The undercover economist

It's sometimes hard to understand why things cost what they do - paying pounds for a coffee which costs pence to make - and why their is such a gap in wealth between different countries. In The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! Tim Harford gives explanations for such puzzles.

The book starts with a look a how scarcity gives value to a commodity, and goes on to describe how businesses increase their profit by charging different prices to different people. Harford explains how problems such as pollution - externalities - can be dealt with by a free market mechanism, and discusses the different ways people in different countries have of paying for their health care. There's also a chapter on the varying success countries have had in auctioning the radio wave spectrum to mobile phone companies. The last few chapters look at the gap between rich and poor countries, and at how it can be bridged.

At the start of the book it did look a bit like it was just going over pretty basic economic concepts, but it does get to deal with more interesting topics. I think it certainly worth reading, especially as it demonstrates to the reader why economists are such fans of free markets.