‘To ask that question is to answer it’ this was the stand out quote of the book. As so often with economics problems the real issue is asking the right question as once you have everything else falls into place and Tim Hartford asks a number of the right questions throughout this book.
I had heard a number of the thought experiments before, ‘we can build cars in Detroit or grow them in Iowa,’ but I had never seen such a succinct argument equating taxes on imports directly with taxes on exports and the eggs analogy was one of the best explanations of MBS, CDO, CDO² &c I’ve read even if it does miss the this issue of correlation it does have very interesting applications to the pricing of a retrocessional excess of loss cover.
I found the parallels between international development in Nepal and software engineering very interesting. Promotions and pay rises come from sexy new projects not doing maintenance despite maintenance often being one of the highest value things one could do.
It was also nice to know who is supposed to have said one of my favourite quotes. Supposedly it was Napoleon who said, ‘Never ascribe to conspiracy that which is adequately explained by incompetence.
The story of New Zealand’s telecoms auctions was also fascinating, particularly that someone was able to buy a NZ mobile phone licence they were willing to pay NZ$100k for by handing over only NZ$6. The lack of a ‘k’ is correct there.
Having read freakonmics I will be interested to read the paper that kicked it all off. ‘An economic analysis of a drug selling gang’s finances’.
The idea that asymmetric information, but where the fact of the asymmetry is known (i.e. as a probability) causes total market failure was very interesting. Insurance depends on mutual ignorance (up to Kelly’s criterion) and there may be no alternative to government mandates if medical testing is able to really clearly price your medical risk. Though, interestingly, I doubt there would be similar clamours for the pricing of annuities.
Overall, a great read. I suppose I will have to read something like Das Capital to balance out all the pro free-trade free-market books I’ve been reading.