Undercover Economist

Provoked, perhaps, by my recent column mentioning that we didn’t know enough of our neighbours, my wife decided to try to organise a street party under the auspices of The Big Lunch. This is an attempt by the Eden Project (best known for gigantic greenhouses in Cornwall) to encourage people to … well, to organise street parties.

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From 18th March, 2006:

When I first came to London to seek my fortune, was taken out to lunch by a family friend with about three decades more experience than I. She cheerfully told me that I wasn’t worth the salary that my brand new job was paying me. She was right, as it happens, since I was an extraordinarily bad management consultant, but she was betting against the odds. The typical young person is worth more than he or she is paid. Young people who feel that the odds are stacked against them turn out to be right.

Older workers, on the other hand, tend to be overpaid relative to what they produce. This is not because they are less productive than the young – although many important skills do start to decline at the age of thirty, or even earlier – but because they are paid so much more. Decades of economic studies have produced the conclusion that average wages increase with age almost until retirement, yet average productivity seems to be flat or perhaps even declining after the age of fifty. (The studies are not unanimous, because productivity is very hard to measure and, of course, the averages hide huge variations from job to job and person to person). Perhaps my plain-speaking mentor was paid five times as much as I was, but if she was only three times as productive then I was the bargain basement employee.

Continued at timharford.com.

On New Year’s Eve 2007, the Financial Times, in its customary look at the year ahead, declared that “the US will skate along the brink of recession in early 2008, but should avoid tipping over the brink”. In retrospect, we can ruefully enjoy that forecast not because it proved to be wrong – although it was – but because it was wrong even as it was published. The recession actually began in December 2007, just as the FT was announcing that it wouldn’t begin at all. To modify the old quip, “prediction is very difficult, even when it’s not about the future”.

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It is a truth grudgingly acknowledged that mixed ethnic communities are not as mixed as they appear. In the school playground I find myself talking to the other white middle-class mums and dads, in spite of the fact that in a Hackney school there are plenty of parents who are neither. We know the white couple at number four but have had little contact with the African family at number two. It’s not something I am proud of, but there it is.

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From The Tipping Point to Nudge, the rise of pop-social science has been a noticeable feature of the past decade in publishing. Not everyone is impressed. I recently interviewed a professor of education who is an expert in policy evaluation. She lamented the fact that politicians tend to get their facts from popular social science books containing innacuracies. A couple of hours later, I interviewed a politician who was fizzing with excitement about a popular social science book. If only I’d been able to introduce them, the explosion would have been something to see.

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From 11th March, 2006:

Ann Marie Rogers is in a tough spot. She has an aggressive form of breast cancer, albeit at an early stage. It may kill her, and so she has been through surgery, radiotherapy, chemotherapy and a legal battle which, so far, she is losing. The battle is to get the National Health Service to pay for the cancer treatment her doctor has prescribed, the drug Herceptin. Last month the High Court ruled that the local NHS trust was within its rights to refuse to pay for the drug.

These are uncomfortable cases, but they can’t be avoided in a system where the government pays for healthcare. The NHS has limited funds and someone has to decide the most effective way of spending them. The buck stops with the National Institute for Health and Clinical Excellence (Nice), which regularly makes the headlines after refusing to recommend some treatment or other, most recently for brain tumours. (Nice will issue guidelines for Herceptin only after the drug is licensed for early-stage breast cancer by the European Medicines Agency.)

Continued at timharford.com.

Thanks to everyone who sent good wishes after my last “cancer scan” column, which described the year-long process of waiting for a precautionary test. I think that all is well with me, although it is hard to be sure: as I write, the scan still hasn’t happened.

This time the fault was with the paperwork. I showed up, having carefully followed the preparatory instructions I’d been sent, only to be told rather sniffily that I’d followed the wrong ones. “I’ve followed the instructions you sent!” “I didn’t send them.” “Well, I certainly didn’t send them.” Back to square one.

Under the circumstances, I hope you’ll forgive me if I have become strangely obsessed with NHS management.

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From 4th March 2006:

Family Harford is now safely installed in one of the grimmest parts of Hackney. Just outside the back door is a “massage parlour”, a kebab shop, a jerk chicken joint and a betting shop, not to mention flowers for the young man who was recently shot dead outside a local nightclub. At the front is a row of abandoned cars, courtesy of the garage just across the road and the other one just round the corner. Delis are there none.
Cities are agglomerations of bright lights and skyscrapers, but also of sharp elbows and grime. Technically speaking, they are collections of “externalities”. An externality is a cost or a benefit that affects bystanders. Aficionados of economics lectures will recall the quintessential example of the pollution from a factory that damages the business of the fish farm downstream.

Continued at timharford.com.

The most appealing aspect of an often bizarre Conservative election platform was the proposal to make it far easier for new schools to enter the state-funded sector. Under Tory proposals, anyone who passes regulatory muster can set up a school and bid to attract pupils, who will come neatly packaged with state funding. The Conservatives want to expand dramatically the range of choices, introducing new, innovative schools and perhaps reinvigorating older schools with the bracing winds of competition. But will it work?

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From 25th February, 2006:

My collection of Dire Straits compact discs languishes, unplayed, in the “ghetto” section of my music library. My decision to buy the albums dates back 15 years to a time when my brain was half-grown. The actual discs, though, are newer. They were bought for me by an insurance company after my flat was burgled and Money for Nothing, and much else, was stolen. I could have done with something aligned with my current tastes, but the insurance policy ruled otherwise. How should we rebuild after disaster strikes? Should we try to put things back as they were before, try to improve them or cut our losses? The question is much in the US consciousness six months after Hurricane Katrina flooded New Orleans and destroyed other communities along the Gulf coast.
Part of the problem is that the victims are kept out of the important decisions. My insurance company could have saved administrative expenses by writing a cheque and letting me modernise my music collection without interference. But such an approach might have left me hoping for occasional break-ins. Since a careless householder exposes his insurers to unnecessary risks, their meddling is perhaps a necessary evil.

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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