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230 of 240 people found the following review helpful
5.0 out of 5 stars The Power of Orthodox Economic Thought
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...
Published on November 18, 2005 by Marty McFly

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76 of 92 people found the following review helpful
3.0 out of 5 stars Outstanding style, but not the whole story
This is the kind of book any non-fiction writer can envy: a complex subject described with fluidity, wit and confidence. However, the view of economics that you will get from this book is often a bit *too* confident.

For example, no distinction is drawn between what's known from empirical research and what's "known" from utterly non-empirical mathematical...
Published on May 12, 2007 by A. J. Sutter


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230 of 240 people found the following review helpful
5.0 out of 5 stars The Power of Orthodox Economic Thought, November 18, 2005
By 
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.
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72 of 74 people found the following review helpful
4.0 out of 5 stars The Economist as Detective, September 19, 2007
By 
This review is from: The Undercover Economist (Paperback)
Ever since the surprise success of "Freakonomics", a flood of economics books for the general public have been published, all trying to cash on the success of that peculiar best seller. According to the principles explained in Tim Harford's book, that is probably a mistake: profits come from scarcity - so further books about `the economics of everyday life' face diminishing returns. And yet, Harford offers several explanations as to why such books may continue to be published: one is that if everyone thinks that economics books are going to be best sellers, an editor who wouldn't publish economics books may lose her job. I'm merely speculating, of course, but this is what happened (with dotcom stocks instead of econ books) to Tony Dye, chief executive of Phillips & Drew (pp. 135-137).

Tim Harford's stuff, though, is worth reading. A regular contributor to slate.com and the financial times, Harford has the gift of explaining complicated economic ideas in accessible language.

Although the comparison to "Freakonomics" is made prominently by the book's cover (which in my version includes an endorsement from Freakonomist Steven Levitt himself, as well as a description as the "elder sibling" of Freakonomics by `The Economist'), `The Undercover Economist' is the better economics book. Freakonomics, after all, doesn't teach too much economics: beyond emphasizing that "people respond to incentives" (an important message, for sure) it answers such questions as whether Sumo wrestlers cheat (They do) and what name should you give your child (It doesn't matter). Harford, on the other hand, explains such valuable economic concepts as rent seeking, externalities and asymmetrical information, and does so in a language that suits both academics and laypeople, with fun examples and a little history of economic though to boot. What more can you ask for in a popular book?

For those with a little knowledge of economics (I have an undergraduate degree in Business Economics) much of it will be familiar. And yet there are enough interesting tidbits that don't make it into your average introductory economics textbook. The chapters about the stock exchange and the application of game theory for auctions were both informative, thought provoking, and fun to read.

For me, the great revelation was the discussion of the environmental effects of globalization. I admit that I have long considered environmental damage to be the most credible counter argument to economic benefits of trade; But Tim Harford makes a good case that that ain't so. "Races to the Bottom" in which countries compete for the worse environmental regulations are unlikely, Harford argues - the advantage in producing "dirtily" is simply not big enough. Rather, Harford shows that protectionism leads to over production, and thus to pollution. And yet, Harford acknowledges that economic growth as such does hurt the environment. And therefore the dilemma of environmentalism or growth is not entirely imaginary - just exaggerated.

There are times when Harford does not raise his opponent's best arguments. In the chapter on free trade, Harford does not discuss various theories of Path Dependencies and learning curve. In the chapter of poverty, he hardly discusses the effects of the environment on economic growth (a major issue in Jeffrey Sachs'The End of Poverty: Economic Possibilities for Our Time), or the questionable legacy of western imperialism. I'm not saying that these are irrefutable objections - quite the contrary - but Harford doesn't quite do them justice.

Still, Harford's book is well written, entertaining, and informative. It targets the economically challenge but has something to offer to all readers, no matter how economically astute.
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100 of 112 people found the following review helpful
5.0 out of 5 stars Finally, an economist speaks my own language!, November 3, 2005
I just finished this book, which is a bit like a real life cheat-sheet. Give this guy the Nobel prize: he made economics INTERESTING AND FUN for me!!! A dreading challenge, believe me!

Economics is everywhere. We're surrounded by it, but most people do not think about it in they're daily lives. That's unfortunate: one would certainly learn to drive before standing behind the wheel of an automobile. So why not learn about the economic incentives that actually drive most of our own behavior before getting out and getting hit by that $2.90 latte?

Learning about those incentives is not only worth it, as the examples in this book prove again and again; it also helps you make sense of what is happening around you, and therefore make better, informed choices. If one understands how most things are driven by the invisible laws of trade, competition, inflation and cost/spending or tax incentives, then one has less chance to get abused by such a system. Even better: this book shows how to ride that system and take advantage of the inherent value one holds as a consumer.

I am finishing writing this review and am going out get a latte and do some grocery shopping. Now that I've read Tim Harford's book, I know where to go and how to make the best use of the scarce money I have (but I won't reveal the tricks here, as it would be like revealing a surprise end to a good book).

My bet is that I'll be able to save what I paid for the book by the time I log back in to Amazon to see if my review has been picked up or not!
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273 of 320 people found the following review helpful
5.0 out of 5 stars It's much better than Freakonomics, December 15, 2005
Steve Levitt's "Freakonomics" has made the economics of everyday life a trendy subject for readers and very lucrative for economists. Tim Harford has caught the wave with his own "The Undercover Economist." However, "The Undercover Economist" is far better.

"The Undercover Economist" does an excellent job at explaining much of economics theory through the simple experiences of everyday consumers. We all buy coffee, go to the supermarket, buy airline tickets, buy used cars, and buy or rent housing. He explains the underlying economic forces that apply to our everyday purchasing choices by relying on his extensive background in macro and microeconomics, but also Game Theory, and Behavioral Economics. As a result, he educates the reader in a broad based knowledge of economics ranging from the basic (macro economics) to the cutting edge (Game Theory).

"Freakonomics" deals with obtuse subjects that have nothing to do with consumers' everyday lives. When is the last time you were concerned with Sumo wrestlers or Chicago High School teachers cheating, or whether abortion in the 70s influenced the crime rate in NY City in the 90s. These events have nothing to do with economics but rather regression analysis. Levitt, unlike Harford, never covers basic economic topics like demand, supply, and price elasticity just to name a few.

Harford does an excellent job of tying microeconomic events to the World economy. Your buying a cup of coffee at Starbucks boosts Brazilian coffee exports to the U.S., which affects the U.S. current account deficit that impacts the U.S. demand for foreign capital that may affect interest rate levels and future economic growth. Meanwhile, by focusing on Sumo wrestlers cheating Levitt can't readily explain the Japanese trade surplus. Thus, Levitt boxes himself in a corner with nowhere to go.

Harford is a better writer. He is a well-established British FT columnist. Levitt can't write for the general public. So, he hired himself a co-author, Stephen Dubner, to put prose to paper. This strategy worked only up to a point, as Dubner wasted much ink on adulating Levitt. As a result, "Freakonomics" comes across as a PR campaign for Levitt. There is none of that self-adulating distraction in Harford's book.

Harford gives credit where credit is due. Levitt truly believes he invented a new science "Freakonomics" or the economics of everyday life. But the subject is as old as economics itself as Adam Smith in his 18th century writings always referred to everyday common transactions between local merchants and consumers. Levitt just invented a meaningless word that turned out to be lucrative. Harford often acknowledges his predecessors (from Adam Smith to Steven Landsburg) and does not claim to have invented a new science. He just intends to educate while he entertains. Harford has been successful on both counts. Levitt has not.

I recommend several other good books on this subject. These include: David Friedman's "Hidden Order: The Economics of Everyday Life", Gary Becker's "The Economics of Life", and Steve Landsburg's "The Armchair Economist."
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29 of 31 people found the following review helpful
5.0 out of 5 stars Economics in Daily Life - with a difference!, February 25, 2007
By 
David Rasquinha (Arlington, VA USA) - See all my reviews
(REAL NAME)   
This review is from: The Undercover Economist (Paperback)
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!
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31 of 34 people found the following review helpful
5.0 out of 5 stars Superb... Best of Breed, January 6, 2006
By 
After having taken nine economics courses at both undergraduate and graduate levels over the years, I found Harford's UNDERCOVER ECONOMIST to be the most enjoyable and penetrating popularization of the subject to date. Better even than Landsburg's THE ARMCHAIR ECONOMIST, Freiedman's HIDDEN ORDER, or Wheelan's NAKED ECONOMICS.

Harford is a good writer and is particularly good at explaining reasons for the disparity of wealth and poverty in various countries around the globe.

Not to mention explaining why Starbuck's coffee costs so much (and it isn't Starbucks who is gaining the lion's share of the profits...)

It also explains why Amazon pricing seemed to vary on my wish lists from time to time! (Targeted pricing based on whether I had deleted my 'cookies' recently...)

There is much else contained here for the curious and informed reader... covering real world examples embracing both micro and macroeconomics.

Excellent. The best introduction to the 'dismal science' yet produced.

Note: Levitt's FREAKONOMICS is more or less a collection of disjointed articles that vary from superb (the economics of Chicago gangs) to mundane (trends in children's names) depending on your interests. Your interest will waver on each topic depending on whether you prefer watching 'The Sopranos' or the Lifetime channel.

Harford's volume, on the other hand, contains much of the important theory you would learn in introductory microeconomics and macroeconomics classes, albeit presented in a much more interesting fashion than you would encounter in almost any business school in the country.
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20 of 21 people found the following review helpful
5.0 out of 5 stars An excellent treatment of everyday economics, August 26, 2007
This review is from: The Undercover Economist (Paperback)
I must begin by saying that I liked this book very much. Not to cut suspense, since the review is obviously favorable all along, but just to set a positive tone for the start.

On the surface, "The Undercover Economist" is just another popular economics book, of the kind that is quite common lately (Freakonomics is one example that immediately comes to mind). However, once you finish reading it (paying attention all the way, of course), you realize it presents some relatively deep ideas, explaining them very thoroughly and logically connected pieces from different aspects of economics.

The book begins by a thorough overview of supply and demand, providing simple and befitting examples, both from real life and imaginary. Next, it treats the topic of price targeting (also called "differential pricing") - with really a huge assortment of examples from diverse fields. Then, it explains about free markets and what's good about them.

The connection of market freedom to "finding the truth" is enlightening, and becomes even more so while reading further. The author then moves to more macro-economic topics, discussing globalization and the economic situation in third world countries, such as Cameroon. Finally, he concludes the book with a thorough treatment of the changes in the Chinese economy in the past 30 years. This is the best part of the book, in which all the concepts presented in previous sections come together to explain why the communist system prevailing in China before 1976 failed, and why the gradual freeing of its economy in the years that passed since succeeded on a magnificent scale.

Here are another few topics that I found interesting, in no particular order:

* Why is wine always very expensive in restaurants ? Because one of the big costs in a restaurant is table space. Restaurants would therefore like to charge customers for dawdling, but because they can't do that, they charge higher prices for products that tend to be consumed in longer meals, like wine, appetizers and desserts.
* The story of how the Environmental Protection Agency (EPA) in the USA reduced sulfur pollution problems in the 1990s by cleverly issuing "pollution permits" that factories could buy. This way, the "truth" was exposed - the real costs of pollution reducing equipment to companies.
* Did you ever think about what an "efficient economy" means. Simple. If we can point to a change that could make at least one person better off, and nobody worse off, we (economists) say that the current situation is inefficient. This simple explanation is much deeper than it first appears, as it sets one of the basic rules of free markets - in an efficient market, everyone lives on the margins (excepts of one having scarcity power). If some field is too profitable, more competitors will enter it.
* There is an excellent treatment of the problems with the USA's current health care system that's worth reading, not only for Americans.
* When we bash dictatorships in third world countries, we must keep in mind that not all dictatorships are equally bad. In fact, stable dictatorships damage their country's economy much less than unstable ones. This is because stable dictators expect to stay in power for a long time, and hence don't have an interest to rob the economy too much, because that will reduce from their future profits. Unstable dictators, OTOH, are the worst kind - they just come to power, steal as much as possible and disappear. The author cleverly compared stable dictatorships to biological viruses, that have over time evolved not to kill the host body, but rather to use it in order to feed and reproduce to other bodies.

As I mentioned, I really liked this book. In fact, I think it's one of the best popular-economics books I've ever read. It is very highly recommended.
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76 of 92 people found the following review helpful
3.0 out of 5 stars Outstanding style, but not the whole story, May 12, 2007
By 
This review is from: The Undercover Economist (Paperback)
This is the kind of book any non-fiction writer can envy: a complex subject described with fluidity, wit and confidence. However, the view of economics that you will get from this book is often a bit *too* confident.

For example, no distinction is drawn between what's known from empirical research and what's "known" from utterly non-empirical mathematical proofs such as Kenneth Arrow's proof of the efficiency of markets (@ 68-69). Arrow's proof is based on the properties of abstract convex sets, not on those of real-life markets. (You can get the flavor of Arrow's argument by downloading his Nobel lecture.) Moreover, Harford doesn't always integrate the subjects he discusses. Two chapters after discussing Arrow's proof, he spends a chapter discussing the impact of information asymmetries on economics (Ch. 5). But he doesn't mention that one of the achievements of information economics, albeit again accomplished by proofs, is to show that markets are virtually *never* efficient. (Check out the 2001 Nobel lecture of Joseph Stiglitz, esp. @pp. 503-507). Harford also ignores the impact of psychology on economics, which was recognized by the Nobel in 2000. In particular, the empirical work of laureate Daniel Kahneman and his late collaborator Amos Tversky challenges the assumptions of "rationality" that underlie the neoclassical theory that the book so smoothly espouses. (For a popular introduction to the work of Kahneman and Tversky, try Barry Schwartz's excellent "The Paradox of Choice", as well as Kahneman's Nobel lecture.)

As other reviewers have noted, the book's justifications for globalization are not its strongest suit. Harford assures us that the "circular flow of currencies" in US trade with other countries "will balance out in the end" (@196), but doesn't factor in the flow of interest the US is paying to its foreign creditors, now that we're again the world's #1 debtor nation. In his glowing discussion of China, he mentions that wages have gone up in the countryside, but omits to say that they have increased at only a fraction of the rate of increase for urban jobs, resulting in heightened income inequality. But aside from a facetious reference to Bill Gates owning everything (@66), you won't find any discussion about income inequality in this book, much less about whether "free market"-type reforms play a role in enhancing it. And when Harford glibly describes Chinese textile workers as "selfishly" looking for the best jobs (@77), he omits to mention that often they're looking for jobs in order to support the education or health care of family members back home. And how free are most labor markets anyway: consider whether you'd "selfishly" dump your current job if no one would give you a recommendation for your next one -- or for a more Chinese example, if your employer promised you he'd pay you your back wages sometime in the future, and suing him was not an option. His remark is more apt, if at all, only for the most highly-educated and fluid segments of the labor market in certain areas, such as software engineers in the Shanghai region.

I was scribbling my disagreement with the author in the margins of many pages of this book. But for his expository skill, I have only admiration. My rating reflects a compromise between style (5 stars) and substance (a bit less than 2 stars). For a slightly drier, but much more balanced and informative book covering a lot of the same subject matter, try "Reinventing the Bazaar" by the late John McMillan.
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21 of 24 people found the following review helpful
3.0 out of 5 stars Outstanding style, but only part of the story, May 12, 2007
By 
This is the kind of book any non-fiction writer can envy: a complex subject described with fluidity, wit and confidence. However, the view of economics that you will get from this book is often a bit *too* confident.

For example, no distinction is drawn between what's known from empirical research and what's "known" from utterly non-empirical mathematical proofs such as Kenneth Arrow's proof of the efficiency of markets (@ 68-69). Arrow's proof is based on the properties of abstract convex sets, not on those of real-life markets. (You can get the flavor of Arrow's argument by downloading his Nobel lecture.) Moreover, Harford doesn't always integrate the subjects he discusses. Two chapters after discussing Arrow's proof, he spends a chapter discussing the impact of information asymmetries on economics (Ch. 5). But he doesn't mention that one of the achievements of information economics, albeit again accomplished by proofs, is to show that markets are virtually *never* efficient. (Check out the 2001 Nobel lecture of Joseph Stiglitz, esp. @pp. 503-507). Harford also ignores the impact of psychology on economics, which was recognized by the Nobel in 2000. In particular, the empirical work of laureate Daniel Kahneman and his late collaborator Amos Tversky challenges the assumptions of "rationality" that underlie the neoclassical theory that the book so smoothly espouses. (For a popular introduction to the work of Kahneman and Tversky, try Barry Schwartz's excellent "The Paradox of Choice", as well as Kahneman's Nobel lecture.)

As other reviewers have noted, the book's justifications for globalization are not its strongest suit. Harford assures us that the "circular flow of currencies" in US trade with other countries "will balance out in the end" (@196), but doesn't factor in the flow of interest the US is paying to its foreign creditors, now that we're again the world's #1 debtor nation. In his glowing discussion of China, he mentions that wages have gone up in the countryside, but omits to say that they have increased at only a fraction of the rate of increase for urban jobs, resulting in heightened income inequality. But aside from a facetious reference to Bill Gates owning everything (@66), you won't find any discussion about income inequality in this book, much less about whether "free market"-type reforms play a role in enhancing it. And when Harford glibly describes Chinese textile workers as "selfishly" looking for the best jobs (@77), he omits to mention that often they're looking for jobs in order to support the education or health care of family members back home. And how free are most labor markets anyway: consider whether you'd "selfishly" dump your current job if no one would give you a recommendation for your next one -- or for a more Chinese example, if your employer promised you he'd pay you your back wages sometime in the future, and suing him was not an option. His remark is more apt, if at all, only for the most highly-educated and fluid segments of the labor market in certain areas, such as software engineers in the Shanghai region.

I was scribbling my disagreement with the author in the margins of many pages of this book. But for his expository skill, I have only admiration. My rating reflects a compromise between style (5 stars) and substance (a bit less than 2 stars). For a slightly drier, but much more balanced and informative book covering a lot of the same subject matter, try "Reinventing the Bazaar" by the late John McMillan.
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29 of 34 people found the following review helpful
5.0 out of 5 stars The Elder Sibling to Steve Levitt's Wild Child, November 4, 2005
The title of this review comes from the Economist's recent piece on Tim Harford's book. In my view, the Undercover Economist is quite simply a triumph of good writing. Harford turns the "dismal science" on its head, making the concepts that most of us failed to learn in econ 101 understandable and RELEVANT to our everday lives by using them in everyday situations, from walking the aisles of a supermarket to picking the stock market. How many of you have been guilty of the "Grolsch method" of stock picking? Read this book to find out!
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The Undercover Economist
The Undercover Economist by Tim Harford (Paperback - January 30, 2007)
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