In the Agora: Review of <i>The Undercover Economist</i>

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November 18, 2005

Review of The Undercover Economist

If you read only one pop economics book this year, The Undercover Economist should be it. Harford, a columnist for the Financial Times among other distinctions, has written a book that could almost serve as a textbook for an Economics 101 course. But it's emphatically not dry or dull. Instead, what Harford has done is convey the excitement, the power, and the often counter-intuitive results of economic thought. In so doing, he has written more or less the economic equivalent to The Selfish Gene.

Many recent books (notably Freakonomics) have dealt with the more exciting realms of economic research, such as the application of certain economic models to what most people would consider non-economic behavior. And far more books have talked about "economics" in the context of even trendier ideas like globalization (think The World is Flat or even No Logo). Such books, however, are reflections of marginal (in the case of the former) or unsophisticated (in the case of the latter) economic schools of thought.

Harford presents the orthodoxy in all its glory, and reminds readers that economists really do see the world in a different--and fascinating--way. He explains simple, but often misunderstood, concepts like adverse selection (that is, why health insurance costs too much), as well as even simpler, but far more consequential, economic models, such as David Ricardo's explanation of why landowners, and not farmers, make money from rising crop prices. Along the way, he explains why the prices at Safeway and Whole Foods are about the same--and why the prices for items on the top shelf are higher than prices for the same goods on the bottom shelf.

Granted, the book has its flaws, principally its (market-driven) lack of any equations or graphs and, more important, its refusal to take up any serious questions of macroeconomics. If you want to understand how recessions occur or how federal spending affects the world and national economy, then you're out of luck. But in focusing tightly on basic microeconomic principles--the foundation of the most insightful parts of economics--Harford succeeds in keeping the book accessible and useful.

Posted by Paul Musgrave at November 18, 2005 08:45 PM

Comments

Paul, how would you rate Steven Landsburg's review of TUE? Specifically, his veiled judgment that one would do just as well if not better to read his "The Armchair Economist," David Friedman's "Hidden Order," and William Easterly's "The Elusive Quest for Growth"?

Or perhaps you'd have other suggestions for the dilettante economist?

Posted by: Zach Wendling at November 19, 2005 08:55 AM | permalink

I would say, first, that Easterly and Harford aren't writing for the same market: Harford is essentially doing econ as pop sci, and Easterly is writing policy-relevant stuff. I haven't read "Hidden Order," so I can't compare. I haven't read "The Armchair Economist," either--but I started to, and put it down. I don't like Landsburg's style.

Posted by: Paul at November 19, 2005 09:38 AM | permalink

I find this sentence in Landsburg perplexing: "For example, [Harford] says that sellers offer discounts when customers are very price-sensitive. Actually, they offer discounts when some customers are more price-sensitive than others. If all customers were equally price-sensitive, there would be no reason to favor some over others with a lower price." In fact, Harford is careful to explain that only a few customers have to display price sensitivity for these phenomena to emerge. I think Landsburg's being unfair here. (On the Ostrom example, possibly less so--to be frank, I skipped most of the Nepal example. Dull.)

Posted by: Paul at November 19, 2005 09:41 AM | permalink

November 18, 2005

Review of The Undercover Economist

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