Learn more Download now Shop now Browse your favorite restaurants Shop now Shop now Shop now Shop now Shop now Shop now Shop now Learn More Shop now Learn more Shop Fire Shop Kindle Learn More Shop now Shop now Learn more

on 2 February 2006
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.
22 Comments| 77 people found this helpful. Was this review helpful to you? Report abuse
on 3 May 2014
It takes a special kind of effort to be so behind the times that I’m reviewing The Undercover Economist more than three years after it was published, despite having it on my “must read” list for most of that time. As a fan of Tim Harford’s contributions to the Financial Times and his presentation of More or Less, I had great expectations for this book – and I wasn’t disappointed.

The Undercover Economist seeks to explain the economic theories underpinning everyday life, from buying a coffee to shopping in a supermarket. I was passingly familiar with most of the theories being discussed, as I would imagine that most people would be, but Harford does a good job of fleshing out the details, equipping the reader with economic vocabulary, and showing how the theories work in everyday situations.

Harford is clearly an excellent writer, and the book zips along at a fair lick for the most part. There are, however, some parts that drag a little. Occasionally, Harford goes to some lengths to explain the same theories repeatedly in different situations in a way that becomes a little repetitive and unnecessary in parts. I sometimes felt like the speed of the repeated explanations was a little slow, as though I was some way ahead of the book. This was a bit frustrating. But it’s not a major issue. I guess what I’m saying is that a well-abridged version of the book would be no bad thing.

There are also bits of the book where I feel like Harford strays a little too far into relating a particular point of view, rather than setting out the wider picture as I would expect from a book like this. I am actually interested in Harford’s opinions on globalisation, for example, but don’t think that this is necessarily the place to communicate his point of view (almost) exclusively. I felt that a little more balance would have been welcome in this introductory book.

But these are niggles. Economics is often portrayed as dry and theoretical, and The Undercover Economist shows it to be anything but. It sheds light on the economic decisions we all make everyday, and the way that we are economically manipulated by corporations and governments – for better or worse. It is absorbing and enjoyable – not words that necessarily spring to mind for books about this particular subject matter.

So whilst there were some rough edges, I enjoyed The Undercover Economist. And perhaps the best I can say is that the sequel is on my “must read” list… and I think I’ll get to it some time before 2017!

This review was originally posted on my blog, at [...]
0Comment| 2 people found this helpful. Was this review helpful to you? Report abuse
on 29 June 2010
Tim Harford reminds us how to look at the world around us with a more detached and perhaps more cynical view. Economics are an everyday necessity, but many of us forget just how we use them in each transaction we make. In this book are many examples of how very simply one can improve ones own transaction analysis - choose to make a better deal. It is common sense, should we bother to think about it!

However, the book is also quite repetitive, and I found that after sailing through the first hundred and fifty pages I put it down and did not find the urge to pick it up again for nearly a year. While very interesting, it is definitely not gripping reading. More to the point, if stuck on a beach for a few days, or snowed in on a ski trip (eg my first encounter with Tim Harford's later and better book The Logic of Life: The Rational Economics of an Irrational World), then it is an ideal companion in an ideal environment for one to be able to assimilate the whole book and digest it more easily. If competing with the normal distractions of daily life then the book tends to fall by the wayside, even though it could well be helpful in mastering and maybe even minimising those distractions.

I'm not an economist, but I am a realist. I've always tried to look at the big picture; what goes in here? what comes out there? does that make sense, or is it a con? This book reinforces my prejudices, or rationality - take them how you will. I think it could be shorter, or perhaps the examples could be told in a lighter vein, maybe the theories could be laid out a bit more clearly. I'm told by those who claim to know better that some of his economic theory is shaky, but as written here it seems to make sense to my muddled mind.

There is a Notes section devoted to giving the references chapter by chapter and why he chose the ideas, and also a comprehensive Index at the end of the book. But it would have helped the reader grip the themes if there had been a more detailed Table of Contents showing the sub-headings of each chapter.

I'm only giving it three stars because it is not gripping enough, and his thoughts should expressed in a clearer fashion - as he does in his other book I mentioned above (which is much closer to deserving five stars).
0Comment| 2 people found this helpful. Was this review helpful to you? Report abuse
on 3 June 2009
My knee jerk reaction to economists is that they tend to be dull, serious-minded people, who make fancy predictions using sterile models, and couch it all in arcane speak that makes the rest of us mere mortals cringe at the relative modesty of our intellectual gifts. Therefore, it is a relief when a practitioner of the dismal science can take off his lab coat and speak the language that the rest of us speak. It is this clarity - and heaps of wit to boot - that makes Tim Hartford's the Undercover Economist akin to a breath of fresh mountain air into my somewhat cluttered urban living space.

Tim Hartford uses economic theory, originally propounded by David Ricardo, to explain some very mundane problems. For example, why is a cup of coffee at London Victoria so expensive? Or why is Fair Trade coffee so expensive? Like, Sherlock Holmes, he uncovers the answer: scarcity power. Yes, companies - and people, including you and me - will try to maximise our scarcity power. As soon as we have enough scarcity power, we'll charge the customer as much money as possible. One way companies do this is to price target.

Hartford shares some fascinating examples about game theory and price targeting. Have you ever wondered why the seats on economy class are so much worse than those in business class? Or why buying Fair Trade coffee is important to Starbucks? Answer: Price targeting. Companies will use price as an means to get information on what you are willing to spend money on, and then tailor the product to meet your need (while charging the maximum amount of money that they can).

Hartford then turns to the question of economic development in poor countries. (I really liked this section of the book). Why is a country like Cameroon so poor? There are certainly no glib answers. However, Hartford presents a few reasons why poor countries remain poor. The most important reason he gave was that of incentives: people only behave according to the rewards that they perceive will accrue to them. And the incentives for investment, education, institutional development are missing in countries like Cameroon. Therefore, no matter how many bleeding-heart campaigns "End Poverty" campaigns that Bob Geldof and Bono, Cameroon (and half the world) will remain poor except the incentives change. Sounds too pessimistic? No, I don't think so. As a Nigerian, I know, even if I grudgingly admit it, that Hartford is right on this point.

The book concludes with Hartford's take on globalisation and China's phenomenal economic growth. Hartford convincingly makes the case that the poor are poor because they are not integrated into the global economy, and that globalisation is not a win-lose game as often portrayed in the media; high-tariffs may make a few interest groups better off, but it makes the rest of us worse off.

The Undercover Economist is written is a clear, accessible style. It is laced with interesting anecdotes from the author's experience, which are delivered with (sometimes cynical) wit. I thoroughly enjoyed the book. I felt like a Watson trailing a worldly-wise Sherlock Holmes as he solved yet another mystery; I could almost hear Holmes, I mean Hartford, say "elementary, my dear, elementary". The book reminds us to challenge our tired assumptions about globalisation and economics. Any why does it matter? Because, as Tim Hartford puts it, "economics is about people". Economic growth does make a difference to people's lives. It's a message that I, as Nigerian, can relate to. The book deserves my 4 stars
0Comment|Was this review helpful to you? Report abuse
on 29 December 2011
I enjoyed Tim's Dear Economist column in the FT but I'm rather let down by his book unfortunately...

If you have any grasp of buying and selling, give this book a miss. As the author writes himself, the scarcity principle is an armchair observation (I'm surprised he didn't reference the concept of supply and demand, as this says it all in a nutshell). Tim does raise some quite intriguing facts about supermarket pricing and placing behaviour, but let's be honest, we are all mostly aware of this.

Also, some of what he writes is quite questionable. For example, it was my understanding that supermarket generic products were labelled in a simple fashion because the margins were so low that the cost of the label printing was actually important to the price per unit. Of course, this may have changed with technology, but Tim presents it as the generic products being made unattractive to less distinguishing purchasers. He ignores the fact that the generic products are often simply worse quality. Consider a regular tin of beans: the generic or non-brand will have a lot of sauce in the can, and less beans. The brand variety will be full to the brim. Flavours will also be different. All of these aspects are relevant to the sale of the product. If anyone has shopped exclusively for periods of time in either up or down market stores, you'll easily see the difference in quality of what you are consuming. When you have the choice, you will alter your shopping habits accordingly. The way Tim puts it, you'd think the customer was entirely at the mercy of the store - which is rubbish. If we spend a little more per product than we have to, it's because we don't care.

To add to this, Tim's writing style in the book is somewhat turgid. In the ft he was a witty and clean author (at short lengths), but unfortunately, the book does not reflect this. Wittiness appears to be more bitchiness/arrogance at times, while some of the paragraphs are constipated with question after question. I think the biggest problem with the book is that much of what is written is actually inconsequential, or the examples badly chosen. Why bother describing (in detail) solutions which we all know are completely unworkable from the get go?

Take my advice, if you want to understand practical economics get a well regarded and candidly written biography of a self-made investor or entrepreneur (either 'The Snowball' or 'Buffet'). You will learn a tremendous amount on the practical functioning of the real world, and not get bogged down on speculative theorising.

Not worth the money.
0Comment| 4 people found this helpful. Was this review helpful to you? Report abuse
on 12 March 2008
I loved the idea of this book. When i saw this book in a bookstore in Victoria, London, I read the back of it and decided to buy it - at Amazon, of course.

The front page illustrates an "expensive cup of coffee" which highlights that starbucks customers (although it is not the starbucks emblem it is very similar and makes you think that) KNOW they are paying a ridiculous amount of money for a cup of coffee or hot chocolate, but do not mind being ripped off each time.

The beginning of the book is entertaining. Basic economics is introduced in an easy manner, using examples that are coherent and easily applied to economic theories.

Unfortunately, this became more and more technical and less entertaining, resembling an economics text book... a boring one.

This book is badly marketed. It catches the eye of pretty much everyone, promising everyone a read that will make them judge a product's price before buying it by highlighting the real costs of products; give them an insight to market behaviour and trends, etcetera. However, it turns out to be unbearingly boring, and even though many will start reading it only a few will finish it, probably critics and people that have a genuine interest in economics.

My advice is to give it a quick read, flick through the pages before buying it, read the middle sections and figure out whether it is the sort of book you are interested in. For me, even though i have studied economics, it is not. I hope this review will not lure away potential readers, i just hope most people will know this book is not what it seems from the cover.
11 Comment| 10 people found this helpful. Was this review helpful to you? Report abuse
on 20 July 2006
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 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.
11 Comment| 119 people found this helpful. Was this review helpful to you? Report abuse
TOP 1000 REVIEWERon 28 January 2014
Tim Harford’s “Undercover Economist” is a clear and well argued read. You don’t need any prior economic knowledge to understand his key arguments and he explains things in clear and simple language.

The book is along the same lines as a raft of populist social/science books - perhaps the most obvious comparison is with Steven Levitt’s “Freakonomics”. However, while the two share an easy reading quality, Freakonomics is more concerned with micro economics (and human decisions) while Harford also covers macroeconomic arguments. Of the two, I found Harford’s more interesting and insightful. It seems more concerned with explaining things than going for the shock value. That’s not to say that there are not some contentious issues - the economic view of sweatshops for example won’t thrill everyone but his arguments are well reasoned.

There is a clear development of Harford’s approach - from the importance of scarcity right up to looking at the reasons for China’s development. The content of the chapters is cross referenced so you get a real sense of an argument building.

The concept of Harford as an “undercover economist” is the only area that doesn’t live up to the promise. Sure there are times when he uses the idea to explain why things are as they are from an economist’s point of view - notably looking at coffee prices - but while there are times when it is a useful device, for much of the book the undercover concept is a bit spurious. It’s really more of an explanation of why the world is as it is economically.

It’s both an enjoyable read and a very good and clear introduction to some key economic ideas that will give some useful examples to explain the key ideas.
0Comment| 4 people found this helpful. Was this review helpful to you? Report abuse
VINE VOICEon 4 November 2010
The truth is, in my eyes, economics is and will always be the best field of study ever. Complex, world-changing and integral to our daily lives, it has never been and will never be obsolete or far removed from our everyday actions and decisions. It may not have occurred to everyone how important economics is and how deeply it affects each individual until the onslaught of the recent recession, but regardless of how long your interest has been, The Undercover Economist is a must-read for just about anyone who has the slightest bit of curiosity in what economics is really all about.

Tim Harford is a genius. This I found out when I attended one of his talks at the LSE a few months back. His book is no less brilliant and does not let up in its charms. The Undercover Economist is a good introduction to the study of economics - it covers the basic and immediately dives into what it really is. It erases the misconception that it only affects economists, and explains in various understandable ways. The author explains the subject in clear, easy to understand language, tailored especially for non-economics folks. That is not to say that this book is only for those who doesn't study economics. Fellow economists will also be charmed by The Undercover Economist, especially those in their early years of study and are looking towards how economics operates in our daily life.

The text in the book is conversational and is founded through examples in real life situations. Everyone will be able to relate to this because it refers to many things we do regularly - for instance, choosing free trade instead of non-free trade coffee, shopping in supermarkets and getting on the property ladder. The insights this book will give you makes you feel like an insider knowing how things operate - it is rather brilliant! It answers so many questions in a way that will pique your interest in the beauty that is economics.

And if you think this book is a boring academic text - you're wrong! It's as fun as an economics book can be - with its light hearted banters and amusing situations, not only is the author's brilliance embedded in this book, but also his fantastic sense of humour!

Clearly, I love this book, and I'm sure other readers do too. If you're vaguely interested in economics or are simply bored, why not pick up a copy of The Undercover Economist and perhaps discover an appreciation for everything economics...
0Comment| One person found this helpful. Was this review helpful to you? Report abuse
VINE VOICEon 2 May 2006
This is a really good introduction to Economics.

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.
22 Comments| 70 people found this helpful. Was this review helpful to you? Report abuse

Sponsored Links

  (What is this?)