Tim Harford The Undercover Economist

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My recommendations for top podcasts, tweets, videos and anything else that makes economics fun.

Marginalia

Understanding the wisdom and madness of crowds

James Surowiecki’s modern classic The Wisdom of Crowds (UK) (US) set a very high bar for the field. (Why has James not written another book?) This is one of those books that gets talked about a lot, with the emphasis on the idea that the average opinion of the crowd can be very smart indeed – hence prediction markets, etc. etc. etc. All that is true and interesting, but in fact Surowiecki discusses lots of other situations where a group needs to make a decision and covers groupthink and all that good stuff. In short it is a messier and more complex – and also deeper and more interesting – book than many people realise. Well worth a read, or a re-read.

Then there’s Philip Ball’s superb book Critical Mass (UK) (US) – which really lit my fire when I read it back in 2005. Ball’s book asks what social scientists can learn from ideas in physics and chemistry about how large groups of decision-makers behave. Lots and lots of interesting ideas and good stories. A good alternative, although I do not recall it so vividly, there is Steven Strogatz’s Sync (UK) (US); it has been commercially successful so the wisdom of crowds suggests you might take it seriously.

Michelle Baddaley’s new book Copycats and Contrarians (UK) (US) is a good accessible survey of what different academic disciplines have to say about herding, fashion, group dynamics and all such things. I blurbed the book and said, “‘A wide-ranging cross-disciplinary perspective of why we run with–or avoid–the crowd, and why it matters, from choosing a restaurant in a tourist trap to believing fake news. I learned a lot, and you may too.”

 

Then on the psychology of group decision-making there is Wiser (UK) (US) by Cass Sunstein and Reid Hastie. I love this book – my favourite by Sunstein, even better than Nudge. Lots of fascinating ideas about polarisation, echo chambers – and plenty of intriguing research.

Or, try Scott Page’s The Diversity Bonus (UK) (US)Page writes with great clarity about complex ideas in algorithms and complexity science, so you’ll learn a lot about those subjects. But the book is also an excellent argument in favour of embracing cognitive diversity in problem-solving teams.

Next up: the always-interesting Francesca Gino has published a brand new book about breaking out of groupthink called Rebel Talent (UK) (US). It’s next on my list to read.

My own book Messy: How To Be Creative and Resilient in a Tidy-Minded World discusses group dynamics and creative friction in the second chapter, and that’s one of the chapters that seems to have struck a chord with readers.

Come for the complex network analysis of the teams which made the best computer games in history, stay for the mind-blowing “Lord of the Flies” research into 10 year old boys at summer camp. The book is now available in paperback both in the US and the UK – or through your local bookshop.

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8th of May, 2018MarginaliaResourcesComments off
Marginalia

Understanding Algorithms

You’ve probably noticed that there are a lot of algorithms about these days, doing everything from recommending a walking route to figuring out how to beat the world’s best players at Go. But what are they, really, how do they work, and how will they change the world?

I’ve read some excellent books recently on the subject and have a few recommendations.

 

For a fun and memorable discussion of how specific algorithms work (even how you might use them yourself to sort out your sock drawer or find a nice apartment) then try Algorithms to Live By (UK) (US) by Brian Christian and Tom Griffiths. I enjoyed this book very much, although not quite as much as Brian Christian’s The Most Human Human (UK) (US), which is all about how to have a better conversation, whether you’re a human or a bot. It’s one of my favourite books, ever.

 

On the economic and social implications of artificial intelligence, I strongly recommend Prediction Machines (UK) (US), by Ajay Agrawal, Joshua Gans, and Avi Goldfarb. Since I wrote “What We Get Wrong About Technology”, I’ve been telling people not to overlook simple, cheap innovations (paper, the shipping container, concrete). Space travel and supercomputers get all the press. Just being cheap doesn’t. But being cheap can transform the world. “Prediction Machines” gratifyingly chimes with this idea: the authors argue that artificial intelligence is best thought of as a way of producing super-cheap predictions; predicting what you might buy, predicting whether a shadow on a scan is cancer, predicting what the Japanese translation of this sentence might be.

Implication 1: good predictions reduce uncertainty, and lots of things we do are a response to uncertainty. For example, freezers (uncertainty about what and when I will want to cook) Airport lounges (uncertainty about how long it will take me to get to the airport means I show up early). AI is therefore bad for airport lounges.

Implication 2: sufficiently good predictions are game-changers. If Amazon’s recommendation engine gets good enough, they can take the risk of shipping me stuff I haven’t yet bought.

Implication 3: “judgement” becomes an important complement to predictions. How bad is a false positive when I predict a fraudulent credit card transaction and annoy my platinum card holder? What about a false positive diagnosis of cancer?

Implication 4: AI rarely replaces an entire human job directly. It tends to replace specific tasks – small slices of what we think of as a job. Reimagining/reengineering workflow will be an important competitive advantage.

As a bonus, the book has lots of good examples and is written clearly. I learned a lot.

 

For a sceptical take on the limits and the toxic side-effects of machine learning, there’s Cathy O’Neil’s passionate, political and very readable Weapons of Math Destruction (UK) (US) or the new book Artificial Unintelligence (UK) (US) by Meredith Broussard, which I have barely skimmed but seems to contain a very good mix of storytelling, history and technical ideas. Promising.

 

 

 

Finally, I’ve been fortunate enough to read the manuscript of Hello World (UK) (US) – out in September – by Hannah Fry. This is really a superb overview: lots of good stories, clear explanations, and it’s wide-ranging. I think if you want a general guide to the new world of data-driven computing you couldn’t do much better than this.

 

 

 

My book “Messy: How To Be Creative and Resilient in a Tidy-Minded World” is now available in paperback both in the US and the UK – or through your local bookshop.

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30th of April, 2018MarginaliaResourcesComments off
Marginalia

Books to make you feel better about the world

I recently reviewed the excellent Factfulness (UK) (US) by the late Hans Rosling, his son Ola and his daughter-in-law Anna. It’s an absolutely terrific, inspiring, and wise book, which among many other things is likely to make you feel better about the world. This is not because everything is rosy, but because most people’s perceptions of the world are badly skewed by a mixture of outdated ideas, dramatic media stories, and our own instincts to spot the worst and most frightening facts about the world. Hence “Factfulness” is a relaxing condition.

Bravo – everyone should read this book. But there are some others to look out for.

Charles Kenny, in Getting Better (UK) (US), also points to dramatic progress in achieving some (not all) of the goals that really matter, and in showing the connections between economic growth and progress on health, education, freedom and happiness. He also explores what else needs to be done to get the most out of development aid and to make development work for everyone; this is a nice complement to Factfulness, which is more focused on helping people understand the world.

Steven Pinker, in Enlightenment Now (UK) (US) also reviews this progress. But where Pinker differentiates himself is in Better Angels of Our Nature (UK) (US), which even for an optimist like me is surprising in its message that violence, torture and cruelty – measured in a variety of ways – has been in widespread decline for centuries. Well worth your attention, and I found Pinker persuasive in rebutting many of the obvious objections.

Rebecca Solnit’s A Paradise Built In Hell (UK) (US) takes a different tack, telling stories of the way people respond to disasters such as 9/11, Hurricane Katrina or the Blitz. Solnit argues that the famous “stiff upper lip” is a common response across communities. We scare each other with tales of looting and anarchy, but in fact most communities pull together.

One of the best and most thought-provoking books I’ve ever read – although sadly it did not make me feel as good about the world as the others – is David Mackay’s Sustainable Energy Without The Hot Air (UK) (US). David, who died far too young, goes step by step through the way we consume and produce energy, teaching us how to make estimates, what really matters, and what the most promising sustainable energy sources might be. Spoiler alert: sustainable energy will probably involve some very hard choices. Utterly brilliant book and it is available online as a free resource.

I suppose I should mention my own Fifty Things That Made The Modern Economy (UK) (US) – although I don’t see the book as making an argument for progress as such, it’s impossible to ponder the list of ideas and inventions, from the contraceptive pill to the cold chain, the S-bend to the light bulb, without feeling grateful for those who went before us. It’s true that barbed wire was a bit of a mixed blessing and leaded petrol was an unmitigated disaster – but still, where would we be without paper, or beautiful beautiful concrete? A French journalist told me that the book put me squarely in the category of optimistic Anglo-Saxons, so there.

 

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23rd of April, 2018MarginaliaResourcesComments off
Marginalia

The past, present and future of banking

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(Business seals; Rishengchang Museum.)

Not long ago I was fortunate enough to visit the Rishengchang in Pingyao – which I tentatively understand to be the oldest “draft” bank in China, allowing merchants to send money across the nation. Pingyao is well worth a visit, if ever happen to be in that part of China. It put me to thinking about some fine histories of money and banking I’ve read in the past few years.

I knew a little about the Chinese system of Feiquan or “flying money” from reading William Goetzmann’s excellent Money Changes Everything (UK) (US), which has a vast trove of material on money and finance in China.

Fifty Things That Made the Modern Economy (UK) (US) also described the Chinese inventions of paper, paper money, and forms of banking. I just loved the way that paper money blew Marco Polo’s mind.

For another magisterial take on money and banking, try Felix Martin’s Money: An Unauthorised Biography (UK) (US).  Martin writes deftly and his book, especially the first half of it, is packed with fascinating historical anecdote and colour.

For a take on banking in the great depression, try Lords of Finance (UK) (US) by Liaquat Ahamed. This book won the FT’s Business Book of the Year award a few years back – a riveting account of how the Great Depression could have been prevented, and wasn’t.

And for the present and future of banking, I strong recommend John Kay’s Other People’s Money (UK) (US), which begins with the question: if we were designing a financial system to do what we say a financial system is supposed to do, would it look anything like Wall Street today? (Spoiler: the answer is no.) Kay is an elegant writer, a well-informed historian and a superb economist. This is a terrific book.

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16th of April, 2018MarginaliaResourcesComments off
Marginalia

Five of the best introductions to economics

I’m often asked which economics books I recommend to someone who wants to get a good introduction to the subject. There are some obvious choices – a good textbook, for example – and of course I wrote The Undercover Economist (UK) (US) and The Undercover Economist Strikes Back (UK) (US) to be the very best introductions to microeconomics and macroeconomics I could manage.

But of course there’s so much more, and I wanted to make a few suggestions.

Thinking Strategically (UK) (US) by Avinash Dixit and Barry Nalebuff is the book that made me fall in love with economics. Without it I’d have dropped the subject completely at university. Thinking Strategically is an introduction to game theory – a mathematical analysis of human vs. human interaction from a tennis match to a salary negotiation. There’s not much maths in the book, but just enough to make the point. The writing is lively and the insights are full of counterintuitive wisdoms. Excellent stuff.

Money Changes Everything (UK) (US) by William Goetzmann was a real inspiration for the financial sections of Fifty Things That Made the Modern Economy (UK) (US). Goetzmann goes deep into the history of financial ideas from money itself to insurance to banking. A detailed and scholarly book, but never a dull moment.

Hidden Order (UK) (US) by David Friedman is a brilliant alternative to a microeconomics textbook. Friedman is a libertarian – even more so than his father Milton – and the politics emerges from time to time in this book, but there’s no shame in that. It is scintillatingly clear about how economic theory fits together, and full of clever thought experiments.

The Truth About Markets (UK) (US) by John Kay presents the flip side to Friedman: where Friedman sees simplicity, Kay warns that markets are a little messier and more socially embedded. Unlike many critics of classical economics, Kay understands exactly what he is chipping away at, and both the genius and the limits of the market. A wonderful book – and prescient in many ways.

Grand Pursuit (UK) (US) by Sylvia Nasar is a magisterial history of economic thought: Marshall, Robinson, Keynes, Fisher and the rest. A real education for a history-of-thought ignoramus like me. (On a similar theme, I’m looking forward to reading the brand new The Great Economists (UK) (US) by Linda Yueh, which looks good.)

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3rd of April, 2018MarginaliaResourcesComments off
Marginalia

How To Have Fun

When I’m not writing about economics or talking about numbers, I’m having fun – which means playing games.

 

Role-Playing

The standout at the moment is Amazing Tales by Martin Lloyd – a wonderful role-playing game for parents and young children. I have, from time to time, run role-playing games with simple systems (a favourite is the classic Dragon Warriors – currently available as a pay-what-you-want pdf). But somehow with young children the system always gets in the way; there are too many things to keep track of both for them and for me. Amazing Tales radically strips back the system (name four things that your character is good at doing, anything from “making friends” to “escaping”) and encourages gameplay that can easily be done in 15 minutes, snuggled up at bedtime instead of a story. My son (six) loves it. My daughter (11) enjoys the odd game too. Congratulations to Martin for figuring out how to make this work.

(And if you want a grown-up RPG, for me, it’s GURPS (UK) (US) every time, ideally in Dave Morris’s eerie world of Legend (UK) (US).)

Best role-playing podcast? Feel free to suggest a few; I enjoy Improvised Radio Theatre With Dice when I’m in the mood for a slow burn. I’m sure there’s much more out there.

 

Gamebooks

I endorsed – and absolutely loved – Dave Morris’s Can You Brexit Without Breaking Britain? (UK) (US) A Brexit gamebook sounds like satire, and there are certainly touches of satire here and there. But it is also an attempt to get to do something our politicians haven’t done, and get to grips with the details of Brexit. From the customs union to citizen’s rights, how do you manage the negotiations while keeping the voters happy? (Or are you secretly planning to reverse the decision? The choice is yours.) Deal with the aging leftist leader of the opposition, Barry Scraggle, and the Edwardian darling of Brexiters, Tobias Tode. It’s very funny, very well-researched, and very difficult to complete. Enjoy!

Speaking of Dave Morris gamebooks, his series with Oliver Johnson, Blood Sword (bad title, great books) is perhaps the most ambitious and best series of gamebooks ever written – and back in print. You can play solo or with a small group; the plot is excellent, the setting full of atmosphere, and there’s even a satisfying combat and magic system. (UK) (US)

I could recommend many more, but for another left-field recommendation, try Michael Stackpole’s City of Terrors (UK) (US), best enjoyed with the vintage Tunnels and Trolls system.

 

Boardgames

If you want to read about the time I interviewed Michael Lewis over a game of St Petersburg, here’s the piece; if you want to read about the time I went to the boardgames festival in Essen and spoke to the creator of Settlers, Klaus Teuber, I’ve got your back.

But if you just want my boardgame recommendations, then:

  • Agricola is the best boardgame ever made, although it takes time to chew over the rules and time to play. Works well for two as well as larger groups; my wife and I play and play and play. (UK) (US)
  • Puerto Rico is also the best boardgame ever made, and the same caveats apply. Quite similar to Agricola, tactically it is perhaps even more interesting. (UK) (US)
  • Carcassonne is a magnificent entry-level game; quick, easy to play, satisfying domino-style mechanic. Also, it has the original Meeples. (UK) (US)
  • Settlers of Catan is the modern classic – the game that Monopoly wishes it was. If you’ve never played a modern boardgame perhaps this should be the one. (UK) (US)
  • Dominion is a game I keep coming back to. My 11-year old particularly likes it; it’s quick; the expansions are actually good rather than distractions. And as a bonus, it is easy to handicap by tweaking the opening hands. (UK) (US)
  • For sheer Germanic atmosphere, Shadows in the Forest is your perfect family game. For a start, you need to play by candlelight in near total darkness. Also, adorable dwarves hide behind trees. Glorious. (UK) (US)

 

Craft

Viviane Schwarz’s “Welcome To Your Awesome Robot” (UK) (US) is fantastic, if you can get your hands on a copy. It’s a splendidly conceived book explaining how to turn a cardboard box into a robot. Every now and then – when a suitable box arrives – this book comes out, along with sticky tape and scissors and other accessories. An afternoon of fun is guaranteed.

 

 

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13th of March, 2018MarginaliaResourcesComments off
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The best books about failure

I wrote Adapt: Why Success Always Starts With Failure (UK) (US) several years ago, but I’ve not stopped thinking and talking about the idea. So often we’re told to “learn from our mistakes” or “fail forward”, but the truth is that this advice isn’t easy to take: failure is painful and denial is common.
Here are a few of my favourite books on the topic:

I encountered Little Bets (UK) (US) by Peter Sims just as Adapt was coming out, and loved it. Peter had come to similar conclusions but had a totally different range of examples (from Chris Rock to Frank Gehry, if I recall correctly) and a winning, informal style.

Kathryn Schulz’s Being Wrong (UK) (US) is beautifully written (Schulz later won a Pulitzer prize) and a fascinating discussion of the history and psychology of wrongness.

To go deeper into the psychology of wrongness, try Mistakes Were Made (But Not By Me) (UK) (US) by two academics, Carol Tavris and Eliot Aronson. (Aronson was a research assistant on one of the most famous studies of wrongness, Festinger’s When Prophecy Fails.) The book is highly accessible and full of interesting testaments to the power of denial.

And for a more recent synthesis, try Matthew Syed’s Black Box Thinking (UK) (US), which focuses in particular on the importance of examining and learning from our errors (as with an aeroplane black box).

Happy failing!

My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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31st of October, 2017MarginaliaResourcesComments off
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Behavioural economics books to enjoy

Congratulations to Richard Thaler, who has been awarded the Nobel memorial prize in economics “for his contributions to behavioural economics”. Thaler is a worthy winner. In addition to his academic contributions, alongside the likes of Daniel Kahneman and Robert Shiller, he has been the leading evangelist in the profession for behavioural realism in economics.

Thaler’s influence on policymakers has been unparalleled, in part thanks to his book Nudge (UK) (US) with Cass Sunstein. I wrote a quick appreciation of Thaler for the FT (subscription req.) and this much longer piece a couple of years ago asking what lay in store for behavioural economics.

Here are a few of my favourite behavioural economics books:

Daniel Kahneman Thinking Fast and Slow (UK) (US) – now the bible of behavioural economics, full of fascinating experiments and examples.

Michael Lewis The Undoing Project (UK) (US) – a touching biography of Kahneman and Tversky. Skip the first chapter, but the rest is beautiful storytelling and insightful.

Cass Sunstein and Reid Hastie Wiser (UK) (US) – the best book I know about group decision-making and how to overcoming polarisation and groupthink.

For inside stories of behavioural economics try Thaler’s Misbehaving (UK) (US) and David Halpern’s Inside the Nudge Unit (UK) (US).

And for behavioural science to brighten your day, there’s Think Small (UK) (US) by Halpern’s colleagues Owain Service and Rory Gallagher, or How To Have A Good Day (UK) (US) by Caroline Webb.

Enjoy! And if you’d like a reminder that the old rational choice school of thought has some intriguing insights to contribute, may I (ahem) recommend my second book The Logic of Life (UK) (US).

 
My new book is “Fifty Inventions That Shaped The Modern Economy”. Grab yourself a copy in the US or in the UK (slightly different title) or through your local bookshop.

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9th of October, 2017MarginaliaResourcesComments off
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Books about how to see into the future

Walter Friedman has a fascinating history of economic forecasting in the early 20th century: Fortune Tellers (UK) (US). Well researched, full of interesting detail, and some of these guys (Irving Fisher, Roger Babson) were remarkable characters. For an insight into Fisher’s rival as an economist and investor, John Wasik’s Keynes’s Way To Wealth (UK) (US) is a fun light read.

Paul Goodwin’s Forewarned (UK) (US) is a broad survey of different forecasting approaches. I learned a few interesting things – but also felt Goodwin never quite reached a conclusion.

Philip Tetlock, with Dan Gardner wrote Superforecasting (UK) (US). Tetlock is one of the most interesting social scientists alive, and this research project into who does and does not make good forecasts is fascinating. (You might also look up Tetlock’s brilliant earlier, nerdier Expert Political Judgement and Gardner’s earlier polemic Future Babble, books which led to this collaboration.)

People who are interested in an alternative approach, scenario planning, might check out this offering from two of my former colleagues in Shell’s scenario planning team, Rafael Ramirez and Angela Wilkinson: Strategic Reframing (UK) (US). I haven’t yet read the book but I have no doubt about the qualifications of its authors, and the scenario method is a clever approach to an almost impossible future-gazing task.

Finally, this BBC Radio program about economic forecasting is good fun.

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28th of September, 2017MarginaliaResourcesComments off
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Remembering the holocaust

Over the past few weeks I’ve been reading some books about the holocaust. I never dreamed that all this would become so relevant.

Art Spiegelman’s graphic memoir Maus (UK) (US) is brilliant, devastating, and occasionally very funny. Spiegelman’s father and mother, Vladek and Anja, survived Auschwitz against dreadful odds. Anja later killed herself. The contrast between the elderly Vladek – weak, needy, apparently socially clueless – and the younger Vladek – strong, ingenious, and socially nimble – is striking. And the details come alive in Spiegelman’s brutally direct telling.

Elie Wiesel’s Night (UK) (US) seems to be required reading in the US but I’d not read it until recently. It’s simple, excellent, unremittingly bleak. I think the figure of Moishe the Beadle – who has witnessed an atrocity but cannot get any of his fellow Jews to believe him – is the most tragic I’ve ever encountered. Grim and brilliant.

Viktor Frankl’s Man’s Search For Meaning (UK) (US) has, I’m told, changed people’s lives. Like Wiesel, Frankl survived life the camps. Unlike Wiesel he has a message of inspiration and redemption. It’s an interesting contrast. (Both books are very short.)

Then there’s Anne Frank’s Diary of a Young Girl. (UK) (US) It’s heartbreaking.

I’m glad I read these books. I’ll be reading others – histories as well as memoirs.

17th of August, 2017MarginaliaResourcesComments off
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  • Fifty Inventions That Shaped the Modern Economy
  • Messy
  • The Undercover Economist Strikes Back
  • Adapt
  • Dear Undercover Economist
  • The Logic of Life
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