It is time for ‘The Undercover Economist’

The discovery of Neptune was pathbreaking in astronomy. It was the first planet to be discovered in theory before it was actually found. As Tom Standage recounts in The Neptune File, John Couch Adams and Urbain Le Verrier took unusual anomalies in the orbit of Uranus and concluded that these were caused by a planet. They then went on to predict the planet’s location. Telescopes were trained on the location and the rest is history.

The idea that theory can be so practical is something held dear by most economists. In his latest book, Tim Harford (a regular columnist for the FT and Slate), likens himself to an undercover detective, seeing things in others’ behaviour that other people cannot. Hence, the title The Undercover Economist: Exposing Why the Rich are Rich and the Poor are Poor — and Why you can Never buy a Descent Used Car!

This book shows nicely how economists view the world. How they sort the forest for the trees and how they find the relevant trees in the forest. For instance, Harford describes where the money paid to a successful Starbucks really goes. Not to the coffee growers, not to the coffee machine makers and not to Starbucks. Instead, it goes to the owners of the scarce resource: the property the Starbucks sits on. There is your Neptune.

This book has teaches me little but it has taught me how to teach. For the brief period of time I between when I read this book before my students will inevitably get their hands on it, I have been able to describe economic concepts more precisely and more usefully. And for that brief period of time I could appropriate the credit. However, that is not the scarce resource. People like Tim Harford are. They can turn the complex into the simple, the unconvincing into the convincing and put it all in the printed page — a much more efficient way of getting market reach than through lectures.

For anyone interested in economics — even on the margin — this is a terrific read. It will change they way you look at the world.

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