Thoughts on economics and liberty

The delightful populariser of economics: Tim Harford

I've been very pleased to read Tim Harford's earlier books: The Undercover Economist (2006) and The Logic of Life (2008). I don't recall much from these two books at the moment, but the impression remains that he is a sensible fellow.

I just finished reading his later book, Dear Undercover Economist (2009) and was once again delighted with the entertaining way in which he presents the economic way of thinking. I'm reproducing two of his short "articles"  below. These are both (among tens of others) readily available on his blog/website.

Will more money make me happier?

Dear Economist,

Will having more money make me happier?

– Karl Johnston, Glasgow

Dear Mr Johnston,

I have been asked the secret of happiness before, but your question is rather specific. To answer it we need to turn to economist Andrew Oswald.

He has worked with numerous collaborators to calculate a “happiness equation”, based on analysing thousands of people’s responses to questions about their contentment. His conclusion is that, assuming nothing else changes, more money makes them happier. He backs it up with a piece of work studying what happens to people who unexpectedly win lotteries – they, too, become happier.

This is what economists expect; not because we believe that people value money for its own sake, but because money can buy all kind of things, and if none of them brought you any pleasure you’d have to be an exceptionally incompetent shopper.

So the simple answer to your question is yes, more money will make you happier. But be careful – simply pursuing money will not, if your relationships, health or job security suffer. Oswald shows that these are vastly more important than money. Getting married produces £70,000-a-year’s worth of joy, although given the cost of weddings these days that’s not much of a bargain. Staying healthy and employed are more important still, worth tens of thousands of pounds a month.

Envy plays a sinister role. Oswald shows that happiness increases with higher income, but it falls with higher expectations. The higher the income of your peer group the more depressed you tend to be. This is not good news for you: since you ask smart questions and read the Financial Times, you must expect a lot out of life. Oswald suggests that you are likely to be disappointed.

And here's another one:

Ideas are nice really

Dear Economist,

Governments like to promote innovation. But ever greater innovation means ever greater use of resources, disposability of goods, consumer spending and (one surmises) social envy. Is there a case for suppressing innovation?
Marion Hancock, by e-mail

Dear Marion,
There are two ways to raise purchasing power: investment or innovation. Investment means buying big machines so that each worker operates more equipment. It is hard to see how this is more environmentally friendly than innovation. It is also self-limiting: all the investment budget goes on replacing worn-out machines.
By contrast, innovative ideas consume no resources at all. They are particularly useful when there are many people on the planet, because everyone can benefit from a piece of software, a better design for the mousetrap or the theory of germs. Not everyone can benefit from my electric hand drill.
Nor do innovative products use more resources. Today’s expensive consumer products are tiny, or do not physically exist at all – for example, the 4,000 issues of The New Yorker that my wife gave me for Christmas are stored digitally.
It is true that if I was poor enough then I would have received no magazines, digital or otherwise. So perhaps you are not really in favour of suppressing innovation but of ending economic growth entirely. This has proved possible – for example, in Mao’s China or the dying days of the Soviet Union. Environmental Eden did not result.
At least an end to innovation might (you surmise) return us to the envy-free days when my great grandmother might have been your great grandfather’s scullery maid.
But I don’t wish to find out.

Sanjeev Sabhlok

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5 thoughts on “The delightful populariser of economics: Tim Harford
  1. Sudeep Shetty

    Loved This Article i really Njoyed This article, I hope Mahesha Prasad Neerkaje  will read this article as he asked you What is the meaning of Being Rich  

    I will surely read this books , any how presently reading Wealth of Nation of Adam Smith , Took 2 Months to complete 35 Pages due hectic Sheduled of Work , i hope i will get the time to read the book
    Thx  Sanjeev for Sharing Some of the Information 

  2. Sanjeev Sabhlok

    Sudeep, it might not be a good idea to read Adam Smith. At this rate you'll take years to finish his work. Far better to read simpler summaries of his work, and many other simpler documents on economics, first.
    Start with this:
    Then this:
    Then this:
    And so on (Bastiat, Simon, Friedman, etc.). Many resources are linked here: and elsewhere on the web. 
    Once you've got the hang of things, then read good compilations of extracts from Smith (e.g. I prefer Haggerty's The Wisdom of Adam Smith (liberty fund)), and PJ O'Rourke's summary.


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