Book Review

Economics Without The Boring Bits

by Tejvan Pettinger

Written during the Covid19 pandemic, Economics Without The Boring Bits takes an almost textbook-like approach in dividing the book into various umbrella ideas and then delving into specific economic principles. Pettinger breaks down basic ideas that are fundamental to understanding economics as a whole. He is able to expertly explain them in a concise and simple way, whilst taking into account the implication of current events.

Summary

In Economics Without The Boring Bits, we are introduced to various broad discussion points. These include, ‘Economic errors,’ ‘Eco bombshells,’ ‘Political quandaries,’ and a few more. Within each, various different subsections are explored. For example, in ‘Economic Errors,’ Pettinger outlines 6 fallacies. Here is a brief explanation of each:

Broken Window Fallacy: Fixing a broken window is not an improvement for society as a whole as we are simply returning it to its original state. The same can be said about the economy. For example, during the Covid19 pandemic, it can be argued that the subsidies for struggling businesses provided by the government do not help the economy to progress, but simply to recover to its original state. And so, while it appears that we are improving, we are instead trying to reach our earlier position.

Luddite fallacy: The idea that technological changes will cause a disruption to the workforce. An improvement in technology does not mean that there will be a net decline in jobs. Contrary to the belief that technology will take our jobs, it will simply shift jobs elsewhere. We will see a net displacement, not a net reduction.

Luddite fallacy fallacy: The luddite fallacy is true in most cases, except for one. This is because for the least skilled workers in society, the cost of retraining them and educating them to the new way of working means that they may indeed be at risk of unemployment.

Lump of labour Fallacy: This is the idea that there isn’t a fixed amount of work in the economy. Specifically relating to immigration, the tension that foreign workers will cause higher unemployment for local workers is misguided. If the population increases, this simply means that there is more demand, and thus more demand needs to be met. This creates more jobs in the economy, and so an increase in population will not cause an increase in unemployment, but rather, much like the luddite fallacy, will cause a shift in the type of work being conducted by a subset of people.

Zero-Sum Game Fallacy: This is the idea that for certain situations, when one party benefits, if it is at the expense of another, then ultimately, the net benefit is zero. One example is gambling. The total amount of money earned by the winner is the same as the money lost by the loser. When we add the winnings and the losses together, we get a net total of zero. Pettinger explains that critics of the free market believe that the free market is also an example of a zero sum game. When an entrepreneur creates a business, they are simply redistributing the wealth and creating inequality. They are taking, ‘a bigger slice of a piece of cake.’ Pettinger goes on to explain that supporters of the free market would rebut that the entrepreneur creates more new jobs and encourages more enterprise. And thus, it is not a zero-sum game. The entrepreneur is not the only one who wins. It can be viewed that instead of taking a larger slice of the cake, instead the cake has become larger.

Sunk Cost Fallacy: This is the idea that once we have invested a large amount of time or money into something, we will continue to pursue it, even if we know that it will not come to fruition. Pettinger suggests that governments are prey to the sunk cost fallacy. When spending a large amount of money on government projects, often funded by the taxpayer, it becomes difficult to abandon it if it is failing. Not because of the loss of their own time or money, but because of the loss of the taxpayers’. The fear of the loss of reputation makes governments continue to invest. He also rebuts the misconception that starting a business is a sunk cost. A business has the unforeseen benefit of being potentially very successful in the future, and thus it is not always clear to say whether it is a sunk cost or not.

Fallacy of Consumption: This is the idea that we cannot assume that something is true for the whole, when it is only true for part of the whole. One example is that if one person stands in the crowd to get a better view, it benefits only one person. If everyone in the crowd stands, it doesn’t mean that everyone will get a better view. This is also what controls fishing habits. If one fisherman over fishes for a day, he benefits. But if everyone overfishes, everyone loses out. Thus, people regulate the timings that they will fish for.

For the rest of the chapter, Tejvan Pettinger describes the misguided belief about middlemen and the false sense of security that causes us to lower our guard, and ultimately continue to suffer from recessions. Throughout the rest of the book, he explains various other smaller concepts, as above, that fall under a broader theme.

My Opinion

Pettinger succeeds in introducing various economic concepts. He is able to relay them with a degree of expertise while breaking them down into simple and concise explanations. He focusses on explaining various ideas, such as key economic figures like Adam Smith or John Maynard Keynes. He outlines their most influential policies and ideas. For example, Smith, often referred to as the father of modern economics, and his theory of the Invisible Hand controlling market forces to arrive at an equilibrium. In a particularly resonating quote about John Maynard Keynes, he writes, ‘If Adam Smith is the undoubted father of economics, Keynes is the prodigal son,’ for his efforts in reshaping economics and creating a new branch of macroeconomics. Pettinger also explains specific theories such as monetary policy and exchange rates. While some of these concepts may be difficult to fully grasp the first time of reading, the style in which the book has been written allows you to quickly re-read it until you have gained a better understanding. For some, the use of multiple smaller explanations may be insufficient. For example, condensing all the knowledge of exchange rates may be difficult, but as an introduction to these concepts, it is quite useful. Finally, Pettinger also explains his own insights, including why airline ticket prices fluctuate. This allows the book to have lighter discussions, ‘without the boring bits,’ or straying too far into academic principles.

Overall, Economics Without The Boring Bits is a strong book that provides a simple explanation to a vast array of various facts about the economy and is a good starting point to learn about economics. Although it does not go into great depth about each concept, it remains faithful to the title, and instead encourages the reader to explore more about each topic to learn more about it individually having gained a foundational understanding. Economics Without The Boring Bits does indeed provide a broad overview of economics while keeping the reader engaged at all times.