Undercover Economist reviewed in The Economist
Why things cost what they cost
Nov 3rd 2005
From The Economist print edition
MOST economists are nine-to-fivers. Calculating rationalists during the working day, they are much like the rest of us when they are at home with their boots off. But Tim Harford, who works at the World Bank and writes a regular newspaper column, never seems to take off his boots at all. He sees the fingerprints of supply and demand everywhere he looks: at work and at play, sipping coffee, shopping for groceries, even playing poker with friends.
His new book, “The Undercover Economist”, is a playful guide to the economics of everyday life, and as such is something of an elder sibling to Steven Levitt’s wild child, the hugely successful “Freakonomics”, which came out earlier this year.
While Mr Levitt wanders freely among sumo wrestlers, game-show contestants and other inhabitants of the outer fringes of economics, Mr Harford takes care of the home turf—scarcity, competition, taxes and trade. He is happy to learn from his elders, which is all to the good. The best stuff is not always the latest stuff, after all. As far back as 1817, David Ricardo explained why the best farmland often makes money for the landlord, not the farmer. And his analysis serves perfectly well to explain why today’s coffee companies don’t make much money from a high-priced latte in Waterloo railway station.
That said, Mr Harford does not take himself too seriously. He is at his best illuminating the economics of small things. He rehearses some of the familiar arguments in favour of globalisation and mounts a spirited defence of competitive markets, on the grounds that they discover the “truth” about our wants, and how much it costs to meet them. (Taxes, which make some things more costly than they truly are, in order to make other things cheaper, are a kind of “lie”, he says, though often a white one.) He also makes some impish forays into charged issues, such as environmentalism, which he thinks too important to be left to the moralists. But in general, as befits a covert operative, his tone is quizzical and low-key, rather than bombastic and judgmental.
For anyone schooled in blackboard economics, “The Undercover Economist” succeeds in taking the chalkdust out of the subject. But does it also serve the reader who has no economics at all? The difficulty is to avoid talking over readers’ heads, without talking down to them either. It is a trick Mr Harford carries off well, for the most part, though he can sometimes seem almost too anxious to entertain. The best detective stories are usually told straight.