‘The Undercover Economist’
By Tim Harford
I have read Freakonomics and when I read its author’s praise for this book (Steven Levitt: “Required reading… It brings the power of economics to life”, I couldn’t remain but excited about it. And what a read it has been.
Tim Harford is an economist and a member of the Financial Times editorial board. He is now a writer, but before this he worked for Shell, the World Bank and then taught at Oxford University. Through this book, Tim wants to tell us that economics is not pure theory, but it is at its best when applied to solve day to day problems and to answer simple questions in our day to day life. He starts with giving a description of how complex the “economics” is when we think about the various works needed to bring one cup of coffee for us to enjoy. Often, we don’t think much behind the apparent and hence don’t appreciate the big picture. Throughout the book, the author touches one interesting point after the other, providing us with insights which we never got before. He explains how open markets leads to most efficient economy, how “scarcity power” guides the high rents and premium, how ‘marginal’ land is of central importance, how unskilled workers oppose immigration of unskilled workers for their own selfish reasons, how our laziness to go some more steps results in shops at strategic locations ripping us off, and how supermarkets charge more for trivial features and we don’t even know.
He explains how “price targeting” is best for the companies (but it is not so for customers and hence is controversial) and how IBM’s low-end laser printers were actually costlier to make than high end printers. The portion on “efficiency versus fairness: can we handle the truth” is also amazing (case on pharmaceutical companies and pricing methods). He thinks ways to control traffic (concept of marginal cost), evaluates if “green campaigns” are any good at all, and explains the impact of “imperfect information”. The last chapter is on how China is on fast track to richness and why. But it presents a balanced picture, the authors also shows the dark sides of China’s growth.
It is an amazing read on practical economics and I am sure you won’t be disappointed by reading it.