Here’s the article, and I hope you’re able to access it.
Just in case it is behind a paywall for you, here is a quick summary:
- The Economist says that thinking like an economist is primarily about two things:
- There is no such thing as a free lunch, which is another way of saying you can never avoid opportunity costs
- When possible, try to put numbers on things
- The article then lists out five books that help you think along these lines:
I’m about to share my own list, but before I do that, a couple of points.
I’ve read the first, second and fifth book, and they’re all great books to read. I look forward to reading the other two, and the description of the fourth in particular sounds particularly exciting to my ears:
This is the book to read if you want to understand why capitalism—and economists’ way of thinking—has triumphed the world over. By the beginning of the 1990s, it was clear that the capitalist system had defeated the communist one. Today, however, many people yearn to move to a new system, such as “millennial socialism”. A left-leaning scholar, Mr Milanovic sympathises with these feelings. But ultimately he finds many radical prescriptions unconvincing. A country which tried to de-marketise on the scale envisaged by socialists would, he says, be unstable and dissatisfied in other ways. Shifting towards a much shorter working week, for instance, would leave it poorer than its neighbours. For how long would people put up with that? Capitalism is far from perfect, his book shows, yet it is hard to shake the notion that it is the only system that broadly works.
https://www.economist.com/the-economist-reads/2022/08/09/what-to-read-to-understand-how-economists-think
In a way, this reminds me of Churchill’s quote about democracy being the worst form of government, except for all the others that have been tried. And it rings true – there’s many things that we all wish could be “better” when it comes to capitalism, but one of my favorite econ questions is very apposite here: relative to what? That is, if you say capitalism is not good/not perfect, you need to answer the question “relative to what”?
Second, please don’t interpret this blogpost as a critique of the list put out by the Economist. This blogpost is very much in the spirit of “Yes, and” rather than “No, but”. But that being said, my own opinion of the main features of thinking like an economist are slightly different. I couldn’t agree more with the first feature (opportunity costs), but I do disagree with the second one. I would argue that it is entirely possible to get the most out of life without having to put a number on it. In fact, as Russ Roberts recently pointed out in a podcast, it simply isn’t possible or desirable to put numbers on some things. I haven’t read the book yet, but the podcast was instructive in many different ways. Here’s one apposite quote (Russ is answering a question by Tim about how to decide whom to marry):
Alain de Botton has a wonderful YouTube video I recommend on that; I think the title is “You’re going to marry the wrong person.” Fantastic short video. Don’t show it to my wife because she thinks she married the right person, I don’t want her to see it and depress her. But seriously, there’s no best. And part of the theme of my book is that most of life is a matrix. And by that, I don’t mean the movie, the red or blue pill. What I mean is that it’s a set of complicated attributes that are pluses and minuses for all kinds of things.
https://tim.blog/2022/08/07/russ-roberts-transcript/
So the person you’re with, that you’re seeing now, whoever’s listening out there, there are certain levels of attractiveness, there’s a certain level of kindness, there’s a certain level of intelligence, or a certain level — many, many, many attributes. And then there’s chemistry and sexual attraction. We’ve got all those things working. And so, which is the best one? Oh, well I need a formula to add up all those measurements so I can get a single number, and then I’ll just pick the one that gets the best score. And I’d argue that’s the wrong way to think about life. It’s the wrong way to think about how to pick your friends. It’s the wrong way to think about how to find the best job. It’s the wrong way to think about most things.
As I mentioned, I haven’t read the book yet – sometimes I think I should get a T-Shirt with this line printed on it. But I very much belong to the school of thought that would argue that not everything in life need be quantified.
So if I disagree with “if possible, put numbers on everything”, what according to me are the main features of thinking like an economist? If I had to pick just two, here they are (and I’m going to cheat, so there):
- Opportunity costs are everywhere
- Incentives matter
- Life is a non-zero sum game
Getting incentives right, and worrying about what happens if incentives go wrong ought to be part and parcel of your toolkit an an economist. And if you asked me to recommend a book about this topic, my pick would be Discover Your Inner Economist, by Tyler Cowen.
Bonus: check out the podcast between Russ Roberts and Tyler Cowen on this book.
Bonus Bonanza: reflect on the very first comment at the top of the page!
More Bonus Bonanza: Learn about callbacks.
And re: life being a non-zero sum game, I would recommend In The Company of Strangers, by Paul Seabright. If you do end up reading the book, you might end up coming away with the “complaint” that it is about much more than just life being a non-zero sum game, but in my world, that’s a feature, not a bug. But for the moment, here’s a relevant excerpt from the book:
Once bands were willing to make tentative peaceful contact with other bands, they could exchange with them, thereby enormously expanding the kinds of foods, tools, and resources to which they had access. We have evidence of exchange between hunter-gatherers from many thousands of years before the foundation of agriculture, although their lifestyle must have made such contacts sporadic and limited by comparison with the opportunities available to sedentary farmers in later millennia. Some of the oldest known symbolic artifacts, carved beads dating back over forty thousand years, may have played a role in facilitating such exchanges.7 In more recent times, the Yir Yoront aboriginals of Northern Australia had stone axes even though they lived many hundreds of kilometers from the nearest stone quarries (they exchanged stingray-tipped spears for them with neighboring tribes) and even steel ones, well before their first contact with European traders at the end of the nineteenth century. Trade allowed access not only to their neighbors’ skills but to those of their neighbors’ neighbors, and so on.
Seabright, Paul. The Company of Strangers (pp. 46-47). Princeton University Press. Kindle Edition.
And a final recommendation: please also do read The Undercover Economist and The Undercover Economist Strikes Back, both by Tim Harford.
EconForEverybody 