Wednesday, September 05, 2012
Free Lunch Revisited
Posted by David Smith at 09:30 AM
Category: Thoughts and responses

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A new edition of Free Lunch: Easily Digestible Economics is out, extensively revised in the light of the events of the past five years. Intended to introduce new readers to the subject, or to refresh others, it is available by clicking here. Signed copies may be available by contacting me at the economicsuk e-mail address.

This is from the introduction to the book:

This is a book about economics. I used to say that as a half-apology, knowing that economics had to work quite hard to compete with other subjects, not to mention most other things in the bookshop. Things are different now, thanks to the global financial crisis that began in the summer of 2007 and was from over in the run-up to its fifth anniversary as this was being written. The crisis came like a whirlwind, damaging everything in its wake but also shaking up perceptions, including those about economics. Everybody has a view on the crisis, and most people have something to be angry about, with bankers, regulators, politicians and even economists. Apart from the fact that the repercussions of the crisis will live in the memory for decades, its effects are real.

Would we have had severe cuts in public spending and tax hikes in the absence of the crisis? Would, to take a simple example, the coalition government in Britain have been emboldened enough to introduce big increases in university tuition fees? Would there have been a coalition government at all, a rarity in Britain, in the absence of the crisis? The crisis drew into sharp focus questions about how modern economies operate.

It marked a shift from the easy, credit-driven growth of the 1990s and 2000s into something very different. Banks were safe, staid institutions, were they not? No, and in the autumn of 2008, the Western banking system came very close to collapse. This was the time when at a practical level the cash machines almost did not get refilled, the supermarket shelves almost were not restocked, the wages not paid. It was very close to a full state of economic emergency, in Britain and in other countries.

So, without wishing that kind of crisis on anybody, it seems to me that it taught us that everybody should take an interest in economics, and not just at times of great turbulence. The crisis, you will find, makes appearances throughout this book but it does not dominate it. For this is a book about economics. And it is a book about economics quite unlike any other. There are no tricky diagrams of the kind that leave you wondering whether the page has been printed the right way up. There are no complicated mathematical equations. Unless something can be easily explained, it has no place in this book. Above all, at a time when we all need to know some economics, it is intensely practical. This book will not necessarily make you a millionaire – I always say that the only economists you see driving Rolls-Royces are wearing a chauffeurs’ caps – but it will tell you about the process by which we become, mainly, better off, apart from when those crises hit. It is also, I hope, good fun.

The aim of this book is to fill a gap, just like a good lunch. For years, at The Sunday Times and elsewhere, readers have been asking me to recommend an easily digestible book on economics, either for non-economists or for those whose grasp of it is a little rusty. Until now I have found it difficult to do so. There are some excellent textbooks on economics, some of which I shall recommend later, but they are intended for formal courses of study, with teachers offering a guiding hand. This is different. I hope that many students will read and profit from Free Lunch but in a way that complements formal study rather than replaces it.

There are, too, some excellent books describing recent economic history but these can be difficult, if not impossible, in the absence of the building blocks. An account of, say, Alan Greenspan or Ben Bernanke’s time as chairman of the Federal Reserve Board in Washington needs the context of knowing something about monetary policy and how central banks are supposed to operate it. Similarly, trying to judge whether an assessment is fair or unfair of the success of the government’s management of the economy requires a few basic tools.