economics · non-fiction

The Under Cover Economist Strikes Back- Tim Harford

One wonders why the hell one had become so interested in the economy all of a sudden from nowhere? One wonders why she had bought an economics textbook in the first place after finishing schooling 15 years ago? One wonders whether it was an accident for having purchased a book which actually did not make any sense when the book was opened? One finally wonders apart from being travelled back in time for more than a decade why the hell her time machine apparently does not clock back? Sigh!!!!! These have been some of the thoughts that were running in my mind while writing this small text.Okay, I again get back to the essence of creativity explained by Liz Gilbert. I do not know why time and again I get back to her text though I might not be able to quote the exact words by her. Creativity in any aspect is time bound. This universe gives us plenty of ideas and our words in the case of any text changes. To be very frank, when I finished the book that was mentioned in this title, I planned to give a different start to this post. But, things had changed in the last 2 days and my thoughts had been drifted back to “my- way -of -writing” blog posts and I took some time to gear up to this speed after having a super depressed night for no reason.

Like I said I never had the intention to read a book on macroeconomics. I wanted to read something on micro economics, money-market instruments, capital markets, etc as I wanted to learn to trade.But things turned out to be different after I started reading the book. The catch is there was so misnomer.
I wanted to buy The undercover economist that was supposed to be micro economics. Alas!!! Here comes my macro economics book.

The foremost thing that came to my mind when I started reading the first chapter was my economics teacher in school and my 11th-grade class.We had extensive text on macro economics and she was like “Hooligans do follow me and don’t create pandemonium and stop those shenanigans.”Then later, I remembered the huge macro economics book I had in my sophomore year of college where everything from fiscal policy, monetary policy, inflation, the central bank, price indices were explained in detail and we were made to write tonnes of essay answers for our examination.Carrying that book exhausted more energy in addition to reading the heavy content.These concepts were soon forgotten when we started working and everything disintegrated into flames until 2008 when my colleagues started losing jobs and I had to read Wikipedia to catch up on the world news and the reasons for the Great Recession and Collapse of the Lehman Bros.

What I liked about this book was about the interrogative structure and detailed practical replies given by Tim Harford. He had rekindled my memory to refresh things about the two different school of thought in macro economics- Keynesian Theory that focussed on demand drives of the economy and second, the classical theory that focussed on supply drives.This book talks about both the sides of the coin on macro economics- the boon and bane. Also introduces the reader to several other economists that had contributed to the theory.

I can never forget the beautiful example of baby-sitting recession quoted by him as a chapter. When one reads this chapter they wouldn’t forget about when the central bank can print money notes and when not to.This book also taught me about how the left and right centres come up with the fiscal policies and made me practically think what is the present government doing in India when they had reduced the tax claims from the public.He neatly talks about the stickiness in prices coz of which whatever measure is being taken by the central bank will take the time to curtail inflation or any price structure.The story of Brazil was cited as an example for ghost currency and what steps the government took to curtail the hyperinflation and how the imaginary currency was taken as a measure to get the exchange rate of cruzeiro and the replacement of cruzeiro.

So far, I never knew inflation is needed for the economy. This book talks about how much enough inflation is required to boost the production and to reduce the unemployment, increase the demand, etc.He also talks about how inflation impacts the economy by the use of spending multiplier and consumption smoothing and also the difference between nominal and real inflation levels.

The prison-camp recession explained the classical economic theory and how supply side of the economics makes a difference.The right trade-off is required between spending levels and paying off debts.Harford suggests that more spending is needed during the recession and less during the boom.Ideally, the government does the opposite and resort to incorrect adjustments in the monetary and fiscal policies.

An example was cited about what Henry Ford did before the Great Depression to increase the wage level of workers in the Detroit plant and getting all the workforce diverted to his plant and how unemployment became pandemic.At this juncture there was a good explanation on structured employment and cyclical employment and why structured employment is more permanent and due to the skill set gap.Beveridge curve was explained and the reader would naturally go through Wikipedia to get more insights on the curve pattern.

One thing what worried me when I read the chapter on Bossonomics was that India was criticized for its worst work culture in the textile industry and how Indian workers productivity was way less due to the worst management of the textile mills. I had a little setback when I read it but actually Tim was right in this.The modernization of textile mills and better bosses with training and hands-on would do justice to prevent this happen in future also. Not only textile industry, this trend exists in all the firms run by government and family business.It’s time that India rethinks and comes up with models and cut off the bureaucracy and red-tapism.I guess the current government is taking steps to instil competitiveness and thereby improving managing quality.

Ahh!!! The most interesting part according to me was the doomsday machine that was put across in this text. I loved its logic and reminded me of fictional novels and Hollywood movies.He also talks about why central back as an independent authority is good and bad quoting examples of Germany and Greece respectively.We also get to read about the differences between GDP ,GNP and how they are calculated and can be calculated.

Happynomics- this reminded me of a text that I read about the correlation between the mood of public in general and stock market indices. I was surprised that Bhutan has happiness in its economy as a metric to gauge the country’s status. He also talks about what would happen if population keeps growing and the non-renewable resource getting depleted in the future.I love to quote one of the Keynes words – “In the long run, all are dead” and it is true.It had been noted that the population growth has been reduced and people have come up with scientific inventions and innovations to make use of the resources and  the alternative source of energy generation.

The inequality- It is not very pleasant to look at the statistics of our country and see how income is being distributed and how our economy is in a bad shape. But looks like India is growing and something better would happen in future.One last thing what I liked about the chapter on inequality is: he talks about how people compare their incomes relatively and not absolutely.This reminded me of many people whom I know, though they are not millionaires but are doing fairly well and not satisfied in life and resort to cribbing and irritate the family on that subject.

Finally, he talks about the future of macro economics and what the subject couldn’t do earlier to provide signals about recession cycles and the other limitations. He also does credit the macro economists for so much of effort put by them coz they need to be all rounders to provide better advisory services.

I rate this book as 3.5/5. The reason being, there should have been some pictorial representation of stuff explained rather than just the text.This book also boasts more about anglo- speaking economics and has a touch of racism and bias.Overall a neat representation on how to run or ruin the economy.


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