorderly fracture with the EU. Anything else requires all 28 countries involved to take prompt constructive action. May and her chancellor Philip Hammond have made some (faintly) threatening noises about how the EU should play along, but such threats can only work if they compel an energetic and active response. That’s far from certain — compellence is hard.

Of course, a broad, constructive agreement is in everyone’s interest. As May rightly said: “Trade is not a zero-sum game: more of it makes us all more prosperous.” It stands to reason, then, that the EU should embrace free trade in goods and services with the UK — as should the many other trading partners that foreign secretary Boris Johnson tells us are “queueing up” to sign deals with the UK.

To which Schelling might respond: just because a mutually beneficial deal is achievable doesn’t mean it will be achieved. Mutual benefit isn’t enough. If it was, we wouldn’t need a free-trade deal at all. Every country would have unilaterally abandoned all barriers to trade long ago. Back in the real world, trade deals are stubbornly difficult and time-consuming to negotiate. To add to the difficulty, May badly needs to sign a deal with someone — Trump, perhaps, or China’s president Xi Jinping. But neither Trump nor Xi badly need to sign a deal with her. This is not a great starting point.

It’s quite possible that a sensible deal will be reached. But not certain. Sometimes, in international relations, events take on their own unwelcome momentum. Consider the dark comedy Dr Strangelove (1964) in which — spoiler alert — civilisation is destroyed by a series of highly amusing miscalculations. One of the script advisers for the movie? An economist called Thomas Schelling.

Written for and first published in the Financial Times.

My new book “Messy” is now out and available online in the US and UK or in good bookshops everywhere.

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Why economists should be more like plumbers

What kind of economist should I be when I grow up? The opening weeks of the year have brought an embarrassment of answers.

Andrew Haldane, chief economist of the Bank of England, won headlines for comparing economists to weather forecasters. Alas, it was not a flattering comparison: Haldane mentioned Michael Fish’s infamous October 1987 forecast on primetime British TV, which offhandedly reassured viewers that there wouldn’t be a hurricane so “don’t worry”. The warning was followed by a severe storm that killed 18 people in the UK and four in France.

But if economists are like weather forecasters, the lesson is that they should keep trying. Meteorologists have a difficult job yet they do it well — partly with the help of half-a-million weather measurements a day and powerful supercomputer simulations. Perhaps economic forecasting should emulate that approach. For now, many serious economists think that economic forecasting is for fools and charlatans, and that real economists have a different job entirely.

What, then, is that job? Beatrice Cherrier, a historian of economic thought, points out that economists have long looked for an appealing metaphor. In the 19th century, economics was part science, part moral philosophy and part art. Later, economists liked to compare themselves to physicists, borrowing the jargon, the methodology and the mathematics of physics. With the discipline inspiring awe after the splitting of the atom, it must have been tempting for economists to seek the same quality of insight — not to mention the prestige and the funding.

Whether economics has really been strengthened by ideas from physics remains a matter of controversy. Some critics say that economists should embrace ideas from psychology. Others simply argue that economists have copied the wrong kind of physics and, if they used more up-to-date technical tools, they’d achieve better results.

An alternative view is that economics should be a practical, problem-solving discipline. The most famous proposal along these lines is a throwaway remark from John Maynard Keynes, who looked forward to the day when economists would be “humble, competent people on a level with dentists”.

Humility and competence sound good to me — and dentistry seems an appealing model in other ways. Dentists don’t forecast how much tooth decay you might suffer over the next decade; they tell you to floss and to lay off the fizzy drinks. Dentists know that their job is not forecasting but preventing or solving problems.

But Tony Greenham, a programme director at the RSA, recently declared that Keynes was quite wrong. Dentistry is built on objective science, says Greenham, but economics is not: economic analysis should involve clashing schools of thought, debating ideas in front of a public who must then make their choices at the ballot box. Greenham has a point, of course. Economics will never be a hard science, so there must always be room for debate. And most economic policy decisions produce winners and losers, each with a right to be heard.

Still, if dentistry offers a practical, evidence-based approach to solving problems, I’m not sure that Greenham is wise to warn economists away from that goal unless there really is no hope. Several leading economists have argued that economics should have a more practical bent. Al Roth, Nobel laureate in economics, says that economists should be like engineers. Roth has designed systems for matching students to schools and kidney donors to recipients, and his argument is that when designing such a system it’s not enough to get the broad outlines right — as a physicist or an economic theorist might — but the details too.

Meanwhile Esther Duflo — too young for a Nobel but hugely celebrated in the profession — recently gave the prestigious Ely Lecture in Chicago. She argued that economists should act like plumbers, or at least that, “some of us should do some of it some of the time.”

For Duflo, plumbing is even more practical than engineering: not only must the plumber install the system, she must observe and tinker with it as leaks and blockages become apparent. Issues that weigh heavily in theory may be trivial in practice, and vice versa.

So perhaps I should be a meteorologist, or dentist, or engineer, or plumber — or, as others might advise, psychologist, epidemiologist, historian, anthropologist or data scientist? Of course, the wonderful and frustrating thing about economics is that each of these approaches — and others — has something to offer as we try to comprehend the dizzying interactions of the economy all around us. No wonder economics is so much fun — and so hard to do well.

As I pondered all this career advice, I couldn’t help but think of Bill Phillips. Phillips was born in 1914 to a New Zealand farming family. He learnt engineering via correspondence course, and was a gold miner, crocodile hunter and war hero. He studied sociology but became an economics professor at the London School of Economics. He produced perhaps the most-cited macroeconomic paper ever written, describing the “Phillips curve”. He learnt several languages and, later in life, was fascinated both by complex dynamic systems and by the economy of China. He also built the first computer model of the British economy. It was a hydraulic computer — a system of equations, crafted in plumbing.

Now that’s an economist.

Written for and first published in the Financial Times.

My new book “Messy” is now out and available online in the US and UK or in good bookshops everywhere.

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Undercover Friday 3 – Neroli

A brief post today, because I’ve been working hard on a book manuscript. Details to follow, but here’s a hint. I’ve had a wonderful time writing the book.

Nevertheless, a few bits of news and some links. I discussed the question “should economists be more like plumbers?” with my FT colleague Gemma Tetlow on Facebook Live.

Terrific feature article from Oliver Burkeman, Is Time Management Ruining Our LivesI don’t agree with every word (here are my 10 email commandments) but I think that there’s an enormous amount of wisdom underneath the clickbaity headline.

This week I’ve been reading For Whom the Bell Tolls (US) (UK). Turns out Hemingway can really write. Who knew?

And if these strange times are stressing you out, try Brian Eno’s Neroli. Magic. (US) (UK)

 

20th of January, 2017MarginaliaComments off

An Optimist’s Guide to 2017

Unless you are paid to write obituaries, 2016 was a grim year. In the UK, half the voters were so aghast at the state of the nation that they voted to leave the EU; the other half were aghast at the result. If my colleague Gideon Rachman is right, a train-crash Brexit negotiation is likely to disappoint both sides. In the US, a similar situation prevails: half the country is appalled at the prospect of President Trump, while the other half elected him because they were appalled at the status quo.

We can remind ourselves that things would be very much worse if we lived in Syria — but while that’s reason for gratitude, it’s hardly a source of comfort. Yet there’s a lot going right in the world. Noticing the good news as well as the bad is not just reassuring — it’s also essential for making reasoned policies. So, here are five reasons to be cheerful in 2017.

• We’re healthier than ever before. A century ago, global average life expectancy at birth was just 35. When I was born, it was 60. Recently it rose above 70. Even in Africa and the former Soviet Union, where life expectancy fell in the 1990s, the upward trend has resumed and longevity is now at the highest level yet recorded. Partly this progress is thanks to far more widespread access to good sanitation. And it’s partly because there are treatments — vaccines and antibiotics, for example — that were not available for any money 100 years ago but now cost pennies. Charles Kenny, author of Getting Better (UK) (US), wrote: “Countries as poor and wretched as Haiti, Burma and the Congo have infant mortality rates today that are lower than those that any country in the world achieved in 1900.”

There is a much-noted exception to this finding. Late in 2015, economists Anne Case and Nobel laureate Angus Deaton found that mortality has recently been increasing in middle-aged non-Hispanic whites in the US. The finer details of that finding have been disputed but it’s certainly clear that this particular group hasn’t been enjoying the advances in health that are so widespread elsewhere. Yet it’s only striking news because lack of progress in health is so unusual.

• Despite this increase in life expectancy, the number of people living on the planet is increasing much more slowly than in the 20th century. World population growth, which was an unsustainable 2 per cent a year in the 1960s, has been falling steadily and is about to drop below 1 per cent a year. This is good news for the planet.

• The world economy continues to grow and, despite a decade of economic distress in the US and Europe, world growth rates have reliably exceeded 3 per cent. At such a rate, the world economy itself doubles in size every 20-25 years. Such growth poses serious environmental challenges but, on balance, it’s a lot better than stagnation. According to data assembled by the economist Max Roser, the proportion of the world’s population living in the most extreme poverty has fallen from about 95 per cent two centuries ago to about 60 per cent 50 years ago to about 10 per cent today.

• The fruits of this growth are not quite so unevenly distributed as some commentary would have us believe. There is no one simple way to measure global income inequality but it’s reasonable to describe it as falling: China and India, after all, are large, poor and growing quickly. In the US, income inequality has risen. But in the UK, it has not — at least, not for a generation. Income inequality across most of the UK population increased dramatically in the 1980s but has fallen a little since then. At the very top of the UK income distribution, inequality continued to increase for longer. Yet it fell after the financial crisis, and the share of income enjoyed by the top 5 per cent, top 1 per cent and top 0.1 per cent is lower today than it was in 2000. Inequality is still high in the UK, but this is an old problem rather than a worsening one.

• Finally, there’s the decline in war, murder, torture and many other kinds of violence over the long run, certainly since 1945 and, arguably, over a much longer period. It was most famously documented by Steven Pinker in his 2011 book The Better Angels of Our Nature (UK) (US). Is this certain to continue? Perhaps not in a world where nuclear war is possible. Nevertheless, so far, so good.

None of this is to suggest that all is well. There’s plenty to concern any reasonable person, from the growth of nationalism in Europe, to Donald Trump’s apparent belligerence, to the alarming changes in the planet’s climate, to the ability of terrorists to strike in Europe’s capitals. So I’m worried about what 2017 has in store for us. But it’s not because I think the world is going to hell. It’s because I think we have so much progress to celebrate — and so much to lose.

Written for and first published in the Financial Times.

My new book “Messy” is available online in the US and UK or in good bookshops.

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Undercover Friday 2 – Resolutions and Recommendations

 

A resolution

My resolution this year is “more social, less social media”. I’m sure I’m not the only one. As we all know, social media can work wonders but it can also be addictive. And of course the comments can be toxic: it only takes one mean tweet to ruin anyone’s day. (Many people suffer far more than the occasional mean tweet, alas.) On the other hand, I continue to find email perfectly functional: when people email me to comment on what I’ve written or said, I don’t always agree but I usually learn something. And I do manage to read and respond to my email, which is quite impossible on Twitter or Facebook. I stopped trying a long time ago, realising that I would never write another book if I spent my time reading the mentions on Twitter.

If you’re trying to spend less time on social media too, the “Note to Self” podcast has had some good advice recently – particularly the episodes with Marina Abramovic. I believe in shaping your environment to help you. So: I don’t take my phone to bed with me, I don’t have Facebook on my phone, I’m logged out of Facebook on my computer so I don’t click over as a reflex, and I don’t have a “mentions” stream active on Tweetdeck. Every little helps. Meanwhile I’ll be trying to spend more time with my friends – in person, on the phone, even by letter.

On the other hand, if you’re loving your social media use, good for you. I’m on Facebook and Twitter – but email me if you actually want to get in touch.

 

Some recommendations

Debatable” was a life-changingly good episode of RadioLab. Please listen to it if you haven’t already – and then check out this interview with the journalist who reported the story, Abigail Keel.

My favourite gift from Father Christmas was the absolutely brilliant graphic novel Vision: Little Worse Than a Man (UK) (US). It’s about struggle of a superhuman artificial intelligence to live a normal suburban family life. Remarkable.

Check out Brad DeLong’s essay on secular stagnation if you want to become smarter.

I’ve been enjoying Frank Trentmann’s Empire of Things (UK) (US) – a magisterial history of shopping and consumerism – and found myself going back yet again to Marc Levinson’s excellent The Box (UK) (US), a history of the shipping container. All part of the research for 50 Things That Made the Modern Economy.

 

And a review

I think most authors look at their reviews with trepidation; I certainly do. But occasionally the fear turns to joy. Writing in The Age, Peter Martin opines: “The best pop songs start by giving you what you want, and then build up to so much more… Now there’s Messy, a book that presents itself as an impossibly simple account of the virtues of a messy workspace, then builds to something extraordinary.”

What delighted me so much about the review was that Mr Martin saw exactly what I was hoping to do – but like any self-critical author I was always afraid that I hadn’t succeeded.

Enough self-promotion – have a good weekend.

13th of January, 2017MarginaliaComments off

Embrace the digital pile-up

One of my resolutions this year is to get more done. I seem to make the same vow every year and I suspect that many discerning readers of the Financial Times have a similar perennial yearning. But thanks to the research I did for my latest book, Messy, and a fascinating new book from Ofer Bergman and Steve Whittaker, I now feel I have a better sense of why some tactics work and others fail.

Their book, The Science of Managing Our Digital Stuff (US), is an academic tome addressing a deeply practical pair of questions: how do we all cope with the ever-increasing influx of emails, documents, photographs and bookmarks? And how can we do better?

Two strategies suggest themselves: organise and label everything meticulously (the “filer” approach), or organise nothing at all and search when you need something. We could call this latter tactic the “search everything” approach — or “hoarding”.

Both strategies can work in certain circumstances but both also turn out to have serious weaknesses. Filers struggle because getting so carefully organised takes too much time, and filer strategies often break down as users become busier and busier. But, more importantly, filers often suffer from “premature filing”, as they try to categorise incoming messages they don’t yet have the context to understand fully. Folder structures that make sense at the time are often incomprehensible later. And far too much low-value stuff is filed when it should have been deleted, becoming digital chaff that obscures the target.

Meanwhile, hoarders risk drowning in a sea of email: it’s impossible to make sense of an inbox with 14,284 emails. Yes, one can use email search — in 2011 Whittaker and four colleagues showed that when you’re trying to find an email needle in your archive haystack, search works at least as well as navigating through a folder structure. But Bergman has shown why we tend to resist searching: it feels like hard work. It’s more cognitively taxing than clicking through folder trees, a process that uses visual memory without much effort. We like folders because they feel natural in a way that search does not. And most important: search only works if you remember what you’re searching for.

When coping with paper documents, there’s a handy intermediate strategy between filing and hoarding: “piling”. Pilers let documents accumulate on their desk, sometimes informally grouped by topic or project. The piles are self-organising because recently handled documents end up going back on top. Whittaker and Julia Hirschberg have shown that pilers tend to keep smaller archives. The stuff in their piles is well used, unlike the redundant folders of the tidy filers. Piling looks messy but it works.

But email poses a particular challenge — is there a strategy that imitates the informal accessibility of the desktop piles, yet works in a fast-moving inbox? I think there is.

Here are the principles of “email piling”. First, email piling should be simple — crude enough that it’s quick and misfiling is almost impossible. Second, it should be organised around taking action. Ultimately, you’re not building a library, you’re keeping track of stuff that you need to do. Therefore, third: it should be visible. Your piles are reminders to take action, so they shouldn’t be hidden away.

So: crude, visible and built around taking action. The corollary of all this is that if you have an email that doesn’t require your action, you can archive it, safe in the knowledge that the search box will produce it again if needed. As a result, your email pile will be a jumble but a small one — just like the paper piles that Whittaker and Hirschberg studied.

That’s the theory, then. And in practice? I use Gmail’s “multiple inbox” function to sort my emails into three categories: yellow star for stuff to do, blue star for stuff to read and red star for stuff that’s waiting for someone else. (Assigning the star requires just a click or two.) Unlike normal folders, all three of these categories are in plain sight whenever I open Gmail itself: three simultaneous colour-coded inboxes.

***

I find this digital piling works remarkably well, at least for me. Most emails don’t fit in any of the categories — a sign that it should be replied to and/or archived immediately. The “to do” inbox is small enough that I don’t feel anxious that things will be lost. And, as an added benefit, if I check email on my phone and see that it requires a proper reply from a proper keyboard, I can dump it in my “to do” inbox and it vanishes from the phone to reappear on the computer, where it can be properly handled. When the email disappears, so does the compulsive anxiety to tap out a response with one thumb.

I have a few other folders but only for very well-defined bits of information I know I need to keep.

This isn’t a system that tries to organise emails once and for all, or tidy them away out of sight. The aim is to manage them as they come through. Rudimentary and unsophisticated might not be the ideal approach to life in general. It works very well for email.

Written for and first published in the Financial Times.

My new book “Messy” is now out and available online in the US and UK or in good bookshops everywhere.

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Undercover Friday

I’m planning to post some semi-regular jottings on Friday afternoons. Enjoy!

Fifty Things that made the Modern Economy hits number one… To my delight, my new BBC radio series was the number one podcast in the UK at Christmas, according to iTunes. If you’ve not encountered it, please have a listen – they’re short stories about the inventions and ideas that surround us every day, and the lessons that they can teach us. Everything from concrete to the iPhone, the bar code to the elevator. If you do subscribe then please pop over to iTunes or wherever and review it – it’ll help other people to find the podcast.

Book of the Week: I’ve been reading the new edition of John Kay’s “The Long and the Short of It” (UK) (US). It’s an outstanding and practical guide to how financial markets work and how to invest in them without getting ripped off. Kay sets out several key principles – think about your portfolio as a whole, take the efficient markets hypothesis seriously but not literally, reducing charges is the simplest way to make money – but he also explains the economics behind these principles and produces copious suggestions for putting them into play. Kay knows an enormous amount about this and his writing is clear and sharp – if sometimes demanding. Strongly recommended.

Thomas Schelling.  Just before Christmas, Thomas Schelling died at the age of 95. I was fascinated by the range of his contributions to economics and to US strategic thought – and given that he was one of the fathers of nuclear arms control, it’s a particularly poignant moment. I interviewed Tom Schelling for the FT shortly after he was awarded the Nobel memorial prize, made a video about his famous “chessboard” model of segregation, and told a TED-style story about him for BBC radio. Perhaps my favourite Schelling book is Micromotives and Macrobehavior (UK) (US) – but they’re all good.

How disaster planning can help with New Year’s Resolutions: A few years ago, I discussed whether Schelling’s idea of a “commitment strategy” can help us keep New Year’s Resolutions. I suspect, however, that psychologist Gary Klein’s idea of the pre-mortem is particularly useful. Basically: after drawing up your resolution (or any other goal or project) spend some time imagining that it doesn’t work out, and exploring why that might have been. Very often, you’ll think of obvious stumbling blocks and figure out ways to avoid them.

Resource of the Week – The World Wealth and Income Database. The great Tony Atkinson died on New Year’s Day. (Here’s the FT obituary of Tony Atkinson.) Here’s the excellent resource that he helped to create, the World Wealth and Income Database – the first stop for people trying to understand in-country inequality.

Shameless plug. My new book “Messy” is available online in the US and UK or in good bookshops everywhere.

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6th of January, 2017MarginaliaComments off

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