Book Review – The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor–and Why You Can Never Buy a Decent Used Car! by Tim Harford

Quick Review:Hidden Order meets Freakonomics.A fast-paced set of everyday problems and sensible economic solutions that are explained and repeated in a way that teaches economic principles with novelty instead of pain.

Economics is a subject that some people fear, some people love, and some accept as a powerful tool not to be disregarded.I fall in the third group.I took one Microeconomics class in college and have a keen interest in figuring things out, or at least learning how they work.For most of my life, I understood economics about as well as most people:something about GNP, tariffs, and taxes and how governments handled numbers with a lot of zeroes.I was therefore quite stunned when I ran into an old college friend who was getting a PhD in economics.When I asked the usual lame question about working for the World Bank or the Federal government, he explained (patiently, with the air of someone who has done this before) that economics is about allocating scare resources (that is, all kinds of resources).That sat with me for a while until I took my own class, which taught me the mechanics of economics but not the purpose.

This book serves a purpose for economics, both micro and macro, that every intimidating college subject could use:a clearly written and accessible book (NOT a textbook) that gives a little bit of how and a whole lot of why.This book contains no math, no word problems, and a clear progression of ideas that builds upon previous concepts.Anybody taking or considering taking an econ class should read this book first to understand these concepts before they have to solve problems.

Some of the topics include how coffee is priced and who makes the money, how supermarkets work, why there\’s traffic congestion, why American healthcare is so expensive, how corruption keeps poor countries poor, and what changes can be made so that standard of living could be raised for billions of people.The last three chapters about poor countries, globalization, and China, are both sensible argument and passionate plea to lower barriers to trade, encourage small steps that even the most poor and corrupt countries could take, and most of all, don\’t forget about people when you\’re dealing with economics.There are some killer takeaway sentences in these sections that deal with concerns that people have about globalization and free trade.Some of my favorites are:

·“A ‘no imports\’ policy is also a ‘no exports\’ policy”

·“Rich countries are mostly trading with each other”

·“If American environmental standards are really so strict, why do the most pollution-intensive American companies spend only 2 percent of their revenues on dealing with pollution?”

·“Foreigners are bringing dirty industries [like bulk chemical manufacturing] to the United States, but American companies are bringing clean industries to the world.”

·“Sweatshops [in developing countries] are the symptoms, not the cause, or shocking global poverty.Workers go there voluntarily, which means – hard as it is to believe – that whatever their alternative are, they are worse.”

·“Because coffee is such an easy business to get into, I am willing to make a prediction:coffee farmers will never be rich until most people are rich.If coffee farmers became rich but other farmers or workers in sweatshops were poor, the others would switch to farming coffee.High coffee prices will always collapse, until workers in sweatshops become well-paid blue-collar workers in skilled manufacturing jobs, who don\’t find the idea of being even a prosperous coffee farmer attractive.”

The author faces and explains big problems that are in the news every day, and he gives solutions that make sense both emotionally and intellectually.What began as an introduction to economics turns into a treatise on how to improve the world, the environment, and the lives of billions of people.You\’ll certainly get more than you bargained if you read this book!

About the Author:(from the author’s website)

Tim writes the ‘Dear Economist’ column for the Financial Times, in which readers’ personal problems are answered, tongue-in-cheek, with the latest economic theory. His other weekly column, ‘The Undercover Economist’, reveals the economic ideas behind everyday experiences from buying a cup of coffee to getting stuck in traffic. He is the presenter of a TV series for BBC2, called ‘Trust me, I’m an economist’.

Tim was the first Peter Martin fellow at the Financial Times and rejoined the newspaper as economics leader writer in April 2006.Tim’s other experience includes time at the International Finance Corporation (part of the World Bank), as a scenario expert at Shell, as a tutor at OxfordUniversity, and as a speechwriter for Stanley Fischer, now Governor of Israel’s Central Bank.

Tim lives in London with his wife and daughters.

Other books by this author:

The Market for Aid by Michael Klein and Tim Harford