The Undercover Economist - Part 1, Who Pays for Your Coffee?

The Undercover Economist is a book by Tim Harford explaining to people the basic economic forces behind our everyday activities and actions. However, today is not the day that I shall be reviewing and giving an overview on the book as a whole. Instead, today, and in the coming few weeks I am going to look at each individual chapter and look at what it has to offer us as budding economists.

Who Pays For Your Coffee?
The first chapter of a book is, in my opinion, the most important. It is the one that first draws the reader in an pushes them to read on, further and deeper. 'Who Pays For Your Coffee?' does this perfectly, giving us a great insight into a the typical economists everyday thoughts and mindset and covers the basic economics needed to understand what this book is about.
        The first economic idea introduced to us is that of scarcity and how he who is in possession of a scarce resource is in power. This idea is portrayed to us by the use of an economist's favourite device, a model. The model used comes from a multimillionaire stockbroker turned economist, David Ricardo, and is one of farmers, land and landowners, which develops from the farmer having the scarce resource of his money, to a situation of the landowners owning the scarce resource, the land. This simple model explaining the economic principle of scarcity allows Harford, somewhat seamlessly, to move the reader on to a second important economic principle, margins, thus covering two major economic points quickly and written in a way so that even for non-economists it is understandable.
        Next Harford, reverts the topic back to coffee shops showing how these economic principles can be related to real life situations and the fact that Harford was able to do this so easily expresses to the reader a convenient truth, the power of economics. He quickly reveals to the reader how what they have just read about how scarcity and margins relate to coffee shops comes from a model from 1817, showing us how economics really is everywhere.
        

Freakonomics

Just read Freakonomics by Steven Levitt and Stephen Dubner. Wow. What a book, it really opens your mind about connections in life and how to not just assume the obvious.
        Levitt, an accomplished economist, graduating from both Harvard and MIT, and Dubner, a journalist, who has previously worked at places such as The New York Times Magazine, explore the riddles of everyday life that seem to be overlooked by the 'common man', such as 'which is more dangerous, a gun or a swimming pool?' , coming up with explanations that are completely logical, yet seem to leave you turning conventional wisdom on its head.
        My favourite explanation comes from almost the very start of the book, why did crime rates in Chicago suddenly drop at the start of the 1990s, when almost everyone was predicting them to go incompletely  the opposite direction? Well from Levitt and Dubner's impeccable logic, they explain to us how it was not the commonly thought idea of an unbelievably good police department, instead it was due to the fact that abortion had been made legal a couple of decades earlier, a conclusion neither myself or I suspect many other would reach.
        In conclusion, Freakonomics is a book not just for economists and economic students, but anyone wanting a good read to open their mind to abstract thinking and to the old economic principle of how incentives work.