THE UNDERCOVER ECONOMIST STRIKES BACK

It’s hard enough to manage, or even understand, our own finances. The “Undercover Economist” seeks to teach us how to manage the economic affairs of nations.

Before we can fix the world’s dysfunctional economies, Financial Times columnist Harford (Adapt: Why Success Always Starts with Failure, 2011, etc.) would have us understand the forces that make national and global fortunes thrive or fail—i.e., macroeconomics. Harford is a Socratic sort of tutor; here, he presents the questions from the point of view of a wonkish student. Money, we learn, encompasses three things: a store of value, a medium of exchange and a means of accounting. Harford neatly defines such terms as “nominal GDP targeting,” “recession,” “liquidity trap,” “price rigidity,” “consumption smoothing” and “spending multiplier.” Remarkably, it is all quite accessible and occasionally waggish. Readers will easily follow a discussion of stimulus versus austerity and determining the right amount of inflation (3 or 4 percent). The author also notes that printing money is sometimes a good practice. John Maynard Keynes, the patriarch of modern macroeconomics, is the right fellow for the short term, and the classic economists are fine for the long haul. As the recent crisis teaches, understanding and managing a global economy is difficult and complex, requiring many thinkers. Harford examines Keynes, Paul Samuelson, Paul Krugman, Joseph Stiglitz and other wise practitioners. There is much to learn from the Underground Economist’s primer, though against whom he is striking back, as the title has it, isn’t clear. Readers may not be called upon to manipulate the world’s economies, but the next time a conversation turns to the “Phillips Curve,” Harford’s students need not be excluded.

Uncovering cant and weak practice with some common sense and plenty of experience, Harford puts the art of macroeconomics within reach, making the unruly study considerably less dismal.