Undercover Economist

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Text of Undercover Economist

How economists view the world? Economist can tell you What, How and why? Book equipped you with investigation tools to detect and make you an undercover economist.

Introduction

1. Who pays for your coffee?

Why things are expensive? Pop corn at theatre Apartments at good locations Coffee at railway platforms

Scarcity Natural Artificial through legislation, regulation etc.

Location of coffee bar. Example: Starbucks

1. Who Pays for your coffee?

Scarcity power shifts from one group to other. Agricultural land Meadow land Scrub land

Marginal land is of central importance

2. What Supermarket dont want you to know.

Marketing in supermarkets Costa Coffees Price-Targeting Are you willing to pay more? Its time for a reality check How good or bad is Price-targeting?

What Supermarkets Dont Want You to Know

Are you willing to pay more? no frills

no frillsMix them togetherI feel special

Use different powder I feel very sp Make it hugeI feel greedy

What Supermarkets Dont Want You to Know

3. Perfect markets and the World of Truth

Prices are optional, which means they reveal information Perfect markets: The truth, the whole truth, and nothing but the truth Life without markets The signalling function of prices Can we handle the truth? Can we enlist markets to help with fairness?

Perfect Markets and the World of Truth

4. Cross-town traffic.

Are we paying the tax for the right reasons? Perfect market and conscience Externality charges and moral being of society How much your life is worth? Is environment important? Being POSITIVE

Cross-town Traffic

5. The inside story.

Peach or Lemon? George Akerloff Why it is not possible to find a good second hand car One negotiator knows too much and the other too little Why banks have impressive buildings? Making lemonade

The inside story

6. Rational Insanity.

Choose where to invest based on rationality Stock market and Interest rate relationship

A paradox: More rational erratic behavior Stock Market Random walk Grolsh beer keeps market nearly - random

6. Rational Insanity

7. The men who knew the value of nothing.

Evolution of Game theory The Vickrey auction Why use an auction? Auction is like Von Neumans game of poker

The Men Who Knew the Value of Nothing

8. Why poor countries are poor?

The missing jigsaw piece Where are the increasing returns? A theory of government banditry Bandits, bandits everywhere Institutions matter The plot thickensincentives and development in Nepal Is there a chance for development? - Kleptocracy at the top stunts the growth of poor countries

Why Poor Countries are Poor e.g. Cameroon

9. Beer, Fries and globalization

Starts with 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.

Two types of economy: 1. Self sufficiency and export oriented. 2. Which is better closed or a liberal economy? Globalization is green: 1. Race to the bottom, pollution moves from rich to the poor. 2. Physically moving goods causes pollution. 3. Trade promotes economic growth but also hurts the economy.

Beer, fries and globalization

10. How China grew rich?

Good education system One child policy- so women can work More middle aged people with good settings Maos focus on agriculture and special agricultural techniques Resulted in a large scale famine Deng Xiaoping in 1978 Foreign investments and SEZs like Shenzen Proximity to Hong Kong and Taiwan

How China grew Rich?

Demand Supply interactions Market Failures Externalities Globalization International Trade Comparative advantage

What we learnt?

Thank You