Tim Harford The Undercover Economist

Undercover EconomistUndercover Economist

My weekly column in the Financial Times on Saturdays, explaining the economic ideas around us every day. This column was inspired by my book and began in 2005.

Undercover Economist

Ten years of social media have left us all worse off

The last decade has had plenty of landmark moments — but one big change crept up on us slowly: our experiences in the liminal space of social media. Somewhere between Silicon Valley and our vibrating pockets, between our closest friends and some faceless trolls, our privacy, politics, economy and above all our attention were reshaped by Facebook and its outriders.

Social media existed before 2010, but not as we now know it. Few of us had smartphones in 2009. Facebook’s active user base has grown sevenfold over the past 10 years, and there simply aren’t enough people for that to happen again. Instagram and WhatsApp were both launched about a decade ago, and swiftly absorbed into the mother of all social networks. As for Twitter, let me simply note that Donald Trump only started tweeting in earnest in 2011.

What effect has all this had? It’s plausible to argue that social media enabled major events such as the Arab spring and the election of Mr Trump, although of course there is never a single explanation for such things. There have been some telling little moments, however — such as when the UK Conservative party press office took the low-rent Orwellian step of posing as an independent fact-checking organisation on Twitter. (No doubt they would describe that incident differently, while adding that Oceania has always been at war with Eastasia.)

I should not exaggerate. This isn’t 1984. Partisan news sources were popular long before we self-selected into online echo chambers. Propaganda is not new. And there are benefits from social media: it gives a platform to all sorts of people who deserve to be heard. But it is hard to make the case that social media has led to a more thoughtful, rigorous or compassionate discourse about politics. Amid the bullying, the misogyny, and the endless outrage, it’s hard to tell the bots and the people apart, largely because so many humans have lowered themselves to the level of the bots.

What about the economics? Network effects mean that social media platforms tend to spiral towards monopoly. You want to be where your friends are. It might be hard for a new search engine to displace Google, but if I am tempted by an alternative, I don’t need to persuade my friends and family to move too.

An obvious antitrust measure would be to force Facebook to divest WhatsApp and Instagram, two services that could and should be its competitors. A more radical approach is to require social networks to improve their interoperability and data portability — effectively allowing other services to piggyback, or users to flit among services. If I switch email providers or phone companies I can bring my phone number and contact database with me, or automatically forward messages sent to my old email address. It’s possible to imagine social media working more like that in future, although it would require substantial effort both technologically and legislatively.

Yet none of this solves perhaps the most basic problem. Ten years ago all we had to worry about was email overload. Now we carry around powerful and highly distracting devices. They observe our behaviour, buzz insistently to get attention, and leverage our desire to fit in, communicate and reciprocate. We did not consciously sign up for this, and each of us needs to think carefully about what we really want from social media.

Last Christmas I vowed to spend less time on my smartphone. It worked — until a couple of months ago, when I started using Twitter much more. Why? I had something to sell. That seems wretchedly appropriate. Still, another decade is starting. I cannot break Facebook up by myself, but I can plan to do something more constructive with the time and energy I often spend on social media. I hope I am not the only one.


Written for and first published in the Financial Times on 27 December 2019.

My book “Fifty Things That Made the Modern Economy” (UK) / “Fifty Inventions That Shaped The Modern Economy” (US) is out now in paperback – feel free to order online or through your local bookshop.

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

‘Salvator Mundi’ and the limits of certainty

Mona Lisa may be famously inscrutable, but “Salvator Mundi” has surely replaced her as Leonardo da Vinci’s most enigmatic work. It has been two years since it was reported that the long-lost painting had been sold to a Saudi prince as a gift to the Louvre Abu Dhabi, for an astonishing $450m — two and a half times the previous record for any painting sold at auction.

Since then the unveiling has been postponed without explanation, and the painting’s whereabouts are unknown: on a yacht, says one report; in secure storage in Switzerland, says another.

No doubt the mystery of its whereabouts will be resolved. The mystery of its provenance is deeper. In 2005, “Salvator Mundi” was bought for about $1,000 at an auction in New Orleans by two art dealers, Alexander Parish and Robert Simon. (Mr Parish later told Vulture that they had been willing to go as high as $10,000, but it proved unnecessary.)

On the surface, the painting was worth little: it was in very bad shape. But Messrs Parish and Simon thought it might be by a disciple of Leonardo; in which case it might easily be worth several hundred thousand dollars — a gamble worth taking. As a painting by Leonardo’s studio, with a touch or two by the master himself, it might have been worth $20m.

So what is it? Ben Lewis, author of The Last Leonardo, notes that the debate rages “over whether it belongs in the first division autograph Leonardo category or the second division Leonardo+Workshop category”. Apparently that is a $430m distinction. And the desire for clarity is not merely financial. When we gaze at a painting on a gallery wall, we like to know.

It is hard, too, to disentangle the time-scarred original work from its substantial restoration by Dianne Modestini — which, in turn, was influenced by the close inspection of known works by Leonardo.

Yet as the criminologist Federico Varese points out, it is curious that we insist on a binary distinction. We feel powerfully that the painting is either an autograph Leonardo, or it is not. As a matter of logic that may be true, but as a matter of practicality we do not know and we will never know. There is some evidence of Leonardo’s involvement, but the evidence is circumstantial. We are relying heavily on intuition — albeit the intuition of people with deep expertise. Regrettably but unsurprisingly, the experts differ.

This is partly a problem of knowledge: we cannot travel back in time to see who painted what. But it is also a problem of definition. Philosophers might recognise the “bald man paradox” here. Plucking out a single hair from a full head of hair does not produce a bald man. Keep going, however, and baldness will result. And yet it seems absurd to identify any particular hair as the crucial one that made the difference between baldness and non-baldness. Similarly with “Salvator Mundi”: how many brushstrokes from Leonardo does it take to distinguish a workshop piece from an autograph work?

So “Salvator Mundi” is the Schrödinger’s cat of paintings — perhaps one thing, perhaps another. We can’t know.

Schrödinger’s cat discomfited the Austrian physicist Ernst Schrödinger, for good reason. But to a statistician or a social scientist, this sort of irresolvable uncertainty is part of life.

I just tossed a coin. Did it come up heads or tails? One or the other, clearly. But even after the fact, if you haven’t seen the result it is not absurd to say that there is a 50 per cent chance of either outcome. And if I then put the coin back in my pocket without checking, 50-50 is the closest we will ever get to knowing.

We should be able to live with such fuzziness. When asking a question such as “who is the greatest ever Formula 1 driver?”, we know that we can have a fun argument — Lewis Hamilton, Michael Schumacher, Ayrton Senna, Juan Fangio? And we also know that the argument cannot be resolved.

But we forget this in other parts of life. Who would be the better UK prime minister, for example, Jeremy Corbyn or Boris Johnson? Which Democratic candidate would be most likely to defeat US president Donald Trump in the 2020 elections? Is it Joe Biden, Elizabeth Warren, Bernie Sanders or Pete Buttigieg? How serious a threat is climate change, and how drastic a change is required to deal with it?

The answers matter far more than the question of how much Leonardo contributed to “Salvator Mundi”, if he contributed at all. But we will never know for sure what the answers are.

One approach to all this fuzziness is to demand sharpness. I have often written admiringly about the work of Philip Tetlock, who has examined the problem of forecasting — a field dominated by vague prognostications — by asking forecasters to make verifiable predictions with deadlines.

But there are limits. The world defies our attempts to confine it with neat definitions.

It is not wrong to debate these vast questions of policy and politics. Indeed, it is vital that we do. But it is futile to expect a certain answer.

Written for and first published in the Financial Times on 6 December 2019.

Catch up with the first season of “Cautionary Tales” [Apple] [Spotify] [Stitcher]

For more on the joys of ambiguity, try my book, Messy

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

How Sesame Street set a gold standard for education

The children’s television show Sesame Street just celebrated its 50th birthday. I know my favourite character should be Count von Count, who shares my fondness for numbers. But I’ve always had a soft spot for Mr Snuffleupagus, Big Bird’s best friend.

Mr Snuffy was thought by every adult on Sesame Street to be imaginary despite being as real as Elmo. It’s a good joke: Mr Snuffy, a strange anteater-mammoth hybrid, is colossal. How could the adults not notice him?

After the gag had run for 14 years, the adults finally realised that Mr Snuffleupagus was real, and apologised to Big Bird for doubting him. This was a weighty decision: Sesame Street’s writers were concerned about child abuse, and reflected that it might be unwise to portray the adults as endlessly disbelieving what the childlike Big Bird told them.

This was typically painstaking behaviour from a show that has always had ambitious ideas about helping children. In 1967, a former TV producer named Joan Ganz Cooney wrote a report for the Carnegie Corporation titled “The Potential Uses of Television in Pre-school Education”. She made the case that carefully crafted television could “foster intellectual and cultural development in pre-schoolers”. Two years later, her vision became reality, in the Children’s Television Workshop and Sesame Street.

It was a radical idea: just a few years earlier, Marshall McLuhan had infamously argued that “the medium is the message”. It seemed natural enough to many that television was an inherently superficial medium with, therefore, a superficial message.

By contrast, Sesame Street was a bet that good television could make a real difference to children’s readiness for school, particularly for those starved of other opportunities to learn. Not only would it help them to read and count, but it would be racially integrated. Over the years it would tackle issues including death, divorce, autism, infertility, adoption and HIV.

Researchers swarmed all over Sesame Street, trying to figure out whether it actually worked. This wasn’t as easy as one might think. One early study, conducted by Samuel Ball and Gerry Ann Bogatz, aimed at a conventional experiment: some families, chosen at random, would be encouraged to sit preschoolers in front of this brand new show, while a control group of other families would receive no encouragement.

The problem was that Sesame Street became so popular, so quickly, that it became hard to distinguish between the two groups; everyone was watching. Nevertheless, the study authors did the best they could. They found that children who watched more Sesame Street learnt more, and that “in terms of its own stated goals, Sesame Street was in general highly successful”. Perhaps the message is the message after all.

Yet it is hard to be sure about causation. Did Sesame Street help kids learn? Or was the programme attractive to children who were already flourishing?

A recent study by two economists, Melissa Kearney and Phillip Levine, approaches the problem from a different angle. Professors Kearney and Levine noted that in the early years of Sesame Street, some geographical areas simply couldn’t receive the broadcast signals that carried the show. Two-thirds of US children could watch the show, and many did, but one-third could not.

Based on this accidental experiment, Profs Kearney and Levine concluded that the children who had lived in a region where Sesame Street was available were less likely to fall behind at school. The effect was about as large as attending the US Head Start early childhood education programme — impressive, given that TV is so cheap. The benefits were particularly large for children who lived in deprived areas.

It is hard to read about this study without being reminded that Sesame Street was born in a very different world — one where children received Sesame Street via UHF broadcast, rather than watching Baby Shark on YouTube, where a version produced by the South Korean media brand Pinkfong has nearly 4bn views.

Like the Children’s Television Workshop 50 years ago, Pinkfong has lofty educational goals: its videos are supposed to teach English to Korean children. It has more than twice as many YouTube subscribers as Sesame Street, which struggled financially in recent years before cutting a deal with HBO.

But the vast, cosmopolitan and mysterious world of toddler YouTube seems unlikely to deliver the same educational benefits to children as Sesame Street, which was continually tweaked to help children learn rather than being relentlessly optimised for the clicks. As Alexis Madrigal observed in a long report for The Atlantic on toddler YouTube, the viral videos tend to be fast-paced and full of superfluous details. These features may attract the attention of preschoolers, but educational experts think they are unhelpful.

I’m an optimist. Online video could surely be even more educational than Sesame Street, given its ability to be interactive and to gather data on an individual child’s progress. But it would have to be carefully designed and tested, in the same way that Sesame Street was. An educational revolution doesn’t happen by accident.

Written for and first published in the Financial Times on 8 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

Exit, voice, or loyalty… what should we do when things go wrong?

“Under any economic, social or political system, individuals, business firms, and organizations in general are subject to lapses from efficient, rational, law-abiding, virtuous, or otherwise functional behavior.”

That is the first sentence of the economist Albert Hirschman’s book Exit, Voice, and Loyalty, published in 1970. No kidding; look around. Rational, law-abiding, virtuous and otherwise functional behaviour is in short supply.

Hirschman’s book is about how we register our discontent with such lapses, and whether our discontent makes a difference. Do we walk away? Do we protest? Or do we suffer in silence?

The instinct of the economist, used to studying competitive markets, is to think of “exit” as the most straightforward and powerful protest. If we don’t like the product or we don’t like the price, we take our custom elsewhere. The alternative is “voice”: we complain, in any form from a muttered grumble to a Molotov cocktail.

In many ways, exit is easier than it has ever been. A citizen of the US can move to a different state; a citizen of the EU can move to a different country. (Irish passports have become popular among the British citizens who can obtain them; people value the option to exit.) We have an endless choice of entertainments to enjoy, news sources to consume, companies from which to purchase. Niche political movements abound. The exit door never seems far away.

And yet, many of us have rarely felt so trapped. Yes, it’s possible to leave Facebook or stop using Google. But it is hardly as simple as switching to a different brand of toothpaste.

And for an age in which politics is supposed to be in endless flux, it is surprising how little changes. US president Donald Trump’s unpopularity is astonishingly consistent, with disapproval ratings of 53-56 per cent. The popularity of his predecessors ebbed and flowed; Mr Trump’s is frozen in ice.

In the UK, the sense of paralysis is palpable: we’ve had an election, a generationally defining referendum, a new prime minister, another election, another new prime minister, and now yet another election. Lots of politics but not a lot of progress. And nobody has managed to assemble a policy platform that commands broad support.

What is going on? Hirschman pointed to an intriguing case study: railways in Nigeria in the 1960s. Despite poor roads and an 800-mile journey from the peanut farms of northern Nigeria to the ports of Lagos and Port Harcourt, Hirschman observed that trucks comfortably outcompeted the railways. Why?

One might have expected that as peanut shippers quit trains and leased trucks instead, the railways would have responded. Hirschman argued that the reverse was true. The railways were propped up by the Nigerian state, so exit was no threat. Instead, the threat was voice, in the form of unhappy customers lobbying the government and generally raising hell. But those customers didn’t bother; they quit instead.

Typically, we think of exit and voice as complementary. Your complaints will be taken more seriously if you can credibly threaten to leave, as anyone who has called to cancel a mobile phone contract can attest. But sometimes exit can silence voice. That is particularly true when “voice” means something more than a mere complaint — taking time-consuming action such as attending council meetings, going on strike or actively campaigning. If you have another option, it is tempting to walk away and take it.

A similar logic applies to the two-party system that defines the US and remains strong in the UK. Like the Nigerian railways, the dominant parties seem to be a part of the landscape. They are propped up by tradition and the logic of first-past-the-post voting. Exit seems to be no threat to them, especially not to the hardliners who would rather lose than compromise.

What about voice? As with the Nigerian railways, voice has been weakened by exit. Some moderates have been thrown out of their own parties — notably Philip Hammond, who was UK chancellor of the Exchequer just a few months ago. Many others have decided they’ve had enough, and few people begged them to stay. What is true for members of parliament is true for party members, too. The extremists are delighted. The moderates have quit in disgust. The parties have moved ever further from the median voter.

That might matter less if both parties had not decided to give the final say over leadership to the party base, rather than to MPs, who know what it takes to get elected. It is an idea that looks better on paper than when put to the test. As it is, both the Conservatives and Labour are led by men who seem to inspire rapture among a narrow clique of supporters, but whom many voters find somewhere between laughable and contemptible.

The situation seems unsustainable. But will it change? As Hirschman was finishing his book, Nigeria was consumed by civil war. The country’s railways continued to stagnate for decades. I am hopeful that British democracy will bounce back a little more quickly; I just wish I could see exactly how.

Written for and first published in the Financial Times on 29 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

Algorithms judge us; how can we judge them?

If there was ever a demonstration that people think with their guts, it was the furore over the idea that Apple Card is “a f***ing sexist program”. David Heinemeier Hansson, a successful entrepreneur and programmer, complained on Twitter that his wife had a far lower credit limit than he did, and soon everyone from the US senator Elizabeth Warren to Apple co-founder Steve Wozniak to the New York Department of Financial Services were weighing in to show their support.

The idea of women being treated badly by Big Tech and by banks seems all too plausible. Apple is quite literally an iconic brand. Goldman Sachs, the bank that issues and manages the Apple-branded credit card, is nearly as famous. So the ingredients for a viral story are all there, however thin the anecdotal evidence. I

s the Apple Card actually sexist? One definition of equal treatment for men and women would be that credit was extended equally to both, regardless of the fact that women tend to be paid less than men. Another would be that people with the same income got the same credit, regardless of gender. You might have spotted the problem: it’s impossible to offer both forms of equal treatment simultaneously.
This isn’t just some clever piece of logic-chopping. If two groups of people are measurably different, then any rule about how they are treated — be it an algorithm or human judgment — will end up looking unfair, if not by one measure then by another. Is the Apple Card sexist? Arithmetic suggests that, for one definition of sexism or another, it must be.

This doesn’t excuse cases where decision processes — algorithmic or otherwise — are grossly biased, grotesquely inaccurate or both. Our problem is that we don’t know which ones they are, so we tend instead to believe emotionally resonant stories about famous brands. In the algorithm-saturated world we are entering, we need a way to distinguish the good from the bad, the ethical from the outrageous. We should be demanding better evidence that the algorithms that shape our lives are doing so fairly and effectively.

Goldman Sachs says that gender, race, age and sexual orientation are never explicitly part of the decision-making process. The company also says that the process is scrutinised both by consultants and an internal department to ensure that there is no accidental bias. You and I, however, are just going to have to take their word for the robustness of that scrutiny.

Companies are learning the hard way that people now want serious explanations: Goldman claims the Apple Card is unusually transparent, but people evidently want more.

Transparency might help — but it is neither a panacea nor an easy option. Netflix once released anonymised data about movie preferences as part of a competition to improve its recommendations. Alas, because some customers had posted reviews for both Netflix and the Internet Movie Database, it wasn’t hard to link the anonymous serial numbers with real names and intimate film reviews. One woman sued Netflix for potentially revealing her sexual orientation to her husband and children. Transparency is hard; Goldman cannot simply dump its data set and invite us all to poke around. But it could give access to independent assessors.

The philosopher Onora O’Neill argues that anyone who would like to be trusted should be trying to demonstrate trustworthiness. Trustworthiness, she adds, can be bolstered by “intelligent openness”. In the case of algorithms, we should expect a clear and prominent explanation of how the algorithm is making its decision — and perhaps more importantly, we should expect independent experts to be able to assess the claims that are being made.

There are arguably more important algorithms out there than the one that sets your Apple Card credit limit — such as the Facebook news feed or Compas, which is widely used in justice systems to assess the risk that a criminal will reoffend. I am not qualified to assess their fairness or effectiveness. But I know people who are, if they were allowed to see more information.

Compas has now been exhaustively analysed by academics, and worrying features have been exposed. But the analysis was only possible after a team at ProPublica published a painstakingly assembled data set for all to use. It should be easier for independent experts to scrutinise the algorithms that shape our lives.

One reason I am sanguine about the Apple Card is that other credit cards are available. If Goldman is mistakenly turning down creditworthy people, other companies will want their business. That is not a guarantee of fairness but it is, at least, a powerful force pulling in that direction.

In other cases there is no such force: if a criminal is denied parole on the word of an algorithm, there is no option to shop around. When companies peddle software systems that are supposed to identify the best teachers or the worst criminals or the children most at risk of domestic violence, we should demand proof. If not, we will be sold statistical snake-oil.


Written for and first published in the Financial Times on 22 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

Extend gratitude beyond platitudes

You know that blur of movement on Christmas morning when children meet presents and presents meet children, scraps of wrapping paper fly into the air and float down, confetti-style, all over the living room? Five minutes later, the presents are all unwrapped, the children sit panting, and everyone wonders what to do next.

It does not happen in the Harford household. For the past few years we have had a rule: you cannot unwrap the next present until you have written a thank-you note for the last one.

At first, this was merely my inner economist thinking about efficient incentives. I want my children to write thank-you letters and this generally requires some kind of bribe. At Christmas, that is easy: we are surrounded by gift-wrapped bribes. Using the next gift to incentivise the previous thank-you letter is an idea so elegant I am surprised it is not ubiquitous.

I then realised that this system had unexpected benefits. It forced us to slow down, to look seriously at each gift, to think about what was good about it, and to reflect on the giver. Gratitude as a chore became replaced by gratitude as a mindful counting of blessings.

The practice of gratitude is fashionable; some people advocate a daily gratitude journal as a way to get a quick shot of happiness. Robert Emmons, who studies gratitude, complains of the spread of “gratitude lite”, the sense of gratitude as an easy means to an end. He is the author of books including Gratitude Works! A 21-Day Program for Creating Emotional Prosperity (US) (UK), so perhaps he should take some ownership of this trend. But I know what he means about treating gratitude as a mere tool.

Gratitude is, after all, a complex thing. There is gratitude as mindfulness: noticing something good in the world. There is gratitude as politeness: remembering to say thank you to the shop assistant, even if you cannot be bothered to make eye contact. There is gratitude as reciprocity: writers from Adam Smith to Seneca underlined the idea of gratitude as a partial repayment of a debt.

A Catholic friend of mine says that gratitude is hard, like forgiveness. That seems true, when it is an attempt to find the silver lining to a lowering cloud. But gratitude often is, or should be, a simple matter of counting blessings in a world where there are many to count.

Violence and disease are rarer; most people are richer, healthier, and better educated than ever. There are still evils in the world, but not as many as 100 years ago. Why should gratitude be hard?

Nevertheless, it is. There are practical reasons why we pay more attention to what is difficult than what is easy. Problems require solving; non-problems do not. Psychologists call this “the headwinds / tailwinds asymmetry” inspired by the observation that a cyclist never notices when the wind is at her back. So being grateful requires some attention to what we easily ignore.

Mr Emmons has intensively studied the practice of keeping a gratitude journal, and he says that it is worth sticking with the habit, which gets easier. But rather than simply jotting down the same gratitude platitudes each evening, I’ve been thinking about expanding both the depth and the breadth of my thanks.

On depth, consider a study conducted by psychologists Martin Seligman, Tracy Steen, Nansook Park and Christopher Peterson. Participants were asked to write a letter expressing gratitude “to someone who had been especially kind to them but had never been properly thanked”. Then — this is the squirm-inducing bit — they hand-delivered the letter, read it to the recipient, and had a conversation. The warm glow of this process, for the letter writer, lasted for weeks. I have never hand-delivered such a letter. But I have written one, and it is a powerful experience.

As for breadth, expressions of gratitude are often about or directed to the usual subjects: family and friends, nice weather, good health. It is worth thinking more broadly — as did AJ Jacobs, author of Thanks A Thousand (US) (UK). He started by trying to be mindful of all the people around the world who contributed to the food he enjoyed, saying a sort of secular grace before each meal. But — challenged by one of his children — he decided to go much further, seeking out the many people who contributed to his morning coffee, and thanking them on the phone or in person.

Thanking the barista was easy, but he went on to thank the coffee taster, the lid designer, the pest control expert at the coffee warehouse, the farmers who grew the beans, the steel workers who made the pulping machine, the workers at the reservoir that was the source of the water, and about 1,000 others.

Writing a thoughtful thank-you letter when someone sends you a present requires far less imagination. It is the most elementary expression of gratitude. Still, it is not a bad place to start.


Written for and first published in the Financial Times on 28 Dec 2018.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Free email updates

(You can unsubscribe at any time)

Undercover Economist

A guide to having an actually happy Christmas

Is Christmas a time of magic, generosity and conviviality? Or of overconsumption, stress, and social anxiety? It is easy to make a case either way: listen to Paul McCartney’s “Wonderful Christmas Time”, followed immediately by Tom McRae’s slow sighing cover of the song and hear the same lyrics convey backslapping cheer and solitary despair.

Messrs McCartney and McRae illustrate the dilemma, but they do not resolve it. For that, we need data, so I consulted some academics on the slippery subject of “subjective wellbeing”, or as you or I would call it, “happiness”.

Two years ago, wellbeing researchers at the London School of Economics surveyed a panel of experts, asking them: “Do you think that populations on average have higher wellbeing during major festive periods like Christmas?” None of the respondents was particularly confident, but the verdict was that Christmas is a time for good cheer: 54 per cent thought that Christmas increased average wellbeing, with 18 per cent disagreeing and the rest sitting on the fence.

Fence-sitting is perhaps the wise choice here: the topic has been rather sparsely researched, and what studies do exist provide viewpoints as contradictory as Messrs McCartney and McRae. One recent piece of research by Michael Mutz found that “the Christmas period is related to a decrease in life satisfaction and emotional wellbeing”. An older study by Tim Kasser and Kennon Sheldon found instead that “subjects are on the whole reasonably satisfied with their holiday experience” and that while many people found Christmas a bit stressful, the majority did not. One thing we can say with confidence is that, contrary to the popular myth, suicide rates don’t spike at Christmas; they fall.

It may be more fruitful to ask about how different people experience Christmas — and whether we can suggest ways to enhance the joy and reduce the anxiety. One plausible hypothesis is that Christmas is an amplifier of existing inequalities. Those who are relaxed, have no money worries and a good relationship with friends and family should find plenty to enjoy in Christmas; those who are anxious, isolated or financially stretched may find Christmas makes everything worse.

An alternative view is that how we feel about the festival depends on how we approach it. Mr Mutz found that Christians felt happier at Christmas, while others felt less happy. Similarly Messrs Kasser and Sheldon found that people who spent more time with their families or engaging in religious practices tended to have a better time of things. Consumerism fared less well, according to Messrs Kasser and Sheldon; for all the money and effort buying and wrapping gifts, the activity “apparently contributes little to holiday joy”.

I am not sure atheists would feel better if they headed to church, nor that people who dislike their relatives should seek them out anyway. But these findings do suggest that the syrupy advice of a thousand moralising television specials — that the true spirit of Christmas is friends, family and the little baby Jesus — has something going for it.

What, then, is an undercover economist to advise for a truly merry Christmas?

First, keep the crass spending under control. It is pointless to lament the commercialisation of Christmas, which is not new. Santa Claus appears in advertisements from the 1840s, Macy’s was open until midnight on Christmas Eve in 1867, and Rudolf the Red Nosed Reindeer was invented in 1939 by an advertising copywriter at Montgomery Ward who needed a free gift for shoppers.

So don’t get mad with the marketing men: get even. Commercial spaces such as shopping centres and Christmas markets lay on the sights, sounds and smells of Christmas free of charge. If you like that sort of thing, savour the atmosphere, and don’t bother with the flashily-packaged trash nobody really wants.

You can cite economist Joel Waldfogel, author of Scroogenomics (UK) (US) if you like: he has convincingly demonstrated that many Christmas presents are poorly chosen. Or you can quote Harriet Beecher Stowe, if you prefer: “There are worlds of money wasted, at this time of year, in getting things that nobody wants, and nobody cares for after they are got.” In any case, if it is the thought that counts, then think.

Second, make your own social rituals, whether it is a regular reunion with old friends, carol singing, or church on Christmas morning. There is plenty of evidence that both religious and secular Christmas rituals can improve your enjoyment of the holiday. The difficulty comes in wading through the coagulated expectations of everyone else in your social circle. Take the time to think about what you really value, discuss it with your family, and make it happen.

Third: share the chores. Women have tended to spend considerably more time on the task of shopping for and wrapping Christmas gifts, while men seem to enjoy Christmas more than women do. This may not be a coincidence.

Fourth: be grateful, and write your thank-you letters. More on this next week. Finally, don’t listen to too much Tom McRae. Merry Christmas.

Written for and first published in the Financial Times on 21 Dec 2018.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Free email updates

(You can unsubscribe at any time)


Undercover Economist

How to survive an election with your sanity intact

A week to go — or eleven months, if you’re a US voter — and the time has come to share with you my handy guide to surviving an election.

Step one: think about your goals. Mine are to keep my cool, keep my friends, learn a little about the world and cast my vote wisely. You might well share these goals — but bear in mind that most of the people you will encounter on the news or on social media have very different aims in mind: they would like you to be excited, if not downright angry. Therein lie the clicks, the views and sometimes the votes, too.

It follows that we need to be thoughtful about what sort of political news we watch and read. There is plenty of excellent analysis out there, but one needs to seek it out. Twitter has its merits as well as its faults, but it has been a while since I saw a really good explainer go viral on Twitter.

Step two: find out about the issues. I can think of a good newspaper that provides detailed analysis of policies, but it is not the only source. There is a rich seam of blogs run by academics, while think-tanks such as the Institute for Fiscal Studies, the Resolution Foundation, The King’s Fund and many others have claim — justifiably — to provide unbiased and dispassionate analysis. Others clearly lean to the political left or right, but even those are far more likely to educate you about a given policy issue than watching the television news or reading your Facebook feed.

I realise that nobody is going to plough through all those policy papers. Instead, pick a topic that matters to you — maybe climate change, maybe Brexit, maybe healthcare — and read a few pages of wonkery. I’d be surprised if you don’t learn something both interesting and valuable within five minutes.

Step three: don’t obsess about all the lies. The use of the lie in politics is mutating. Once politicians made questionable claims in the hope that the deceit would pass unchallenged. These days, one of the weapons of political warfare is to make a false claim in the full expectation that it will be rebutted, and the outrage about the lie will crowd out other stories. (See also: “£350m a week for the National Health Service”.) By all means shoot down the lie — but then move on.

There are people whose heroic task is to fact-check all the important claims made in media interviews, debates, election leaflets and on social media. Given that some fairly dark propaganda can be quietly circulated on social media, this is not an easy task. As Joseph O’Leary, senior fact-checker at the UK charity Full Fact observes: “fact checkers are only as good as the claims they notice”. There is also the “bullshit asymmetry” principle: it takes 10 times as much effort to refute bullshit as it does to produce it.

Professional fact-checkers could be forgiven for being outraged at the task our political discourse has handed them. Yet the best of them are rigorous, fair, transparent — and careful not to amplify false claims by endlessly repeating them as part of a fact-check.

Step four: vote tactically. Yes, it would be nice to have a rational electoral system, but we don’t. So check out how the votes went in your local area in 2017 and 2015. (For goodness’ sake, don’t trust the bar graphs on any election leaflets shoved through your door.) In most cases, the choice is simple: pick whichever you prefer of the two leading candidates in your area. For extra credit, you might try to find out whether the incumbent lies on the sane or insane wing of their own party — although many of the sane incumbents seem to be quitting politics, which is not encouraging.

I realise it might be tempting to exercise a protest vote, and that is every voter’s right. But bear in mind that the smug glow of ideological purity had better feel pretty good to make it worthwhile, because some of those protest votes are going to prove awfully counterproductive.

Step five: if you’re having a conversation about politics, try to learn something. There is no point in having a shouting match with friends and neighbours, and it is equally fruitless to sit around with like-minded people commiserating with each other about how terrible the other lot are. Why not, instead, ask what people have found most noteworthy about the campaign? An intriguing person, maybe, or a weird policy, a columnist or a podcast they’d recommend? When someone expresses an opinion, whether you agree or disagree, ask them to elaborate.

Be curious. You might learn something — and the psychological research suggests that they might learn something, too. In my own fond recollection — which is, no doubt, a nostalgic delusion — politics used to take the form of an argument between reasonable people about the best way to solve the country’s problems. If it is now evidence-free rather than evidence-based, insulting rather than respectful, destructive rather than constructive, then that’s something we need to change.

And since I can’t control what everyone else does, I suppose I’ll have to start by changing myself.

Written for and first published in the Financial Times on 15 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Receive these posts by email

(You can unsubscribe at any time)

Undercover Economist

Why we should all be playing games

“British politics is full of people who think they’re playing mah-jong but they’re actually playing Ludo.” Wise words from Robert Shrimsley on the Financial Times’s politics podcast — but I fear the situation is even worse. British politics may be full of people who aren’t playing any good games at all. That would be a shame for them, and for us. Games are wonderful; we should all be playing more of them.

In truth, any sort of serious hobby seems to be valuable. Many of the smartest people have at least one: Albert Michelson, the physicist who measured the speed of light and won a Nobel Prize, painted well, played the violin, and was a seriously good billiards player.

Billiards is a good game,” he once announced. But it was not as good as painting. Painting was not as good as music. “But then music is not as good a game as physics.” Michelson was not alone. One long-running study of scientists, begun by the psychologist Bernice Eiduson in 1958, found that the most successful scientists tended to pursue arts, sports or music to a high level. In contrast, the less successful scientists “had no comments on hobbies or artistic proclivities either because they had none or found them irrelevant to their work”.

But of all the deep pastimes one might embrace there’s nothing quite like a tabletop game to sharpen the mind, strengthen friendships and ease the soul. A quick internet search will produce countless explanations of why boardgames are good for children — they get them away from screens and social media, subvert family hierarchies, allow them to experience success and failure in a safe environment, and teach social and cognitive skills.

I have no argument with any of that, but games should not just be for children. All those benefits accrue to adults, too.

Almost a decade ago I interviewed Klaus Teuber, creator of The Settlers of Catan, one of the best and most successful modern boardgames. “You can know someone for 10 years,” Mr Teuber told me, “and the first time you play a game with them you see a side you never saw before.”

It’s true. A good game is a refreshing change of tone from gossip or dinner party chit-chat about politics or house prices, yet it remains a convivial activity for consenting adults.

Games can be a serious matter, of course. War games have been used by the military since the early 1800s, when the Prussian army’s love of Kriegsspiel was widely thought to be one of the secrets of their military success. A tabletop war game uses models to represent troops, dice to represent the vicissitudes of war, and an umpire to introduce the possibility of miscommunication. It teaches deeper lessons than simply thinking and planning, while being just as safe.

Thomas Schelling — a cold war strategist and winner of the Nobel Prize in economics — once wrote: “One thing a person cannot do, no matter how rigorous his analysis or heroic his imagination, is to draw up a list of things that would never occur to him.” War games offer a solution to that conundrum: the experience of trying to outwit a gaming opponent makes the unimaginable start to seem familiar.

More elaborate field exercises can produce a great deal of understanding. Steven Johnson, author of Farsighted, argues that a major US Navy war game exercise in 1932, “Fleet Problem XIII”, highlighted the vulnerability of US naval bases to attack from Japan. The game produced the insight, if anyone cared to use it.

But the highest form of gaming is, of course, the role-playing game, of which Dungeons & Dragons is the most famous example. Role-playing games are notoriously difficult to describe, but they combine the dice-rolling rules of a war game with the long-running characters of a soap opera, and a healthy dose of improvised theatre and “let’s pretend”.

Martin Lloyd, the creator of the children’s role-playing game Amazing Tales, argues that such games have all sorts of benefits: they bring friends together, inspire individual and collective creativity and require problem-solving. They have sometimes been used with more ambitious therapeutic goals in mind — for example, to help people on the autism spectrum develop social skills, and as an alternative to group therapy for military veterans. But for most gamers the point of games is that they are enjoyable in a deeper way than most mere entertainments. They create moments of enchantment to rival the finest music or theatre. A good game has you solving puzzles, throwing yourself into improvised acting, and then helpless with tears of laughter. The friendships I’ve forged over the gaming table have been the ones that have lasted.

But Mr Teuber put it best. “Every day we work hard and we make mistakes and we are punished for those mistakes. Games take us to another role where you can make mistakes and you don’t get punished for them. You can always start another game.”


Written for and first published in the Financial Times on 1 November 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Free email updates

(You can unsubscribe at any time)

Undercover Economist

What exactly is so bad about uncertainty, anyway?

The one certainty in politics at the moment is that it is uncertain. From a British point of view, there is the apparently endless game-playing over Brexit — coupled with the looming prospect of an unpredictable and highly consequential general election. I’m sure I don’t need to elaborate on the situation in the US.

The received wisdom is that political uncertainty is bad news, at least for the economy. Is that really true? And, if so, why? If we understand the problem a little better we may also have a sense of whether there is any chance of improvement.

The evidence from the research of various economists suggests that uncertainty is indeed a brake on economic activity. Nuno Limão and colleagues have shown that uncertainty over trade policy is itself a kind of barrier to trade. Meredith Crowley and colleagues have found that UK companies were less likely to enter EU markets, and more likely to exit, if those markets were more exposed to the risk of a breakdown in Brexit negotiations. And Nicholas Bloom has found that uncertainty — measured in various ways — tends to be a cause of recessions as well as a consequence. So the problem is real, but what exactly is causing it?

One theory is that there is something deeply unsettling about ambiguity. Back in 1961, a promising young economist named Daniel Ellsberg explored this issue in the Quarterly Journal of Economics. (Mr Ellsberg later became far better known as the whistleblower who leaked the Pentagon Papers.)

Mr Ellsberg imagined a gamble involving two urns, each known to contain a hundred red or black balls in total. The first urn contains 50 red and 50 black balls. The second has an unknown mix. Let’s say I offer to pay you $100 if the ball you draw out of an urn is red. From which urn would you prefer to pick — the first or the second? Most people prefer the first. But people also prefer the first urn if they are paid $100 for a black ball instead. It’s not that they feel their chances are better — logically, the first urn cannot possibly be a better choice for both red and black. It’s just that . . . well, the known risk feels less uncomfortable than the ambiguous risk.

That aversion to the unknown may explain part of why uncertainty seems to corrode the foundations of the economy. But I suspect that the main problem is something far less ethereal.

Imagine you are an entrepreneur with plans and permits to build, say, a cardboard recycling facility in Peterborough. If there is a fairly soft Brexit, or no Brexit at all, you think that a large plant would be profitable. If there is a hard Brexit, or even no deal, you still think you can make money with a smaller installation. What do you do?

Simple: you wait. You wait even though you would want to build some kind of factory under any circumstances. You wait because you will make a better decision if the Brexit uncertainty resolves itself. The uncertainty makes it more profitable to delay.

That’s the theory. What do the data suggest? In the UK, private sector investment is remarkably weak, given that the UK has not been in a recession. In fact, it is hard to find a parallel where a growing UK economy has been accompanied by such feeble investment. This weakness has persisted since about the time of the 2016 referendum. It is weak both historically and compared with the situation in the US and Germany. Perhaps that is all a coincidence, but I rather doubt it.

In the face of uncertainty, companies will value flexibility. The economists Benjamin Nabarro and Christian Schulz, contributing to the Green Budget of the Institute for Fiscal Studies, make an intriguing argument. They speculate that given persistent Brexit uncertainty, this desire for flexibility is being satisfied by hiring workers instead of making large investments in capital. That is a way to expand output without doing anything irreversible. It’s good news for jobs, and bad news for investment and productivity.

My example of the cardboard recycling plant implied that uncertainty will tend to depress investment, but uncertainty is not always an obstacle in that way. If the building permit for that recycling facility was about to expire, making this a now-or-never decision, you would find yourself making your best guess and building something. If the uncertainty would not be resolved until 2025, you might also decide the costs of delay were too great, and build immediately.

There are even cases where uncertainty encourages exploratory investments: not knowing what will happen, you try to ensure that you have a toehold in every possible future. For example, the mere possibility that a large country’s government might get serious about climate change encourages research into low-carbon technologies.

Not all uncertainty depresses investment, then. But if there is a scenario guaranteed to put everyone’s plans on ice, it is this: a major decision with weighty consequences that is forever being postponed. If that reminds you of anything, you are not alone.

Written for and first published in the Financial Times on 25 October 2019.

My new podcast is “Cautionary Tales” [Apple] [Spotify] [Stitcher]

Free email updates

(You can unsubscribe at any time)

Previous Next


  • 1 Twitter
  • 3 RSS
  • 5 Podcasts
  • 6 Facebook


  • Fifty Inventions That Shaped the Modern Economy
  • Messy
  • The Undercover Economist Strikes Back
  • Adapt
  • Dear Undercover Economist
  • The Logic of Life
  • The Undercover Economist

Search by Keyword

Free Email Updates

Enter your email address to receive notifications of new articles by email (you can unsubscribe at any time).

Join 181,483 other subscribers

Do NOT follow this link or you will be banned from the site!