Tim Harford's "Undercover Economist" borrow a copy now.

Overview of "Undercover Economist"

A professional economist by trade, Tim Harford places the principle issues of economics before the lay reader. As a lay reader I will present the strengths and minor weaknesses of Harford's reasoning in this missive.

There is a lot of thorough economic research that has taken place in recent decades. He old standard econimcs is now supplemented by a new economics where individual consumers and government procurers are treated in a new light. Governments, corporations, and citizens in a free market economy should pay attention to the discovered "undercover" assumptions that now can be seen in everyday transactions.

 

 

 

 

 

 

 

 

Main Strengths of the new economics

When Prof. Akerlof published a famous paper about assymetric information he did so with a common place example everyone in North America could relate to. Basically he stated that the buyer when faced with a purchase to buy a used car from a used car seller, it is more obvious to us now but the seller has a lot of information the buyer is not attuned with. There can be lemons on his used car lot and there can be legitimately driveable cars on his lot. The actual worth or value of each car is not shared by both parties. Akerlof's Principle is applicable to countless situations. Yes, economics is about buying and selling. How free are the free capital markets?

The first chapter in "Undercover Economist" is simply called...... Who pays for your coffee? Harford uses the ordinary purchase of a cup of coffee to aid in presenting a summary of ordinary market influences in product pricing. The main idea is, of course, the question of scarcity. If there is less coffee available the cost of a cup of coffee is higher. Starbucks also plays the scarcity advantage by not competing with lower priced coffee availabvility but aims to sell their coffee in urban locations very close to pedestrian traffic and further from mom and pop stores who may sell for less. Advantageous locations for commerce clearly means a higher price to the customer. The landlord or property owner who charges rent will increase rents to also adnantage his assets.

Harford must have been planning a user friendly book like this one for a long time. Having worked for some major players, including the World Bank, be defintely covers a great deal of the questions we deal with today. What about the issue of immigration? Rightly so, he is on the side of long term economic results and he states that immigration is not an instrument to steal jobs from the country's present citizens. If a worker is at risk and perhaps does lose a present job because of an immigrant taking over, then there must be an adjustment employment opportunity for this worker. A free market economy is not one that is in stasis. The younger working people of today will have many different employers compared to our fathers and fore fathers who may have carried out a single employment theit whole life.

Another issue of today is the US health care situation. With private health care insurance it is in this case that the insurer may not have "good" or adequate information of a new citizen to be insured. In fact many younger US citizens may forego paying into a health insurance policy until they think they will really need one. The health insurer, therefore, may be insuring citizens that may be more at risk healthwise. The assymetric information therefore is that the health insurance provider does not know (as yet) the true risks of a newly signed up worker.

As Canadians and Europeans are aware, the all-inclusive or public health care is the established direction to take. With only a single billing to the a government for most medical procedures, it is much more efficient than the US health care system. Harforth, proposes a compromise for US health care. He beieves the US government should be in charge of larger or "catastrophic" charges to one's medical care. In other words, medical fees of up to $1000 who be covered by the individual. Public health coverage would do the rest. This idea is somewhat based on the Singapore system but I do not think this could be a solution for the US. At least Harford is addressing this important concern.

As I was saying: beg, borrow, steal or buy(?) the "Undercover Economist". Many more contemporary socio-economic and political issues are before us. What are the pluses and minusus of Globalization? Why are the poor countries poor? How did China become rich so quickly? Stay tuned.

Yes, I will try to bolg more about economic and government policy questions.













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