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Blink 3 of 8 - The 5 AM Club
by Robin Sharma
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The Undercover Economist summary
Tim Harford
The economics behind everyday decisions
16 mins
Brief summary
The Undercover Economist by Tim Harford is an engaging exploration of economics that reveals hidden forces that shape our lives. It offers insights into how pricing, incentives, and regulations affect everyday decisions and provides a fresh perspective on complex economic concepts.
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The Undercover Economist
Summary of 7 key ideas
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Key idea 1 of 7
The economy has a huge impact on the simple choices you make every day.
Sipping your morning cappuccino, do you ever stop to think how that cappuccino got there? Probably not. Yet, perhaps you should, as it reveals crucial insights about our economy, and thus our lives.
Even something as simple as a cappuccino is the result of the economy’s ability to bring many professions together.
Imagine trying to make that cappuccino all by yourself. Where would you even begin? You’d need to first grow the coffee beans, harvest, dry and blend them. You’d also need to raise a cow, gather its milk, and then fashion your coffee mug out of clay. Finally, in a spark of engineering genius, you’d have to build an espresso machine.
Could you tackle all this by yourself? Not likely. You rely on an entire economic system, especially the division of labor across the world, to produce your favorite morning beverage.
Maybe you decide to buy your morning coffee, instead. Even the price that you pay is tied to an entire economic system.
Generally, the more scarce a resource is, the more it will cost, but this isn’t always true. For example, you might think that if every coffee shop uses the same resource, then every cup of coffee would be priced the same. But they aren’t.
In the UK, a chain of train station coffeehouses called ATM has far higher prices than its competitors. Is it because they sell a rare kind of coffee? No. ATM can charge high prices because the space they occupy, i.e., railway stations, is extremely scarce.
Lots of people pass by during their morning commute, and there is consequently a high demand for ATM’s space. Without competitors who occupy the same space, this demand for coffee pushes the price up.
It is thus the intersection of convenience for customers and the high rent that makes ATM’s coffee more expensive.
It is these sorts of insights that allow you to think like an economist, and thus better understand the world around you.
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What is The Undercover Economist about?
The Undercover Economist explains how economics defines our lives. From the price of a cappuccino to the amount of smog in the air, everything is tied to economics. The book shows us how economists understand the world and how we can benefit from a better understanding of economic systems.
Best quote from The Undercover Economist
Any well-run business would seek to charge each customer the maximum price hed be willing to pay.
—Tim Harford
Who should read The Undercover Economist?
- Students of economics
- Anyone who wants to reduce their daily shopping bills
- Anyone interested in how economics affects our everyday lives
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