The undercover game-changers

Book review of 'Fifty Things That Made the Modern Economy'

Fifty Things That Made the Modern Economy

Tim Harford

Hachette

343 pages; Rs 599

In The Shipman’s Tale, Geoffrey Chaucer writes about a merchant too busy with business to notice that his wife is having an affair with the clergyman. The clergyman borrows money from the merchant which he uses to endear himself to the merchant’s wife, and then tells the merchant that he has repaid the debt.

Tim Harford, Britain’s answer to Malcolm Gladwell, recounts this story from The Canterbury Tales in the chapter on “Double-Entry Bookkeeping” in his latest book. Mr Harford, who writes the “Undercover Economist” column in the Financial Times and has trained his eye on the more interesting aspects of economics before, presents here a list of 50 overlooked inventions that transformed the modern economy.

The Chaucer reference is a cautionary tale of how even the best inventions — and double-entry bookkeeping is as good as it gets, allowing businesses from the 14th century onwards to pump money where the profits are — have left some losers in their wake. Nearly every invention mentioned here — from the banal (the passport) to the unheard-of (the Haber-Bosch process that harnesses nitrogen to make ammonia) — is both uplifted by early pros and saddled with later cons.

Consider the humble passport. This ubiquitous document was so unpopular in the 19th century that the French emperor dubbed it “an oppressive invention”. The First World War changed all that, and even hundred years on, we continue to use the basic template of the booklet. While Mr Harford, as a citizen of the world, is naturally suspicious of governments deciding who gets to travel and where, security experts will not share his enthusiasm for open borders in this age of terror.

Where Mr Harford makes an impressive case is in listing inventions that have dramatically altered the gender dynamics of the workplace. From infant formula to TV dinners (pre-cooked frozen meals), the 20th century was a time of great churn within the household, as women searched for greater autonomy in running domestic affairs. Mr Harford adds the contraceptive pill to this list, making the argument that its success, initially in the US and then all over the world, freed women from marrying early and giving up their careers.

Yet, Mr Harford’s selection may leave the discerning reader baffled. He includes, as he should, air conditioning and refrigeration in his list but leaves out, say, washing machines. But the charm of this writerly species, a group that includes Steven Levitt and Robert Shiller, is that you don’t read them just for the facts and ideas. “The washing machine didn’t save much time, and the ready meal did, because we were willing to stink but we weren’t willing to starve,” is how Mr Harford defends his exclusion of the washing machine.

While Mr Harford grants that every dramatic invention takes years of hard work and the support of many unknown faces to come to pass, he is not immune to the charms of the neat story. From the magical account of how Selfridges became London’s pre-eminent departmental store to the inspiring tale of Grace Hopper, the woman who may have single-handedly made programming languages possible, it is in the narrative details that even the not-so-monumental inventions begin to sing. At other times, Mr Harford overplays his hand. Consider the chapter on video games: “More puzzling still, while most studies of employment find that it makes people thoroughly miserable, against expectations the happiness of these young men was rising…These young men were deciding they didn’t want to be a Starbucks server. Being a starship captain was far more appealing.”

Apart from the fact that the young men’s parents may have different ideas about the appeal of starship men, this easy correlation between video game consumption and unemployment is a stretch. Does Mr Harford, the celebrated economics writer, really expect us to believe that unemployment is not a complex interplay of several factors but a by-product of a generation’s addiction to video games?

This unevenness extends to other parts of the book. The financial chapters include such heavyweights as insurance and paper money but also tax havens and index funds. I am not sure tax havens really belong in a book about 50 things that changed the face of the modern economy, especially at a time when governments are doing everything in their power to, on the one hand, offer corporations a more sensible tax structure, and on the other, clear the haze between tax avoidance and parking of ill-gotten wealth.

The book also has a Western bias which is perhaps natural, given the scope of Mr Harford’s work. There is a chapter on m-Pesa but none on Grameen Bank, even though banking as a theme runs through the text. The book is ultimately a compilation of innovations and ideas that started and grew in a certain milieu and were then adopted globally. What is missing is how these innovations were further tweaked to meet local conditions.

It does seem from reading the book that all the really important stuff happened before our time. The most convincing section of the book, “Ideas About Ideas”, lists the intangibles that have had an outsize influence. Even the most defining innovations of our age, a cluster that boasts such luminaries as the iPhone, pale in comparison to these inventions, which range from public key cryptography, in whose absence there would be no internet, to limited liability companies, on which is founded the entire edifice of modern commerce.