Tim Harford’s Fifty Things That Made the Modern Economy is an excellent blend of Economics and History.
History is often narrated through wars, personalities or reigns of rulers. Tim Harford, the economic journalist known for his Financial Times column, ‘The Undercover Economist’, tells the story of modern history in his latest book through ‘things’ that are broadly products, services or ideas that have played a major role in economic change.
These ‘things’ range from the ridiculously simple such as a plough or a clock to surprisingly complicated such as the iPhone or Tax havens. Harford gives us fascinating insights into how they came into being and their current significance.
iPhone and the ‘Visible Hand’
Now, some of you might be reading this on your smartphones, where this piece is competing with dog memes, baby videos and political propaganda for your attention. Adore it or despise it, the smartphone has intruded upon all our lives, and for most parts (I’ll stick my neck out here) improved it. Perhaps then the smartphone is the perfect example of the kind of paradigm shift that can be brought upon through innovation funded by private capital. Or is it?
Harford, in a chapter titled ‘iPhone’, informs the readers that this might not be completely true. He cites the work of economist Mariana Mazzucato who has made a list of 12 key technologies that make smartphones work. These include both hardware and software inventions such as the internet, touchscreens, the artificial-intelligence-based voice assistant and the global positioning system amongst others. All of these technologies, according to Mazzucato’s research, were developed by tons of cash that was spent by government agencies—usually US government agencies to solve a particular problem, mostly related to the military. The author eventually points out the obvious: that you still needed the prowess of innovators like Steve Jobs and Jony Ive backed up by private capital to bring those technologies together and create a consumer product:
Of course, the U.S. military didn’t make the iPhone. CERN did not create Facebook or Google. These technologies that so many people rely on today were honed and commercialized by the private sector. But it was government funding and government risk-taking that made all these things possible.
The book also talks about the positive unintended consequences of the creation of certain products and services, the implications of which their creators were not able to foresee during the time of their conception. One example was M-Pesa, the technology that was developed in rural Africa for easy repayment of loans by sending money through text messages. Instead of keeping the money in cash overnight, vendors deposited their day’s earnings through M-Pesa, and also started sending money from towns to villages through the service at it was a much safer option than sending cash through bus drivers (the conventional practice in rural Africa). But perhaps the most crucial of the societal changes that M-Pesa triggered was the reduction in corruption. People preferred to not carry cash, so it was not possible for them to pay bribes to policemen. Nobody wanted to take bribes through M-Pesa as the money trail could be tracked to their phone number. An important lesson for Indian policy makers: coercive government action is not a prerequisite for digitisation of the economy, mitron!
In a chapter about elevators, Harford tells us that these mass transportation systems (as he refers to them) flipped the social hierarchies in a building upside down. When the topmost floors of a building could only be reached by a tough stair climb, they used to be the most affordable parts of the building, and were often used as servant quarters. After the advent of the elevator, the top floors were converted to penthouses, and signalled higher socio-economic status for their residents.
Fifty Things That Made the Modern Economy never pretends to give the readers a deep academic history of these inventions, but Harford provides a stellar set of notes and references if one wishes to dive further into any of them. Harford, a winner of the Bastiat Prize for Journalism, writes this book with equal adeptnesss of a college professor who can philosophise about mundane objects and a grandmother who can excite you with her trivia-filled stories. I won’t hesitate to call this one a must-read.