The Undercover Economist

Who pays for your coffee? With this simple yet mistaken (think about it!) question, Tim Harford introduces David Ricardo's theory of economic rent. Using the coffee stands at London's Waterloo station, he shows how the rents of the best locations are governed by the worst, the marginal sites at which the price can just cover the cost of production. `Undercover' does not imply illegality and danger, just a man going about his everyday business with a few extra intellectual tools.

Fortunately, the chapter titles make more sense after the first. `What Supermarkets Don't Want You to Know' illustrates price discrimination, `Perfect Markets and the "World of Truth"' how a perfectly competitive market could bring about efficient outcomes, and `Crosstown Traffic' and `The Inside Story' how externalities and asymmetric information spoil this story. `Rational Insanity' is an apt a description as any of herding in financial markets, while `The Men Who Knew the Value of Nothing' is not a description of mad economists selling rain forests and small children but an excursion into game theory via the trials and tribulations of radio spectrum auctions. `Why Poor Countries Are Poor', `Beer, Chips and Globalisation' and `How China Grew Rich' are more standard applications of comparative advantage and Olsen's stationary bandit theory.

The opinions and policy prescriptions are unsurprising for a Financial Times columnist -- free trade is good, environmental and fair trade activists are often misguided, tradable permits and taxes are the best way to solve pollution and congestion. (Unfortunately, Bastiat's quip about throwing rocks in your own harbour is attributed to Joan Robinson, which surely has them both spinning in their graves.) Yet while Harford exhibits flashes of unjustified dogmatism -- `trade barriers will always do more harm than good' and holding up South Korea as a shining example of free trade -- his views are generally more nuanced, separating goods trade and direct investment from financial openness in his discussion on globalization, and praising China's pursuit of gradual reforms and `growing out of the plan', rather than fire-sale privatization Russian style.

It is a great strength of the book that it starts with monopolistic competition -- firms with some price setting power, but still constrained by rivals, rather than the pedagogically more common (but empirically less so) extremes of pure natural monopoly or perfect competition. Yet the full implications of this pervasive market structure are not fully appreciated. The unavoidable dilemma whenever there is some fixed cost and marginal costs do not increase with output is that the efficient, marginal cost price loses money, while any increase in price is inefficient. Successful price discrimination may determine whether the product exists at all, not just whether the quantity provided is marginally more or less efficient. This dilemma is never squarely faced, unlike the problems posed by externalities and imperfect information. In `Perfect Markets' it is simply stated that marginal cost price is efficient. This could not be applied in most industries without a vast system of subsidies and restrictions on entry.

Aside from fixed costs, one of the very few areas of basic microeconomics neglected by Harford is the classification of goods based on rivalry and excludability. This may be asking too much of a work that, after all, does not claim to be a textbook. Yet claiming that `the basic rules for making money in the high-tech business are not so different from the rules for train operators or coffee bars' is not convincing. The combination of low rivalry in the intellectual property and low excludability thanks to easy piracy makes the software, pharmaceutical and music industries more different than he admits, and less susceptible to even a second-best market solution. Similarly, lumping police and schools together when considering government versus private provision is rather crude.

One piece of terminology is also unfortunate. As if the word `monopoly' is to be avoided at any cost, `scarcity power' is used instead, which indiscriminately covers cases of natural scarcity such as good crop land, differences in the efficiency of organizations (which are rather confusingly also called `natural'), contrived monopolies through government regulation or criminal violence, and skills that are in short supply.

Yet with these reservations, The Undercover Economist is still superb. In a market where introductory textbooks are growing ever larger, more colourful, and more expensive, the author has taken some of the most important ideas in economics, made them as simple as they can be (but no simpler), and related them to examples that are real, relevant and interesting. All in around 250 pages with 5 simple black and white graphs.

-Originally published in Agenda 13(3), 2006.

This is an entertaining and informative journey through some aspects of economic theory. By using contemporary examples (such as the various factors that influence the price of a cup of coffee), Mr Harford removes some of the mystery and explains how some of the conclusions consumers may draw can be both logical, and flawed. While this won't make your coffee any cheaper, it may make some decisions more informed. And you can always strike up a conversation with your fellow coffee aficionados about the analysis of coffee rents. Just wait until they've had at least one coffee first.

Readers should note that this book addresses market behaviour rather than social issues. Most readers will consider sweatshops to be inherently bad: however the alternatives for the participants need to be considered as well.

Like other books in this field, this could be a starting point for discussion. Knowing more about the way in which supply, demand and the markets which address both work gives some insight into a field which is often seen as full of dry, mechanistic arcana. Who knows? You may even understand the used car market.

Jennifer Cameron-Smith

I grabbed this book from my local bookstore after being drawn in by the title. I've always had an interest in economics as whole, but never took the time to really dig myself into some reading material (besides the voluminous textbook I was forced to trudge through in college).

Mr. Harford does a satisfactory job of trying to explain the devil in the details behind many of society's microeconomic transactions. Like a few of the other reviewers, I did find the text to be a bit dry, but maybe it's a cultural thing (I believe he is English). That being said, I think it's fair to say that after a second reading, one should be able to have a fairly strong grasp of the ideas the author puts forward. Tim takes us through economic ideas such as marginal value, externalities and scarcity and presents multiple examples of these in action. I particularly enjoyed his challenges put forth to a lot of popular ideas (Anti-Globalization, Environmentalism), based on standard economic thought.

I believe this book is an excellent starting point for further study of the world of economics.

I came across this book at Commercial Press a few months ago. The cost was $160. I didn't buy it in the first instance but instead went to the Victoria Park Book Festival hoping to get a discounted copy. Yes, there was a simplified Chinese version of the book at $30 only. I thought simplified Chinese was not a problem for me, but I was wrong. Simplified Chinese characters were not a problem. There were not too many simplified characters and I knew most of them. However, the problem was the translation which carried a lot of phraseology and idioms used in the Mainland. Although I could decipher them for their Cantonese meaning, the process of mental translation slowed me down a lot. I could only finish two chapters in several weeks.

At last, I went to Cosmo to get the original book. Luckily, the new paperback version only cost less than $100. It was not a great penalty to me for buying the second copy of the book. I finished reading the book during a trip to Africa.

The book is a world view from the angle of an economist. It is lucidly written complete with some interesting examples. The main theme circles around the ideal of a perfect market, but unfortunately there are always conditions that destroy it. They are scarcity, incomplete information and externality.

Scarcity

The first few chapters are the most interesting and they concern scarcity. The most striking example, which makes the book famous, is the high price of coffee in prime location shops. Prime locations are scarce, and landlords demand extra high rents. To make the most of the scarce resources, coffee price has to be high. It is possible because there are many price insensitive commuters passing by in a hurry. On the other hand, there are also price sensitive customers who do not mind walking a few hundred metre more to buy normal price coffee. Coffee shops differentiate the customers and create coffees of different prices and varying degree of prestige, like special brands, special flavours and special additions in order to attract both types of customers. There was a coffee bar called Costa Coffee which offered fair trade coffee: products directly marketed for the third world producers. Customers were charged more and they paid thinking they were helping non-privileged farmers. It turns out that the marginal costs of all the high price varieties are very little compared to the big price difference. Owing to customer protests of being cheated, Costa Coffee had to withdraw its so-called fair trade coffee. Notwithstanding that, many customers are willing to pay more for more prestigious products, but with inflated price.

The book also reveals the strategy of supermarkets in setting the price of their merchandise. Besides differential pricing for similar products of slight variations, like organic products and brand name products, supermarkets deliberately arrange them at different shelve locations. Similar products with different prices are not placed side by side for easy comparison. Cheap products are put in inconspicuous location. It really pays if one could spend a little more time comparing prices when shopping in a supermarket.

Incomplete information

The author proposes that the perfect markets are distorted owing to incomplete information, both for buyers and sellers. In an imaginative ideal world of truth, where all information on the true cost of product and the true intention of buyer are known to all parties, there will be a perfect market with the following outcomes:
- Companies are making things the right way.
- Companies are making the right things.
- Things are being made in the right proportions.
- Things are going to the right people.
However, a perfectly efficient market does not always ensure fairness. An example is that interference to the market is made in providing to the poor in the form of subsidized heating fuel. We agree to distort the market so that the poor do not have to face the truth of high fuel cost. For arguments and solutions, you may wish to check out the book for various models proposed by famous economists.

The book also explains the phenomenon of rational insanity. In a complex market, take the stock market for example, there are educated and intelligent rational persons who are capable of gathering all information affecting stock prices. However, if all information leading to a rise or fall in stock prices are known, all rational investors will be capable of predicting stock price movement and act accordingly, leading to no predictability at all. As a result, all that is left to affect the market is unpredictable news. As such, stock prices and indices move at random affected by such unpredictable news. Although the long term trend still reflects the basic analysis, on any given day the trend is dwarfed by random movements. The paradox is that perfectly informed investors produce a random market, but a random market doesn't reward anybody for becoming perfectly informed.

A similar phenomenon is at work at supermarket checkouts: which queue is the quickest? If it was obvious that which queue was the quickest, people would already have joined it, and it wouldn't be the quickest any more. So you may as well stand in your queue and don't worry about it. It is the same as randomly joining any queue which looks shorter.

Externality

Besides the costs to the buyer and the seller, very often a market transaction may involve costs external to them, i.e. costs to a third party. An example quoted in the book is the buying of petrol at gas station where the transaction creates externality effect of causing noise, accidents, traffic congestion and air pollution. One of the solutions to deal with the hidden externality costs which distort the perfect market is to include the cost in the transaction. Some cities have introduced externality tax to drivers in order to control the use of roads, promote better engine performance in noise and emission, raise levy to traffic accident compensation and subsidize low pollution fuel. I think the high tax on tobacco is another form of externality tax as a penalty or compensation to the harm of smoking. The recently proposed tax on plastic bags is also another example of attaching a value to the external cost.

The book raises a viewpoint that the ethical standing of the environmentalists is a result of the fact that public policies do not make evident the environmental costs of our actions. If the effect to the environment of our actions is clearly defined in term of externality costs, environmentalists could argue their points from an economic standpoint. Much of the moral tone would then drain out of the debate and the environment itself would be much more effectively dealt with. When environmentalism is merely a moral issue, even environmentalists themselves cannot work out the real impact of everyday decisions. An example is the initiative to use less disposable diapers which could clog up landfill sites or use more washable diapers which will pollute the environment with the washing process and chemical detergent. The diaper problem, and other environmental issues, will not be solved by a small group arguing inconclusively over the morally appropriate individual action. If the environmentalists could not have the clear cost signal on the environmental damage, the majority of people would not inconvenience themselves even if they understood environmental problems. Both information and incentive in the avoidance of externality cost are necessary.

The last part of the book is on globalization and the economics of why some developing countries stay poor. This is where the book is criticized by many academics of putting forward assumptions without substantiation. I also think that the author is raising swift remarks without convincingly supporting them with sound arguments. However, this does not diminish the value of the book as interesting reading material. It is still a book I recommend, even to those not interested in economics.

I grabbed this book from my local bookstore after being drawn in by the title. I've always had an interest in economics as whole, but never took the time to really dig myself into some reading material (besides the voluminous textbook I was forced to trudge through in college).

Mr. Harford does a satisfactory job of trying to explain the devil in the details behind many of society's microeconomic transactions. Like a few of the other reviewers, I did find the text to be a bit dry, but maybe it's a cultural thing (I believe he is English). That being said, I think it's fair to say that after a second reading, one should be able to have a fairly strong grasp of the ideas the author puts forward. Tim takes us through economic ideas such as marginal value, externalities and scarcity and presents multiple examples of these in action. I particularly enjoyed his challenges put forth to a lot of popular ideas (Anti-Globalization, Environmentalism), based on standard economic thought.

I believe this book is an excellent starting point for further study of the world of economics.

This book, culled mainly from Harford's great body of articles for the Financial Times in London, was a fantastic read. I've been an economist for some 15+ years and picked up this tome while waiting for a flight in Mumbai. As a sidenote, if you're planning on being in India anytime soon, you can pick up the British paperback edition for around $4.50 at the airport. The book is an excellent tutorial on basic microeconomic principles. Not a lot of heady theoretical stuff here. Plain English. Interesting. Compelling. Topics that are very relevant today. I'd say the ideal audience is a college econ major or a sharp high school kid who is thinking about majoring in econ in college. Also a great book for us economists to give to our non-economist friends to explain how useful and important we are in the world.
The most value in the book is that it gets you to think in economic terms about everyday things. As a result, it is not a quick read. You will pause and think and reread sections and have long discussions with your wife and officemates about all that you're learning. And that is certainly worth the price.

This book does an excellent job of describing economics in a way that laymen can understand, although experts won't find much that is new in it.

Harford's description of price discrimination is the best I've seen, and the first to describe how to tell the extent to which an instance of price discrimination has good effects (the extent to which it expands the number of sales).

His arguments that globalization reduces pollution are impressive for most types of pollution, but for carbon dioxide emissions I'm very disappointed. He hopes that energy use has peaked in the richest countries because he's failed to imagine what will cause enough increased demand to offset increases in efficiency. For those of modest imagination, I suggest thinking about more realistic virtual reality (I want my Holodeck), personal robots, and increased air conditioning due to people moving to bigger houses in warmer climates. For those with more imagination, add in spacecraft and <a href="[...]">utility fog</a>.

Some small complaints:

He refers to Howard Schultz as the owner of Starbucks, but he only owns about 2 percent of Starbucks' stock.

His comment that the store stock price dropped below its IPO price fails to adjust for stock splits - a share bought at $18 in 1997 would have become 12 shares worth $8 each in the summer of 2001.

His claim that "Google is the living proof that moving first counts for nothing on the Internet" is a big exaggeration. It's quite possible that Google success was primarily due to being the first to reach some key threshold of quality, and that many small competitors have matched its quality without taking measurable business away from it.

This is an extraordinarily well written book. It clearly explains economic principles without resorting to technical language; more importantly, it uses these principles to explain why some things work and some don't, whether it be policies for fostering economic growth, controlling pollution, reducing congestion, or providing lower cost health care. Even though I was an economics major, I learned a lot, and even when the material was very familiar to me, the writing was so good I was not tempted to skip.

Some of the facts which were new to me: China's approach to adopting capitalism gradually was to hold constant the amount of resources controlled by state planning, letting economic growth free up more and more resources subject to the market economy; many European countries such as France employ a kind of free market approach to health care in that private health insurance is compulsory, but the state subsidizes the cost for poorer citizens (what Massachusetts is now trying); in countries like England, the per cent of income spent on gasoline actually goes up with income until you get to the very rich. Harford's first hand accounts of Cameroon, and his explanation as to why modern irrigation canals in Nepal increase productivity, but modern dams do not, is the type of color which adds so much to this book.

Harford also uses economics to explain corporate pricing strategies. By the time he gets to refreshment stands in movie theaters, it gets a little tiresome and he misses something: I think the markups on candy bars are lower than other items because it is easier to sneak them in. Another thing missed is that used car warranties allow for a vibrant used car market despite the information asymmetries Harford discusses.

The general conclusion of the book is that you can have social justice and economic efficiency, but you must be clever and not ignore economic principles, especially people's strong tendency to mostly do what promotes their self interest.

In The Undercover Economist, Harford covers economic topics such as externalities, comparative advantage, market failures, game theory, globalization and international trade. The author uses past and present easy to understand phenomena to illustrate the market forces leading to why things are the way they are, i.e. exorbitant prices at Starbucks.

Compared to Freakonomics, Harford's book is more academic and significantly less entertaining to read. Much of what he discussed can be found in beginning college economic courses.

As a business graduate, this book wasn't particularly useful to me. In particular, I took issue with three of Harford's assertions:

1. Harford claims you can never purchase a decent used car for a fair price. Without getting into the details of his reasoning, one can look no further than the used car market in the U.S. I have bought and sold decent used cars at or below blue book value numerous times. As a buyer of a used car, anyone can simply have a mechanic check the car before the purchase to avoid a lemon.

2. Harford, like most economists is in favor of abolishing all tariffs expeditiously. Tariffs almost always lead to inefficiency and possibly market failure. Harford is also in favor of not rushing market reforms. He cites China as the biggest success story of gradual market reform. Russia, on the other hand, failed to implement market reforms because of moving too quickly. His belief that drastic market reforms should be executed gradually and thoughtfully is in contradiction with his idea of removing trade barriers such as tariffs quickly.

3. Harford sees sweatshops as a stepping stone to economic improvements in developing countries. He mentions most economists are in favor of this controversial practice. But he fails to propose alternatives to ease the burdon of the resulting child labor and the abuses that accompany it. Where there are sweatshops, there is child labor and work under duress. Almost all children involved in sweatshops will lose valuable education. Harford advocates education as one of the remedies to cure poverty. How will child labor move any country closer to an educated work force?

This book is undoubtedly useful to any reader who has limited knowledge of macro and micro economics. For those who have more than a casual understanding of economics, there are other books that are more educational.

This book tries to popularize basic economic concepts. Harford is most interesting and provocative when describing daily economic events, such as why some things seem overpriced. He suggests that movie popcorn is expensive because high-priced food is a way for theaters to price-target- that is, to get money out of consumers who are not particularly sensitive to prices. Similarly, he explains the value of difficult liberal arts majors as a signaling device- a way to tell employers, "I did really tough work in college so I must be smart."

Sometimes Harford is simplistic. For example, he argues that nations like Cameroon are poor and corrupt partially because they are dictatorships. However, Taiwan and South Korea began to bloom economically before they became democracies (as has China).

Tim Harford's "The Undercover Economist" is in many ways a return to the fundamentals of economics. In recent years, the field of economics has seen a growing influence of quantitative modeling and econometrics, to the extent that the medium has become the message. The complexity and elegance of the modeling often obscures the fact that these are mere tools for the study of economic behaviour. At its foundation, economics is the study of human behaviour with the focus on how people make decisions by applying (consciously or unconsciously) the basic economics concepts of scarcity, relative pricing, comparative advantage, marginal cost etc.

Harford is a columnist for the respected Financial Times and it shows in his clear and almost conversational writing style. He almost entirely avoids the use of jargon and technicalities, using simple logic and even common sense to explain economics ideas. His use of everyday situations to illustrate his points makes the book read like a collection of anecdotes, with the difference that the anecdotes serve to buttress the theme in the background. Readers will doubtless enjoy his application of economic reasoning to shopping at the supermarket, pricing of a cup of coffee, health insurance and so on. And for those who like the bigger picture, Harford's explanation of the benefits of globalisation and the rise of China are top drawer.

I wish he had not glossed over the free loader issue while discussing externalities. Similarly, in explaining the problem of asymmetrical information in used car sales, he glosses over the role of independent 3rd party information providers who can help in restoring the balance of information. Perhaps he will attack these in a future book? I for one will stand in line to buy it!

Harford offers us an introductory course in economics with a dry wit and lots of interesting, real-world examples. There are a few dry stretches (such as the extensive treatment of agricultural land prices), but the book is mostly engaging and some parts are very entertaining. For example, Harford's treatment of price targeting and how supermarkets and the store have used technology to target customers is intriguing and fun. I also found the treatment of stock valuations insightful. In explaining the reasons that poor countries stay poor, he tells quirky (albeit disheartening) tales of his time in Cameroon. It isn't quite as fun a read as Freakonomics, but it does a better job of teaching fundamental economic principles. (Freakonomics shows that economics can be interesting and can answer questions you wouldn't expect it to; The Undercover Economist shows that economics can be pretty interesting and answer fundamental questions that you would expect it to!)

Harford is refreshingly aware of the weaknesses of the free market but does a solid job of characterizing its strengths. Sometimes the analysis is simple (the history of China's recent development, for example) and may miss important points. The key to remember is that Harford is teaching basic principles with a great deal of explanatory power but not with _all_ explanatory power. Take away the principles from your reading, but don't treat the analysis of a given application as definitive.

Relative to a similar volume, Landsberg's Armchair Economist, this is more enjoyable: Harford relies more on real-world examples and empirical research (not entirely, but more) than does Landsberg with his hypothetical scenarios, although I also enjoyed Landsberg. (I guess this isn't surprising: would you rather shadow an Armchair Economist or an Undercover Economist? The answer is clear!) I have yet to read some of the others, such as Naked Economics (I'd rather _not_ shadow a Naked Economist, given most economists I know) or Discover Your Inner Economist.

Robert Ian MacKenzie does a good job reading the unabridged audiobook, which consists of nine compact discs.

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.

The strength of this book is that Harford explains pretty traditional, mainstream economics in a way that the non-economist can appreciate and realize its importance. With all sorts of politicians and special interest groups touting economic policies to make the world a better place, Harford's book helps us to be better citizens and make informed decisions. And I found Harford to be a pretty engaging writer that made the chapters breeze by.

Most interesting to me with the chapter on health care, which explains why it is so costly and unsatisfactory in the United States with private insurance, and quite frankly, isn't much better in other countries with national health care plans, such as the UK. Harford cites Singapore as an example where patient choice coupled with governmental intervention in the event of extremely costly health care as a system that works, and explains the economics behind it.

Given the enormous discussions on free trade, immigration, health care reform, and effective economic policies for developing nations, Harford's book is quite welcome in neatly spelling out the economic issues and the paths to progress in what I felt was a balanced view of the issues. I'm glad I read it.

"The Undercover Economist" covers a broad array of economic concepts, mainly using anecdotes and easy-to-understand hypothetical examples to illustrate the benefits of things like free trade and market pricing. Strikingly, you can read pages at a time without encountering a single number -- the book is clearly aimed at an audience which was scarred by too many graphs and charts in high school. I am fairly familiar with the economic concepts already, but I enjoyed the book too -- the author's easy-flowing writing style and sense of humor make the economic lessons go down easy. The wealth of real-world examples, from a comparison of India to China, to a proposal of how American health care could be improved, to an examination of why coffee seems so expensive, provide strong backing for the author's arguments. In my case, the book is preaching to the choir, but it also might sway people who considered themselves anti-globalists without ever considering the unintended consequences of their beliefs. "The Undercover Economist" is a good and interesting read.

This quite interesting book, said to be the precursor to "Freakonomics," really is good economics (mostly) made mostly fun. Tim Harford does look conflicted in some places, though. He can't quite make up his mind about the full value of our capital-driven market system, nor of the value-neutral nature of a free market economy. Some reviewers talk much about the dark side, or the ugliness, or the general badness of capitalism, but don't believe it. Mr. Harford's conflicts are much lighter than that, and mostly add to the book's interest.

For example, this from page 75: "Markets fail to work in the face of scarcity power...," is not convincing. Using Microsoft as an example here doesn't work, with so much competition having arisen since the book's publication. Another example states that automobile drivers won't solve the problem of traffic congestion. Of course drivers do! In the short term, it's alternate routes; long term, it will be more roads and technology.

One can see that this good-hearted author desires a central government to be wise and kind. Unlikely, as national economies are far too big for a single person or group, or planning committees. Libertarians can rest easy to hear, "nobody has your interests at heart as much as yourself," says Mr. Harford. Amen. This important concept will let us take the book seriously. Mostly. Also, the section on health care insurance (p108) could be worth the price of the book. It is rational, calm, and realistic for the most part, even as he wistfully hopes for fair and inexpensive treatment for the ailing.

Laced with classic British wit, this book is essentially two parts. First, Harford explains Ricardo's theory of rent surplus.

He then spends the rest of the book applying it to a variety of situations, and has interesting economic insights into random things such as the price of Starbucks coffee, uncomfortable airport seats, and corruption in Cameroon.

He also discusses some theoretical underpinnings of economic theory, and interesting instances of when it appears to fall apart (health care seems to be one instance), and why economists often seem to drop the ball - because the real world is so complex, they invariably forget to factor in some critical piece of the equation or the other.

Particularly interesting is an analysis of the stock market, and its runs in the late 90s in the light of game theory. The discussion is buttressed by analyzing a number of auctions carried out by G-7 countries in the early 2000s, showing how small nuances could lead to radically different results: the ability to halve the income tax, or such incredible bungling that political and civil service heads rolled.

Highly recommended, both as a great read, and as a progeny of the line that started with "Freakanomics."

I snarkily suggested that Steven Levitt missed a killer marketing opportunity by publishing Freakonomics (no fuzzy, fancy math, but all those words) instead of Freakonomics Comix. With its "Lichtensteinesque" cover, Tim Harford took my advice and targeted a post-literate generation that gets its news from The Daily Show & that gets its views from Ted Rall.

Actually, Mr Harford has written (words, alas) a very good book, much better than Levitt's. Dr Levitt told compelling stories. Mr Harford tells compelling stories for which the major premises and major points are usually clear. Harford's book is a principles primer. Levitt assumed that his assumptions were clear as he leapt from unstated principles to observations & conclusions. Harford spells things (the externalities & asymmetries of market failure, for example) out.

About government failure, Mr Harford is less clear, & he occasionally veers into a twilight zone between Pollyanna & Walter Heller, who believed that a macroeconomy could be fine-tuned & played like a Strad. Macroeconomics, of course, isn't where Harford's book is at, since he's mostly explaining the microeconomic choices of individuals & firms, but his excellent discussion of globalization is a macro construct with consequences, intended & unintended, on the sweatshop floor.

Mr Harford writes well & usually makes sense. Of a staff man for the Financial Times, published on pink paper, who could ask for anything more?

Tim Harford's "The Undercover Economist" is the best of the four popular economics books I have ("Basic Economics" by Sowell, "Naked Economics" by Wheelan, and "Freakonomics" by Levitt are the other three).

"The Undercover Economist" exceeds the others because: a) it explores a wide range of economic topics from the standpoint of a few everyday example scenarios (like the price of coffee at Starbucks), and b) it deals with economics in the realm of public policy - the most interesting and relevant area to most people - staking out clear positions on "fair trade" and protectionism, road congestion charging, and health insurance and national health care, among many other topics.

It strikes me as funny that Publishers Weekly implies Harford is a laissez-faire capitalist who won't acknowledge a middle ground between capitalism and communism, but some the store reviewers actually call him a socialist. Both appear to be judging the book against their ill-informed preconceived notions of the conclusions economics should reach. For Publishers Weekly, what exactly are the elements of this middle ground, and why not let them stand up to economic argument? For the reviewers who call Harford a socialist, do you feel that the US health care system or the road system are shining examples of American capitalism (hint, they're not: the solutions Harford proposes are more market-oriented than the existing systems)?

With that said, I have a few problems with the book. Specifically, Harford's argument for a road "congestion externality" is very unconvincing. Intuitively, when driving, I both cause congestion to other drivers and "receive" congestion from them. The recipients of congestion are virtually all drivers themselves, and drivers receive congestion roughly in proportion to the amount that they create. If roads are built in the proper places using gasoline taxes derived from drivers, is this really an externality that demands correction? To me there is nothing economically intuitive about charging drivers an externality tax and using it to fund public transit.

I think the problem is being defined wrong. Road use going out of a big city at 5 PM should cost more than road use in the same area at midnight - there is more demand and the same supply of road. However, there is no market for road use, because government builds roads and allows them to be freely accessible. That, frankly, is really what doesn't make sense from a market perspective. Roads should probably all be run as toll concessions. Similarly, there are many other areas - including health care - in which I wish the book argued its point more thoroughly. Still I found it a highly entertaining and informative read.

In this brief, cogent book, author Tim Harford provides an accessible, entertaining introduction to economic thinking. This deftly written report belongs on the shelf of anyone with an interest in economic matters - and as the author makes clear, everyone has an interest in economic matters. He deftly punctures the balloons of those who advocate fair trade coffee, protectionism, government-underwritten medical care and other such policies. These tactics may seem humane on the surface, but he contends that they often merely advance the selfish goals of the few at the expense of the many. If the book has a weakness, it is Harford's tendency to take certain points of political opinion for granted and to state them as moral choices without qualification or proof. For instance, he puts forth the admirable - though some would say questionable - notion that governments are obliged to cushion the shock of unemployment. That, however, is a quibble. We highly recommend this concise, comprehensive book.

Who said that economics was boring?

Tim Harford, a young English economist, has written a splendid book, probably the best I have read of its kind, about the application of the basic economic principles to little things. This book is for anyone with common sense ---even economists--- who want to better understand the world in which we live in.

The analysis is rigorous and consistent, yet simple and fun. In a natural way, Harford reaps the rewards of almost 300 years of economic doctrines to explain how things work, why frequently they fail to work properly, and what can be done to fix them.

Setting "good economics" at the service of anyone who wants to learn from it, the author explains with a clean logic why freedom and trade probably are the main pillars of modern societies. Indeed, it seems that there is not a more direct way for achieving sustained economic growth and social development.

Harford emphasizes the goodness of a free market, in which prices give adequate information for efficient resource allocation, but without idolizing this system of exchange. In fact, the author devotes many pages of the book to explain the serious problems that emerge when imperfections, as the lack of competition, the presence of externalities, information asymmetries, and inadequate institutions, are important.

Current affairs as corruption, poverty, globalization, environmental problems and the emergence of China are analyzed with a good detail under the magnifying glass of the "undercover economist", who always offers a fresh perspective of the problem and opportune remarks. If these remarks were listened by at least some of the people that actually take policy decisions, no doubt it will deliver some gains to more than one person without taking from any other. Pure economics!

"The Undercover Economist" is a fascinating and clear book. It looks at everyday life from the perspective of an economist - examining issues that are relevant to the lives of most people.

If you read this book you will find out some of the following, plus more: how coffee shops and supermarkets alter prices to target consumers who aren't vigilant in their spending decisions; why buyers are always at a disadvantage in the used-car market; how to improve the price and fairness of medical insurance; why poor countries are poor; and why the worst way to combat the impact of the high cost of fuel on regular people's budgets is to cut fuel taxes.

At times, I have a short attention span, so wit and a good dose of humor usually help to keep me interested in the content of non-fiction books that, like this one, are written for a general audience. However, "The Undercover Economist" wasn't often funny. Nevertheless, I had trouble putting it down because its content was presented in such a practical and interesting way. The only aspect of the book's style that was occasionally disconcerting was that the author sometimes alternates between first-person tense and talking about "the undercover economist" in the third person, when it appears he's referring to himself - but don't let this put you off reading this book, it doesn't happen that often.

One of the spotlight reviews argues that the "Undercover Economist" is better than the more popular, but similarly-themed, "Freakonomics". I agree with that review. "Freakonomics" is slightly better written and more humorous than "The Undercover Economist", but much less informative.

I have a soft spot for economics books, especially somewhat poppy ones. Mr Hartford strikes a perfect balance between poppy and teaching core principals. In fact I had a very hard time putting this book down.

What sets this book apart from other economics books are the examples. Mr Hartford's choices range from Starbucks (why coffee beans will always be cheap but coffee won't be) to the true cost of tariffs to health care reform. In fact his was the only argument for health saving accounts (combined with insurance) that actually makes sense to me. And while he's not in the Prof. Krugman camp, he's not far off.

The final two chapters, on globalization and China, are also extremely well written and help present the net societal benefits of globalization and also helps to explain the true costs of tariffs. These chapters are both to the point and, more importantly, don't sugar coat the problems that are inherent to the system and the dangers of doing things half way.

This was a quick, fun and enlightening read. What more can you ask for!

I majored in economics in college, but I struggled with it, especially the more intensive math parts. After it was too late to change my major, I pondered why I chose this field to begin with. I remembered that my initial attraction was to the elegant ways that economics explained individual behavior. That all got lost in the subsequent heavier tomes that I had to consume on employment, GDP, etc. Then came books like the Armchair Economist: Economics & Everyday Life and Hidden Order: The Economics of Everyday Life. These books were fun and challenging. And then came Freakonomics [Revised and Expanded]: A Rogue Economist Explores the Hidden Side of Everything, which perhaps by virtue of its title and the more controversial subjects it covered, managed to become a national bestseller. Other titles followed, similarly attempting to address "everyday" issues through the perspective of economics. The New Republic has derided this trend as cute-o-nomics, but that's the subject for another place.

Where does The Undercover Economist fit in? For myself, I found some of the initial material more reminiscent of traditional economic textbooks as I found some of the economic discussions difficult to follow. Maybe that was just my problem, but the economic text definitely did not flow with the story as it does in Freakonomics. The book picks up though and becomes more accessible to the layperson. The discussion on health care is an eye-opener, as we get the so called "third way" that is not often mentionied in the otherwise dychotomized debate that pits privately provided against publically provided health insurance. The chapter on why poor countries stay poor and why China has grown are also fascinating. Particularly important is Hartford's description of free market economics as "the World of Truth", where actions are reflective of individuals' and firms' true interests and desires, not diluted, masked or distorted by things like taxes, regulation and forces that interfere with free markets. I highly recommend the book but be prepared to be challenged as well as entertained.

I had the pleasure of receiving this book from my sister recently. I didn't expect it, but it was one a reading list of mine. My gosh, I wish I had read it earlier. I've read Freakonomics before and that ... was agony. I disliked Levitt's writing style. When I came across this, this was a very surprising change.

Harford writes incredibly interesting and points out many things that are not common to the average eye. Now, when I'm buying groceries, rather toothpaste, I cannot help but think, am I overpaying? Why are there so many alternatives? This book will indeed change your insight on how you look.

The post below me said that most of this material is covered in economics 101. Yes, he is right in some sense. If you don't learn what opportunity costs are in ec101, ask your college for a refund! Yet, many of the insights that Hartford provides, such as why is Starbucks run the way it is, is much different than what you would expect out of ec101. I have yet to find a professor that could teach like Harford has expressed in this book.

If you enjoy learning about the world, certainly read this book. You do not have to be passionately interested in economics to enjoy this. In fact, Harford writes to appeal to a much larger market here. You can tell some of his interests when he explains certain concepts in much too great detail, yet, those that are interested in economics will be pleasantly overjoyed.

Give this book to an undergraduate in college or a high school junior/senior. Not all the concepts will be knew to some, yet, there is a lot of interesting thought that comes through. You can tell that Levitt has great interest in this subject and writes with such passion and vigor.

Tim Harford is an excellent storyteller: weaving significant economic theories into a narrative that most of us can understand is certainly an art. In a sense, even readers like me, without any comparative advantage - paraphrasing Harford - can pick up the book and read it from cover-to-cover and come away reflecting on Starbucks' business model or possible solutions to the problem of Asymmetrical Information.

Where I found Harford's views a bit biased was in his country-analysis. In the last chapter he focuses on China as a "case in point" of economic development, gushing about the new skyscrapers, concluding how the "Chinese economy" provides people like Yong Li "real choices." It would have been easy to digest if Harford had left it at that; but he states "fuss over "offshoring" notwithstanding, India is nowhere at all: with a billion people producing less than 1 percent of world exports."

I guess Harford has a lot more data from the World Bank at his disposal than most of us; however, the Indian-born mind of mine thinks of the old adage "Economics can be used to prove just about anything" [well, the adage is about Statistics, but I guess it fits here too]

In The Undercover Economist, Harford explains economic theory in a way that is very readable and very entertaining, even for those of us that have always found economics to be a dry subject. Frequently compared to 'Freakonomics', this is a far superior book, since Harford applies economic theories to situations that affect the typical consumer.

Harford is no-doubt a champion of the free markets, and presents a fairly convincing argument against trade barriers and other regulations. He even goes so far as to state that sweat shops aren't such a bad thing.

Overall, an excellent book if you're looking for something to entertain you as well as inform.

If you read only one pop economics book this year, The Undercover Economist should be it. Harford, a columnist for the Financial Times among other distinctions, has written a book that could almost serve as a textbook for an Economics 101 course. But it's emphatically not dry or dull. Instead, what Harford has done is convey the excitement, the power, and the often counter-intuitive results of economic thought. In so doing, he has written more or less the economic equivalent to The Selfish Gene.

Many recent books (notably Freakonomics) have dealt with the more exciting realms of economic research, such as the application of certain economic models to what most people would consider non-economic behavior. And far more books have talked about "economics" in the context of even trendier ideas like globalization (think The World is Flat or even No Logo). Such books, however, are reflections of marginal (in the case of the former) or unsophisticated (in the case of the latter) economic schools of thought.

Harford presents the orthodoxy in all its glory, and reminds readers that economists really do see the world in a different--and fascinating--way. He explains simple, but often misunderstood, concepts like adverse selection (that is, why health insurance costs too much), as well as even simpler, but far more consequential, economic models, such as David Ricardo's explanation of why landowners, and not farmers, make money from rising crop prices. Along the way, he explains why the prices at Safeway and Whole Foods are about the same--and why the prices for items on the top shelf are higher than prices for the same goods on the bottom shelf.

Granted, the book has its flaws, principally its (market-driven) lack of any equations or graphs and, more important, its refusal to take up any serious questions of macroeconomics. If you want to understand how recessions occur or how federal spending affects the world and national economy, then you're out of luck. But in focusing tightly on basic microeconomic principles--the foundation of the most insightful parts of economics--Harford succeeds in keeping the book accessible and useful.

Economics is that one branch of the sciences where everyone claims to be an expert. If you're a doctor or an engineer, no lay person would question your hard earned knowledge. But, in the case of economics, everyone's an expert. Everyone has some half baked solution for the world's woes. Harford's book works to dispel these "solutions" by outlining the basis of modern economics in a clever and simple style. His technique is brilliant.

Economics is not a difficult field of study but it does require an acceptance that markets, when left to work their own mysteries, will always produce a better outcome than that proposed by a bureaucrat. Put simply, why is North Korea a basket case yet nearby Japan or Singapore economic miracles? It can't be attributed to natural resources. North Korea has plenty of these while Japan and Singapore have none. No, it is simply that North Korea has chosen to tread the path of economic lunacy and, as a consequence, its people are suffering horribly.

Harford outlines economics wonderfully. His book is a treat to read. Do yourself a favour and read it yourself!

I reinforce the positive reviewers on Harford's topics, and don't find it "socialist" or a "rant" on global warming (he suggests charging for damaging activities, and we can decide exactly what those are separately), but most important September 2009 is the section on health insurance. He identifies the problems as inside information (healthy people declining health policies since they expect to need little of them) and the need for competition and free markets in the health care system (take that, socialism-accusers!). His writings form another opinion on how to solve the problem that should be widely publicized and seriously considered, but of course won't be.

The more I read about the strain developing countries are placing on natural resources and global food supplies, the more interested I have become in economic theory and policies. Unfortunately, my knowledge of such is limited to basic introductory courses in college. For that reason, I am glad I picked up this book; it has answered many of my questions and has shed light on many interesting topics for future reading!

Mr. Hartford uses the first few chapters to introduce fundamental concepts such as supply and demand, scarcity, marginal costs, market efficiency, externality charges, and price targeting.

However, the fun doesn't stop there! Mr. Hartford then uses those concepts to explain a broad array of interesting topics: these topics include the health insurance industry, the stock market, auctions, free trade and globalization, tariffs and taxes, subsidies, pollution, government corruption, poverty, and China.

I must say that I am very impressed with this book. It wasn't too hard of a read, but it does make you think. In fact, in the later more advanced chapters, I often found myself going back and re-reading certain sections. Still, I enjoyed the book and found his writing style to be very good and easily digestible.

I really enjoyed the last chapter, which goes into great depth explaining how China has grown as a country and as a future economic powerhouse.

If you read or think to read Freakonomics, read this book it is far better structured and gives a good overview on many current issues on economics.

Mr Harford carries us through the world of economics asking himself questions on the things he observes and trying to proove whether he is doing the correct assumptions.

He starts analyzing how markets work and wondering why a coffee cup is so expensive at a railway station, the main reason is one of the market failures: the power of scarcity, this relates that some things are not easy to be replicated, eg a second coffee shop at the railway station. To follow the case the "undercover economist" visits a couple of supermarkets and sees how the tricks work to increase revenue and target the right product to the right customers. Target pricing works as well in other onsets like drugs or transports. Perfect markets, those where no profit can be made other than the cost of capital, are explained afterwards showing their benefits, specially the fact that perfect markets are efficient which as consequence means that products are offered at the lowest possible price.

Two other market failures are analyzed: the cost of externalities and information assymetries. In each case the author proposes solutions to overcome this shortcomings with examples of the real world. We learn that the congestion tax in London is a good solution to the problem (externality) created by too many people that try to go by car to London city and find themselves in a traffic jam. Equally Singapore is an example how health costs can be maintained at a low cost overcoming the information gap that patients and insurers have.

Two chapters follow where the internet bubble and the auctions for mobile telephony are reviewed explaining in the way how exchanges work and what determines the share price, and what you should think before setting up an auction.

The last part of the book takes care of country prosperity. It starts analyzing why poor countries are poor and looks what receipts might help to solve poverty. Next globalisation is reviewed with its consequences, the author is optimistic and gives some data on what has been improving during the last decades. The final chapter of the book is devoted to the rise of China in the last 25 years and what has made China so successful.

The author manages to combine a well made case for each issue he develops while being entertaining and interseting, using straightforward reasoning that can be followed by newcomer without being boring to the proficient.

To complement my study in an introductory economics course, I've been reading a lot of pop econ books, including Naked Economics: Undressing the Dismal Science, so I decided to pick up this book. It is a fun, easy read about important economic concepts like scarcity, competitive markets, externalities, price discrimination, and more.

I found the chapters explaining the economic principles behind the burst of the Internet bubble (chapter six, "Rational Insanity") and the application of game theory to government auctions (chapter seven, "The Men Who Knew the Value of Nothing") to be the most interesting and insightful. While the chapter defending globalization does an excellent job defining the concept of comparative advantage, Hartford unconvincingly argues that "globalization is green" by using a graph plotting both the amount of particulate matter air pollution and the amount of foreign direct investment in China over a 12 year period. An earlier chapter does a much better job explaining how government intervention in the markets has reduced the amount of sulfur pollution in the United States. I found myself wondering, if it works so well for sulfur, why is it so controversial for carbon emissions?

The book wraps up with a case study that applies the concepts covered in the book to the economic history and development of China during the past century. It would make a good complement to the PBS documentary, Commanding Heights: The Battle for the World Economy.

Recommended.

This is a fun book. Hartford treats his topic in a lighthearted way that keeps the reader engaged. I also appreciate his ability to take complex economic theories and make them easy to understand thru the use of clear examples.

Sometimes, Hartford gets overly detailed. Those passages are a drag on the book. In addition, Hartford's discussion of rich/poor countries does not capture the incredibly complex systems that make up a national economy. The whole comparison of Cameroon and China is a bit too simplistic and his argument misses the mark.

On the plus side, his explanation on the pricing of cappuccino is must reading....it'd be a great first lecture for an Econ 101 class!

A highly enjoyable book.

Loved this book. I guarantee that you'll start thinking differently after reading the first chapter on selling coffee. Granted that Econ 101 is a sleeper - like most things, though, life in the real world is much more interesting than it is in the classroom. I frankly don't know why Harford is the `Undercover' economist - I'm pretty sure that there aren't many gangsters out looking to bust someone for figuring out how Starbucks makes so much money - but the book reads well and is always interesting.

He addresses topics that touch us all from grocery shopping to the world's economy. After reading his views about African poverty and economics I listen to the talking heads and politicians with a much different view.

Good book - highly recommended.

This book is a wonderfully enlightening description of how economies work. It includes discussions about prices, poverty, wealth, and the overall reality of why the economic world works the way it does.

I've always avoided economics-related stuff, because so much of it is so dry & boring & unintelligible. But this book really breaks it down beautifully.

Especially enlightening is his well-justified description of how wealth builds in some places and why poverty festers in other places. It's a refreshing reprieve from the typical blame/shame-based "poor people are poor because rich people are evil" rhetoric that is so pervasive in our world today.

I found Tim Harford's book very revealing and usefull, because it explains complex economic behaviors and phenomenons in a very light, friendly and accessible fashion. From the complexities of markets to important geopolitical realities this book is enlightening. There are some important concepts I handpick from the text: the power of scarcity, the evils of privileged or asymmetric information , markets as information exchanges, moral risks that perverts free trade, the importance of comparative advantages in daily life, game theory as a tool for auctions, all explained in plain words.

Without being a political statement, this book shows that free markets are far more beneficials to societies than any other form of economic arrangements because markets put the truth over the table and destroy privileged information and the power of scarcity.

The Undercover Economist is a great book that explains several economic theories in an easy to read English. You won't need to have a degree in Economics or similar fields to have a good understanding of Tim Harford's concepts. This book will make you more assertive in business thinking process for sure or decision making process.

I enjoyed the illustrations that he gave through factual events that he personally witnessed when it comes to explain why poor countries are poor. Unlike many writers, he gave himself the opportunity to visit a few developed countries to learn and understand why this part of the world procrastinates to fully engage itself into a real development. His analyst started from economic facts to address social and political networks that undermine development.

In game theory, this book comes a little bit short. Harford mainly addresses how relevant pieces of information affect outcomes following players' strategies. Don't expect deep illustrations of Nash equilibrium, prisoner dilemma, zero sum game for instance.

I will recommend this book to everyone who is interested in business development, and economics.

I like the book in general, it explained various aspects of economics in a very simple way using a very carefully and basic examples. The author selected chapters' subjects though is irrelevant and difficult to link or relate with other chapters, and I only grasp the idea after going over 3 to 4 pages. Some arguments used are more confusing than explaining like those in the chapter about Cameron. Although I enjoyed reading this book, it will be very difficult for me to select Tim's books again.

I picked this up after reading Freakanomics, on a recommendation. For anyone curious in how the world actually works, this is a must read. Hartford presents the complex workings of the business word using real world examples and relevant topics.

My background is in engineering...this means that anything even remotly related to business or human behavior related needs to be explained slowly and with pictures. The Undercover Economist had me hanging onto every word, and understanding the intricite details of consumer behavior. This book is written to accomidate the reader even if they have no idea about how business works, meanwhile it does not pander to the uninformed reader by oversimplifying what it tries to convey.

If you've ever wondered about how the important decision in the world are made, this is the book for you. It covers the reasoning behind the costs of daily purchases, the state of international economies, and how we can save the world by lowering trade barriers and limiting the influence of labor protection groups. Will this book change you life? No, no change is perminant unless it comes from within. However, next time you get off the subway and see a Starbucks or go to buy a used car, you may think about the actual cost of the grande mocha-chino and what you may be willing to pay for it, or the vested interest the used car salesman has in his reputation and thus not ripping you off.

Another benefit of this book is that it may pay for itself in the decisions you make after reading this book. It will not help you settle your debts, but you may understand the real value of common goods and services.

After being told I this book is better than Freakonomics I had high hopes. And I was not disappointed in the least. As the name says this book reads like a undercover detective story. What I really like about this book, and perhaps now understanding Economics better, is that Economics is the study of what humans actually do versus what we think they are doing or what they may do. And how using complex mathematical models the non-obvious trends can be determined. I finally understand why coffee shops are so in vogue and particular why you and me would be willing to pay more for something we now make at home. Just having read the final chapter on China is almost like freaky because just yesterday I received an invitation to speak at a conference in Shanghai!

Early in "Undercover Economist" Harford provides a clear explanation of how pricing pressure changes according to supply vs. demand. One of his examples is London's "Green Belt" - an undeveloped ring around the city that ends up increasing rents. Los Angeles County provides another example - so much of its land is off-limits to development that the area has become LESS attractive, not more, due to higher costs of housing and commuting, as well as increased pollution.

Another point made by Harford is that large school districts in the U.K. have such negotiating power that they keep salaries low. This seems strange given that U.S. teachers are paid far more than, and receive much better benefits than their private-school counterparts - even in large districts.

Illegal immigration is briefly reviewed - too briefly, in fact. Harford would have us believe that the matter simply turns on whether one is personally threatened by immigration or not - ignoring the serious externalities associated with U.S. illegals due to their reluctance to assimilate (school and police language problems), negative impact on property values (noise, crowding, unkempt yards, crime), etc.

Harford's explanation of how/why sellers accomplish differential pricing (eg. "fair-trade" coffee, discounts to Florida locals at DisneyWorld, slowing down printers, low-cost train sections without basic amenities) was very useful, as was his review of pollution auctions that not only achieve efficient improvement, but also provide key information for future regulation - avoiding endless moral posturing.

U.S. healthcare inefficiency is still another topic addressed. However, Paul Krugman (New York Times, 11/14/05) does this much more clearly.

As for why some nations are poor, Harford offers evidence that corruption, incompetence, and the lack of trust (eg. a rationale legal system) are major culprits.

One of the last topics covered is China's remarkable transformation post-Mao. This topic probably merits a book of its own - I wish more detail had been provided.

While I agree that economic prosperity leads to purchase costlier but cleaner products like cars, I don't think that is entirely true. For example, Land Transport New Zealand has found that while cars are 30% cleaner, economic prosperity means people have gone for bigger cars. Which means their net carbon footprint remains the same.

Which leads us to the next question. Are developed countries really friendlier to the environment compared to developed countries? While it may be true that developed countries do posses cleaner technologies, if you look at nett carbon emissions and emissions per person, they are both higher in developed countries. This could be explained by the previous observation that with economic prosperity, people will go for cleaner technologies like cars, but then they compensate for that with more of the cleaner technology.

If the argument given in the book is true, why then is the world wanting US, the most developed and prosperous country, to be the first to reduce their emissions and they are not so much after India and China? The answer is, in spite of their prosperity and cleaner technology, they have not reduced their emissions level.

Again, with India and China developing at a fast rate, their environment should be getting cleaner. That is not the case. Since the economic boom, China's emissions have shot up, contrary to what the book says. So also in the case of India.

This seems to go against the argument that economic prosperity will lead to reduced emissions and so better environment.

Sridhar Ekambaram
Wellington, New Zealand.

Tim Harford is a sharp-minded columnist for the Financial Times, one who spends most of his time applying the laws of economics to everyday problems. His book, "The Undercover Economist", is a natural progression from his FT column: each chapter starts with a simple premise, from the price of a cup of coffee to the difficulties of buying a used car. Along the way, Harford attempts to undercover the broad economic issues that underly even the simplest transactions.

It's a tactic that has managed to draw in even the least business-savvy of readers, and his analyses of the various transactions we don't often think about are good fun. His sceptical approach to 'free trade' goods and environmentally-friendly business is particularly refreshing in this era of buzzwords and eco-hype.

But overall, the book is a disappointment. Harford's chapters don't meld into a cohesive whole, with each one coming across as a self-contained column or essay without forming an overarching argument. In fact the only real opinion in the book is the rather predictable one favouring unfettered capitalism and laissez-faire liberalism, a claim which is never really explored in depth.

I also think it falls firmly into the 'popular economics' camp of books without really improving the genre. Yes, economics can be fun - but at some point the coffee cups, apple cores and used cars have to be put away so the facts and theories can be taken in. Harford makes a few attempts at didactic, explanatory writing, but they never last long. It seems like this book doesn't want to be an introduction to economics, but on the other hand can't avoid being one because of its desire to please those turned off by facts and figures. All this confusion leads to a confused product.

A great introduction to mainstream free market economics, making an easy and humorous read of complex subjects, including just what the Chinese did to spark their remarkable growth in recent years.

Makes a great case for the so-called Washington Consensus (free markets, low taxes, balanced budgets), but does not tackle the reservations about it now gaining ground. In particular, says nothing about the truly frightening growth of economic inequality in the US, which many attribute to unthinking endorsements of global "free markets" that aren't really free, and whose benefits seem to accrue only to those at the very top. I would love to see a sequel by Harford that took on these questions.

The Undercover Economist is part Freakonomics and part Eat The Rich. Combining a pop cultured version of economics and a travelogue of world hot spots past and present, Tim Harford attempts to talk to the average man without the complexities of economics or the dumbed-down biases of a Polemist.

To be fair, Harford has to strike a very fine balance. The chosen themes are culled from prevalent discussions and the opinions never purely monetary to the point that they completely neglect non-economic aspirations. Nevertheless, these biases are present and infiltrate the theories and chapters occasionally. A job paying minimum wage might be better than no job at all, but neither addresses the true aspirations or the non-GNP needs of man.

A more pressing concern is the book's less than enthusiastic style. At times wordy, while at others too obscure the book does not quite hit the populist note it aspires to. Be it a discussion on Starbuck's, globalization, London or China's growth The Undercover Economist unwittingly slips into unpremeditated obscure axioms.

A great introduction to mainstream free market economics, making an easy and humorous read of complex subjects, including just what the Chinese did to spark their remarkable growth in recent years.

Makes a great case for the so-called Washington Consensus (free markets, low taxes, balanced budgets), but does not tackle the reservations about it now gaining ground. In particular, says nothing about the truly frightening growth of economic inequality in the US, which many attribute to unthinking endorsements of global "free markets" that aren't really free, and whose benefits seem to accrue only to those at the very top. I would love to see a sequel by Harford that took on these questions.

The Undercover Economist is part Freakonomics and part Eat The Rich. Combining a pop cultured version of economics and a travelogue of world hot spots past and present, Tim Harford attempts to talk to the average man without the complexities of economics or the dumbed-down biases of a Polemist.

To be fair, Harford has to strike a very fine balance. The chosen themes are culled from prevalent discussions and the opinions never purely monetary to the point that they completely neglect non-economic aspirations. Nevertheless, these biases are present and infiltrate the theories and chapters occasionally. A job paying minimum wage might be better than no job at all, but neither addresses the true aspirations or the non-GNP needs of man.

A more pressing concern is the book's less than enthusiastic style. At times wordy, while at others too obscure the book does not quite hit the populist note it aspires to. Be it a discussion on Starbuck's, globalization, London or China's growth The Undercover Economist unwittingly slips into unpremeditated obscure axioms.

If you liked Freakonomics, you will love The Undercover Economist. More straightforward explanations about who really gets the money from a $4 cup of coffee, how China went about becoming an economic superpower, why healthcare is not working in the US and specifically what can be done about it, why trade restrictions always backfire, and why poor countries remain poor. Easy reading, but not too easy . . . really gets you thinking. This kind of education can help all of us become more critical consumers of what we get from the media, politicians, and special interest groups.

Using humorous and applicable examples, Harford manages to bring some complex economic concepts down to a basic level of understanding, similar to Steven Landsburg's book The Armchair Economist. Landsburg's book is a more engaging read, and his writing more precise, but where Harford really shines out is that he manages to keep his book easy to read from page to page, while Landsburg has a tendency to get caught up in confusing technical language and jargon.
If you're looking for a good source of some sound (and simple) economic explanation, Harford's book is a great place to start; it's clear enough and interesting enough that you're sure to find what you're looking for.

Hartford's book is a great introduction to economic thinking and analysis and would serve as a good econ 1010 textbook, but doesn't provide anything you couldn't find in a good principles book. The author does not clearly and concisely explain the economic principles he is describing, but does provide excellent and enlightening examples. Sadly, the author's tone is that of a condescending economist who mentions frequently how he is 'highly educated' and well paid and gives the impression that he is smarter than everyone else for understanding economics. I was also disappointed how closely the book followed Varian's "Intermediate Microeconomics", even using many of Varian's examples. I would recommend this book as a supplement to a principle's textbook but if you are looking for a book about the economics of everyday life, skip this book and grab "The Armchair Economist" which is far more clever, analyzes a broader range of economic phenomena, and will teach you how to think like an economist.

Referred by a friend, I read this book. It immidiately attracted my attention. Through practical stories and examples, it brings the dry classic economic theory in life, yet profoundly. After I read this book, my view point get sharp to see how the business work and how to deal with the daily life. Why we struggle to make comparative advantage, how to reward the employees? This book opened my mind in my practice business world, and immediately we feel the inovative change. This is the single book mostly affected my life. A philosophy with Math principle.

decent coverage of scarcity theory, and slight coverage of comparative advantage, but not much ground-braking information here. Its not as good as Freakonomics, which I also disliked. I'm still looking for a book on classical economic theory that I can tolerate... any suggestions are highly welcome!

If you want to better understand economics and how it impacts everything from the big (inter-country trade) to the small (the price of a Starbucks coffee), read this book.

It is a very dense book and can be a slow read because it attempts to teach you many economic principles. But take your time and try to understand as much as you can because the overall payoff is well worth it.

...Harford's work is invaluable. Some of the more technical reviews of this book lose sight of the basic issue: most of us do not think about the Dismal Science in our day-to-day lives. What this book does well is tie Economics to how we mere mortals live. Suggesting a scholarly treatise as an alternative misses the point completely. I had not the least interest in reading David Ricardo after this.

Harford describe in plain english the economic complexities that are working to do everything from supplying your morning coffee to holding down the sugar industry to invigorating China. There are many more variables and history to most situations than people realize, and Harford describes these well for the dozen example topics he covers. If you enjoyed Freakonomics, you'll probably like this book too.

A book for people who enjoy grappling with ideas and being introduced to new ways of looking at familiar situations. It can even save you money - after unthinkingly putting a small bunch of broccoli in my supermarket trolley the other day, I remembered what the first chapter of this book had to say about supermarket pricing policies and took the time to discover that the much larger bunches, placed less eye-catchingly on the next shelf up, were actually cheaper.

You may not agree with every word the author writes - for instance, he is more sanguine than I am about desperately poor people working in sweatshops to produce uneccessary consumer goods for the rich. But this actually illustrates one of the book's strengths - the author consistently presents economics as a way of making your own personal value judgements more informed, rather than as a discipline which inevitably leads you to one value judgement or another.

Clearly written and well organised, this is a highly enjoyable read for intelligent people of any political stripe who are interested in the world around them.

This is a very readable, informative book, if you can make it past the first few pages. In the spirit of Freakonomics, this author can't get over himself in the introduction and the first chapter. However, the rest of the book makes entertainment out of explaining economic theories and then smashing them to bits. And in the final chapters, he does a good and digestable job of explaining game theory as well as the characteristics of economic corruption and ultimately educating readers about why some things, like poverty and injustice are problems of collective selfishness.

Harford did a good job at writing a well organized book that gave citizens a decent education on the economics of everyday life.

I don't agree with him on everything, but I especially appreciated his chapter educating people on why globalization makes both parties better off. His chapters on why China grew rich and why Cameroon is poor were very well done.

It seems like some other economists have gotten a lot of free publicity. But this is the book that you should read if you are interested in understanding the building blocks of economic theory. I found it to be better than Freakanomics, which I didn't bother to finish.

A good illustration of supply and demand, incentives and other concepts that will entertain you and inform you of what the money in your world is actually doing.