Monthly Archives: October 2010

Should the government hire people to bury banknotes down disused mine shafts, thus stimulating the private sector to dig them up again? Keynes argued that there were circumstances in which even government spending as wasteful as this could be economically worthwhile, and ever since he did, people have been tying themselves in knots about how fiscal stimulus actually works.

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From 17th June, 2006:

It may surprise casual observers of the beautiful game to discover that one of the heroes of English football this year was a German. Jens Lehmann, the Arsenal goalkeeper, saved a last-minute penalty against the Spanish side, Villarreal, thus earning Arsenal a coveted spot in the Champions League final.

Penalties pit the goalkeeper against a lone striker in a mentally demanding contest. Once the penalty-taker strikes the ball, it takes 0.3 seconds to hit the back of the net – unless the goalkeeper can somehow get his body in the way. That is simply not enough time for the keeper to pick out the trajectory of the ball and intercept it. He must guess where the striker will shoot and move just as the ball is being struck. If Lehmann had not guessed correctly, he wouldn’t have been a hero.

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For many years the received wisdom in economics has been much the same as that in Buddhism: money doesn’t make you happy (see, for instance, “The Seven Secrets of a Happy Life”, FT Weekend Magazine, August 28/29).

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From 10th June, 2006:

I am becoming a dab hand at turnip soup now that Family Harford eschews supermarket mange-tout in favour of a weekly organic box. I have to confess that I miss the marvellous mange-tout, bursting with freshness and rushed to me straight from Nairobi in a battered old 747.

The mange-tout is, sadly, now beyond the pale. My tree-hugging friends condemn the purchase of anything that has travelled what they judge to be excessively long distances – in the jargon, anything with too many “food miles”. The term echoes “air miles” and the distinct impression we get is that anything you buy outside a farmers’ market has been flown first class at terrible cost to the planet.

The truth is somewhat different. Hardly any food miles are, in fact, air miles. Just under half of them are customers driving to the shops, the rest are vans and lorries shipping food around on the roads. Air and sea miles are a rounding error – 0.1 per cent for air and 0.04 per cent for sea, according to a report on food miles commissioned by the Department for Environment, Food and Rural Affairs and published in July 2005.

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The moral case for doing more to help the very poor is unanswerable. The practical case is more problematic: much foreign aid has been spent poorly in the past and we still have plenty to learn.

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From 2nd June, 2006:

Every now and then, the markets are gripped by a strange madness. The recent sudden sharp slump in share prices has many commentators recalling October 1987, when the Dow fell by more than a fifth in a day. What is odd about that “Black Monday” is that the collapse was so swift and yet so brief – in retrospect, just a blip in a 20-year bull market.

Small wonder that at such times we can only conclude that animal spirits are at play. What else could explain buying frenzies and desperate crashes? The FT’s own Tony Jackson recently put this received wisdom very clearly: “What we have here is the Greater Fool Theory. This says that even though you are perfectly aware a thing is overvalued… you keep buying it anyway. Why? Because the thing is still going up. When the time comes, you will find a Greater Fool to take it off your hands. Until, of course, the music stops, and the Greater Fool turns out to be you.”

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Sir Alec Issigonis, the designer of the Mini and the Morris Minor, once declared the camel to resemble “a horse that was planned by a committee”. He has a point: this column wasn’t written by a committee either.

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From 26th May, 2006:

If you’re lucky enough to visit the spectacular Kunsthistorisches Museum in Vienna, your eye may be caught by one of Pieter Bruegel’s best known works, the “Peasant Wedding”, which depicts a feast table of peasants absorbed in eating and drinking while a vast stretcher of pies is carried past.

It seems that the lives of our 16th-century forebears were not always cripplingly harsh. Economists, being economists, wish to know just how poor or prosperous life used to be. We have historical information about how much money people earned, but that is no use unless we know how much things used to cost. So economists calculate the inflation rate, which is an attempt to adjust for the effect of increasing prices.

But which increasing prices? Flipping through the Montgomery Ward & Co mail-order catalogue, which began publication in 1893, the economic historian Bradford DeLong calculates that a simple bicycle cost 260 hours’ wages for the typical worker in 1895, and just 7.2 hours’ wages in 2000. But silver spoons cost more hours of labour today than in 1895. Your personal inflation rate depends on whether you are spending your money on bicycles or spoons.

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Is the world like Play-Doh or like Lego? That might seem like an odd question for an economist, but there were some provocative characters present at a recent “Growth Week” at the London School of Economics, organised by a new joint venture between Oxford, LSE and the Department for International Development.

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Tim Harford’s blog

This blog is no longer updated but it remains open as an archive.

Tim, also known as the Undercover Economist, writes about the economics of everyday life.