'The Undercover Economist' explains
the why of it all
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
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
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
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.