'The Undercover Economist' explains the why of it all

By Stephanie Bassett

November 10, 2008 | The Undercover Economist is written by Tim Harford and is about the U.S. economy. Throughout the book the author was able to keep my attention the entire time, which is a great accomplishment since I usually have no interest at all in the economy.

I honestly enjoyed this book though and couldn't put it down once I started it because of all the useful information I learned while reading it. Harford had a much more interesting perspective of the economy than the average person because he is a great economist. I found many of his arguments were very intellectual and he was creative in his writing. I agreed with a lot of his concepts and I like the examples used in the book to explain them. He also is a very good writer and it seemed to flow very well.

In chapter one he talked about coffee. He explained that we as consumers buy the coffee that is the most convenient. Location is a very important thing for a business; many competitors are often fighting for the same spot because that location is what is going to make them the big money because of the convenience to the customers.

Harford also said, "Economics is in many ways just like engineering; it will tell you how things work and what is likely to happen if you change them. Yet the fact that economics itself is a tool for objective analysis doesn't mean that economics are always objective. Economists study power, poverty, growth and development. Economists step beyond their role as engineers of economic policy and become advocates."

Harford explained economics in a way that really hit home to me. It made sense and made me think in a whole different way about economics. It's so much more than I thought it was. It's basically the study of our everyday lives in a way.

In chapter two, Harford explains how scarcity gives you power. He explained several ways to do this. My favorite quote from this chapter is, "If you want a bargain, don't try to find a cheap store. Try to shop cheaply. Similar products are, very often, priced similarly. An expensive shopping trip is the result of carelessly choosing products with a high markup, rather than wandering into a store with 'bad value,' because price-targeting accounts for much more of the difference between prices than any difference in value between one store and another."

Chapter three, Harford explains what it would take to make a "perfect market," even though such a thing does not exist. He talks about a market system and explains more how it works. I like when he explains how taxes are inefficient, because I completely agree. Chapter four talks about some market failures and briefly explains consequences of such situations. He talked about externalities, the positive and the negative. I love the example he used throughout this chapter of pollution, such a big factor in our lives, but I've never thought of it from an economic standpoint. Economics is about who gets what externalities and why.

Chapter five, Harford finally explains part of the title of his book, "and why you can never buy a decent used car!" He said that secondhand cars are cheap and of poor quality. Sellers with good cars want to hold out for a good price, but because they cannot prove that a good car really is a peach, they cannot get that price and prefer to keep the car for themselves. This is the one argument I didn't agree completely with. I have had plenty of decent used cars in my time and I will probably always continue to buy cheap used cars. I think that brand new cars are the real rip-off; they lose value as soon as you drive them off the lot and you end up paying more for them than they are even worth. He went on and explained that you also can't get a decent meal in a tourist trap, which I agree with. I've been to London's Leicester Square as well and I ate at several restaurants there and the food was terrible. We would have to leave the tourist trap to find somewhere decent to eat.

My favorite chapter was chapter eight, which explains why poor countries are poor. One quote said, "The new theory says that sometimes the more you have, the faster you grow: phones are useful if other people have phones; roads are useful if everyone has a car; technology is easier to invent if you've done a lot of inventing before. That story would explain why rich countries stay rich and poor countries fall further behind."

Sadly, many of these countries that remain poor do so because they have corrupt governments. I kept thinking of how Kwamena explains the problems in his country and it is sad to me that such places struggle not due to their own mistakes, but the mistakes and corruption of their governments. I learned a lot about some of these countries, such as Biya and how they have problems with bullying gendarmes, who are often drunk and stop every minibus and try their best to extract bribes from the passengers. Otherwise they continue to harass them until they give in.

Harford then explains the importance in institutions. The rest of the chapters were also very good and explained things such as globalization, how China became rich and rationality.

Overall, I really enjoyed this book. I think Tim Harford is extremely smart and I agreed with most of the information he came up with. I think of economists in a different way now and I now know exactly how important economics is in our everyday lives. I learned that economics is about giving us choices and helping us solve the world's problems. And I hope I will think twice now about going to a "convenient" shop to get a drink. I recommend this book to anyone and everyone and think it will be a great asset to any library.

NW
MS