Summary of The Undercover Economist

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The Undercover Economist book summary
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Rating

9

Qualities

  • Innovative
  • Applicable

Recommendation

In this brief, cogent book, author Tim Harford provides an accessible, entertaining introduction to economic thinking. This skillfully written report belongs on the shelf of anyone with an interest in economic matters - and as the author makes clear, everyone has an interest in economic matters. He deftly punctures the balloons of those who advocate fair trade coffee, protectionism, government-underwritten medical care and other such policies. These tactics may seem humane on the surface, but he contends that they often merely advance the selfish goals of the few at the expense of the many. If the book has a weakness, it is Harford’s tendency to take certain points of political opinion for granted and to state them as moral choices without qualification or proof. For instance, he puts forth the admirable - though some would say questionable - notion that governments are obliged to cushion the shock of unemployment. That, however, is a quibble. getAbstract highly recommends this concise, comprehensive book.

About the Author

Tim Harford writes the "Dear Economist" and "Undercover Economist" columns in the Financial Times magazine. He is also the economics editorial writer at the Financial Times.

 

Summary

Morning Coffee and Scarcity

Commuters pay a stiff premium to buy morning cups of coffee from the train station kiosk. The reason is scarcity. Usually only one vendor has a kiosk in the station, although the extra price commuters pay probably does not even go to the vendor. The one who really controls this scarce resource is the owner of the real estate where the kiosk sits. This is a pattern.

In the nineteenth century, economist David Ricardo analyzed the role of scarcity in pricing. He offered the example of a region rich in fertile land but sparsely settled. Land owners could not charge high rents, because land was abundant and farmers were few. However, in this situation, one would expect many more farmers to move in, searching for cheap land. Eventually, so many farmers would arrive that land would become a scarce resource. Then, landlords could charge higher rents. More interestingly, farmers would probably begin to plow nearby marginal, less desirable, less fertile land, bearing cheaper rents. As this happened, rents on the marginal land would rise, particularly as new farmers began to compete for it. However, in this instance, rents on the prime meadowland would...


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