The Financial Times Guide to Using Economics and Economic Indicators.

With the increasing globalisation of the world enterprise culture, an understanding of economics - however basic - is fast becoming a must for entrepreneurs wherever they conduct business. Even a one-person business soon recognises itself as part of a much broader economic picture, whether national, regional, or international. This book, by Romesh Vaitilingam, makes a useful contribution towards an understanding of that broader economic picture and its relation to business practice whether conducted by large or small enterprises. But, useful as it may be to a well-defined set of readers, the book also has some decided limitations.

The most obvious strength of the book is also its most obvious weakness. Prepared by a writer for the Financial Times, this guide carries the authoritative tone of one of the world's leading business newspapers and is generally written in that paper's hallmark style. Unfortunately, though, the author cites the Financial Times to the exclusion of almost every other newspaper on earth. Thus, for example, while the Financial Times is cited some 68 times, there is no mention whatsoever of the Wall Street Journal, another of the world's leading business newspapers. Indeed, The Economist, published by the same organisation as the Financial Times, is the only other publication mentioned in the book.

The author himself is highly aware of other sources and of their potential importance to business people: "Economic news is pervasive. Almost everyday sees the publication of new facts and figures for one economic indicator or another: Consumer credit, retail sales, industrial production, the public sector borrowing requirement, the exchange rate mechanism, the level of unemployment, the rate of inflation, the balance of payments, and so on. Newspapers like the Financial Times regularly report these latest developments in the economies of the United Kingdom, Europe, and the world." Yet, despite his reference to newspapers "like" the Financial Times, the author does not follow through in discussing any of them or their usefulness to business people.

Such attention to a single source, however good, detracts substantially from the book's utility and therefore, from its appeal to a broad readership. Readers need a variety of sources if they wish to understand how economics and economic indicators may affect their business.

That need can be met only by information from as many sources as possible, by a careful sifting through of that information from the most reliable sources, and lastly by a precise analysis of the best sources in order to derive well-founded conclusions. By concentrating on a single source of information, however, The Financial Times Guide to Using Economics and Economic Indicators fails to provide the reader with the sort of breadth he or she needs to pursue an understanding of economics and economic indicators. That failure is further underlined by the absence of even a list of books recommended for further reading.

Despite the narrowness of its scope, the book does have some very obvious strengths. It offers the reader definitions of some very basic concepts in economics and explains very clearly how they affect business. Early on, for example, the author tells the reader that "understanding elasticity is essential to a company's pricing policy." He then explains that the managers of a firm "will want to know if, when they increase the price, demand will fall to such an extent that total revenues (price multiplied by sales) will diminish, stay constant, or increase. Consumer responsiveness to price changes is at the core of firms' abilities to set and change prices."

Further along, the author develops his general concept of elasticity by discussing income elasticity. "In addition to this price elasticity, there is income elasticity, the responsiveness of demand to changes in consumers' incomes. This is determined by the type of good (normal, inferior or something else peculiar), and is especially useful for assessing how demand might increase in response to general rises in incomes resulting from economic growth or recovery after a recession..."

The author then rounds out his discussion of elasticity with one more subcategory. "There is also cross-price elasticity, the responsiveness of demand to changes in the prices of other products, whether substitutes or complements. Understanding this is fundamental to a firm's ability to compete effectively on prices, and the basis of huge amounts of money being spent on advertising, as firms attempt to establish brand loyalty. The intention is that once a brand is popular, the price will be less cross-price elastic: Relative decreases in the prices of its rival products will tempt away fewer customers."

In this extended example, drawn from the text, readers can see very clearly how the author works. He introduces a basic concept, he defines it fairly carefully, and he shows its relevance to business in language that is accessible to most readers. Such is the approach taken throughout the book. But the author also takes the reader beyond very basic concepts to a broader understanding of economic and political issues which may affect the business climate.

Discussing development, for example, the author mentions foreign aid and explains how it has actually been counter-productive to some recipient countries. Speaking in particular of bilateral aid and grants from industrial countries, he says that too much of it has been tied to the purchase of goods and services from the donor countries. "This kind of aid is less beneficial to poor countries since it forces recipients to pay higher prices for imports, encourages them to invest in vast capital projects, and does little for the relief of poverty, one of the most pressing problems of the developing world."

Such observations help to balance one's judgement of this book, but they do not altogether outweigh its limitations. If you are a business person, a regular reader of the Financial Times, and need help translating its economic data into useful business information, then this will be an ideal book for you. But if you are a business person looking to gain a broadly based understanding of economics and economic indicators, you will need to find other books in addition to this one. This is a useful book, but its usefulness should be indicated by a more precise title: The Financial Times Guide to Using Economics and Economic Indicators in the Financial Times.