The undercover economist: exposing why the rich are rich, the poor are poor—and why you can never buy a decent used car!
Oxford, 2006
Abstract
From Publishers Weekly Nattily packaged-the cover sports a Roy Lichtensteinesque image of an economist in Dick Tracy garb-and cleverly written, this book applies basic economic theory to such modern phenomena as Starbucks’ pricing system and Microsoft’s stock values. While the concepts explored are those encountered in Microeconomics 101, Harford gracefully explains abstruse ideas like pricing along the demand curve and game theory using real world examples without relying on graphs or jargon. The book addresses free market economic theory, but Harford is not a complete apologist for capitalism; he shows how companies from Amazon.com to Whole Foods to Starbucks have gouged consumers through guerrilla pricing techniques and explains the high rents in London (it has more to do with agriculture than one might think). Harford comes down soft on Chinese sweatshops, acknowledging “conditions in factories are terrible,” but “sweatshops are better than the horrors that came before them, and a step on the road to something better.” Perhaps, but Harford doesn’t question whether communism or a capitalist-style industrial revolution are the only two choices available in modern economies. That aside, the book is unequaled in its accessibility and ability to show how free market economic forces affect readers’ day-to-day. Copyright Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. From Bookmarks Magazine Harford exposes the dark underbelly of capitalism in Undercover Economist. Compared with Steven Levitts and Stephen J. Dubners popular Freakonomics July/Aug 2005), the book uses simple, playful examples (written in plain English) to elucidate complex economic theories. Critics agree that the book will grip readers interested in understanding free-market forces but disagree about Harfords approach. Some thought the author mastered the small ideas while keeping in sight the larger context of globalization; others faulted Harford for failing to criticize certain economic theories and to ground his arguments in political, organizational structures. Either way, his case studiessome entertaining, others indicative of times to comewill make you think twice about that cup of coffee. Copyright 2004 Phillips & Nelson Media, Inc.
Quotes from this work
[S]ome companies have scarcity power and can set prices that are far above their true cost, which is where they would be in a competitive market. This is why economists believe there’s an important difference between being in favour of markets and being in favour of business, especially particular businesses. A politician who is in favour of markets believes in the importance of competition and wants to prevent businesses from getting too much scarcity power. A politician who’s too influenced by corporate lobbyists will do exactly the opposite.
[Y]ou will often hear so-called experts complaining that taxes on driving or on pollution would be bad for the economy. That sounds worrying. But what is ‘the economy’? If you spend enough time watching Bloomberg television or reading the Wall Street Journal you may come to the mistaken impression that ‘the economy’ is a bunch of rather dull statistics with names like GDP (gross domestic product). GDP measures the total cost of producing everything in the economy in one year—for instance, one extra cappuccino would add £1.85 to GDP, or a little less if some of the ingredients were imported. And if you think this is ‘the economy’, then the experts may be right. A pollution tax might well make a number like GDP smaller. But who cares? Certainly not economists. We know that GDP measures lots of things that are harmful (sales of weapons, shoddy building work with subsequent expensive repairs, expenditures on commuting) and misses lots of things that are important, such as looking after your children or going for a walk in the mountains.
Most economics has very little to do with GDP. Economics is about who gets what and why.
Keyhole surgery techniques allow surgeons to operate without making large incisions, minimizing the risk of complications and side effects. Economists often advocate a similar strategy when trying to fix a policy problem: target the problem as closely as possible rather than attempting something a little more drastic.