Undercover Economist

It’s my birthday soon. I won’t confess to my age, although I am relieved to discover that there are still more people in the country who are older than me than are younger.

I am certainly old enough to worry about whether I’m past my prime. But that all depends. David Beckham is certainly past his prime and he’s younger than I am. Footballers peak at 26, if the winners of Fifa’s World Player of the Year award are any guide. Heavyweight boxing champions tend to win the title in their late twenties, although with a spread from 20 (Mike Tyson) to 45 (George Foreman). Sprinting is even more of a young man’s game: Carl Lewis first won Olympic 100m gold at 23, Jesse Owens at 22, and Usain Bolt at 21. The average age at which a male sprinter wins the Olympic gold medal is just under 24.

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Companies are always on the lookout for cheap ways to reward their employees, and what could be cheaper than a grandiose title or a purely symbolic “employee of the month” award? As the comic-strip character Dilbert’s pointy-haired boss once announced, “I’m promoting you from senior engineer to lead engineer. The pay’s the same but people will disrespect you less.”

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“A wiseguy sees things if there are wiseguy things to see,” wrote Joe Pistone, the FBI agent better known as Donnie Brasco – the name under which he managed to infiltrate the mob. But what are the wiseguy things to see? And how is a wiseguy to know he isn’t dealing with the likes of Joe Pistone?

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From the 15th April, 2006.

For nearly two months, a glossy magazine from my mobile phone company has been lying around the place. I took it with the intention of choosing a decent calling plan, but so far I’ve made little progress. Occasionally, I pick it up and thumb it listlessly but cannot get my mind around the different pricing options.

The permutations include on-peak, off-peak, in-network, out-of- network, joint accounts, “bundles” of this and that, and a variety of additional offers conditional on my signing some form of longer term contract. The choice is bewildering.

Usually, I have little sympathy with those who complain about the agony of choice. If the choice is important, such as when you buy a house, then it’s good to have the choice even between fine details. If the choice is not important, such as that between the 55,000 drinks alleged to be available at Starbucks, then few of us acquire grey hairs making it.

Continued at timharford.com.

“You inched towards the dark side,” joked one behavioural economist after he read a recent column in which I hinted that his field has some merits. It was a quip that got me thinking, because behavioural economics does indeed have a dark side. Behavioural economists study the psychology of economic decision-making, and if they are any good at their task they will discover something the unscrupulous salesman could use to his advantage.

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From 8th April, 2006:

Anguish in Hackney. Our neighbours’ daughter – let’s call her Georgina – just missed out on a place at the local comprehensive school, a brand-new “academy”, well-funded, staffed by uber-teachers, designed by Sir Richard Rogers, with meals by the River Cafe and an organic kitchen garden laid out by Jamie Oliver.

The school is a five-minute walk away and Georgina is the brightest girl in her class, but she was unlucky. With eight applicants for every place, her name simply didn’t emerge from a carefully stratified lottery designed to draw children from every ability range and from near and far.

Now what? If her parents do nothing, Georgina will have to commute across London to a school with places going begging. No prizes for guessing whether it will be a good school. But her parents won’t leave it like that. They may head for commuterland, but more likely will remortgage the house to put her through private school. Neither option is appealing to both parents who work for modest wages at an inner-city charity, but the alternative is worse.

Continued at timharford.com.

My wife and I only argue about the big issues, such as whether it’s a good idea for her to leave utensils in the sink. For the record, clearly not: it means that coffee-filter cones and colanders which need nothing more than a quick rinse are infected with deposits of grease from other dishes. My wife is simply creating work.

The other day, as I was running a sink of hot, soapy water in order to clean a coffee-filter cone, I mused on an inconsistency: we celebrate creating jobs in the wider economy, but complain bitterly about creating them around the house.

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From 1st April, 2006.

The Labour party is accused of taking loans of £4.5m and rewarding lenders with life peerages. In the US, where everything is bigger, lobbyists spend at least that per congressman; annual spending is more than $2bn a year. Only an economist, then, would ask why there is so little money in politics.

We have seen countless hand-wringing books arguing that democracy is for sale, and, given the plentiful supply of scandal, this is easy to believe. But something doesn’t add up. Assume for a moment that the most pessimistic hand-wringers are right and the government really is for sale. How much would you pay for it? In the UK, government spending is nearly half a trillion pounds a year. If anything, this is an underestimate of how much it would be worth to control the government, since if I was an industrialist with the government in my pocket, I could order that foreigners be fended off with tariffs, and domestic competitors be bound fast with red tape.

Continued at timharford.com.

Life presents us with some very large decisions: where to live, whom to marry, whether to have children. Is there any reason to believe that we make these choices wisely?

Don’t come to an economist for the answers. When it comes to choice, classical economics leaps to the punch line and works backwards: if both Betty Sue and Sally Ann are willing to marry you and you chose Betty Sue, the economist can only conclude that you preferred Betty Sue. Whether the marriage made you happy, or you were right to choose her, is none of the economist’s business. Game theory, for instance, may tell you how to get what you choose, but not how to choose.

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From 25th March, 2006.

The British edition of my book, The Undercover Economist, is out soon, so I won’t be able to keep my eyes off Amazon.co.uk. The function of Amazon is to allow people to buy your book, but it also provides a “sales rank” showing how many books are selling, and it collects readers’ reviews. The sales rank changes every hour and it’s a drug. The reviews, whether good, bad or crushingly indifferent, are nearly as addictive.

The Undercover Economist in me wonders why anyone would write a review and, given that people do write reviews, why anyone would pay attention to one. Writing a review takes time and effort and appears to offer no reward. At the time of writing, about one in 500 buyers of the American edition of my book had left a review. The other 499 hadn’t bothered. This is as economic theory would predict.

Continued at timharford.com.

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
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