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The International Writers Magazine: Review - From Our Archives

Oxford University Press, 2006, 276 pp. ISBN: 0-19-518977-9
Charlie Dickinson review

HE UNDERCOVER ECONOMIST: Exposing Why the Rich are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! is an all-too-rare introduction to the arcana of economics written for the lay person and enlivened with engaging anecdotes from everyday life.

If you liked FREAKONOMICS (Steven D. Levitt & Stephen J. Dubner), Tim Harford's explorations of why poor countries are poor, how used cookies to charge people different prices for the identical book, and why only landlords are getting rich off Starbucks--among other topics--makes for an absorbing read.

As an economist, Mr. Harford brings an especially appropriate background to this book: He writes the "Dear Economist" column for the FINANCIAL TIMES MAGAZINE, he works at the World Bank in Washington, DC, and he's been an economist for Shell Oil and also taught economics at Oxford University. Harford doesn't quite have Levitt & Dubner's breezy writing style, but that misgiving aside, Harford makes up for it by not shying away from bold (and mostly successful) efforts to acquaint the lay reader with such challenging economic concepts as Ricardo's Law of Rents, "asymmetric information," and game theory applied to auctions. One reads THE UNDERCOVER ECONOMIST knowing Harford has not sacrificed intellectual rigor for "dumbed-down" explanation.

Indeed, one of the strengths of Harford's economic forays is that he gives the lie to many "dumbed-down" assertions about modern economics, too easily accepted as true in our age of rapid change. One common, unproven assertion about globalization is that it damages the environment by "outsourcing" (a loaded verb, of course) industry from nations with strict environmental regulation to nations with lax or no regulation. Anti-globalism activists say this all the time. Harford not only gives evidence this assertion is false, he goes further to ask one of the book's most heart-felt questions:

"The question is whether any environmental catastrophe, even severe climate change, could possible inflict the same terrible human cost as keeping three or four billion people in poverty. To ask that question is to answer it."

Harford, like most economists, champions fair and open trade as giving the poor of the world chances to advance economically. But he also knows economic competition doesn't solve all problems of the world's poor. He recounts a visit to one of the world's poorest countries: Cameroon. Why is that country seemingly condemned to poverty? In a word, kleptocracy--corruption from the top down. The same consequence goes for North Korea and Myanmar, among other long-suffering dictatorships.

One of THE UNDERCOVER ECONOMIST's chapters, "The Inside Story," is an especially insightful analysis of the health insurance crisis in the United States. No country spends as much on medical care, yet for many Americans the system of private insurance is prohibitively expensive. Is government insurance, such as the National Health Service in the UK, the answer? Well, socialized medicine has its own rationing problems, too, and little patient choice of treatment. Among the various health care approaches Harford surveyed, the one he liked best was Singapore's. Compulsory coverage for everyone, but as large deductible, catastrophe insurance (not first dollar, "sniffle" coverage). The power of patient choice is kept and the government pays for those poor and aged who can't fund their mandatory medical savings accounts.

THE UNDERCOVER ECONOMIST exposes much more. Why the mania had to end. How retailers get you as customer to reveal your price insensitivity (that is, turkeys voting for Thanksgiving). Why buying a used car is fraught with risk. The list goes on. Read Tim Harford's entertaining THE UNDERCOVER ECONOMIST for insights well worth the price of the book.

© Charlie Dickinson September 5th 2006
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