Economics 101; for the Savvy Consumer

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Byline: William H. Peterson, SPECIAL TO THE WASHINGTON TIMES

Oscar Wilde once defined a cynic as "someone who knows the price of everything and the value of nothing." In "The Undercover Economist," Tim Harford notes that the line is now commonly applied to economists. An ex-economics tutor at Oxford University, Mr. Harford should know. He writes the "Dear Economist" column for the Financial Times Magazine and also works for the World Bank in Washington as a lead writer on economics.

Mr. Harford's fetching book is part a field guide to economics in action and part an expose of Economics 101 principles lurking beneath the action. As he says in the introduction, he is out to convert his reader into a more savvy consumer, no matter how hard advertising puffs, and into a more savvy voter able to dig out the truth behind the tall stories that politicians may tell.

The savvy consumer sees, for example, the wisdom of comparison shopping. He spots the role of price elasticity in supply and demand in the way that, say, Disney World discounts admission tickets by more than half to Orlando locals than that charged to mostly out-of-state tourists. The Disney people know locals are more likely to come regularly at a reduced price while the tourists are relatively price-insensitive and will likely still come at least once, even if the price is a bit steep.

And since economics early on was known as "political economy," Mr. Harford's insight into politics is also keen. He tells the story of a Soviet official visiting Britain not so long ago who was trying to comprehend the capitalistic system of the West, asking "Tell me: Who is in charge of the supply of bread for the population of London?" The question strikes the author as comical, and the answer - "nobody" - strikes him as dizzying. It must have been especially so to that Soviet official.

Mr. Harford ponders why countries are rich or poor. And if poor why sweatshops as stepping-stones may be preferable to nothing at all, or to their governments banning them, or for Westerners to fight poverty in developing countries by boycotting their athletic shoes or clothes. A few decades ago South Korea was in a fix of sweatshops throughout the land. But today South Korea is a world technology leader and has just built a billion-dollar Hyundai auto assembly plant in Alabama. …