Podcast Summary: LSE Public Lectures – The Consolations of Economics with Tim Harford

Date: October 6, 2009
Host: LSE Film and Audio Team
Speaker: Tim Harford (Financial Times columnist, author of "The Undercover Economist")

Overview

In this lively and entertaining lecture, Tim Harford explores how economics can be a practical tool for solving everyday problems and even making us happier. Drawing from his "Dear Economist" column, Harford illustrates the surprisingly deep (and often humorous) connections between economic principles and daily life, tackling questions about love, happiness, wine, and more. The event combines witty anecdotes, insights from behavioral and microeconomics, and audience Q&A to show that economics is not just about money or markets—it's about understanding and improving our choices.

Key Discussion Points and Insights

1. Economics as a Tool for Everyday Life

• Harford’s background: Introduced as the Financial Times “agony aunt,” Harford explains how he began providing economic advice on personal dilemmas (01:19–07:25).
• The premise: Economics, he argues, is as life-transforming as medicine or science—capable of meaningfully helping people in daily decisions.

2. The Power of Oversimplification and Rational Choice

• Advice columnist as economist: The similarity between problem pages and economic advice—both provide clear, general, often oversimplified answers (05:50–07:25).

  • “You write into a problem page, what are you going to expect? You're going to expect an answer that first of all is grossly oversimplified, secondly, contains no knowledge of your personal context… It’s also the kind of answer you expect from an economist." – Tim Harford [07:05]

• Rational vs. behavioral economics: Rational choice prescribes optimum actions; behavioral economics explains why humans do otherwise (07:25–08:30).

3. Memorable Problem Letters (Anecdotes)

• Letter 1: The Financially Boring Marriage (08:31–12:00):

  • A 74-year-old man wonders whether to pay his much younger mistress to continue a discreet relationship.
  • Harford employs the Permanent Income Hypothesis and incomplete contracting theory to counsel that charm—not money—is his best strategy.
    • “You cannot write an enforceable contract setting out what you expect for your considerable outlay... Not many [romantic/financial arrangements] succeed on the terms you propose.” – Tim Harford [11:07]

• Letter 2: The Escort Facing a Recession (12:00–15:56):

  • An escort in Canary Wharf asks how to handle a downturn in demand post-Lehman Brothers collapse.
  • Drawing from economic studies on prostitution and agency work, Harford suggests relocating, waiting for supply to fall, or using downtime productively.
    • “You have three options, none of them perfect. 1. Relocate. 2. Tough it out... 3. Treat your spare time like an estate agent: study or find a sideline.” – Tim Harford [14:22]

4. Economics and Happiness

• Polling the audience: Topics are voted on; happiness and dating are most popular (17:00–19:00).

• Debunking psychology’s ‘happiness equations’:

  • Harford mocks simplistic psychological formulas, advocating for a more rigorous, econometric approach (19:12–21:10).
    • “A proper economist’s happiness equation is estimated. You'll have at least 25 variables… That’s just nonsense.” – Tim Harford [20:13]
  • Quotable sarcasm: “We don’t like to call it happiness; we like to call it subjective well-being. We think happiness sounds a bit frivolous. To which my only answer is: 'Well, cheer up.'” – Harford [21:05], referencing Alan Krueger

• Key empirical findings from happiness research (22:00–28:30):

  • Unemployment: Deeply depressing, regardless of money.
  • Education: More education = more happiness (to a point).
  • Marriage: Married people report more happiness, but divorce is "underrated" compared to separation or widowhood.
  • Children: “Optimal number of children is none. If you are going to indulge, then two is the least depressing option.” – Tim Harford [27:50]
  • Money: Yes, richer people are on average happier.

• Caveats of survey-based happiness:

  • Small incidental events can heavily bias self-reported happiness (example: finding a coin boosts happiness scores) [29:30–30:20].

  • Kahneman & Krueger’s approach: Instead of “Who is happy?” ask “When are we happy?”—activity-based happiness assessment [30:21–32:40].

  • Findings:

    • Most enjoyable: Sex (but little time spent), socializing, praying.
    • Least enjoyable: Commuting, time with the boss.
    • Fun quote: “The most fun you can have, it turns out, is having sex… There’s no research on what happens if you’re having sex with your boss.” – Tim Harford [32:52]

5. The Economics of Dating – Speed Dating Studies

• Explaining speed dating mechanics (30:12–33:32):

  • Speed dating allows for large-scale, honest data collection on romantic preferences.

• Are the Romantics or Economists right about love? (33:33–38:58):

  • Romantic view: People have fixed standards and search until they meet “the one.”

  • Economist view: Romantic “preferences” are flexible; people adapt standards to market conditions.

  • Research findings:

    • Both genders adjust standards according to the dating “market”—propose about the same number of dates whether the pool is attractive or not.
    • “So it turns out that the romantics are wrong, the economists are right, and if you do ever go on a speed date, take a short, ugly friend with you. It really, really works.” – Tim Harford [38:33]

  • Gender-based preferences:

    • Women prefer tall, rich, non-smoking, educated men.
    • Men prefer thin women and care little about female income.
    • Everyone prefers non-smokers and the highly educated.

6. Economics of Food & Drink

• Perception over substance:

  • People’s perception of wine is dominated by label and price, not taste (39:00–42:00).

  • MRI studies demonstrate different brain responses to identical wines presented with different prices.

  • Key quote: “Serve terrible wine in very nice bottles. It may work.” – Tim Harford [40:59]

• Wine medals and judging:

  • Repeated servings of the same wine get inconsistent scores from judges—medals indicate little (42:01–43:20).

• Food trickery and limits (43:20–49:20):

  • Experiments with blended pâté, Spam—and dog food—show that while people can rank tastes accurately (dog food is worst), they can’t identify which is the dog food.
    • “You can't skimp. You skimp on anything, people really will notice.” – Tim Harford [48:13]

Notable Quotes & Memorable Moments

• Harford’s self-deprecation and wit:

  • “I felt guilty that I didn’t really understand how a bank is run. And then I realized that the managing directors of all the banks didn’t understand the first thing about how a bank is run. And I felt somewhat better.” – Tim Harford [02:55]

• Actionable summary:

  • “If you can possibly manage all of this: get rich, but stay at college, marry somebody, but use a lot of birth control, and men, consider a gender reassignment surgery.” – Tim Harford, humorously summarizing his “happiness equation” advice [27:10]

• On relationships:

  • “People who are married are smug, smug people.” – Tim Harford [23:57]

• Lesson on happiness and activity:

  • “Turns out, your boss is the only human being on the planet whose presence makes you less happy.” – Tim Harford [32:30]

• Speed dating tip:

  • “If you do ever go on a speed date, take a short, ugly friend with you. It really, really works.” – Tim Harford [38:33]

Important Q&A Moments (Selected Timestamps)

• Staying at university vs. getting a job (53:14–54:10):

  • Q: Is it better to stay at LSE to avoid work?
  • A: “Turns out that being at school or university is the happiest time of your life... so yes, you're right and your friend’s wrong.”

• Mid-life unhappiness (54:11–56:45):

  • Q: Can you avoid the “late 30s” depression dip in happiness?
  • A: The pattern is robust and not much can be done, but being rich, having friends, and not commuting help regardless of age.

• Gender imbalances and dating markets (56:50–61:28):

  • Q: What should a man do after transferring from a military academy with 85% men to a more balanced environment?
  • A: Small gender imbalances create large effects in dating markets; use your new advantage.

• Insurmountable problems for economics? (61:29–63:39):

  • Q: What's the biggest problem you’ve failed to solve through economics?
  • A: Complex, dynamic problems like climate change, terrorism, or the financial meltdown don’t have simple economic solutions.

• Most satisfying problems solved (63:40–68:00):

  • A: Highlights letters from readers, including one where advice led to a positive life change (student changed schools, did better, went to Cambridge).

• Wedding costs and happiness (69:15–70:00):

  • Q: How to ease the pain of paying for a daughter's expensive wedding?
  • A: Suggests treating it as a loan, notes Oswald's happiness research equates marriage to a significant monetary boost, and offers playful advice.

Final Advice Summary (Paraphrased, 70:05):

• “More sex, get married, stay in college, use contraception, short ugly friends. I didn’t manage to give you advice over Christmas, but I can summarize it pretty quickly: Scrooge is badly underrated. Learn from the master.”

Segment Timestamps

| Segment | Topic | Time | |---------|-------|-------------| | 00:00–01:19 | Introduction by host |
| 01:19–07:25 | Tim Harford’s background, “Dear Economist,” economics as help | | 07:25–15:56 | Funny letters; financial and escort dilemmas | | 17:00–19:00 | Audience poll: happiness vs. dating | | 19:12–32:52 | Happiness research: data, myths, activity-based insights | | 32:53–38:58 | Economics of dating; speed dating research | | 39:00–49:20 | Food and wine economics; experiments with perception | | 53:14–70:00 | Q&A with audience; real-world problem solving | | 70:05–End | Harford’s final summary & memorable sign-off |

Tone and Language

Harford’s delivery is witty, self-deprecating, and accessible. He happily skewers both economists and psychologists, brings humor to economic theories (especially about marriage, dating, and wine), and encourages the audience to look for practical and even playful uses for economic thinking.

For listeners and non-listeners alike, this episode is a whirlwind tour of how economic logic—plus a dose of British humor—can make our lives a little less baffling, and sometimes, a little bit happier.