61 of 62 people found the following review helpful
4.0 out of 5 stars Economics for Everyman
Reading the popular press, one might be forgiven for thinking that economists are people who make forecasts which are of little relevance to most of us and almost always wrong, or who write about esoteric subjects using language and mathematics which we find impenetrable. This book is quite different. It shows, with great clarity and many examples, how economics can be...
Published on 2 Feb 2006 by John Stanley
101 of 108 people found the following review helpful
3.0 out of 5 stars not bad
I picked this up at the airport and nearly finished in two flights. It's an easy reading explanation of an economist's take on some everyday things and some big issues (like globalisation).
Some of the early stuff (about coffee shops etc) is really good fun. You might not be shocked by it but it is a very effective way of explaining some key economic theories...
Published on 20 July 2006 by tomsk77
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61 of 62 people found the following review helpful
4.0 out of 5 stars Economics for Everyman,
This review is from: The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--And Why You Can Never Buy a Decent Used Car! (Hardcover)Reading the popular press, one might be forgiven for thinking that economists are people who make forecasts which are of little relevance to most of us and almost always wrong, or who write about esoteric subjects using language and mathematics which we find impenetrable. This book is quite different. It shows, with great clarity and many examples, how economics can be used in our daily lives to understand what is happening and make better decisions.
It shows why coffee bars charge such high prices for cappuccinos; they are on prime sites, which are scarce, and much of the profit goes to the owners of those sites. Scarcity is also created by planning restrictions, trade unions, professional bodies and immigration policies, which raise prices to the benefit of some but the detriment of others.
It discusses how supermarkets seek to maximise revenue, differentiating customers who are sensitive to prices from those who are not by analysing purchasing habits, using special offers and ‘value’ lines, and by placing similar but differently priced products side by side or on different shelves.
The chapter on free markets shows how they reveal what people are prepared to pay for something, and such markets adjust – often incrementally, invisibly and in myriad ways – to changes in supply and demand. In contrast, markets that are distorted by subsidies, taxes or controls, are inefficient and result in misallocation of resources.
In many actions, what we do has a deleterious effect on other people or the environment, a so-called externality. For example, driving to work increases congestion on the roads and CO2 in the atmosphere. Alternatively, what we do can have a beneficial effect; installing energy efficiency measures reduces pollution. The book shows how economics can value externalities such as pollution and reduce them in the most economical manner, for example by auctioning pollution permits.
Many transactions involve asymmetric information, where one party knows more than the other. If we buy a used car, the seller knows more about it than we do; it may be good car or it may be a ‘lemon’. On the other hand, if we buy medical insurance, we know more about our health than the insurance company. The author explains why it can be impossible to buy a good used car, why the cost of health insurance is so high, and how the information gap between buyer and seller can be narrowed.
In Rational Insanity, it explains why share prices behave erratically, why it is difficult to make money trading them without information or insights not available to others, and why fund managers often run with the herd. But sometimes, as in the 1990s boom, the herd can be wrongfooted.
One of the more illuminating chapters is on Game Theory, which can be employed in poker, nuclear war and many other interactions. Particularly fascinating is the account of how this was used in the auction of UK third generation cell-phone licences to raise over £22 billion for the government, against an initial estimate of £3 billion. The economists who designed the auction certainly earned their fees, but may have been disappointed to see the proceeds used just to reduce the national debt.
To illustrate why poor countries are poor, the author describes a visit to Cameroon. The country is racked by corruption, and the government and its acolytes are seen to be no better than bandits. However, in the example of Nepal, one of the problems is misallocation of aid, due to failure of agencies to understand the motivations of those being helped.
The chapter on globalisation shows how much richer the world has become by trading in goods and services. It shows that in such a world we should stick to doing what are most efficient at, even if someone else can do it better. Barriers to trade, such as duties, import restrictions and subsidies, hinder this process, benefiting one part of the economy but damaging another. They can also have other undesirable consequences; subsidies to US sugar producers harm farmers in Colombia, who have turned to producing cocaine.
How China Grew Rich describes the story of the remarkable transformation, as Deng Xiaoping slowly loosened the strings of a centrally-controlled economy in ways that encouraged entrepreneurship and wealth generation, without damaging those who were less able to change. This contrasts with Russia, where the relatively rapid changes after 1990 have made billionaires but left many people worse off.
Tim Harford in not only an accomplished economist but a prolific writer. His book is enjoyable, easy to read and contains not a single equation. But, being written from the clearly-stated viewpoint of an economist, those with other perspectives may reach different diagnoses and prescriptions.
It is perhaps unfortunate that his book was published in the US in the wake of Freakonomics, which has been widely praised. But whilst the latter describes some pathbreaking economic studies, not all of which are of practical application to most readers, The Undercover Economist contains numerous examples and ideas which show that economics, far from being a ‘dismal science’, can be applied by all of us in everyday activities. Read it and find out how.
59 of 61 people found the following review helpful
5.0 out of 5 stars Not Dismal anymore,
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As someone who's picked up Economics mostly by reading the business pages of the Independent it's been very useful.
The chatty style belies the fact there's lots of information to be learned from this book.
His central two points are that scarcity dictates price (supply and demand) and that prices are set according to the information available to both buyer and seller.
Along the way you'll find out why your morning coffee is priced the way it is and why it's hard to get a decent second hand car.
Although it's hard to believe in a book about economics, I found this to be a bit of a page turner and finished it in a bank holiday weekend.
31 of 32 people found the following review helpful
5.0 out of 5 stars Excellent book - well written, good content,
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This review is from: The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--And Why You Can Never Buy a Decent Used Car! (Hardcover)This is an economics book that covers a lot of ground well, without resorting to mathematics or diagrams. It's probably intended for the interested, or at least curious reader. However, if you need convincing of the relevance of economics as a method for explaining "issues" it's not a bad place to start.
The author starts in a very informal manner, by describing some ways in which economics explains things going on all around the average person in the western world. Having drawn you in on the pricing strategy for a cup of coffee and the different prices charged by the same supermarket, it walks you through bigger and bigger issues all the way through through to free trade and the challenges facing developing economies.
There is an agenda that some will find difficult to accept - including the primacy of the market and how environmental and anti-globalisation can be ciphers for self interest, for example.
There are no new insights of economics as a discipline but the friendly self-deprecatory style provide an easy accessibility. I'd put the author up there with P J O'Rourke, Steven Levitt, and Paul Ormerod (the last being the most technical)
If you read the FT Magazine you will get a good idea of the author's style to help you decide whether to buy.
101 of 108 people found the following review helpful
3.0 out of 5 stars not bad,
Some of the early stuff (about coffee shops etc) is really good fun. You might not be shocked by it but it is a very effective way of explaining some key economic theories in a very accessible and interesting way.
I was also quite impressed by his explanation and perception of the stockmarket. This is something that I have read quite a bit about and deal with through work and I found myself nodding in agreement with him - that share prices are largely random but sometimes there is a brief opportunity to do something logical and make money, therefore fund managers spend a lot of time money and effort trying to find that 1 in 100 chance. (I still think active fund management is on balance a waste of money but that's another argument). I also liked (though I've heard a version of this before) his comparison of arbitrage in markets to picking a supermarket queue - if one is obviously shorter people join it very quickly.
I thought the section on second-hand car dealers, which goes on to discuss firms marketing insurance products, was also very interesting. Especially the way that providers try and communicate their trustworthiness through marketing etc. Again that confirms to me my perception of how the fund management industry pitches itself to clients.
There were a couple of points where I diverged significantly from him. First on tax, where he suggests that sales and income taxes discourage effort. This is something I have argued back and forth many times and I just don't buy it. I don't think most people most of the time think about tax and therefore I don't think it influences their behaviour significantly.
Secondly I think he is a bit too starry-eyed about globalisation. I agree with the general proposition that trade is good (not bad) for developing nations. But it is not an unqualified good. Yes it provides income and employment, and yes for many people in these countries working in a trainer factory is preferable to a lifetime argicultural labour. But that is not always the case.
Similarly I found his defence of free trade against the arguments that it leads to enviromental damage pretty unconvincing. There are plenty of people with lots of business experience who are much less sanguine about the ability of markets to inherently deliver the right results. See Adair Turner's Just Capital for example.
Finally a point on the writing style. Generally this is very clear and readable. but I find the whole 'undercover economist' thing a bit annoying. either use it or don't use it. in the book he seems to forget that he has been using it and only drops it in every 30 pages or so. why bother?
those whinges aside it's worth a read.
102 of 110 people found the following review helpful
5.0 out of 5 stars A lighter side of economics?,
I don't know much about economics, at least I didn't when I picked this up. But I have wondered what all the fuss is about, especially when I try to keep up with the Budget, camapigns against poverty, and what's happeneing to my pension. The Undercover Economist not only makes economics easier to understand but it is doesn't clutter my mind with macroeconomic theory, fiscal rules and all that stuff.
So as you read the book, soon you will find yourself ordering more coffee, but you'll have a much better understanding of the sophisticated system that you are engaging in, and how you're being ripped off.
The book covers economics in ten interesting chapters - each with a different theme through which it introduces the reader to new understandings of the world of economics. This book will unveil to you a host of neat little theories that explain how every day life works, from why bookshops sell coffee, to world poverty with plenty in between.
What really marks this book from the rest is its humour. There are very few funny economic books and the Undercover Economist is one of them. It reveals that the grey subject matter, so long understood as the dismal science, can really be a lot of fun - if only economics lecturers would be a little less serious about it.
29 of 32 people found the following review helpful
5.0 out of 5 stars The Undercover Economist,
28 of 31 people found the following review helpful
5.0 out of 5 stars clarity is golden,
Harford seems to have mastered the art of making somewhat complex considerations appear extremely natural. If all economists in the media could express themselves so clearly and with such a judicious choice of examples the public would surely be better informed and more engaged with the most important issues of the day.
18 of 20 people found the following review helpful
2.0 out of 5 stars Economics is the New Rock 'n Roll,
This review is from: The Undercover Economist (Paperback)With the release, and runaway success, of Freakonomics publishers were faced with an interesting new phenomenon: The possibility that a book on economics could be interesting and could connect with the "common man" and as a result that it could sell in large numbers. Overlooking that Freakonomics was a book about statistical analysis, the hunt was on for other accessible economic texts.
As a result, a book as tedious and confused as Tim Harford's Undercover Economist has been allowed to reach the public.
To be sure, the book starts well - the opening chapters make for an interesting and informing introduction to economics, and form a promising introduction to the book. But pretty soon things begin to go awry. The chapter that explains why it is impossible to purchase a good second-hand car seems to ignore the likelihood that very many readers will have purchased perfectly good second-hand cars. From here on, Harford's credibility is damaged, and when he goes on to explain why countries are poor, and why globalisation is good without any of the earlier chapters credible and transparent economical theory to back up these assertions, he becomes trite and boring.
The Undercover Economist has its moments, Harford is a likeable and easy-to-read author, and the section on the 3G Wavelength Spectrum auctions is fascinating, and goes some way to explaining what seemed like an impenetrably confusing fit of behaviour on the part of these companies. But overall, after the first 25% or so, the book begins to drag, and fails poorly to live up to the promise of the early chapters, or to the marketing blurb on the cover.
The heartless survival-of-the-fittest neo-cons among reviewers find his book insufferably 'leftist' while the socialists find its claims that unrestricted capitalism is good for everyone intolerable. I just found it increasingly dull, and quite prescriptive. It didn't educate me and leave me to draw my own conclusions, it harangued me and expected me to share its conclusions without explaining adequately to me why I should.
8 of 9 people found the following review helpful
4.0 out of 5 stars A Lively Look at Beginning Economic Theory,
This review is from: The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--And Why You Can Never Buy a Decent Used Car! (Hardcover)The Undercover Economist successfully avoids mind-numbing equations, boring examples and abstruse subjects.
Using ten themes, Mr. Harford provides a popular platform for the latest thinking on economics.
In Who Pays for Your Coffee? he looks at how a desire for quick access to caffeine allows landlords along commuter routes to charge high rents for take-out coffee locations.
In What Supermarkets Don't Want You to Know? he explores how item choices and pricing are used to create the appearance of competitiveness while encouraging the price insensitive to pay as much as they like. He also explains the theory of why you pay so much more for fancier coffee drinks . . . and even possibly for fair trade coffee.
Perfect Markets and the "World of Truth" considers how economic policy can influence how people make decisions and allocate resources more efficiently such as by raising taxes on fuel while subsidizing the poor with a "head start".
Crosstown Traffic looks at the ways that social problems can be solved by a judicious use of fees, such as by charging for the right to pollute.
The Inside Story examines how imperfect information causes costs and prices to soar . . . as those who know what's good and bad take advantage of those who don't. People sell used cars that are lemons and hold on to ones that are peaches. Those who need health insurance because they are sick buy it while those who are well avoid the cost.
Rational Insanity describes talks about irrationality in economic decisions such as the recent Internet bubble.
The Men Who Knew the Value of Nothing is about describes the brilliant and not so brilliant auctions that economists set up to sell radio spectrum for new services around the world.
Why Poor Countries are Poor contains an unforgettable tale of what it's like in Cameroon and why the economy isn't likely to get better anytime soon.
Beer, Fries and Globalization makes the case for free trade.
How China Grew Rich is a nice study in government policy in China and how it overcame the worst problems of being a centralized economy.
If you know economics, all that will be new in most of these chapters will be the examples, which are fairly new and interesting.
If you don't know economics, you probably won't follow some of the chapters such as Beer, Fries and Globalization.
So this book will be most appealing to those who know a lot about economics and will be interested to see how key ideas can be explained more simply and in a livelier way.
For those who don't know economics, it's a lot better than my economics professors in explaining key ideas. But you may end up learning more than you wanted to know. Many of the chapters are of more interest to economists than the typical non-economist reader. I suggest you selectively read the chapters to focus on the ones that seem interesting to you.
I thought that the last chapter on China had the most interesting material and explained it very well.
Some people will compare this book to Freakonomics. That's a peculiar comparison to make. That book uses economics to provide new perspectives on old problems. This book, instead, tries to teach economics. The two books have substantially different purposes and perspectives as a result.
2 of 2 people found the following review helpful
5.0 out of 5 stars Til Hartford did not write that book when he was 10 !!!,
This review is from: The Undercover Economist: Abacus 40th Anniversary Edition (Paperback)The book is excellent, I read it when it was actually published some 6-7 years ago BUT not 40 years ago ... so what is the point of this "4Oth anniversary edition" ? Unless you refer to hartford birthday - which is ridiculous - there is no reason to publish such an anniversary edition !
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The Undercover Economist by Tim Harford (Paperback - 3 May 2007)