A long time ago (well, about a decade and a half) I wrote a book about economics. Nothing fancy, nothing especially advanced. Just the kind of duffer’s guide I would have liked to have had at my disposal if I were starting out again.
When I started out in economics journalism I really didn’t know where to begin. How to navigate what was at one and the same time a high-profile sector of news and a field of academia? I didn’t have an economics degree and when I left university I had blithely assumed I would end up reviewing novels or something along those lines. Frankly, I had no inkling I would end up doing what I’m now doing.
And while there were plenty of decent books out there on economics, they were mostly polemics or narratives rather than simple guidebooks. There were quirky books about how charming and quirky economics was and what lessons it held for our everyday lives (think Freakonomics etc). But what duffers’ guides there were were mostly devoted to students rather than those like me who were trying to navigate flows of news and data rather than a syllabus. Plus they weren’t always especially readable.
Anyway, I went away and wrote it, the book came out back in 2009 and I guess enough people bought it (thank you!) that the publishers recently emailed saying they were thinking of a new edition, and would I like to make any changes? I was (and am) in the middle of writing another book, so my initial response was: ARGH. NO. I was also somewhat terrified that the whole thing would have to be completely changed. After all, it was written in 2008, and we all know quite a lot has changed since then.
However, after my initial reaction I got down to re-reading the book and while it’s certainly of its time, most of it seemed to hold up OK. The chapter on Libor was definitely surplus to requirements; there was no mention of cryptocurrencies (Bitcoin came into existence at roughly the same time I was doing my final drafts) and the environmental bits were slightly out of date. I wrote a new chapter on the Universal Basic Income and made some smallish changes throughout. I also wrote a brand new introduction, which you can read below.
If you have any friends or relatives who might benefit from a simple guide to economics, do buy a copy. Make sure you choose the paperback version with the graph on the front, not the one with the bull. That’s the old one.
50 Economics Ideas: Introduction
‘A dreary, desolate and, indeed, quite abject and distressing [subject]; what we might call, by way of eminence, the dismal science.’ - Thomas Carlyle
I have vivid memories of writing this book. How could I not? It was among the most dramatic periods in modern economic history.
I recall sitting in the Alps in September 2008, staring at a sunny mountainside as I wrote one of the chapters and receiving a text message from a friend: “It’s over.” The friend worked at Lehman Brothers, the Wall Street bank. It had just filed for bankruptcy protection. The masters of the universe were, it turned out, not so masterful after all.
This book was always intended as a guide to the fundamental precepts of economics; it was supposed to stand the test of time. But it was commissioned shortly after the first run on a British bank in nearly a century and a half. As it was being written, those hitherto almighty investment banks were imploding and the global financial system was on the brink of collapse. As it went to print in 2009 the world was in the teeth of an almighty recession.
For years, economics had been considered a dry, technocratic subject; all of a sudden we were reminded that it could also be utterly explosive. Capitalism and the forces that underlie it have long had the power both to inspire and infuriate but all of a sudden those forces - of supply and demand, of incentives and externalities - had thrust this topic onto the sensitive surface of everyday life. Economics was more relevant than ever before, but not necessarily for the right reasons.
Nor did the drama let up in the ensuing years. The financial crisis of 2008 was followed by a succession of sovereign debt crises. The euro came close to collapse; economic forces toppled government after government. In 2016, the people of Britain voted to leave the European Union, a decision which sparked near-universal dismay among economists and upended not one but two Prime Ministers.
The Covid-19 pandemic triggered something even more astonishing: a vast shutdown of economies across the world to protect people from the virus. Nearly every statistical record - for both contraction and expansion - was broken as many countries went into a state of hibernation. As they were re-awoken the web of supply chains along which companies pass materials and products seized up, energy prices leapt and we faced the most serious bout of inflation in decades.
Few events could have eclipsed these dramas, yet the Russian invasion of Ukraine was one such event. It is still playing out as I write, but it is hard not to conclude that the conflict will have profound consequences, not merely for lives and livelihoods in Ukraine, but for the world’s economic destiny.
Given all of this I was somewhat nervous when I re-read the book that it would have failed dismally to stand the test of time. Yet while times certainly change, the funny thing about economics is that its tools remain just as relevant and powerful as ever. For while this is often portrayed as a dull or depressing topic, the deeper you delve into it the more you realise that the precise opposite is the case. Economics is ultimately a set of tools which help us make sense of the world and the people who inhabit it.
As I wrote in the original introduction, economics examines what drives human beings to do what they do, and looks at how they react when faced with difficulties or success. It investigates choices people make when given a limited set of options and how they trade them off against each other. Times may change but these tools remain as helpful as they ever did.
I have made a few changes to some of the chapters that follow. Cryptocurrencies, an idea first touted by someone calling themselves Satoshi Nakamoto in 2008, now make an appearance, as does one of the other remarkable developments of recent years: the commitment by countries around the world to eliminate net greenhouse gas emissions by 2050.
But most of the book remains pointedly as it was in 2009, and while some paragraphs may seem somewhat dated, others will hopefully underline that while many of today’s economic issues feel novel, more often than not they are echoes of yesterday’s economic issues, whether that is inflation (chapter 19), energy crises (chapter 26) or financial bubbles (chapter 34).
The Victorian philosopher Thomas Carlyle famously called economics the “dismal science” and given much of economics is fixated on stuff that goes wrong, you can probably see his point. Yet all too often it is only thanks to economic tools and analyses that we find the good news stories.
For instance, in the years since this book was first published, more than half a billion people have been pulled out of extreme poverty. And for all the tragedies facing the world’s people - conflict in the Middle East and elsewhere, pandemics and their consequences, climate change and its impacts - the remarkable thing is that year-by-year life mostly keeps getting better. In most countries, people are richer, healthier and longer-lived than their parents. It is going much too far to put this down to economics, but at the very least economic tools can help us understand what is happening and, maybe, why.
This book is not intended to be read as a continuous narrative: each of these 50 ideas should make sense on its own, though I have highlighted where you might benefit from looking at another chapter.
My hope is that by the time you’ve read most of the ideas you will be able to think that little bit more like an economist: to ask probing questions about why we act the way we do; to reject the conventional wisdom; to understand that even the simplest things in life are more complicated than they seem – and all the more beautiful because of it.