Wednesday, 27 December 2017

Book Review: The Economics of Just About Everything

It's always going to be difficult for a book to live up to a title like The Economics of Just About Everything, but Andrew Leigh's 2014 book with that title does about as good a job as any. The book is probably best characterised as a newer, Australian-focused version of Freakonomics, by Steven Levitt and Stephen Dubner. Like Levitt and Dubner in their original book (but less so in the subsequent books such as Think Like a Freak, which I reviewed here), Leigh draws on a mixture of international research and his own research to highlight some interesting analyses undertaken by economists in recent years.

Leigh also avoids the temptation simply to repeat topics or themes that have been well covered in other pop economics titles in recent years. That leads to some genuinely unique and interesting chapters. I especially enjoyed Chapter 5, which applies David Galenson's analysis of creative innovation to Australian painters, rock musicians, and novelists. Galenson claims that there are two types of innovators:
...'conceptual' innovators, whose work implements a single theory, and 'experimental' innovators, whose work evolves from real-life experience and empirical observation.
Galenson's theory suggests that 'conceptual' innovators should peak earlier in their careers (that is, at younger ages) than 'experimental' innovators, and his research has demonstrated that it holds true in a variety of cases (including economists). Leigh extends this to a number of Australian cases and shows that it also holds true. However, at points it did leave me wondering whether there was a risk of endogeneity. For example, maybe we consider someone a conceptual innovator because they peaked early and so the causality runs the other way? Leigh never addresses this point, but I think it needed some statement.

Chapter 7 covered global poverty and development and like most pop economics books, it couldn't really do justice to the topic (and to be fair, it's not a topic that would be easy to do justice to in a single chapter). However, I found it interesting that one of the articles that Leigh made mention of was one that I also covered in my blog a couple of months ago.

Chapter 8 (entitled "Smashing the crystal ball") was on forecasting, and does a good job of explaining why it is that you shouldn't really depend too heavily on economic (or other) forecasts. However, it would have been good if Leigh had mentioned more explicitly the uncertainty in these forecasts, and that the uncertainty can often be measured and is genuinely useful to decision-makers (which is a point that I have made before).

Overall, I found this book to be an interesting read, in the style of Freakonomics. Leigh makes the point in the introduction that:
If there are two themes to this book, they are that economics is everywhere, and economics is fun.
I think there is a strong case to be made for those themes, and Leigh does a good job of it. Add it to your holiday reading list, if it's not too late!

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