Each of the ten chapters in The Undercover Economist presents concrete real-world examples and uses simple economic principles to explain some of underlying mechanics of our often baffling world.
1. Who Pays for Your Coffee?: Introducing the concepts of scarcity and bargaining power, we learn that the premium price we pay for coffee on our morning commute to work has nothing to do with the quality of the coffee and everything to do with location, location, location
2. What Supermarkets Don't Want You to Know: In a discussion on price-targeting policies, we see that the difference between Whole Foods Market and Safeway has very little to do with the relative price of goods and a lot to do with who the shoppers are.
3. Perfect Markets and the ‘World of Truth’: What does truth mean in economic terms and how does it lead to perfect market efficiency? We see where efficiency is good, where it may fall short, and why it’s not always fair.
4. Crosstown Traffic: Introducing 'externalities' and how they help deal with some of the major blights on our society: pollution, congestion, and fights with neighbours.
5. The Inside Story: George Akerlof's revolutionary 1970 paper reveals how inside information dramatically affects markets and why this means it’s virtually impossible to buy a decent second hand car.
6. Rational Insanity: A paradox: economists study rational behaviour, but the more rational the behaviour of stock market investors, the more erratic the behaviour of the stock market becomes. We learn how a market full of unexploited opportunities offers big rewards to any investor willing to research them and how a ‘rational’ investment in Grolsch beer keeps the market nearly-random.
7. The Men Who Knew the Value of Nothing: A brief look at game theory reveals how auctioning radio spectrum air space is like playing poker.
8. Why Poor Countries Are Poor Self interest and ambition are often the cause of wastefulness in developing countries but a visit to the world’s worst library in Cameroon shows that the real tragedy occurs when there is no law, press or democratic opposition to restrain the actions of powerful people.
9. Beer, Chips and Globalisation A peek into the histories of Antwerp and Bruges suggest that if you want to be rich, it is a good idea to forge links with the rest of the world. A discussion on globalising trends illustrates how foreign investment is good for economic growth and why comparative advantage is controversial when it comes to trading with the Chinese.
10. How China Grew Rich: How did China grow from a mere minnow in the global trading scene to the fourth largest exporter in the world in less than 20 years? Incentives, education, investment and just a little bit of luck.