Max S. Dunn

Book: The Undercover Economist

Posted by: Max Dunn on July 7, 2009 08:04:52

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

When I get a book from the library, I don't underline memorable sentences like I usually do; instead, I attach little yellow stickies. By counting the stickies, I can see how much of the book I want to remember. So on the little yellow sticky scale, this book rates a 14 - pretty good!

One thing I liked about this booked is that it covered common economic principles in a straightforward way that could be understood by anyone. Harford writes, "Economist tech to call this 'own-price elasticity.' Personally, I think 'price sensitivity' is a bit more descriptive." Here are some other interesting points:

• Even if markets are not perfect, the can convey tremendously complex information. (Page 65)
• The nonmarket system suffers suffers from a serious problem: the truth about values, costs and benefits has disappeared. (Page 69)
• Why are taxes inefficient? Because they destroy the information carried by prices. (Page 71)
• Complete, free, and competitive markets are just a bizarre economists' fantasy. However, this fantasy helps us understand why economic problems arise and helps us to move in the right direction to patch them up. (Paraphrased, page 78)
• We should worry about costs and benefits missing from the market transaction. The trick is to mimic perfect markets by getting (consumers) to pay all of the costs of their actions. ('Externality costs', paraphrased, page 87)
• Economists care about the environment but dream of a world where it is no longer an issue that invites moral posturing, but is properly integrated into markets and the world of truth, which would provide both the information and the incentives necessary to persuade ordinary people to behave in an environmentally responsible way. (Page 102)
• Environmental regulations are not a major cost; labor is. The most pollution-intensive American firms spend only 2 percent of their revenues on dealing with pollution. (Page 215)
• The transport costs of moving a CD player from Osaka harbor to the port of Los Angeles are less than the costs of someone driving to Best Buy and back home with the CD player. (Page 219)
• Taxes on transportation fuels are consistent with free trade and much better for the environment than trade restrictions. The worst environmental problems today are caused by poverty not wealth. (Page 221)
• The environmentalist movement should demand free trade immediately. (Page 221)
• Sweatshops are the symptom, not the cause, of shocking global poverty. Workers go there voluntarily, which means that their alternatives are worse. (Page 222)