©2006 Tim Harford; (P)2007 Hachette Audio
"A playful guide to the economics of everyday life, and as such is something of an elder sibling to Steven Levitt's wild child, the hugely successful Freakonomics." (The Economist)
"This is a book to savor." (The New York Times)
Family father, neuroscientist, and non-fiction audiobook addict.
Why is coffee so expensive on train stations? Which type of illegal activity gives the best profit? What are the benefits and the downsides of free markets? Is natinal health insurance good or bad? Should you feel bad when purchasing products made in countries where workers do not enjoy the same rights as in your own country?
In The Undercover Economist Tim Harford deals with these as well as other economic issues that we encounter on a daily basis, often without being aware of it. The book is generally easy to understand and have a subtle humorous tone which keeps you engaged. Like almost all economist (that I have encountered anyway), Harford favors a more or less free market. Whether this should be seen as a bias or if this is because free markets are intrinsically good is a question I cannot answer. In any case the book is definitely pro free market which may be a dealbreaker for some potential readers.
Harford begins by introducing the concept of scarcity power. He claims that the scarcity of a product or any type of asset will determine the price of that asset. In the case of a coffee stand on a busy London train station the price can get very high indeed which ultimately results in high coffee prices. In my mind scarcity is simply part of the supply and demand equation. If the supply is very small, and demand very high prices will be high. Perhaps there is something I do not understand...
Harford moves on to discuss the implications of this principle in the society. For instance, if you own a maffia, one of the most lucrative paths to take is to start a legit business and then threaten competition to increase scarcity power (reduce supply). With the competition gone you can charge what you want and make a nice profit.
One of the most interesting things I learned from this book was that sales, rebates, special prizes for students and seniors, class seating on trains and airplanes etc, are often just ways for a business to charge customers as much as they are willing to pay for any particular product. A coffee stand may earn a profit by selling coffee quite cheap but would of course like people with a lot of money to pay as much as possible. To get rich people to pay allot while not scaring off poor people or students you can offer large cups or alternative types of coffee such as coffee mocha coco bozo with cream, ice cream etc etc. Such fancy product are really not much more expensive to produce but you can charge much more for it (and if you check out the prizes at your local cafe this is exactly what they do).
Similarly if you own an airline company it makes sense to have different types of seating because then you can charge insane amounts of money for a little bit more leg space and a little better service which many people are willing to pay to feel just a little bit more special. To increase the gap you can also consciously make standard seating slightly uncomfortable.
While being a free market proponent Harford acknowledges that markets can run into trouble. For example, the insurance industry is very susceptible to the problem of imperfect information. If people only get insurance once they are sick, or if insurance companies only offer insurance to those who are completely healthy and have a tiny risk of getitng sick, then the market will not work. As Tim puts it, insurance industry is dependent on mutual ignorance. In the case of health insurance one practical solution is to have universal health insurance, which erases these issues. The only problem with this is that people are likely to consume more health care than they really need...
Harford also offers an analysis of what makes poor countries poor. The short answer is high tariffs (which reduces trade with the rest of the world), and corruption. These two factors can be particularly detrimental in small countries which are extremely dependent on international trade. There is nothing preventing poor countries from developing into richer countries and there are in fact many examples of such a transition. One particularly striking example which is discussed in the book is South Korea which used to have many “sweat shops” where working conditionins were poor compared to the rest of the world. However, because they could offer cheap products they achieved impressive growth and a rapid switch from an agricultural to a manufacture economy. Today, South Korea is a highly technological society with a high standard of living and sweat shops have moved to other countries, because today there are better jobs available to Koreans. Harford makes it clear that boycotting a county’s products because their workers do not have the same job security or pay as our own workers does not help that country, even though it people think they are doing a good deed.
To illustrate what freer markets can achieve Harford looks to China, a country which has seen an improbable economic growth in recent decades. As a result of this development, 300 million people have been lifted out of poverty in China. This number is so high that it is difficult to comprehend what it really stands for. When a natural disasters kills tens of thousands of people it is also easy to lose sight of the fact that every person is an individual with his or her own personality, feelings, food preferences, etc etc. Similarly when hearing that that 300 million people have been lifted out of poverty it means a very significant improvement in the lives of these individuals and that is something worth remembering!
The book is pretty good, but since it is per the housing loan crisis a lot of the numbers are a little dated. The book is full of interesting stories and anecdotes explaining his principles, but sometimes the explanations are a little thin. What may be obvious to an economist is not always that obvious to me the layperson.
In some cases I got the impression that the author felt that his economic views were right, and everybody else's was wrong without giving a balanced viewpoint.
Very good reader, but he speaks fast.
"Better than Feakonomics - more in depth"
I have come to the world of Economics like many people via the route of Freakonmics. As much as I enjoyed Freakonomics I felt there was a very small amount of (admittedly excellent) content spread over a longer book.
This book is different. The author sometimes takes a while setting the scene but this all adds to the understanding of the principles he is explaining. I can honestly say that my understanding of the world is greater having listened to this book. The narration is fine, with a pleasant english voice that doesn't grip you but at the same time does not become tiresome.
I would certainly purchase another book by this author
"Interesting insight on microeconomics part"
Only for microeconomics. The macroeconomic narrative is from too much a right-wing perspective of economics.
Make coffee at home instead of buying it at a coffee shop
"I wish everyone would read this book."
"Would you listen again?" I did! - Twice already!
As logical-minded but economist layperson, this book really struck a chord with me.
I can honestly say it changed my outlook on life. From calculating the true cost of decisions, such as exactly what I'm paying for when I buy a coffee, to the rent I pay.
Yes, I went on to Read the second book in the series. And subscribed to some Audible Economics lectures that no longer seemed out of my grasp.
The book is interesting and funny. Not necessarily what you, at least I, might have initally expected from Economics.
Well read and clear. No faults at all.
"Engaging and educational"
Varied every day examples of economic concepts and detailed explanation of the key concepts told in a humorous way, makes this an enjoyable way to get to grips with economics.
You can practically hear his tongue in his cheek.
"Very engaging and informative"
Most enjoyable - I have already played this more than once to help get my head around the concepts and improve my memory of them. Examples used are straightforward and help illustrate the basics of economics. Thoroughly enjoyable.
"A Super Book"
I feel the narration is a bit of a shame, as Tim Harford has been presenting very ably on BBC Radio and I feel he'd have done a better job.
That written, The Undercover Economist is a rather engaging book on economics. Often humorous, always accessible.
"A great introduction to economy"
This is a fantastic book for people new to economy. It sounds dry, but it is not!
This really is an excellent book, well narrated and I walked away with a significantly greater amount of knowledge regarding economic's than when I started. This book was pitched exactly at the right level for me and the key to making this book work is the examples and stories that are told throughout, which I think most people will be able to relate to, in their everyday lives.
If you have a passing interest in economic's and are looking for somewhere to start or to build on the
knowledge that you already have, then I would really recommend this truly entertaining book.
In fact, I would guess that even somebody with no interest in economic's would find something in this book. It makes you realise that economics affects everybody and is everywhere.
"Began to drag mid way through"
I'd been looking forward to this one for some time, I'd read a lot of hype in the press etc and I read Tim's columns in various papers etc. But I came away a bit unfulfilled and somewhat bored by the middle of the book. Perhaps it is not really aimed at me but I found a lot of the explanations too long and way OTT for the concepts he was trying to explain.
Disclaimer: Half of my degree was Financial Economics some 15 years ago and I follow finance/economics reasonably closely, although i do not work in the sector.
This book made economic principles easy to understand by applying them to real world situations. It also contains fascinating insight into how markets work. I'd highly recommend this book to anyone starting out in economics.
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