Book Review: The Undercover Economist

For someone whose previous understanding of economics stretched about as far as The Law of Supply and Demand and who couldn't think of a more boring subject I was hooked in the first few pages. This book isn't a college course rolled into a paper back, instead it is an engaging read that explains some of the how's and why's of the world. It certainly opened my eyes to some of the reasoning and rationale behind decisions that lead people to riches and whole countries to poverty.

Each of the ten chapters of the book explains a different concept but in such an engaging way that you don't feel like you are having to learn much - it all seems so obvious when it is pointed out to you.

1. Who Pays for Your Coffee? Where we learn that it costs forty cents to make a one dollar cup of drip coffee and costs less than a dollar for a small latte, which sells for $2.55. So somebody is making a lot of money. Who?


2. What Supermarkets Don't Want You to Know Safeway charges more for Tropicana orange juice and for Poland Spring sparkling mineral water than Wholefoods does. For Wholefoods customer these things are the basics so are priced competitively, while Safeway customers might consider tap water and concentrated orange juice as perfectly acceptable alternatives.


3. Perfect Markets and the 'World of Truth' Nobel Prize winner Kenneth Arrow proved that not only are all perfect markets efficient, all efficient outcomes can be achieved using a competitive market, by adjusting the starting position. Why was his insight so important?


4. Crosstown Traffic Introducing 'externalities' and an interesting comparison on the model for congestion charging and how to encourage University students to drink more, or less, as the case may be.


5. The Inside Story George Akerlof's revolutionary paper of 1970 explains how inside information affects markets and why this means that you can't buy a decent second hand car.


6. Rational Insanity We learn of the 'Grolsch' method of picking shares based around the fact that at parties hosted in the City of London, Grolsch beer was being served at all of them, and so buying Grolsch shares was a good investment, or not.


7. The Men Who Knew the Value of Nothing Would you like to sell a £300,000 house for £3,000? Or would you prefer to sell a £300,000 house for £3,000,000,000? Both events happened!


8. Why Poor Countries Are Poor Read about the world's worst library in Cameroon and the economic principles applied to keep the wealth and power firmly in the grip of a few.


9. Beer, Chips and Globalisation Q: What is globalisation and why does it matter? A: Trade of goods and services; migration of people; the exchange of technical knowledge; 'foreign direct investment'; cross-border investment in financial assets. And it affects all of us.


10. How China Grew Rich Just how did Shanghai and other Chinese cities transform into modern metropolises so rapidly? With new, towering skyscrapers and construction at every corner; the Chinese economic powerhouse continues to grow. It all comes down to economic fundamentals. Exposed by the Undercover Economist.

"In the end, economics is about people - something that economists have done a very bad job at explaining. And economic growth is about a better life for individuals - more choice, less fear, less toil and hardship."