Little, Brown, £20 Order at a discount from the Independent Online Shop

Book review: The Undercover Economist Strikes Back, By Tim Harford

Our chief economic storyteller turns his talents to the big picture of recession – and recovery

Tim Harford is trying to do for macro-economics what he – and a handful of others – have sought to do for micro-economics. That is to de-mystify the subject, explaining in simple language what we know and don't know about the way the world economy works.

Get money off this title at the Independent book shop

Someone needs to, for this end of the subject is in serious disarray. Most economists failed to warn adequately of the risks in the run-up to the last recession, and now are confused about the best prescription for pulling out of it. We know quite a lot about how individuals and companies respond to economic stimuli and books such as Freakonomics by Steven Levitt and Stephen Dubner have brought the subject to millions. Harford's The Undercover Economist carried on this work. But while there have been a host of prescriptive books, there has been much less of a mission to explain.

So Harford takes us through the ambiguities of macro-economics, how it developed, the ideas of John Maynard Keynes and Milton Friedman, and also contributors less well-known to the outside world such as Bill Phillips and Andrew Osward. There are implications for policy. The meat of the book is how to deal with recessions, the central question facing the Western world now. But there are also nice diversions into the baby-sitting co-op that workers on Capitol Hill in Washington founded, Henry Ford's doubling of his workers' wages in Detroit, and why cigarettes were a currency in Germany in PoW camps. The first, by the way, failed because there were not enough sitters, the second succeeded because it cut labour turnover, and the third resulted in the cigarettes used for trading having part of their tobacco extracted and smoked – the PoWs debased the currency.

As for recessions: is it shortage of demand or shortage of supply? Or both, but maybe at different times? Was the most recent recession a demand shock or a supply shock? These ambiguities are what Harford so cleverly captures. As a general proposition there is usually a conflict between the short-term and the long-term, in that short-term measures to cope with recessions may undermine long-term potential growth. He is also sensible. Macro-economists did not cause the banking crisis, for it was the job of bankers, accountants, politicians and lawyers to keep things safe. But "when the banking crisis hit, the macro-economic mainstream didn't have good models of what the economic consequences might be," even if "casual empiricism suggested they wouldn't be pretty". So they didn't really know what to do.

That common-sense approach shows through in other parts of the book. Why do we have faster-rising inequality in Anglo-Saxon economies than on the Continent? He suggests it might have something to do with the fact that the English-speaking world has very good universities but not very good schools. He is sceptical of the current fashion for focusing on happiness rather than GDP, noting that the one country that has happiness as a policy objective, Bhutan, has a dubious record on human rights. And as for the concern that growth cannot continue forever, he points out that the peak in energy consumption per person in the UK was back in 1973. It is now the lowest for 50 years.

Economists will continue to attract opprobium. Indeed, by their wild assertions they bring a lot of it on themselves. But maybe, thanks to people such as Harford, the profession will gain a better-informed audience, and a more perceptive one for its real shortcomings.

Arts and Entertainment
Eddie Redmayne with his Screen Actors Guild award for Best Actor

film
Arts and Entertainment
Rowan Atkinson is bringing out Mr Bean for Comic Relief

TV
Arts and Entertainment

Theatre

Arts and Entertainment
V&A museum in London

Art Piece taken off website amid 'severe security alert'

Arts and Entertainment
Over their 20 years, the band has built a community of dedicated followers the world over
music
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment

ebooksNow available in paperback
Arts and Entertainment

ebooks
Arts and Entertainment
Reese Witherspoon starring in 'Wild'

It's hard not to warm to Reese Witherspoon's heroismfilm
Arts and Entertainment
Word up: Robbie Coltrane as dictionary guru Doctor Johnson in the classic sitcom Blackadder the Third
books

Arts and Entertainment
The Oscar nominations are due to be announced today

Oscars 2015
Arts and Entertainment
Hacked off: Maisie Williams in ‘Cyberbully’

Maisie Williams single-handedly rises to the challenge

TV
Arts and Entertainment
Eddie Redmayne in The Theory of Everything and Benedict Cumberbatch in The Imitation Game are both nominated at the Bafta Film Awards
Arts and Entertainment

Academy criticised after no non-white actors nominated

Arts and Entertainment
Damian Lewis shooting a scene as Henry VIII in Wolf Hall
TV

Arts and Entertainment
A history of violence: ‘Angry, White and Proud’ looked at the rise of far-right groups

tv

An expose of hooliganism masquerading as an ideological battle

Arts and Entertainment

art

Lee Hadwin can't draw when he's awake, but by night he's an artist

Arts and Entertainment

TV

Arts and Entertainment
Michael Keaton in the 1998 Beetlejuice original

film

Arts and Entertainment

TV

Arts and Entertainment
Olivia Colman and David Tennant star in 'Broadchurch'

TV

Arts and Entertainment
Michael Kitchen plays Christopher Foyle in ITV's 'Foyle's War'

TV
Arts and Entertainment

TV
Arts and Entertainment
Downton Abbey star Joanne Froggatt will be starring in Dominic Savage's new BBC drama The Secrets

Arts and Entertainment
Vividly drawn: Timothy Spall in Mike Leigh’s ‘Mr Turner’
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?

ES Rentals

    Independent Dating
    and  

    By clicking 'Search' you
    are agreeing to our
    Terms of Use.

    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project