The Undercover Economist Strikes Back: How to Run--or Ruin--an Economy

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Overview

A provocative and lively exploration of the increasingly important world of macroeconomics, by the author of the bestselling The Undercover Economist.

Thanks to the worldwide financial upheaval, economics is no longer a topic we can ignore. From politicians to hedge-fund managers to middle-class IRA holders, everyone must pay attention to how and why the global economy works the way it does.

Enter Financial Times columnist and bestselling ...

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The Undercover Economist Strikes Back: How to Run-or Ruin-an Economy

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Overview

A provocative and lively exploration of the increasingly important world of macroeconomics, by the author of the bestselling The Undercover Economist.

Thanks to the worldwide financial upheaval, economics is no longer a topic we can ignore. From politicians to hedge-fund managers to middle-class IRA holders, everyone must pay attention to how and why the global economy works the way it does.

Enter Financial Times columnist and bestselling author Tim Harford. In this new book that demystifies macroeconomics, Harford strips away the spin, the hype, and the jargon to reveal the truth about how the world’s economy actually works. With the wit of a raconteur and the clear grasp of an expert, Harford explains what’s really happening beyond today’s headlines, why all of us should care, and what we can do about it to understand it better.

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Editorial Reviews

Publishers Weekly
11/11/2013
In his follow-up to The Undercover Economist, Financial Times columnist Harford brings vigor and even humor to otherwise dry topics such as the difference between GDP and GDP per capita. Presented as a Socratic dialogue between Harford and the reader, with questions that can veer cutesy and answers that become arch, the reader is treated nonetheless to a thorough happily concise explanation of economic policies and issues. After discussing microeconomics and the Keynesian approach, which Harford openly supports, the last third of the book focuses on macroeconomics, an analysis that takes into account more outside influences. By Harford’s own admission, the complex nature of culture and populations makes the outcome of any economic policy virtually impossible to forecast, which makes the book’s title disappointingly inaccurate. The economist not only doesn’t strike back, he doesn’t strike at all. By presenting explanations of, but no opinions on, the efficacy of economic responses, Harford leaves it to readers to form their own conclusions as to why the microeconomic stimulus plan in the U.S. was neither more nor less effective than the more macroeconomic austerity measures in Europe. However, by remaining noncommittal and demystifying the topic, Harford brings clarity to what has often been comprehensible to only a select few. Agent: Zoe Pagnamenta, Zoe Pagnamenta Agency. (Jan.)
Library Journal
Having taught us the basics in his best-selling The Underground Economist, Financial Times columnist Harford here gives us instruction in macroeconomics, e.g., the study of how the global economy works, starting with a user-friendly question: What would you do if you ran the world's economy? He also explains why we should care.
Kirkus Reviews
2013-11-18
It's hard enough to manage, or even understand, our own finances. The "Undercover Economist" seeks to teach us how to manage the economic affairs of nations. Before we can fix the world's dysfunctional economies, Financial Times columnist Harford (Adapt: Why Success Always Starts with Failure, 2011, etc.) would have us understand the forces that make national and global fortunes thrive or fail--i.e., macroeconomics. Harford is a Socratic sort of tutor; here, he presents the questions from the point of view of a wonkish student. Money, we learn, encompasses three things: a store of value, a medium of exchange and a means of accounting. Harford neatly defines such terms as "nominal GDP targeting," "recession," "liquidity trap," "price rigidity," "consumption smoothing" and "spending multiplier." Remarkably, it is all quite accessible and occasionally waggish. Readers will easily follow a discussion of stimulus versus austerity and determining the right amount of inflation (3 or 4 percent). The author also notes that printing money is sometimes a good practice. John Maynard Keynes, the patriarch of modern macroeconomics, is the right fellow for the short term, and the classic economists are fine for the long haul. As the recent crisis teaches, understanding and managing a global economy is difficult and complex, requiring many thinkers. Harford examines Keynes, Paul Samuelson, Paul Krugman, Joseph Stiglitz and other wise practitioners. There is much to learn from the Underground Economist's primer, though against whom he is striking back, as the title has it, isn't clear. Readers may not be called upon to manipulate the world's economies, but the next time a conversation turns to the "Phillips Curve," Harford's students need not be excluded. Uncovering cant and weak practice with some common sense and plenty of experience, Harford puts the art of macroeconomics within reach, making the unruly study considerably less dismal.
The Barnes & Noble Review

Economics is pretty boring at the best of times. When the system is humming along and most people are employed, subjects like interest rates, inflation, and financial stability seem dry to most. But in the midst of a grindingly slow recovery from the worst downturn since the Great Depression, the proportion of people that want a better understanding of how the whole thing works has grown; economics has sprouted up in Europe, and global debt commentary has even bled into stand-up routines, if only at a rhetorical level.

Tim Harford's The Undercover Economist Strikes Back goes a good way toward meeting this need, serving as a lighthearted compendium of the main fault lines of disagreement in the famously contentious field of macroeconomics, while also making a good-faith effort to show the relative merits of different points of view. It's written in a breezy manner, employing the same conversational question-and- answer style that structured its predecessor, The Undercover Economist: " 'Moderate inflation' sounds a bit like 'moderate pregnancy' to me," Harford quips. The book is littered with pop culture and literary references located at the beginning of each chapter, including two particularly chuckle-worthy excerpts from Douglas Adams's Hitchhiker's Guide to the Galaxy and The Restaurant at the End of the Universe, recounting the sad fates of the Alterian dollar and Flainian Pobble Beads and advising against using tree leaves as legal tender. This approach is good, because it helps dilute the two dominant emotions people associate with economics: tedium and dread.

Harford frames the book as "a determined and practically minded poke- around under the hood of our economic system...to figure out whether there is anything we can do to make it work better." He does this by hypothetically placing readers in control of the world's economy, prompting them to find out for themselves how to accomplish the above goal. While The Undercover Economist focused on microeconomics (the study of the economic phenomena underlying everyday transactions and business decisions), the sequel is about economists' attempts to understand the big picture.

Accordingly, most of the chapters are devoted to large-scale economic phenomena: money, inflation, stimulus, output gaps, unemployment, and gross national product, while the remainder focus on the theories that tie these things together, anchored by the analogy of a "babysitting co-op recession" first popularized by Paul Krugman, and the "prison camp recession" analogy of the IMF economist Robert Radford. The former, about a dysfunctional babysitting co-op using homemade vouchers in Washington, D.C., is meant to illustrate the main idea of Keynesianism: without enough money circulating around, an otherwise functional economy can fail, while the latter example, a prison camp in World War II that ran out of Red Cross supplies, demonstrates the classical view that economic activity can often be attributed to "policy, or something called exogenous shocks...things, good or bad, that strike your economy from outside."

I read this book while on holiday in Cork City, Ireland, where the national unemployment rate is approximately 15 percent, and found myself looking at the city through the prism of the debate laid out by Harford. Were Cork's previous high growth and low unemployment rates entirely due to over-investment in the country's now-collapsed housing bubble? After that "exogenous shock," is the current situation the new normal? Or do the Keynesians have it right, and all that's needed is a bit of stimulus to get people spending money again? Harford treats both perspectives with respect, while remaining honest about his own biases, best summarized by this insight from his questioner: "It feels like what you're saying is that I should run my economy like a tough bastard right-winger during a boom, and like a bleeding-heart left-winger during a recession."

Harford's trick is to make his interlocutor the driver of the conversation, having them ask questions and draw conclusions that follow logically from the long explanatory passages written in his own voice. The formula's an excellent way to introduce and build upon unfamiliar concepts; at times I felt like I was reading an innovative, new kind of textbook. It must be said, however, that the suspension of disbelief is difficult to sustain sometimes, as when the fictional questioner offers a supernaturally astute interjection on the subject of output gaps (periods when the economy is operating below its potential): "Hang on — if you assume that output follows a smooth trend, then you are basically assuming that all recessions are Keynesian recessions." Though the format works very well for explaining complex economic concepts, it's hard to ignore that both sides of the conversation are essentially Harford, possessing both his intelligence and facility with economic logic.

Perhaps the most welcome aspect of Undercover is its intent to honestly highlight the limitations of the discipline with respect to outsiders' impressions. Harford states again and again that macroeconomists should not try to make forecasts: "You don't expect your dentist to forecast the pattern of tooth decay, but you expect that she will be able to give you good practical advice on dental health." By the end of this book, you'll have learned so much that you'll be just as confused as the experts — and anything but bored.

Reviewer: Charles Reinhardt

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Product Details

  • ISBN-13: 9781594631405
  • Publisher: Penguin Group (USA)
  • Publication date: 1/16/2014
  • Edition description: Reprint
  • Pages: 272
  • Sales rank: 147,910
  • Product dimensions: 6.40 (w) x 9.10 (h) x 0.90 (d)

Meet the Author

Tim Harford is the author of The Undercover Economist, The Logic of Life, and Adapt. He is a weekly columnist for the Financial Times, and his work has appeared in The New York Times, Forbes, Esquire, Parade, New York, and Wired. Harford lives with his family in Oxford.

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  • Posted February 24, 2014

    It¿s odd in economic writing but Hartford makes a genuine attemp

    It’s odd in economic writing but Hartford makes a genuine attempt to understand and explain economics based on numbers without political bias. In a sea of books purporting to explain why the other guy is wrong and the writer is correct it’s nice, I think, to find an accessible writer focusing on what is provable. Well, arguable.

    Hartford has the enjoyable skill for making the difficult sound a little less so. His writing is accessible and his explanations easy to digest. Compared to his other books this one is different: he writes in question and answer form. I notice that other reviewers are bothered by it. The style lends itself to reading in smaller chunks - slogging through page after page of Q&A wears one down. But don’t be put off – it’s accessible and very readable.

    In this book he takes on the larger picture of macroecomonics with the same insight he uses in his other books. He lauds logic and history when it is repeatable and explores more deeply when it seems to fail us – we are human beings after all – as in unemployment. Topics include GNP, inflation, money, stimulus, and both the ‘babysitting’ and ‘prison camp’ recession.

    No doubt there are cranks on all sides deriding Hartford as leaning too far this way or that. It’s how economists who don’t write books make a living. But for the average interested reader there is much to learn from this very able teacher. You won’t come away understanding triple variable investment curves but you will have an uncommon insight into economy that ought to make you the life of the party.

    1 out of 1 people found this review helpful.

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