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Book Review: The Undercover Economist

Wednesday, May 21, 2008
I recently finished reading the book The Undercover Economist, by Tim Harford. At about 250 pages of content, the book was a fairly fast yet entirely interesting read, and it piqued my interest in Economics more than any class ever has. This is, of course, possibly due to his command of the English language and unmatched wit.

Part of what makes the book so interesting is that he'll take something simple - like the cost of a cup of Starbucks coffee in Washington D.C - and deconstruct the reasons behind the cost (and why not all that money goes back to Starbucks). He actually does this for many different things, from apartments in Manhatten to used cars - but he also explains some of the problems that go into the pricing. Of course, the book, being written by an economist, takes a "free markets are awesome" approach to solving the problems of the world.

I find that I'm still unconvinced by the concept of comparative advantage. I mean, it makes perfect theoretical sense. However, I feel that he (and economists in general) fail to factor in nations and national interests when talking about it. Sure, in the classic example Poland should produce wine and England should produce cloth. But what if Poland wanted to wage economic warfare? What if Poland found that, as a nation, it could advance its interests by forcing England to produce more wine, which was less efficient? Comparative advantage seems to fall apart mighty quickly for me when I examine it through a political lens - I feel it only will work if everyone agrees that it will work.

Also, while admitting that I'm not an economist, it seems that free markets have one huge flaw: they're entirely reactive in nature. There's little to no incentive to be proactive in completely free markets, since the information in very "now" in nature. Again, I could be wrong, but I don't see any forward-looking tendencies in a completely free market.

Nevertheless, despite my small criticisms, this was an excellent book and I wholeheartedly recommend it. The ability to discern complicated subjects into an easy-to-read yet informative book is rare, but Tim Hartford seems to have it!

Note: Vilfredo Pareto... this guy has been popping up all over the place for me!


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