En­ter­tain­ing yet en­light­en­ing tales from the world of eco­nom­ics

India Today - - LEISURE - By Ro­hit Saran

Do you know why prices don’t fall when in­fla­tion falls? Or how in­fla­tion rate af­fects ex­change rate? And how both the rates af­fect in­ter­est rate? If you don’t know th­ese an­swers, which is very likely un­less you have stud­ied eco­nom­ics, it’s not your fault. The blame goes to econ­o­mists and busi­ness jour­nal­ists who con­tinue to make eco­nom­ics less anec­do­tal and more an­a­lyt­i­cal, less be­havioural and more the­o­ret­i­cal.

Tim Har­ford, a World Bank econ­o­mist and a Fi­nan­cial Times colum­nist, is one of the rare breeds who have tried to make eco­nom­ics in­ter­est­ing. In his first and supremely read­able best­seller The Un­der­cover Econ­o­mist, Har­ford had con­cluded by say­ing “eco­nom­ics is about peo­ple—some­thing that econ­o­mists have done a very bad job at ex­plain­ing. And eco­nomic growth is about a bet­ter life for in­di­vid­u­als—more choices, less fear”. In this se­quel, Har­ford con­tin­ues with his mis­sion of bring­ing power of eco­nom­ics to life. And he has al­most suc­ceeded. For ex­am­ple, wouldn’t you want to know:

How Henry Ford in­vented un­em­ploy­ment (yes that’s true, al­most)?

Or up to what point does in­crease in in­come in­crease hap­pi­ness and at what point does more money stop bring­ing more joy?

Or how ask­ing an In­dian man­ager whether he is a Brah­min and a bach­e­lor can re­veal things about the qual­ity of man­age­ment in In­dian com­pa­nies that is not pos­si­ble to find oth­er­wise?

It’s through such ques­tions that Har­ford ex­plores and ex­plains one macro eco­nomic con­cept at a time. The Henry Ford ex­am­ple ex­plains how higher wages and fewer work­ing hours not only in­crease worker wel­fare, but also un­em­ploy­ment. The in­come-hap­pi­ness cor­re­la­tion is ac­tu­ally a way of ex­plain­ing the im­por­tance—and lim­i­ta­tion—of dif­fer­ent ways to cal­cu­late of na­tional in­come ( GDP, GNP, GNI…). The sec­tion on poor qual­ity of In­dian man­age­ment is about the im­por­tance of com­pe­ti­tion in an econ­omy. The level of com­pe­ti­tion, and not the qual­ity of man­age­ment ed­u­ca­tion, is the key de­ter­mi­nant of the qual­ity of man­age­ment in a coun­try.

The book is a di­a­logue with the hy­po­thet­i­cal reader try­ing to fig­ure out the econ­omy with a se­ries of ques­tions and the au­thor pro­vid­ing the an­swers. It’s an in­no­va­tive writ­ing for­mat, but drags in places. Per­haps 280-page di­a­logue is too much to sus­tain— in­ter­est­ingly. If you cut out the oc­ca­sion­ally forced link­ages in di­a­logue, the book is en­joy­able. Read it to know how your house­hold econ­omy and the na­tional econ­omy in­flu­ence each other.

THE UN­DER­COVER ECON­O­MIST STRIKES BACK by Tim Har­ford Lit­tle, Brown Price: RS 599 Pages: 307

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