The Undercover Economist is the second popular book recently to be written about economics. The first was Freakonomics, which wasn’t really about economics in the sense people normally think of it (Gross Domestic Product, marginal utility, etc.). In that respect, Tim Harford’s book represents a more straightforward look at “economics” in its conventional sense.
The premise of Harford’s book is to throw a light on some of the obfuscated elements of economics, making it more accessible to the layperson. I know that Harford’s book made significantly more sense to me that my Macroeconomics course at university. His tactic is to devote a chapter or two to a single illustrative example. His first such example is coffee, and he uses to explain the basic premises of economics (which I won’t bother trying to explain here). Other such examples include used cars, health insurance, and supermarkets, and damned if I didn’t begin to understand why businesses do what they do. It’s both enlightening and depressing, because economics, despite Harford’s claim that it’s “about people,” seems to be about as coldly calculating as the most sinister of villains. It is little wonder than economics is called the “dismal science.”
There was a noticeable change in the second half of the book, however. After using consumer products to explain the underlying principles of economics, Harford tackles the subject of globalisation and foreign trade, talking at length about corruption in Cameroon, sweatshops in China, and beer in Belgium. Harford is very much free-trade, and it annoys me that he relegates much of the “human factor” to things such as “externality costs,” which is convenient for economists but not practical for the real world. Yes, Tim, maybe working in a Chinese sweatshop is better than the alternative, but that doesn’t make it good or desirable. Actually, this reminded me very much of Thomas Friedman’s mediocre The World is Flat.
Thus, by the end of the book, though I grudgingly admit that Harford may be correct in his opining about globalisation and free trade, I cannot accept some of his premises as glibly as he gives them. Aye, there’s the rub: Harford talks about “Truth,” or a perfect market with total information. And of course this is entirely theoretical—he understands why the real world works the way it does, but the world he advocates is more or less an impossibility. And yet it informs the way he speaks of current economics, which makes for some interesting reading.
I’d recommend this book if for nothing else than the first half, which is insightful and helpful to those of us whose grasp of economics is tenuous.