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Book Title: The Undercover Economist|
The author of the book: Tim Harford
ISBN 13: 9780316731164
Format files: PDF
The size of the: 14.72 MB
Edition: Little Brown and Company
Date of issue: November 1st 2006
City - Country: No data
Loaded: 1116 times
Reader ratings: 6.4
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There was a point at the start of this book when I thought I wasn’t going to make it to the end – or even past the start. It was when the market economy was described as The World of Truth. ‘Oh god’, I thought, ‘this can only mean one thing…’
But I was wrong. This was a much better book than I thought it was going to end up. It was quite slow at the start when he was talking about Starbucks and pricing policies – but my interest picked up when he discussed two computer printers made by IBM in which the only difference between them was that a chip was added to the cheaper one to make it run more slowly. That is, of the two printers the expensive one was cheaper to produce and was then nobbled to make it run more slowly and this surreal exercise was so as to create a price comparison between the two models.
After explaining why the market is magnificent he does then modify this by explaining that the market does have problems and blind spots and some ways incentives can be created to force the market to address these blind spots. There is an interesting discussion of game theory and a very comprehensive discussion of externalities which I found fascinating.
I kept comparing this book with Sowell’s Basic Economics. Both writers are very keen ‘the market is great’ types – but Harford is much less of a fundamentalist than Sowell.
I’m looking at getting hold of a Teaching Company introduction to Economics. I need to learn more about comparative advantage as advanced by Ricardo. Basically, the idea is that free trade doesn’t do all the bad things people think it does, because free trade encourages countries to focus on their comparative advantage. This was something that Sowell also discussed, but I found him so rabidly pro-market and pro-free trade that all I could hear was his playing with numbers. The idea is actually quite an interesting one.
Let’s say workers in the US can make both shoes and televisions, as can workers in Australia. The US workers can make 1000 shoes in an hour and 50 televisions. The workers in Australia can make 500 shoes and 5 televisions in an hour. Ricardo says that even though the US workers can make more of both products than the Australian workers can they would be better off making just televisions and trading with Australia for shoes – as Australia has a comparative advantage in making shoes over Australia making televisions and if both countries do what they do ‘best’ then both will be better off. It doesn’t seem to make sense – but both Sowell and Harford show clearly that when countries play to their comparative advantages they are, in fact, better off.
In both books this also leads to the idea that I should give up my self imposed ban on Nike products – as despite the horrible, sweatshop conditions that Nike creates and profits from, those conditions are better for the workers in third world countries than the existing conditions outside of those workshops are. I’m going to have to read more about this.
Harford isn’t as smug as Sowell, but that has meant he has made me think about things much more than Sowell was ever likely to. For example, he talks about the nexus between environmental destruction and economic progress. This is something my friends and I talk about quite often over an Indian lamb curry. The problem is that we know that we consume a disproportionate share of the world’s resources. We know that the rest of the world can’t possibly share our lifestyle. So, then what? Should we actively stop the third world from developing? Are we ever likely to live simpler, more environmentally sustainable lives in the West? Well, it seems very unlikely. Where Sowell simply denies there is a problem, Harford proposes ways of addressing these issues which are not just saying ‘there’s no place like the market’ over and over again while clicking your heels together.
Central to these are ways of manipulating the ‘pure’ operation of the market so as to take into consideration market failures, such as ecological collapse. He proposes that this be done by putting a value on the production of CO2 or other pollutants and allowing the market to then adjust to that cost.
As he says at the end of the book – morally, development seems to be the only possible solution. I just wish I could believe that when confronted with a choice between a bigger television set and the end of the world that people would make the right choice. Given the number of SUVs on the streets (and despite the cost to run them) I have no reason for any such confidence.
I really need to read a leftwing guide to basic economics that deals with these issues in a comprehensive way.
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Read information about the authorTim Harford is a member of the Financial Times editorial board. His column, “The Undercover Economist”, which reveals the economic ideas behind everyday experiences, is published in the Financial Times and syndicated around the world. He is also the only economist in the world to run a problem page, “Dear Economist”, in which FT readers’ personal problems are answered tongue-in-cheek with the latest economic theory.
--from the author's website
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