The Undercover Economist summary

Every company’s goal, no matter how nice they seem, is to get you, the customer, to pay the maximum amount that you’re willing to pay for a given product, and they use several pricing strategies in order to accomplish this.

Obviously, they can’t just ask you what your maximum payment would be. They’d never get a straight answer. So, companies have to employ sneakier methods.

Companies might be cunning when it comes to chasing your money, but you are not totally at their mercy. There are ways to save your money, and it’s up to you to practice good consumer habits.

First, be aware of where you buy your stuff. Consider, for example, that companies often use a strategy called price-targeting, where they sell the same goods or services at varying prices, depending on the market or the location.

In the media and in the halls of university economics departments, there are many who constantly extol the genius and fairness of the free-market system, which they believe is the most efficient method of ensuring that everybody gets what they want and need at the right price.

But, the market has a major problem: it can easily break down when people are dealing with limited (or concealed) information. This is known as the information gap.

Does the market really provide the most efficient means of getting everybody what they want? That depends on what you want. If you value clean air or public transit, then you probably don’t feel you’ve gotten what you want by being stuck in smoggy traffic on your morning commute. So how can we account for this?

The free market theory suggests that if we all pursue our individual desires, then everybody will benefit. However, this fails to take into consideration the possible negative consequences of our actions.

One of the most heavily discussed economic questions is why some countries are poor and others manage to develop and thrive. Is it because of their access to resources? Because of the markets they choose to enter? Not quite; one of the strongest reasons for poverty is simply having the wrong kind of government.

Lack of democratic control and response to constituent demand is economically unhealthy. Often, an authoritarian leader’s primary goal is to seek personal fortune, even at the expense of the people. In these cases, money that comes into the country is invested neither in infrastructure nor the constituents, thus causing the economy to flounder.

There are many examples of once-poor countries that now are wealthy. Think, for example, of Taiwan and South Korea. History has shown that the key to their success lay in opening their borders to international trade.

The economic growth is because it’s far more efficient to engage in international trade than trying to stay self-sufficient.