Are Recessions Like Prison Camps or Baby-sitting Co-ops?

Tim Harford, who writes the Financial Times‘s “Undercover Economist” column, has appeared on our blog many times. This guest post is part of a series adapted from his new book The Undercover Economist Strikes Back: How to Run or Ruin an Economy

Robert A. Radford studied economics at Cambridge University, and worked at the International Monetary Fund. In between, he spent half the war in a German prison camp, and on his release wrote an article, “The Economic Organization of a P.O.W. Camp.” It gives a surprising insight into economic recessions.

The building blocks of the P.O.W. camp economy were parcels of food and cigarettes that the prisoners received from the Red Cross. These parcels were standardized—everybody got the same, beyond the occasional package from home. Occasionally, the Red Cross received bumper supplies, or ran short; in those circumstances everybody enjoyed a surplus or a shortage. Naturally enough, while prisoners had equal rations, they did not have identical preferences. The Sikhs didn’t have much use for their rations of beef or razor blades, for example; the French were desperate for more coffee; the English wanted more tea.

The Undercover Economist Is Back

Tim Harford, who writes the Financial Times's “Undercover Economist” column, has appeared on our blog many times. This guest post is adapted from his new book The Undercover Economist Strikes Back: How to Run or Ruin an Economy. Harford also appeared in our podcast "Hey Baby, Is That a Prius You’re Driving?"

Perhaps the strangest currency in the world can be found on the island of Yap, in Micronesia in the West Pacific. This coin, the rai, is a stone wheel with a hole in the middle. Some rai are fairly portable—a handspan or less across, and the weight of a couple of bags of sugar. But the most valued stones are far bigger—one British sailor wrote in the late nineteenth century of a stone wheel that was four and a half tons in weight and more than nine feet in diameter. In other words, it was almost completely immovable.

Yap’s stone money used to be a serious business. The stones were quarried and carved on the island of Palau, 250 miles away. One Victorian naturalist witnessed four hundred men from Yap, a tenth of the adult male population, at work in the quarries of Palau. Getting the stones from Palau to Yap on a little bamboo boat was a difficult and sometimes lethal affair—some of the stones weighed as much as two cars. (And rai were especially valuable if someone had died on the expedition to fetch them.) The biggest stones might have been used for major transactions such as buying land or wives; more modest-size stones—a couple of feet across—were exchangeable for a pig. Even then, it would have been a lot easier to move the pig than to move the stone.

The Undercover Economist's New Radio Series

Tim Harford, a.k.a. the Undercover Economist (also a Financial Times columnist) has a new radio series on the BBC called Pop-Up Economics:

The show is all about storytelling – and the stories are of remarkable lives or surprising ideas in economics. We’ll learn about the impromptu engineering genius Bill Phillips, the cold war guru Thomas Schelling, and life-saving market designer Al Roth. We’ll discover how the geeks took over poker, and what happened to them.

And the series begins with the innovation lessons from the London Olympics – or as we’ve called it, “Hot Pants vs. the Knockout Mouse.”

We'll be tuning in.

Why America’s Economic Growth May Be (Shh!) Over: a New Marketplace Podcast

With the Presidential debate finished, we are officially in the final lap of America's second-favorite spectator sport. (Yes, football is better than politics.) Of all the talking that Barack Obama and Mitt Romney will do by Nov. 6, you can bet that a great deal of their breath will be expended on economic matters. Because that's what the President of the United States does, right -- runs our economy?

Well, actually, no. The President has far less influence over the economy than people tend to think -- as we've pointed out not once, or twice, but three times.

That, of course, won't stop the candidates from talking about their plans to "fix" or "heal" or "restore" our economy -- all of which imply that we are in an economic doldrums that is sure to pass. But what if it doesn't? What if the massive economic growth the U.S. has experienced through most of our history is a thing of the past?

That's the topic of our latest Freakonomics Radio on Marketplace podcast. (You can download/subscribe at iTunes, get the RSS feed, or listen via the media player in the post.)

One Good Book Cover Deserves Another

I admire both of these books, and their authors, and even their covers.

The Undercover Economist Answers Your Questions

I would recommend introducing your wife to the theory of real option valuation. Point out that the option to marry her was likely to remain open for many years after you originally met. By exercising the option so early, you showed your bride that the net present value of your relationship was large and positive and your uncertainty about the decision was very low.

Bring Your Questions for the Undercover Economist

If the financial crisis has proven anything, it's that you should ignore the advice of most economists.
Most economists, that is.

‘The Logic of Life’

Tim Harford, a.k.a. the Undercover Economist, has a new book out called The Logic of Life. Tim is a very fine economist, writer, TV host, and “agony uncle” (that’s British for “advice columnist”). Yes, he is also British. Although I have blogged in the past about the untrustworthiness of book blurbs, let me say here […]

Radio Free Harford

Tim Harford, the affable British economist who is a star of book writing, journalism, and even TV (his BBC program was called Trust Me, I’m an Economist), is now taking to the radio waves as well, at least in the U.K. His first radio documentary, Analysis: Repugnant Markets, airs today on BBC radio (3:30 p.m. […]

The FREAKest Links: Two’s A Crowd Edition

Fortune Small Business reports that a feud is brewing between two companies that provide inflatable torsos to serve as movie extras in crowd scenes. Industry leader Inflatable Crowd is being sued by competitor Crowd in a Box over patent infringement, while the defendant’s owner claims he came up with the idea on his own. (Hat […]