1: The Shape of Things to Come

1 I avoid the word because most people never use it, and those who do cannot agree on its meaning.

2 Literally. According to Fisher’s friend and biographer Gerald Frost (Antony Fisher: Champion of Liberty, Profile Books, 2002), Fisher brought twenty-four fertilized eggs back on the plane, hidden in his hand luggage: he wanted to dodge the slow process of getting a licence to import the eggs legally – a licence which might not have been granted. In public, Fisher was equally contemptuous of agricultural regulations. Unlike Hayek, he did not seem to recognize that even the free-est of free markets relies on a robust legal framework.

3 As the joke goes, an economist is someone who asks, ‘That’s all very well in practice, but how does it work in theory?’

2: Trust No One

1 In fact, it was discovered much earlier. A French mathematician who wrote one of the many stellar reviews of Theory of Games and Economic Behavior was also a book collector. In the 1960s he purchased a mathematical treatise from one of the stalls along the banks of the Seine in Paris. It included a letter describing the minimax solution to two-person zero-sum games. The letter was dated 1713.

2 RAND’s failure to produce useful research was becoming a joke. By the late 1950s outsiders said that RAND stood for ‘Research And No Development’.

3 However, in the film the US did not know in advance that the Doomsday machine existed, rendering it useless as a threat. Director Stanley Kubrick ignored complaints about this plot flaw from economist and game theorist Thomas Schelling (see Chapter 6).

4 Perhaps Nash had finally accepted von Neumann’s appraisal of his work, almost fifty years earlier.

4: The Government Enemy

1 Fifteen years later, with his stellar reputation already secure, Arrow could admit that he had shown ‘a certain want of diligence’ in tracking down the existing research on voting systems.

2 A New York Post cartoon, titled ‘The Chair of Indecency’, showed Russell, pipe in hand, sitting on a pile of his books, including his classic of mathematical logic, Principia Mathematica, which inspired Arrow.

3 The names don’t matter, of course, but why assume white males? Just look at the RAND strategists in those days.

4 Fifty years later Baumol admitted that he had been ‘too cowardly’ to call them predictions back in the 1960s so he settled on ‘extrapolations’. Even the originators of counter-intuitive ideas sometimes find them hard to take seriously.

5: Free-riding, or Not Doing Your Bit

1 Although we don’t have magic rings, another form of invisibility is now available to users of Twitter and other social media. Celebrities are often abused and harassed on Twitter by followers who rely on online invisibility to escape sanction.

2 Helmsley showed no sympathy towards those close to her. She left two grandchildren nothing in her will, but left $12 million to her dog, a Maltese named Trouble. When the dog bit her housekeeper, Helmsley reportedly said, ‘Good for you, Trouble, she deserved it!’ (New York Daily News, 30 August 2007).

3 But within ten years Oaten had resigned after the revelation of his involvement in a string of bizarre sex scandals, something he ascribed to a ‘mid-life crisis’.

6: The Economics of Everything

1 The prize came late to Schelling in another way too. He was notified only moments before the public announcement, because the prize committee did not have Schelling’s correct phone number. Schelling pointed out he was in the phone book.

7: Everyone Has a Price

1 The economist Joel Waldfogel has devoted a significant part of his career to arguing that non-cash gifts are wasteful, beginning with his 1993 paper ‘The Deadweight Loss of Christmas’ (published in probably the most prestigious academic economics journal, the American Economic Review) and more recently his book Scroogenomics.

8: Trust in Numbers

1 There is even a film about Ellsberg with this title, one of two full-length films about him.

2 Both words can be roughly translated as ‘chance’, but hasard comes from an Arabic word used in dice games, in which uncertainty is measurable and probabilistic. This probabilistic meaning was later adopted by the French mathematician Borel. Fortuit is more associated with unforeseeability and unpredictability, suggesting unmeasurable uncertainty.

3 What’s in a name? Everyone knew him as Jimmie, but that was a name given to him by a nurse, because his mother was too ill immediately after his birth to name him. Later she named him Leonard. Jimmie used the named Leonard only for his published work. And he was born Ogashevitz, changing his name to Savage only when doing ‘classified war work’. See http://www-history.mcs.st-and.ac.uk/Biographies/Savage.html.

4 De Moivre did not realize he should use a bell curve to predict his life span. Instead, as his health began to fail, he noticed he was sleeping fifteen minutes longer each night. He calculated he would be sleeping twenty-four hours a day by 27 November 1754. His method was flawed but his prediction was perfect: he died that day.

9: You Deserve What You Get

1 Engelbart held a crucial patent for the mouse but never received any royalties because he allowed the patent to lapse in 1987.

2 A napkin fitting the description has appeared: see http://www.polyconomics.com/gallery/Napkin003.jpg. However, since Laffer does not remember the incident, this was presumably drawn more recently, as though by popular request. And it seems to be dated September, which does not match the December lunch described by Wanniski.

10: A Troubled Relationship: Modern Economics and Us

1 For example, most economists confidently recite the definition of Pareto efficiency they learned from the textbooks: ‘It’s impossible to make anyone better off without making someone else worse off.’ But this statement is inaccurate. Pareto efficiency focuses on giving people what they want (satisfying preferences) – which is not the same as making them better off. As psychologists have long known, people often make mistakes in pursuing their goals, or simply lack the information to know how best to achieve them. The textbook statement of Pareto efficiency implicitly assumes these problems don’t exist.