Tim Harford's Blog, page 18
February 15, 2024
Cautionary Tales – Into the Black Lair: V2 Rocket (Part 2)
In the 1920s, Germany’s Society for Spaceship Travel boasted some of the sharpest scientific minds – like the incandescently brilliant young Wernher von Braun. But it had very little money, and progress was slow.
Then, in 1932, the army made a proposal: it would fund more serious research if the enthusiasts at the Society would develop a rocket weapon.
Despite a string of failures to launch, von Braun was able to convince key powerbrokers in Nazi Germany that they couldn’t afford to ignore rocket technology. How did he do it? And what happened when the murderous Heinrich Himmler made a play for the rocket program?
Further reading
Essential sources for this series:
Murray Barber V2: The A4 Rocket from Peenemunde to Redstone
Norman Longmate Hitler’s Rockets
Jean Michel Dora
Michael Neufeld The Rocket and the Reich
Michael Neufeld Von Braun: Dreamer of Space, Engineer of War
Michael Neufeld also kindly agreed to be interviewed as background for the series.
Other sources include:
RV Jones Most Secret War
Steven Zaloga V1 Flying Bomb 1942-52
Steven Zaloga V2 Ballistic Missile 1942-52
Freeman Dyson Disturbing the Universe
Walter Dornberger V2
Daniel Lang “A Romantic Urge” The New Yorker 21 April 1950
Bent Flyvbjerg and Dan Gardner How Big Things Get Done
Diane Tedeschi interview with Michael Neufeld Smithsonian Magazine 1 Jan 2008
Michael Neufeld “Wernher von Braun, the SS and Concentration Camp Labor: Questions of Moral, Political and Criminal Responsibility.” German Studies Review. 25:57–78. 2002
Adam Tooze Wages of Destruction
Dean Reuter The Hdden Nazi
Brian Crim Our Germans
Annie Jacobsen Operation Paperclip: The Secret Intelligence Program That Brought Nazi Scientists to America
Steve Ossad “The Liberation of Nordhausen Concentration Camp“
Amy Shira Teitel “The Nazi Smoke and Mirrors Escape That Launched American Into The Space Age” Motherboard, 15 September 2012
Cautionary Tales: Into the Black Lair – V2 Rocket (Part 2)
In the 1920s, Germany’s Society for Spaceship Travel boasted some of the sharpest scientific minds – like the incandescently brilliant young Wernher von Braun. But it had very little money, and progress was slow.
Then, in 1932, the army made a proposal: it would fund more serious research if the enthusiasts at the Society would develop a rocket weapon.
Despite a string of failures to launch, von Braun was able to convince key powerbrokers in Nazi Germany that they couldn’t afford to ignore rocket technology. How did he do it? And what happened when the murderous Heinrich Himmler made a play for the rocket program?
Further reading
Essential sources for this series:
Murray Barber V2: The A4 Rocket from Peenemunde to Redstone
Norman Longmate Hitler’s Rockets
Jean Michel Dora
Michael Neufeld The Rocket and the Reich
Michael Neufeld Von Braun: Dreamer of Space, Engineer of War
Michael Neufeld also kindly agreed to be interviewed as background for the series.
Other sources include:
RV Jones Most Secret War
Steven Zaloga V1 Flying Bomb 1942-52
Steven Zaloga V2 Ballistic Missile 1942-52
Freeman Dyson Disturbing the Universe
Walter Dornberger V2
Daniel Lang “A Romantic Urge” The New Yorker 21 April 1950
Bent Flyvbjerg and Dan Gardner How Big Things Get Done
Diane Tedeschi interview with Michael Neufeld Smithsonian Magazine 1 Jan 2008
Michael Neufeld “Wernher von Braun, the SS and Concentration Camp Labor: Questions of Moral, Political and Criminal Responsibility.” German Studies Review. 25:57–78. 2002
Adam Tooze Wages of Destruction
Dean Reuter The Hdden Nazi
Brian Crim Our Germans
Annie Jacobsen Operation Paperclip: The Secret Intelligence Program That Brought Nazi Scientists to America
Steve Ossad “The Liberation of Nordhausen Concentration Camp“
Amy Shira Teitel “The Nazi Smoke and Mirrors Escape That Launched American Into The Space Age” Motherboard, 15 September 2012
Are economists selfish? Not according to Monopoly
Against my better judgment, I was recently prevailed upon to play a game of Monopoly with the family. It soon developed in a fashion that has become familiar: everyone tried to rip everyone else’s face off, except me. I proposed a mutually beneficial deal to each player, offering extra concessions myself to make sure those deals got done.
This dealmaking tactic didn’t go down well. Every time I reached an agreement with one player, the other players fumed. Before long, I was being roundly denounced as a ruthless exploiter of innocents.
This made me sad. It was partly the disheartening realisation that I am clearly a punchable opponent at the board-game table. But there was something more. My plight in being cast as a pantomime villain seemed to stand in for the fate of economists as a whole.
I should explain. In looking for advantageous trades, I was doing what comes naturally to economists. The basic building block of economic activity — so basic that we take it for granted — is two people making each other better off by finding gains from trade. You can easily spot the economists at the Monopoly table, they’re the ones trying to find the deals that make both sides happy. But are we lauded for our fascination with voluntary agreements for mutual benefit? We are not. Instead, economists are often accused both of celebrating selfishness and of being selfish. As Yoram Bauman, an economist and comedian, once joked: “The only reason we don’t sell our children is that we think they’ll be worth more later.”
What have we done to earn this reputation for ruthlessness? Perhaps it’s that altruism and charity are not front and centre in economic analysis. It may be the character of Gordon Gekko in Wall Street (1987), assuring us that “greed, for lack of a better word, is good”, somehow being associated with economists.
But our reputation for being calculating and unfeeling may also be thanks to the experimental evidence. Over the years, a series of studies have emerged which seem to show that studying economics causes students to behave more selfishly. The basic idea sounds plausible. If you sit in enough classes being told that people are fundamentally self-interested, you yourself might become more self-interested.
A 1993 paper by Robert Frank, Tom Gilovich and Dennis Regan summarised some of this evidence. It found economics students tended to behave less cooperatively in experimental games. They also expected less honesty from others. For example, if asked whether they would expect a stranger who found some lost cash to try to return it. More recent research by Bauman and his colleague Elaina Rose found that economics students were less likely to contribute to two named charities in a classroom exercise.
Yet there is a pair of big question marks hanging over this collection of studies. The first is whether economics teaches people to be selfish, or whether instead selfish people gravitate towards economics. Bauman and Rose note that economics majors are equally mean whether they are near the beginning or the end of their studies — in other words, perhaps economics has no effect on people’s generosity, but big-hearted people avoid economics classes.
Perhaps more important, do these questions really measure honesty, selfishness or any other moral virtue? That’s not clear. In the Bauman and Rose study, for example, the two charities in question were both left-leaning activist groups. So did economics students refuse to contribute because they hate giving to charity? Or did they feel that these particular charities were not very worthy causes?
As for classroom exercises, there is a sense in which the selfish move is the “correct” answer in certain experimental settings, such as the prisoner’s dilemma game. If a student is taught that, and then plays the selfish move, have they become more selfish in everyday life? It seems just as plausible to suggest that they have been taught how to reproduce the textbook answer in an academic setting and want to pass the economics test.
There are certain tendencies in mainstream economics that might nudge people towards a cynical view of human nature, but there is also a long tradition in economics arguing that free markets promote co-operation, honesty, respect for others, freedom and reciprocal benefit.
So does studying economics make you selfish? A new study with that title, by Girardi, Mamunuru, Halliday and Bowles, finds “no discernible effect” of studying economics either on self-interest or on the belief that other people are self-interested.
I suggest that before besmirching the good character of economics students we should look for more convincing real-world evidence. So far I have found nothing. But my search did turn up the fascinating discovery — courtesy of the philosopher Eric Schwitzgebel — that books about moral philosophy were more likely to be missing from libraries than other philosophy books. A deep academic interest in ethics appears to be correlated with larcenous behaviour. It makes you think.
Ironically, the game that inspired Monopoly, The Landlord’s Game, was designed by the activist and writer Elizabeth Magie to teach lessons about a fairer taxation system, and then refined by a socialist professor of economics, Scott Nearing, and his students. Yes, the economics nerds were proposing a co-operative, pedagogical version of Monopoly. Alas their vision was eclipsed by the ruthless battle of attrition we all know today.
Our own session of Monopoly might have been more fun if only my fellow players had embraced the constructive, co-operative spirit of economics. Alas, they did not, so our game finished in the traditional fashion. It petered out with no clear winner and several sore losers.
Written for and first published in the Financial Times on 19 January 2024.
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February 8, 2024
The planet’s got 99 problems, but exponential growth isn’t one
If Christmas is (alas) a time for a materialist blowout, January is often a time for rueful reflection. Should we really have bought all that soon-to-be-landfill for each other? The answer, as I have written a dozen times, is . . . probably not.
Thankfully, people have stopped sending me emails declaring that economists don’t understand Christmas. Now they are sending me emails declaring that economists don’t understand exponential growth, and that as a result, the planet is doomed. This grates, because saying that economists don’t understand exponential growth is like saying that accountants don’t understand double-entry book-keeping, or that poets don’t understand metaphor. Consider the bait taken.
An old illustration of exponential growth remains the best. Legend has it that the genius who invented chess was asked to name his reward by a delighted monarch, and requested a modest-sounding payment: one grain of rice for the first square of the chessboard, two for the second, four for the third . . . doubling each time. This doubling is an exponential process, and most people are surprised when they first hear that the 64th square would require more than any harvest could produce.
Less intuitive yet, each square contains more rice than all the previous squares put together. Whatever square you pick, and no matter how dramatic the pile of rice might seem, what comes next will make it all seem trivial. Now substitute energy consumption or carbon emissions for rice, and you can see the environmental catastrophe looming.
If rice on the chessboard is the most famous illustration of exponential growth, the most famous essay on the topic was published in 1798 by Thomas Malthus. Malthus warned that human population would always threaten to outpace agricultural output. No matter how quickly agricultural productivity grows, if that growth is arithmetical — 10, 20, 30, 40, 50 — then it will inevitably be overtaken by the exponential progress of human population growth — 2, 4, 8, 16, 32, 64. No sustained prosperity is possible: humans will inevitably breed themselves into poverty in the end.
There can be no arguing with the mathematics here. The flaw in Malthus’s argument lies in its assumption of exponential population growth. Global population is flattening off; the number of children in the world under the age of five peaked in 2017. This is a reminder that mathematics only takes us so far and should prompt everyone worried about the planet to ask: what else do we assume is growing exponentially, and is not?
A glance at the UK, one of the world’s first developed economies, is instructive. This industrialising heart of empire once burnt vast quantities of atmosphere-warming, lung-shrivelling coal. But as Hannah Ritchie notes in her thoughtful new book Not the End of the World, per capita coal emissions in the UK peaked more than 100 years ago. Some of that fall represents the offshoring of industrial processes, with the coal choking someone else, but most of it reflects the use of cleaner, more efficient technology.
In the UK, CO₂ emissions per person have halved during my lifetime. Globally, CO₂ emissions per person peaked in 2012. Although the world still faces huge environmental challenges, there is nothing about these numbers that suggests exponential growth.
Economic growth does continue — maybe not exponentially, but it’s exponential-ish. Fortunately, the planet simply does not care about numbers in the national income accounts. What matters for our environment are flows of energy, pollutants and other physical quantities.
One might assume that economic growth must mean growth in pollution and energy use, but the data suggests the situation is more hopeful than that. So does a bit of introspection: if you won £1,000 on the lottery, you might turn up the heating in your home. That does not mean that if you won £1mn, you would boil yourself alive. Not every penny spent must be ripped from the soil of our planet.
There are other glimmers of hope. For example, although deforestation is still happening on a worrying scale, it was much worse for most of the 20th century — and in many rich countries, the forests are returning. Agricultural land use peaked globally about 25 years ago, and Ritchie argues that we might also be at or near a peak in fertiliser use.
But not every indicator is so reassuring. Ed Conway, in his book Material World (2023), points to some unnerving numbers on the sheer quantity of stuff — sand, water, earth — that we move around. “In 2019,” he writes, “we mined, dug and blasted more materials from the earth’s surface than the sum total of everything we extracted from the dawn of humanity all the way through to 1950.”
This is partly because of growing demand, and also because we have picked the fruit in easy reach. Copper is the nervous system of our electronic age, but miners have had to squeeze ever more out of ever sparser ores — the largest and most famous copper mine in the world, Chuquicamata, had seams that were up to 15 per cent copper in the late 19th century. Today, they are less than 1 per cent. Our devices are getting smaller and lighter, but the gargantuan trucks of Chuquicamata are not.
Conway worries that we take for granted the hidden industrial processes underpinning our everyday comforts. Ritchie is concerned that we are so disheartened by prophecies of doom that we may miss the chance to become the first truly sustainable generation in the modern world.
Both are right. We depend on a huge variety of natural resources; there are both alarming and encouraging trends. We need the right policies now, and to embrace them means setting aside thought experiments about exponential growth, and looking instead at what the data shows us about the challenges and opportunities ahead.
Written for and first published in the Financial Times on 12 January 2024.
My first children’s book, The Truth Detective is now available (not US or Canada yet – sorry).
I’ve set up a storefront on Bookshop in the United States and the United Kingdom. Links to Bookshop and Amazon may generate referral fees.
February 1, 2024
Cautionary Tales – Supersonic Nazi Vengeance: V2 Rocket (Part 1)
At the height of World War Two, British intelligence began receiving reports that the enemy was developing a rocket weapon. The idea seemed fantastical — resources in Nazi Germany were scarce and a rocket-building program defied economic logic.
But one intelligence chief took the reports of a rocket weapon seriously and he managed to convince Winston Churchill to heed the threat too. The British Prime Minister gave the order to bomb Germany’s rocket factory to rubble, and 600 bomber planes embarked on a full-scale attempt to obliterate it.
From the air, the damage appeared devastating. The British thought they had succeeded in crushing the rocket-building program. But they were wrong.
Further reading
Essential sources for this series:
Murray Barber V2: The A4 Rocket from Peenemunde to Redstone
Norman Longmate Hitler’s Rockets
Jean Michel Dora
Michael Neufeld The Rocket and the Reich
Michael Neufeld Von Braun: Dreamer of Space, Engineer of War
Michael Neufeld also kindly agreed to be interviewed as background for the series.
Other sources include:
RV Jones Most Secret War
Steven Zaloga V1 Flying Bomb 1942-52
Steven Zaloga V2 Ballistic Missile 1942-52
Freeman Dyson Disturbing the Universe
Walter Dornberger V2
Daniel Lang “A Romantic Urge” The New Yorker 21 April 1950
Bent Flyvbjerg and Dan Gardner How Big Things Get Done
Diane Tedeschi interview with Michael Neufeld Smithsonian Magazine 1 Jan 2008
Michael Neufeld “Wernher von Braun, the SS and Concentration Camp Labor: Questions of Moral, Political and Criminal Responsibility.” German Studies Review. 25:57–78. 2002
Adam Tooze Wages of Destruction
Dean Reuter The Hdden Nazi
Brian Crim Our Germans
Annie Jacobsen Operation Paperclip: The Secret Intelligence Program That Brought Nazi Scientists to America
Steve Ossad “The Liberation of Nordhausen Concentration Camp“
Amy Shira Teitel “The Nazi Smoke and Mirrors Escape That Launched American Into The Space Age” Motherboard, 15 September 2012
For resolutions, is it better to add or subtract?
The New Year ritual of vowing to quit smoking, drinking or dessert is not for me. I’ve long preferred the idea that resolutions should be adding something positive rather than squeezing out bad habits. In a typical year, I might resolve to exercise more, to see more live music or to spend more time with my children. I’m not claiming I always succeed — it’s a mixed bag — but the practice always felt constructive. For a better life, I thought, one should add good things rather than subtracting bad ones.
But I am starting to wonder. Even the words “positive” and “constructive” suggest a mindset of addition. Maybe I need to learn to subtract. In their influential collection of creative prompts, Oblique Strategies, the musician Brian Eno and artist Peter Schmidt included the suggestion, “use fewer notes”. Quite so.
Leidy Klotz, author of Subtract: The Untapped Science of Less, argues that I’m not the only one who lacks the subtractive instinct. Take a wonky Lego bridge with two uneven supports. Do you fix it by adding bricks to the short support? Or by removing them from the longer support? Most people add, when it would be easier to subtract. Klotz noticed that tendency while playing with his son, but soon collaborated with other researchers to test the Lego hypothesis in a formal experiment.
This research programme revealed example after example of what Klotz called “subtraction neglect”. Show people a recipe for soup and ask them to improve it, and they will almost invariably propose extra ingredients rather than suggest removing them. Ask people to modify loops of music and they will seek to add extra notes, not pare away at what’s there.
In one experiment, participants were invited to improve an itinerary for a day in Washington DC. The schedule was absurdly overstuffed: 14 hours, hitting more than a dozen destinations. Even so, only a quarter of people thought to prune any activities in their quest for a better day trip.
It would be wrong to suggest that we never consider subtraction. Many traditional resolutions aim to subtract bad habits, many diets call for the subtraction of calories or unhealthy foods, and I have lost track of the number of stories I’ve heard about companies getting rid of annoying meetings.
But there’s more to the art of subtraction than removing things that are obviously bad. Sometimes you need to subtract something good in order to clear space for the other good things to breathe. The soup will be improved if you take away the waiter’s thumb, but it might also be improved by removing the grated carrot. Or as Antoine de Saint-Exupéry wrote in 1939, “perfection is finally attained not when there is no longer anything to add, but when there is no longer anything to take away . . . ”
This feels a lot like minimalism, but there is a subtle difference between the minimalism of “less is more” and subtraction itself. One can design a minimalist house by adding a few decorations, but Klotz is interested in what happens when you actively remove something that’s already in front of you.
As an economist and a writer, I am a receptive audience for the gospel of subtraction. Editing is more often a process of subtracting words than adding them, while economists grow up with the idea of “opportunity cost” — the idea that everything you buy and everything you do is getting in the way of everything else you might have bought and might have done.
But as I pondered my weekly commitments and the list of things I was hoping to achieve over the next three months, I struggled. What could I subtract? I wanted to do all of it. Was there a trick to figuring out what to subtract? The decluttering guru Marie Kondo advised gathering everything in a particular category of stuff into one place, then item by item asking, “Does it spark joy?” This procedure works well for T-shirts but is useless for a stuffed email inbox. As I looked at my goals and my commitments, it wasn’t helping there, either.
So I wrote to Leidy Klotz for advice. Could he suggest some lifehack, some clever rule of thumb to help me do less? Sure, he wrote. “If you make to-do lists, consider stop-doings at the same time. Every time you find yourself considering a new activity or responsibility, force yourself to consider stopping two that you are already doing.” But he then tactfully pointed out that merely by posing the question “what should I subtract?” I had already escaped the cognitive bias of subtraction neglect. If I was thinking hard about the problem and couldn’t think of anything to stop doing, maybe there was nothing that needed subtracting.
Klotz suggested an experiment, which he calls a “reverse pilot”. Unlike a regular pilot, in which you temporarily try something new, a reverse pilot calls for temporary subtraction. Just stop doing something for a bit, wrote Klotz, and see what happens. “Sometimes there is no way to know for sure what the outcome will be from removing something.”
Fair enough. Although I still couldn’t work out what to subtract from my life. Exercise less? Nope. See less of the children? They might want that, but it hardly felt like a noble plan. Less culture, less music, see friends less often?
But Leidy Klotz had a suggestion, courtesy of Leonardo da Vinci. Perhaps I just should do less work? Or as Da Vinci put it: “Men of lofty genius sometimes accomplish the most when they work the least . . . ” Lofty genius! An appealing conceit. The promise that if I worked less I might achieve more is even more appealing. If only there was some subtle way to suggest this to my editor.
Written for and first published in the Financial Times on 5 January 2024.
My first children’s book, The Truth Detective is now available (not US or Canada yet – sorry).
I’ve set up a storefront on Bookshop in the United States and the United Kingdom. Links to Bookshop and Amazon may generate referral fees.
January 31, 2024
My favourite books for children
An idiosyncratic list, although I am sure it contains few surprises…
The good people at Bookshop UK, who provide a website to sell books online which supports local independent bookshops around the country, tell me, “Read It Forward February … will launch Feb 1st. Simply put, any and all children’s book sales during the whole of February will result in a 10% donation to Booktrust, specifically to support their initiative to provide early years families from disadvantaged backgrounds with books and reading support.”
Sounds like a good excuse to post my own list. And of course there is also The Truth Detective.
Links to Bookshop may generate affiliate revenue for me.
January 29, 2024
Cautionary Tales – Tenerife: The most deadly air disaster
In 1977, two planes collided on the runway at Tenerife Airport. Why did the crash happen? And, given that it took place on the ground, why didn’t more people escape?
In this new two-parter, Tim Harford explores the most deadly aviation accident in history. Both episodes are available now, ad-free, exclusively for subscribers to Pushkin+.
You can sign up for Pushkin+ on our Apple podcasts show page, or at pushkin.fm/plus.
Further reading
Collision on Tenerife: The How and Why of the World’s Worst Aviation Disaster is a comprehensive account by author Jon Ziomek and Caroline Hopkins, one of the Pan Am survivors. Fellow survivor David Alexander’s book is called Never Wait For The Fire Truck.
We drew on a range of official reports into the accident, including those conducted by the Airline Pilots Association, the Netherlands Aviation Safety Board, Spain’s Subsecretaria de Aviacion Civil, and the Armed Forces Institute of Pathology. The websites Project Tenerife and Peter’s Tenerife Crash Page contain further useful resources, along with reportage in outlets such as Salon, the Los Angeles Times and the Daytona Beach News-Journal.
For more on the Moses Illusion, see From Words to Meaning: A Semantic Illusion and A case study of anomaly detection: Shallow semantic processing and cohesion establishment. For attempts to avoid the Moses Illusion in air communications, see A Guide to Phraseology for General Aviation Pilots in Europe.
For more on the fight, flight and freeze response, see Walter B. Cannon and the Invisible Rays, The Effects of Acute Stress on Core Executive Functions, Why People ‘Freeze’ in an Emergency, Freeze for action: neurobiological mechanisms in animal and human freezing, and Fear and the Defense Cascade.
January 25, 2024
More of your crazy economics questions, answered
Last year, inspired by Randall Munroe’s delightful books What If? and What If? 2, I invited the good folk of Twitter to ask me absurd hypothetical questions about the economy, to which I would attempt some serious answers. This year, we’re going to do it all again.
Alex asks: How big would an asteroid made of precious metal have to be for it to be worth doing a space mission to bring it back?
To answer this question I consulted Soonish, a book by Kelly and Zach Weinersmith, which devotes a chapter to the problem. Some asteroids have much higher concentrations of metal than are typical near the surface of earth, and a decent-sized golden asteroid does sound tempting. Alas, there are three problems: physics, engineering and economics. Engineering first. If you want to mine an asteroid, you either need to set up a refinery in space (difficult) or send huge amounts of unrefined ore back through the atmosphere to be refined back on Earth (messy). Then there’s economics: if you somehow did find an inexpensive way to bring a million tonnes of gold back to Earth, gold itself would become frustratingly cheap. A space-mining monopoly might be able to hoard a stockpile and release it slowly, but even that is doubtful. Two competing space miners would be a recipe for a price collapse.
And finally, physics itself: Earth’s gravitational pull is strong, which means it’s hugely energy-intensive to get up into orbit. The cost of getting anything into space is nearly £20,000/kg. This is going to make your asteroid-mining venture expensive, but more fundamentally it means that the most valuable things in space aren’t gold and platinum, but basics such as soil and water. These are the things you’ll need to support any kind of human settlement in space. Forget the golden asteroid: if there’s money in mining anything from asteroids, it will be compost and ice.
Anita asks: Could a universal currency ever be based on electricity, or currents?
The economics textbooks will tell you that a good currency has three characteristics. First, it is a store of value, something that will still be worth a decent amount tomorrow, next week or next month. There are lots of possibilities here: gold, bitcoin or dollars, for sure, but also rice, or shares in Apple, or a house. (Less good: tickets to see a concert tonight, fresh vegetables, the Argentine peso.)
Second, money serves as a unit of account, meaning that it has a consistent, well-understood price relative to other goods. Salt was once a good example, since both the supply of and demand for salt were very stable. It seems likely that some contracts were denominated in salt — hence the word “salary”. Here bitcoin falls down, because its price fluctuates wildly; the same is true of shares in a tech titan. These may or may not be attractive investments, but if you have to keep double-checking their price, they are not attractive currencies.
Finally, money needs to operate as a medium of exchange. Traditionally that would have meant lightweight, divisible, easy-to-recognise, hard-to-forge notes or coins — or, in extremis, portable standardised goods such as cigarettes or tins of mackerel. But these considerations are less important in a cashless society. You can pay dollars for goods using a credit card which you later settle in euros, and in principle retailers around the world will happily accept your credit card whether your bank wants you to pay the bill using Swiss francs or bitcoin.
With that preamble out of the way, where do we stand on a current currency? The answer is that electricity is one of the worst currencies imaginable. Electricity is a very poor store of value, since the problem of how to store electricity is one of the defining ones of our age. It is telling that most solutions to the electricity storage problem begin by turning the electricity into something else, such as chemical potential energy. And few commodities fluctuate in price more wildly than electricity. Because it cannot easily be stored, the price will leap and crash minute by minute depending on factors such as whether the wind is blowing, whether the sun has disappeared behind a cloud and whether everyone has just put the kettle on. Consumers are shielded from all this volatility, but it is there nevertheless. There must be a worse candidate for a currency than electricity, but I cannot think of one.
Olly asks: What if your tax bill was discounted by the distance you lived from the centre of London (eg if you lived in Kingsway, you paid the full amount; if you lived in Shetland, you would pay no tax)?
I suppose the aim here might be to encourage people to move away from London and into less populated areas. If this policy was a success, the likely outcome would be a damaged environment (with more driving and less travel by efficient methods such as trains, bicycles and elevators) and a much less dynamic economy (since cities are where most innovation takes place). I am reminded of the great urbanist Jane Jacobs’s sarcastic description of “a nice, even smear of mixed economic activity”, which seems so plausible from behind a bureaucrat’s desk, and which would be such a disaster in practice.
Fortunately, this tax would make less difference than you think. In response to these tax incentives, some people would be minded to move further away from Kingsway and closer to Shetland. The mere temptation for this mass exodus to occur would prompt both rents and property prices to adjust, offsetting the tax. Owners of London property would suffer, while owners of property far from the charms of Kingsway would prosper. Not many people would actually move. Thank goodness.
Michael asks: What if inflation was made illegal? Could we legislate that no prices could ever rise?
The economist Alex Tabarrok notes that “a price is a signal wrapped up in an incentive”. What he means is that an increase in the price of a product informs everyone that the product is in short supply, and also rewards consumers who buy less and producers who make more. A well-functioning price system — that is, one in which prices can rise (and fall) — is absolutely fundamental to encouraging an efficient use of resources in a complex economy. These relative price changes are useful, even if a generalised rise in prices is unwelcome. The challenge is to allow relative prices to change without allowing average prices to rise. That contradiction is why most efforts to control inflation start by trying to influence the price of money itself. But you have a different proposal, so let’s run with it. Imagine that your law freezing all prices is introduced and that it is widely respected. Two things follow: the economy cannot properly adjust to shortages and surpluses, and the economy cannot adjust to technological change. For example, would it even be legal to offer a new edition of the iPhone or the Tesla for sale? That would seem to introduce a new price, which is against the law. Or perhaps you think it should be legal to introduce new products at new prices — in which case, expect products to be endlessly withdrawn, reformulated in some trivial way and then reintroduced at a different price.
It would also be hard to cope with fluctuations in supply or demand. Say there is an increase in the demand for physiotherapists, or coffee. Normally, we’d expect the price of coffee to rise (inducing people to drink tea instead and encouraging coffee farmers to cultivate more coffee beans) and the salaries of physiotherapists to rise (encouraging them to work overtime or delay retirement and attracting new people into the profession). But because you’ve outlawed price rises, none of this can happen: instead expect long queues for treatment and empty shelves in the supermarket. In truth, it seems more likely that the law would be widely flouted. There would be many surpluses, many shortages and a lot of needless fuss doing deals under the counter or around the back to sell goods at a price that reflected economic reality rather than the mandated and unchanging official price. What would happen if inflation was made illegal? Nothing good.
Nicola asks: In the UK, we used to print banknotes on paper, now it’s a horrible slippery plastic. Could we use a more environmentally friendly material, like leaves? Or perhaps something edible — printed on some sort of simple flour and water biscuit? No waste!
Fans of Douglas Adams may recall the tale of the civilisation that decided to adopt the leaf as legal tender. Briefly believing themselves to be rich, they soon found “three deciduous forests buying one ship’s peanut”. This won’t do. Whether your proposal runs into a similar problem rather depends on your approach. If you simply plan to allow any leaf to serve as currency, the resulting hyperinflation problem will at least put our recent travails into perspective. But perhaps you intend only officially issued currency, printed on leaves or nutritious wafers, to circulate as legal tender. This might work, but I have some concerns. There is, of course, the question of whether security features such as the transparent window, metallic foils and holograms can really be added to an edible substrate.
There is also the question of durability. The Bank of England will replace damaged notes with new ones, and keeps track of these exchanges. Since the most common note, the £20, was replaced with plastic in early 2020, there has been a notable fall in requests to exchange currency. Maybe that simply reflects the switch to electronic payments during and after the pandemic. But I wonder: one common source of damage is listed as “chewed/eaten” — such lamentable incidents became very rare almost overnight when plastic notes were introduced. Your edible currency may seem sustainable; it will not be so sustainable if people snack on the contents of their wallets and the Bank of England has to keep printing replacement currency wafers.
Written for and first published in the Financial Times on 22 December 2023.
My first children’s book, The Truth Detective is now available (not US or Canada yet – sorry).
I’ve set up a storefront on Bookshop in the United States and the United Kingdom. Links to Bookshop and Amazon may generate referral fees.
January 18, 2024
Cautionary Tales – Martin Luther King Jr, the Jewelry Genius, and the art of public speaking (CLASSIC)
One speechmaker inspired millions with his words, the other utterly destroyed his own multi-million-dollar business with just a few phrases.
Civil rights icon Martin Luther King Jr (played by Jeffrey Wright of Westworld, The Hunger Games, and the James Bond films) and jewelry store owner Gerald Ratner offer starkly contrasting stories on when you should stick to the script and when you should take a risk.
Cautionary Tales is written by me, Tim Harford, with Andrew Wright. It is produced by Alice Fiennes; this classic episode, first released in February 2021, was produced by Ryan Dilley and Marilyn Rust.
The sound design and original music is the work of Pascal Wyse. Julia Barton edited the scripts.
Further reading and listening
I discussed the contrast between the speeches of Martin Luther King Jr. and Gerald Ratner in my book, Messy.
Key sources on the life of Martin Luther King Jr. include Taylor Branch Parting the Waters, David Garrow Bearing the Cross, Stephen B. Oates Let the Trumpet Sound, the Autobiography of Martin Luther King Jr., Patrick Parr’s profile in The Atlantic and Alex Haley’s interview with Dr King in Playboy.
Gerald Ratner was interviewed by my Financial Times colleague Emma Jacobs in a piece we wrote together titled “Regrets? I’ve had a few.” Gerald Ratner’s full speech is available to view online.
Sherry Turkle’s book is Reclaiming Conversation and Charles Limb gave a TED talk about his work on improvising brains.
“Nobody makes the statistics of everyday life more fascinating and enjoyable than Tim Harford.”- Bill Bryson
“This entertaining, engrossing book about the power of numbers, logic and genuine curiosity”- Maria Konnikova
I’ve set up a storefront on Bookshop in the United States and the United Kingdom – have a look and see all my recommendations; Bookshop is set up to support local independent retailers.
