A friend recently emailed to ask me for books that might help navigate a world full of statistical bullshit. Here are some recommendations.
I can’t think of a better science writer than Ben Goldacre, who burns with righteous mischief. His Bad Science (UK) (US) isn’t always about statistics, but it’s excellent throughout and an essential read for anyone who wants to understand some of the faults of modern health and nutrition journalism. Wonderful book.
Of course you should subscribe to the More or Less podcast, but you could also enjoy The Tiger That Isn’t (UK) (US). This is the unofficial book of the series, written by More or Less founders Andrew Dilnot and Michael Blastland. A highly readable guide to making sense of numbers in the wild.
Also very good – with more US examples – is Stat-Spotting (UK) (US) by Joel Best. Best’s book has given me some of my favourite examples of bad stats, but it currently seems a bit overpriced on Amazon, alas.
The classic of the field is, of course, Darrell Huff’s How To Lie With Statistics (UK) (US). There’s a sad coda that will tarnish your view of Huff; but this is still a terrific book.
Brand new book by the very splendid Evan Davis is called Post Truth (UK) (US) – haven’t yet read much but looks good.
And finally try Naked Statistics (UK) (US) by Charles Wheelan, who with wit and clarity wrote the similarly excellent Naked Economics (UK) (US).
I’ve had such fun working on the book and radio series, Fifty Things That Made the Modern Economy – and along the way I’ve had the opportunity to read some great books about the history of economics, finance, innovation and technology. Here are some of my favourites.
Alison Wolf The XX Factor (UK) (US) – Fun yet rigorous exploration of women’s participation in the workforce, and how and why it’s been changing over the years.
David Edgerton The Shock of the Old (UK) (US) – An appreciation of the humbler innovations in life, and a reminder that old technologies often stay with us a long time.
Felix Martin Money: An Unauthorised Biography (UK) (US) – Well-argued alternative history of money, packed with great stories.
Frank Trentmann Empire of Things (UK) (US) – An epic history of retail and consumerism.
Marc Levinson The Box (UK) (US) – The nerd-history to end all nerd-history. Levinson loves shipping containers and after reading this book, you will too.
Mark Kurlansky Paper (UK) (US) – I loved this book. Paper is even more underrated than shipping containers.
Mark Miodownik Stuff Matters (UK) (US) – Also good on paper – and concrete, and all sorts of miraculous materials we take for granted.
Robert Gordon The Rise and Fall of American Growth (UK) (US) – Magisterial history of technology and productivity. Closely-argued with lots of data but still feels rich and alive.
Steven Johnson How We Got To Now (UK) (US) – Stylishly-told history of six key innovations. You can’t fail to enjoy technological history the way Johnson tells it.
Steven Levy Hackers (UK) (US) – A modern classic, essential reading on the origins of modern computing.
William Goetzmann Money Changes Everything (UK) (US) – Like Gordon’s book, this is another academic read whose rich storytelling transcend the rigorous foundation. Great book.
Language matters. Any poet can attest to that, as can any lawyer. (One recent court case in the US turned on an ambiguity created by a missing comma.) But it’s less clear that we economists have realised how important it is to write clearly.
One who has is Paul Romer, the Chief Economist of the World Bank. Mr Romer has provoked a staff rebellion by instructing his large team of research economists to sharpen up their language. He’s threatened to block publication of a flagship report if more than 2.6 per cent of the words in it are “and”. Such medicine seems to be too strong for the World Bank: Mr Romer keeps his job title but is to be stripped of his managerial responsibilities.
No doubt the amusing surface of this story hides tedious depths of office politics. But Mr Romer has a point: economists seem to be drawn to obfuscatory polysyllables like wasps to jam. This is true even when compared to other academics, and even in a medium that encourages brevity: Twitter.
Recently economist Marina Della Giusta and colleagues at the University of Reading conducted an as-yet-unpublished linguistic analysis of the tweets of the top 25 academic economists and the top 25 scientists on Twitter. (The top 3 economists: Paul Krugman, Joseph Stiglitz, and Erik Brynjolfsson; the top 3 scientists: Neil DeGrasse Tyson, Brian Cox, and Richard Dawkins.)
Della Giusta and her colleagues found that economists tweeted less, were less likely to mention other twitter users, and mentioned fewer people when they did. This implies that the economists were less likely than the scientists to have Twitter conversations, especially with people they didn’t know. I can’t say I blame them; I avoid using Twitter as a medium for conversation myself. Still, the scientists managed it and the economists did not.
The economists also used less accessible language with more complex words and more abbreviations. Both their language and their behaviour was less chatty than that of the scientists.
The Bank of England has been pondering this kind of thing, too. Last year on Bank Underground, a blog for Bank of England staff, analyst Jonathan Fullwood compared Bank of England reports to the writings of Dr Seuss.
Mr Fullwood’s analysis uses statistical measures of writing complexity: long words, long sentences and long paragraphs make for more difficult prose. The Cat In The Hat stands at one end of the scale; Bank of England reports stand at the other. Mr Fullwood suggests that this complexity is not a good thing – and his work has been praised this week by Minouche Shafik, who recently left the Bank of England to run the London School of Economics.
We economists should write simpler, clearer prose if we want anybody to pay attention to what we think. But at the World Bank, Paul Romer has another mission. He has long argued that economists need to write clearly to help them think clearly. He also believes that trust depends on clarity. If we economists write prose that sounds complicated but does not tie us down to meaning anything in particular, we cannot be surprised if nobody trusts us.
Mr Romer is much taken by a linguistic analysis from Stanford’s Literary Lab. The analysis, published in 2015, tracks the development of “Bankspeak” in World Bank annual reports since 1948.
These reports once described specific situations (“Congo’s present transport system is geared mainly to the export trade”) and what the World Bank had done to improve them. Now they more likely to be clouds of feelgood bureaucratese, in which nothing specific ever happens. Projects “are emerging” while “players” are “partnering”. The result is somewhere on the Venn diagram between unobjectionable and incomprehensible.
When I worked at the World Bank, in the early 2000s, I first heard the phrase “Christmas Tree” used to bemoan work sagging under the pet ideas that had been loaded onto it. This explains Mr Romer’s irritation at excessive use of the word “and”. The Stanford analysis has a prime example of a Christmas tree from the 1999 annual report, which wants to “promote corporate governance and competition policies and reform and privatize state-owned enterprises and labor market/social protection reform…”
Such sentences are written by committee. It is surprisingly easy to write like this when you don’t know what you think, or cannot agree, or dare not say.
Mr Romer knows what he thinks and has never been afraid to say it. His focus on clear language can do little harm. It may even do some good, although I fear that too many “ands” are the symptom but not the cause of the trouble.
We should all aspire to write a bit more like Dr Seuss. If we write more clearly we tend to think more clearly. Since what we say is easy to understand we must make sure that it is true.
But simplicity alone will not save us.
“We’re going to build a big, beautiful wall and Mexico is going to pay for it,” has the same simple tone as Dr Seuss, although it lacks his compassion. Does it reflect clear, trustworthy thinking? I do not think so, Sam-I-Am.
My new book is “Fifty Things That Made The Modern Economy” – coming soon! If you want to get ahead of the curve you can pre-order in the US (slightly different title) or in the UK or through your local bookshop.
Nobody ever mastered a skill by reading books – with the possible exception of reading itself. But books can help. Below are a few that I’ve found helpful over the years. But first, a few observations.
First, a good speech needs to have a purpose. All too often people view speeches the way my daughter sometimes views her school homework: “I’ve got to write an essay about the Henry VIII and the dissolution of the monasteries, and it’s got to be at least two pages long.” “I’ve got to give a talk about information security and it’s got to fill 25 minutes.”
If that’s how you look at things, you’re well on your way to a tedious speech. The starting point will be to sit down with a piece of paper (or worse, to fire up PowerPoint) and start listing all the things you can think of that might fill the void.
Instead, start with the question, “what’s the one thing I want people to learn, or feel, or do, as a result of hearing this?”. Everything else – jokes, stories, visual aids, supporting arguments – flows from that.
Second, deliberate practice helps. Each good speech you give tends to improve every future speech: set yourself the task of giving a truly sensational talk just once in your life. You’ll learn a lot. And when you’re preparing for a speech, practice in front of the mirror, or record yourself on your phone, or recruit a friend to listen. Yes, it’s painful, but even one run-through will make an enormous difference.
Third, distinguish between your speaking notes, your handouts, and your visual aids, and decide whether you need any of them. Your speaking notes are a series of bullet-point prompts; PowerPoint is a perfectly decent tool to generate these but they should be on 3×5 inch cards in your hand, not projected on the screen behind you. Your handouts provide a reminder of what you’ve said, or references, further reading, extra detail. You may not need them at all, but if you do, this is the place for the small print and the footnotes – not on the screen. The only thing that should go on the projector screen is the bona fide visual aid – a graph, image, movie or diagram that makes a genuine contribution to the purpose of your speech (remember that?). If no visual aid is appropriate, insert a blank slide or press “B” or “W” to turn the screen blank black or white.
Okay – lesson over. Here are my recommendations.
The single best book on public speaking I’ve ever read is Chris Anderson’s TED Talks (UK) (US). I reviewed it here; my only caution about the book is that it’s focused on giving the talk of your life. Anyone looking for quick tips to perk up the monthly sales meeting won’t find them here.
A great companion to Anderson’s book is Jonathan Swabisch’s Better Presentations (UK) (US). This is a workmanlike book aimed at academics, and covers all the basics – structure, visual aids, delivery. It’s smart and comprehensive and even an experienced presenter will learn a thing or too.
A more touchy-feely effort is Garr Reynolds’s Presentation Zen (UK) (US). Contains lots of good advice, wrapped up in all kinds of talk about “mind of a swordsman” and “being present”. It would annoy some people but it’s actually full of good advice.
If you want to do the McKinsey slide-deck thing with 50 data-packed slides, but do it well, I would suggest Gene Zelazny’s Say it With Charts (UK) (US). This is not the way I present, but it is appropriate for some contexts.
Finally, good advice on design in general, which will perk up any slide, comes from The Non-Designer’s Design Book by Robin Williams (UK) (US).
My new book is “Fifty Things That Made The Modern Economy” – coming soon! If you want to get ahead of the curve you can pre-order in the US (slightly different title) or in the UK or through your local bookshop.
The UK government is — again — cracking down on driving while using a mobile phone. Tougher sanctions and sharper enforcement will no doubt make some difference. But the real risk of driving while impaired — either drunk, or using a phone — is not the risk of losing your licence. It’s the risk of being in a serious accident. That’s not enough to change the behaviour of some people. What will?
A cardinal rule of behaviour change is: make it easy.
A fine example is the idea of the “designated driver”, the person who stays sober and drives his or her inebriated friends home. It’s a clever concept. The designated driver is the hero, “the life of the party”, who makes it possible for everyone else to drink socially. Friends take turns to be the designated driver, tapping into deep habits of reciprocity. And the question, “who’s the designated driver?” reinforces the social norm that drunk-driving just isn’t right.
What’s the equivalent for texting while driving? It’s not immediately obvious. Distracted driving, like drunk-driving, is dangerous. But the parallel is imperfect because the decision-making process is very different. Having some drinks with friends, knowing I must drive later, is one kind of stupidity. Glancing at a phone which pings at me as I drive across town, then impulsively trying to tap out a reply, is a different kind.
Many of us have deeply ingrained habits of checking our phones and responding to their beeps. That’s not an accidental glitch in the interface: our phones are designed to interrupt us. Ad-funded apps need to attract our attention as often as possible. Public safety demands that we “make it easy” to ignore our phones while driving; the phones themselves want the exact opposite.
Most phones have an “airplane mode”, but not an obvious “drive mode”, despite the fact that your phone is vastly more likely to cause an accident in a car than in a plane. That should change. Smartphones should have, as standard, an easily accessible, well-publicised drive mode. Drive modes do exist, and in the US, the National Highway Traffic Safety Administration has been pushing the idea. But they’re not prominent.
Drive-mode phones might automatically read out text messages, automatically reply to such messages with “sorry, I’m driving”, and send incoming calls directly to voice mail — while allowing drivers to play music and use satellite navigation. In short, drive-mode phones would stop pestering us for our attention.
But why aren’t drive modes more popular? Perhaps we’re waiting for a clever marketing campaign: the “designated driver” idea managed to get itself into The Cosby Show and Cheers.
But we also have to recognise the perverse incentives at work. Many of us want to be distracted less by our phones — not just while driving, but in meetings, during conversations, at mealtimes and in the bedroom. The phones themselves want something rather different. Distracted driving is an acute symptom of a wider problem: distracted living.
Kenneth Arrow, who has died aged 95 at his home in Palo Alto, California, on Tuesday was a towering figure in 20th century economics. In 1972, at the age of 51, he won one of the first Nobel memorial prizes in economics, the youngest winner then or since. Yet even a Nobel Prize understates Arrow’s contribution to economic theory. A brilliant mathematician, he ranged widely, breaking ground in areas that have subsequently yielded many further Nobels, including risk, innovation, health economics and economic growth.
Two achievements are particularly celebrated: his impossibility theorem about the paradoxes of social choice, and his welfare theorems, which formalised the most famous intuition in economics — Adam Smith’s idea that a market produces social good from individual selfishness.
Born in New York on August 23 1921 to immigrant parents, Kenneth Joseph Arrow had his formative experiences shaped by poverty — his businessman father “lost everything” in the Depression. But Arrow flourished at school and received an MA in mathematics from Columbia University at the age of 19. He interrupted his graduate studies to serve as a wartime weather researcher and US Army Air Corps captain.
His doctorate, published in 1951, made up for lost time. The thesis explored the problem of turning individuals’ preferences into a picture of what a society as a whole preferred. Scholars had long known that voting systems could produce perverse results but Arrow went further, showing that the very idea of “what society prefers” was incoherent. He set out four reasonable sounding requirements for building social preferences from individual ones — and proved that no system could satisfy all four of those requirements.
Arrow then turned to the familiar problem of supply and demand. In a well-functioning market for a single good such as apples, there is an efficient outcome with a price at which the number of apples supplied would equal the number of apples demanded.
But that was just one market. It was influenced by the market for pears, for agricultural land, for farm labourers and even for bank loans. Each market pushed and pulled others. What happened when one considered the interactions between every market in the world?
Working at times with the French economist Gérard Debreu, Arrow demonstrated that the intuitions from a single market could be generalised. First, there was a general equilibrium at which prices equalised supply and demand in every market at once. Second, this equilibrium was efficient. And third, any efficient allocation of resources could be reached by redistributing wealth and then letting competitive markets take over. Markets could still fail, but Arrow’s analysis explained the circumstances under which they would succeed.
Alongside such deep theoretical work, Arrow made many contributions to practical economic problems from insurance to healthcare to climate change. On occasion he took an active role on politically contentious issues, and was co-author of the 1997 “Economists’ Statement on Climate Change”, which warned of the dangers of global warming.
He was also noted for his love of gossip and his quick wit. One story tells of Arrow and a colleague waiting for an elevator to take them down, while several passed them going up. The colleague wondered aloud why everyone was going up. The immediate reply: “You’re confusing supply with demand.”
Arrow spent most of his career at Stanford University, apart from an 11-year spell at Harvard. He married Selma Schweitzer in 1947; she died in 2015. He is survived by his sons David and Andrew. He is also survived by his sister Anita, who married Robert Summers, a noted economist and brother of Nobel laureate Paul Samuelson. Her son, Arrow’s nephew, is the former US Treasury secretary Lawrence Summers. Written for and first published in the Financial Times.
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“.
Try Jimmy Scott, “Holding Back the Years”. (UK) (US) A sublimely restrained cover of Nothing Compares 2U and much else.
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.
Michael Lewis could spin gold out of any topic he chose but his best work has shone a spotlight into corners of the world that weren’t getting enough attention until Lewis came along. Liar’s Poker described bond trader Lewis Ranieri and the way securitisation revolutionised Wall Street in the 1980s. Moneyball covered baseball manager Billy Beane and anticipated the “quants” taking over the world. And The Big Short depicted Steve Eisman and Michael Burry, the men who spotted the financial crisis coming and bet vast sums on it.
The Undoing Project, then, is a departure, because it’s a biography of two well-established figures: Daniel Kahneman and Amos Tversky, the Israeli psychologists whose partnership produced the foundations of what we now call behavioural economics. Despite an introduction by Lewis declaring that he hadn’t heard of them until 2003, neither man remotely counts as an unknown.
When Tversky died young, in 1996, he was on the secret shortlist for a Nobel memorial prize in economics, and received a detailed obituary in The New York Times. Kahneman won the Nobel economics prize in 2002 and published his own bestselling book, Thinking, Fast and Slow, in 2011. Their ideas are everywhere; it’s almost impossible to find a book in the “smart thinking” section of a bookshop that doesn’t cite Kahneman and Tversky: an irony, since their work highlights many of the ways in which our thinking isn’t smart at all.
For example, they identified the “representativeness heuristic” — our tendency to make judgments by comparing an example to some mental model. When we meet a nervous, geeky-looking gentleman we note that he matches our stereotype of a programmer and, therefore, probably is a programmer. We forget that most of the people we meet are not, in fact, programmers, no matter how much they might resemble them.
This matters, because when judging probabilities we often skip over the real question, “Is this likely?”, in favour of a representativeness question: “Does this match my preconceptions?”. “Is the lump likely to be a malignant tumour?” becomes “Does the lump match my idea of what a malignant tumour looks like?”. It’s a reasonable rule of thumb that can lead us seriously astray.
All this is well known to anyone who has read Kahneman himself or popularisations of his work, so what does Lewis add? He’s a far better writer than most, meaning that even the familiar is fresh. And there is a great deal here that feels new. Lewis has done his homework; he has evidently talked to the right people — with the inevitable omission of the much-missed Tversky — and he knows how to tell a story simply, powerfully and with an eye for the telling detail.
Yet The Undoing Project gets off to a shaky start with a chapter discussing the selection of basketball players and the way in which basketball scouts commit various cognitive errors. Perhaps the success of Moneyball encouraged Lewis and his editor to think this was wise but it adds very little to our appreciation of the main characters, and much of the chapter is baffling unless one happens to be a fan of American sports.
All is forgiven in chapter two, when we meet the young Danny Kahneman, a Paris-raised Jew whose family spend the war dodging the Nazis and their sympathisers. No matter how many accounts one reads of such horrors, the reader is filled with sadness and a kind of awe at the survivors. At the age of seven, Danny was caught on the streets after curfew by an SS soldier. The man didn’t notice the yellow star under his sweater; instead, he hugged little Danny and, full of emotion, showed him a photograph of another young boy. Then he gave Danny some money and sent him on his way. “People were endlessly complicated and interesting,” Kahneman recalled.
Tversky is no less deftly portrayed: as a child, he was so bullish that he was willing to leap from a high diving board despite being unable to swim — he simply arranged for a bigger boy to be on hand to drag him to safety. As a soldier, Tversky saw a comrade pull the pin on a grenade-like explosive, then faint. As his commanding officer yelled orders to stay put, Tversky dashed forward, dragged the stricken man a few yards away, then dived to cover him, taking the shrapnel into his own body. Yet he berated his own men for carelessly taking risks. “If a bullet is going to kill me, it has my name on it anyway,” they would say. Tversky, a quick wit, reminded them that many bullets were addressed “To Whom It May Concern”.
Today, Kahneman and Tversky’s view of human psychology is widely accepted, and thanks to his longevity and his Nobel Prize, Kahneman is a more famous figure than Tversky. But Lewis takes us back in time, conjuring up the 1970s, when their ideas were new and controversial, they were operating in the backwater of Israeli academia, and when it was the mesmerising Amos rather than the quiet Danny who won all the attention.
Behavioural economics itself is not a major part of the book. Richard Thaler, the most important intellectual conduit between Kahneman and Tversky and economics, does not appear in the story until the closing chapters. While Tversky loved to have an intellectual foe to slay, it would diminish his work with Kahneman to define it merely as a takedown of textbook economics. By writing less about behavioural economics Lewis gives Kahneman and Tversky’s ideas room to breathe.
Lewis admires his subjects and believes they are right about everything important. He has no time for rational economic man, and brutally dismisses one noted critic of Kahneman, the psychologist Gerd Gigerenzer. But this isn’t a hagiography. Tversky is depicted as intellectually aggressive, contemptuous of many academics and perversely compelled to needle the vulnerable Kahneman. Meanwhile, a new side to Kahneman emerges. In my limited personal experience, Kahneman seems wise, kindly and stoic in the face of his advancing years. But Lewis describes the younger Kahneman as depressed, envious of his celebrated partner and desperately needy.
Nevertheless, it is clear that Lewis is cheering our heroes on, and the reader cannot help but join him. The story he tells of their intellectual love affair, and its painful disintegration, is vivid, original and hard to forget. 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.
Thomas C. Schelling, who died on December 13 at the age of 95, was a self-described “errant economist” who worked as a Cold War strategist and won the most prestigious prize of his profession.
Schelling was a popular winner of the Nobel memorial prize for economics. Journalists found his lively prose and counterintuitive ideas easier to describe than the complex equations of his fellow laureate Robert Aumann.
But the Californian-born economist was an unlikely laureate. His ideas were rich and influential — and easily expressed in plain English. He highlighted weaknesses in standard economic approaches, deploying vivid thought experiments more suited to moral philosophy than to economics, and rarely cited other academics.
Instead, Schelling used academia as a vantage point from which to advise the administrations of Presidents Kennedy, Johnson and Nixon. He was at Harvard University for 31 years, and said of one role there that it had given him a decade of “freedom to write and to consult, and I spent much of my time, especially during the summer, doing advisory work for the government.”
That advisory work drew on one discipline in particular.
Game theory had been dreamt up by the mathematician John von Neumann, as an attempt to model in mathematical terms human interactions from poker through to strikes or cartels.
The Hungarian-born von Neumann was a hawk (“If you say why not bomb [the Soviets] tomorrow, I say why not today?”) but Schelling took game theory in a new direction. He emphasised that even the most implacable foes could find areas of common interest — most obviously, during the Cold War, the necessity of avoiding mutual annihilation.
To this end, in the late 1950s and the 1960s, Schelling’s advisory work and his publications focused on issues of effective deterrence, communication, and the strategic limitation of arms. He was a consultant for Stanley Kubrick’s 1964 film Dr Strangelove, a nuclear annihilation comedy which introduces a “doomsday device”. The device is the ultimate deterrent: it will be triggered automatically in the case of war. Alas, it’s a secret, which limits the deterrent effect.
The doomsday device was the perfect illustration of some of Schelling’s favourite themes: strategic commitment, miscommunication, and unintended consequences. It is no coincidence that it was Schelling who insisted that Washington and Moscow establish a secure hotline and work out protocols for ensuring it was tamper-proof. This attention to details that others overlook was a spark for his best academic work. It is also is one reason why nuclear weapons have not been used since 1945.
Schelling ended his advisory work with a letter opposing the 1970 US military campaign in Cambodia. He later worked on the problem of addiction, developing models of self-control that were precursors to what is today known as behavioural economics. This research was partly motivated by his own long and eventually successful struggle to stop smoking. And in 1980, at the request of President Carter, he became one of the first economists to work on the problem of human-induced climate change.
He also anticipated the use of complexity science in economics with a celebrated “chessboard” model of segregation. This showed how two racial groups could completely segregate from each other in a chain reaction despite being quite comfortable in a mixed neighbourhood.
These days such modelling is done on a computer, but Schelling originally explored the idea in a notebook doodle on a long flight. “It was hard to do with pencil and paper,” he told the FT in a 2005 interview. “You had to do a lot of erasing.”
Thomas Crombie Schelling was born in Oakland, California, on 14 April 1921. His father was in the US Navy, but despite Thomas Schelling’s crew cut, square jaw and family history, he did not fight in the war. For medical reasons, the military would not accept him. Instead he studied economics at the University of California, Berkeley and earned his PhD at Harvard. After a spell working on the Marshall Plan, he taught at Yale, Harvard and finally the University of Maryland.
Schelling married Corinne Saposs in 1947. After that four-decade marriage ended in divorce, he married Alice Coleman, who survives him, as do four sons, two stepsons and his younger sister, Nancy.
In 1975, the American jazz pianist Keith Jarrett found himself in an unenviable position. Shortly before beginning one of his improvised solo performances, he discovered that some backstage bungle had left him with an old rehearsal piano. It was out of tune, tinny and had sticky keys and pedals. After protesting and realising nothing could be changed, he decided to play anyway. The flaws in the piano pushed him to play in a new style, discovering fresh ways to express himself. And against all expectations — certainly against Jarrett’s — the result was a masterpiece: The Koln Concert album.
I have been thinking about the unplayable piano a lot since Britain voted to leave the EU. By any conventional analysis Brexit was an act of economic self-harm. But by any conventional analysis, a creaking little piano does not make for great music either. Might the UK economy somehow burst into a display of unexpected virtuosity in unpromising circumstances? Let us review the sticky keys and see what fresh tunes might be playable.
First, immigration. The debate on this has taken a xenophobic turn but the pure economics of tighter immigration also looks challenging, particularly for agriculture, catering, the National Health Service and higher education. Since EU migrants have more than paid their way, discouraging them will also weigh on public finances.
Second, trade. We don’t know what the post-Brexit trade landscape will look like but the UK will find it harder to remain an open economy. It will be more difficult to integrate with pan-EU supply chains, the costs of imports will rise and, while exporters benefit from a weaker pound, they may find themselves facing higher tariffs and, more important, non-tariff barriers.
Third, financial services. London will be a less attractive financial centre hub if it cannot be used as a base to provide financial services across the EU. US banks, in particular, may find Dublin, Frankfurt, Paris or New York to be more sensible vantage points to serve the EU market.
These, then, are the obstacles. What are the opportunities? As labour markets tighten, companies may invest more in skills and particularly in capital: better tools, smarter software and more robots. We may see a more productive economy with higher wages, at least for those who can manage the robots rather than be replaced by them.
If the UK economy cannot integrate smoothly with EU suppliers, that will raise costs but it may also stimulate more local networks. This import-substituting strategy is often associated with the policies of Latin American strongmen but it has occasionally worked.
Is there a bright side from a weaker City? Perhaps. A country that exports a lot of a commodity such as oil can start to suffer from the “Dutch disease”, a condition resulting from a currency so strong that it becomes almost impossible to do anything except pump oil and spend the earnings. In principle, the same thing might occur with a very concentrated industry such as the high finance of the City of London. If the oil — or the high finance — dries up then the exchange rate weakens and other industries can flourish. Perhaps this is part of what we are seeing now as the pound falters, and perhaps the misfortune of the City will be beneficial to other industries such as software or high-tech manufacturing.
There is also the possibility of building affordable houses. Once the country’s tabloid press can no longer blame Brussels about red tape, they may turn their fire on the British regulatory thicket holding back the economy: land use restrictions. If we had built more houses where people wished to live, fewer people would be feeling left behind and blaming Lithuanians for troubles that were engineered in Westminster.
All this suggests a British economy with a larger presence as a producer and consumer of high-tech software and robotics: the Japan of Europe, although hopefully without the quarter-century of economic stagnation. It is not impossible. Data collected by Massachusetts Institute of Technology’s Atlas of Economic Complexity project suggest that the UK has untapped capacity in industries such as cars and precision engineering.
I do not believe in “economic models”. Models are all very well when we are talking about Lego. When it comes to a major 21st-century economy, things are too complicated for that. We will have to see what emerges. The situation looks unpromising but so, too, did Keith Jarrett’s unplayable piano.