Learning from mistakes for success

Little Brown, £20

by Philip Salter

THE “undercover economist”, Tim Harford has a new book out: Adapt. Its central theme is the examination of failure and success, reasoning that a bit of the former is vital to achieve the latter; and even when you are successful, in order to keep it, a little more failure is needed to adapt. This simple message is no truism – Harford shows how all governments and many businesses make the mistake of not making mistakes, and with this lack of experimentation, fail to adapt to a changing world.

As bad as failing businesses are for the owners and workers of a business, Harford argues that failure is part of the success of market-based economies. He writes: “The difference between market-based economies and centrally planned disasters, such as Mao Zedong’s Great Leap Forward, is not that markets avoid failure. It’s that large-scale failures do not seem to have the same dire consequences for the market as they do for centrally planned economies.”

A key strand of Adapt is built upon famed economist Friedrich Hayek’s critique of planners and his insights into information and the evolution of institutions. Harford questions the “planners dream” of being able to control everything.

Harford deals with the toughest policy issues of the day, weighing up patents against innovation prizes, comparing carbon targets with a carbon tax, and contrasting the over regulation of safety procedures on oil platforms with the obtuse regulation of banking. In each, he offers insights that blend into the broad thesis of the book. The answers are tentative when they need to be, reflecting the complexities involved in avoiding unintended consequences.

Adapt stimulates as many questions as it seeks to answer and unlike other popular economics books, it doesn’t shut down the debate with a flaky behavioural experiment from the 1960s, which has long since been discredited.

Some have compared Tim Harford to Malcolm Gladwell of Tipping Point fame. This does a disservice to Harford, who is a much more careful writer and avoids overstretching other researchers’ conclusions or relying on anecdotes.

His claims might not be as decisive as his American contemporaries – also riding the wave of popular economics – but they are more robust and as a consequence more significant.

Palgrave Macmillan, £18.99

by Ruth Porter

A WHISTLE stop tour through the coalition’s policy agenda for its first year, this book is surprisingly pacey given its academic credentials. With an expert cast of contributors it explores the details of coalition policy with elegant simplicity.

In general there is little attempt made to provide critique of the coalition’s policy agenda from the Right; for example, public spending cuts are portrayed as massive, yet in 2015 government spending will still be more than 45 per cent of GDP. Although this does make the book rather one-sided at times, on the other hand it makes it a coherent read and provides insight into likely criticisms the coalition will face approaching the next election.

One of the most interesting threads running through the book is its linking of various aspects of the coalition’s reforms to projects started under New Labour. It also looks at attempts by the post-Blair/Brown party to distance itself from this agenda, perhaps providing some clues into what’s to come with Miliband’s Labour.

Discussions of fault lines within the Lib Dems throughout provide something of an insight into what will be one of the most important areas to watch over coming months as the Party looks to work out what it stands for after electoral disaster in May.

The book seems to agree with the general consensus that this coalition was forged in the furnace of economic crisis (although hinting that perhaps Cameron’s eagerness for the coalition may have been partly to deflect attention from his failure to achieve an outright majority for the Tories). As this period of political history unfolds before our eyes this book offers a thoughtful comprehensive summary of the challenges Britain faces and it is not to be missed.

Ruth Porter works for the Institute of Economic Affairs