Thursday, December 21, 2006

Undercover Economist by Tim Harford

The Undercover Economist

I finished reading "The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! by Tim Harford". A brilliant book, excellently written, lucidly explained, and it is simply unputdownable (if that indeed is a word).
If you have read Freakonomics : A Rogue Economist Explores the Hidden Side of Everything, make sure to read this. If you haven't, read this book first. The book takes simple everyday things, like buying coffee, at a railway station, or just outside it, or from Starbucks, or selling telecom bandwidth, or buying vegetables from your local store, and explains the economic concepts that go behind many decisions made here, by the customer as well as the seller. Lots of basic and not so basic microeconomic concepts are introduced and blended into everyday examples from life: price discrimination, demand and supply, revealed preferences, externalities, game theory, marginal pricing, and many more. While the first chapter is titled "Who Pays for your coffee", it takes a few chapters before the mechanics and economics are fully explained.
For my money, a very useful theory that while applied to Cameroon to explain why it is so poor, and its rulers corrupt, could just as easily be applied to India, its politicians, and its endemic corruption. Without going into too much detail, or any detail at all for that matter, the theories of Mancur Olson are invoked many times in this context.
The last chapter of the book is about China and how it grew rich. Towards the end Tim Harford tends to get a bit moralistic and preachy, but given the overall excellence of the book, it can be ignored and excused.

© 2006, Abhinav Agarwal. All rights reserved. Reposted to this blog Nov 2011