Harford’s book The Undercover Economist is devoted to the exploring of fundamental reasons for rich economies being rich and poor economies being poor. Formaini smartly notices that Harford in his book “seems to want to explain to noneconomists some of the interesting theoretical conclusions that economists use to explain observed behavior and wealth pattern” (204). Within the book, which is rather easy for understanding, a set of major concepts from economic theory are deeply analyzed and interestingly and, sometimes, entertainingly explained by the author. In terms of this paper, a brief summary of Harford’s book will be provided.
Chapter two is focused on the discussing of the meaning of marketing for the growth and development of modern supermarkets. The author particularly interestingly describes the ways business attempting to make the segmentation among their customers in order to increase the revenues with the help of the strategy of price discrimination. It is noteworthy that the examples with supermarket are rather successfully chosen by the author as they helps to understand easily the role of marketing in today’s market. Harford also argues that the price discrimination, depending on the context, should be perceived either as a good or as a bad strategy.
In the third chapter, the markets characterized by perfectly competitive environment, are introduced for the readers. Harford associates competitive markets with so called “world of truth” emphasizing that in such markets prices tend to tell the most accurate truth regarding the opportunity costs of all firm’s choices (61). At the end of the chapter, it is suggested by the author that it is reasonable to consider the perfect competition as a specific moral norm; at the same time, the deviations from this moral norm are defined as “market failures” (Harford 78).
The fourth chapter of the book is devoted to the examining of the concept of market externalities. The author notices that along with such “market failures” as scarcity influence and missing information there is also the issue associated with the existence of side effects of the market players’ decisions on the bystanders. Those side effects are defined by the economists as the externalities (Harford 80). It is, though, smartly, noted that the major goal of an externality charge is associated not with the discouraging everybody from performing anything creating certain inconveniences for the others, but its goal is related to the stimulating for paying attention to these inconveniences. Crucial aim of the externality charges is the establishment of the balance between creating pleasure and trouble (Harford 86).
Chapter five of Harford’s book is focused on the examining of the functioning of the sphere of medical care and of market in general. The author emphasizes on a hugely important role of health insurance in modern medical care, noting that the bad quality of the institute of health insurance might be the reason for hugely expensive medical service and, as a result, for existing the variety of unprotected people. The healthcare system of the USA is analyzed within the chapter, and a set of propositions regarding its improvement are provided.
In the sixth and seventh chapters, Harford discusses the principles of the functioning of stock market, describes key reasons of the valuations of stocks, and explains main characteristics of the game theory, particularly the ones related to the auctions’ implementation. It has to be noticed that despite the authors’ attempt of providing the information about the stock market in rather easy-to-understand form, it is advisable for the readers to be acknowledged with certain fundamentals of this market’s functioning as the topic is rather difficult one.
In chapter eight, an insightful and thought-provoking discussion of the issue of being some nations poor and others wealthy is provided. While taking Cameroon as the example, Harford assumes that the principal reason of the poverty is the corruption within the government or “government banditry” (182). Nevertheless, the author finishes the book by discussing positive effects of globalization and analyzing sufficient experience of the China’s growth demonstrating that initially poor countries are able to grow and enhance.
Taking everything into account, Harford’s The Undercover Economist is the great book providing unique opportunities for the readers without substantial knowledge of economics to achieve better understanding of most significant concepts from economic theory.
Works Cited
Formaini, Robert. “The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor - and Why You Can Never Buy a Decent Used Car!” CATO Journal 26.1 (2006): 204-207. Web. 23 Apr. 2016. <http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2006/1/cj26n1-12.pdf>.
Harford, Tim. The Undercover Economist. New York: Oxford University Press, Inc., 2006.
