Ricardo Rules

When I visited Britland this past winter break, one of my dearest friends (an adorable blonde-hair blue-eye Irish guy) told me to check this ‘The Undercover Economist’ book (by Tim Harford) out after I recommended him to start reading ‘Freakonomics’ (by Steven Levitt). And then our heated discussions on Economics-related topics began (yep, between an Economics-inept like me and a PhD candidate in Economics at LSE like him) but that’s a totally different story.

Now about this Harford’s book, I didn’t have a chance to check it out until last week really. Well, the thing is I (eventually) ordered a copy from Amazon website a month ago but it didn’t turn up on my doorstep until 3 weeks later. Fine I blame my stinginess since I was the one who click that ‘free supersaver shipping’ button for it to be sent along with 4 other books in one bunch, just to save 5 bucks – less than 3 quids. What a great decision, ey?

Anyhow, I only flicked through the first two chapters thus far (due to my time constraints and to be honest I shouldn’t even look at anything else but my thesis-related readings right now). And gosh, I love the book!! His style of writing is smashing and he somehow managed to change some of my perspectives towards Economics a great deal.

Here is what I’ve learned in 2 chapters. I’ve learned that David Ricardo’s model rocks big time when I saw how it actually could excellently apply and explain all those real life situations from high apartment rents in a town like Ithaca to the power of labour unions to how immigrants' skills affect domestic wage levels to sustaining mafia businesses to financial services and estate agents and to movie theatre popcorns. Ok, yes common sense. Also, I've been well aware that the model is used ubiquitously and is respected almost like a 'law,' as well as there are always outside factors that should be plugged in and considered to make the model pragmatic. But what I meant was the author made it so simple that readers could understand the basics of the model and further apply in their own situations even if they have no clue what Economics is all about, which I found pretty impressive (well, and I always reckoned that those ice-age models couldn't say much about what's happening in our ipod-age today... am wrong!!).

Ah well, yeah, I also just realized that I’ve been more or less ripped off from coffee vendors, restaurants, and supermarkets my whole life although I had already knew some of their pricing strategies before I read the book. I’m telling you now: it’s far more complicated than what you reckoned and a hidden agenda is truly applied here (esp. that discouraging tactic used to stop consumers picking cheaper products, eh yes.). And apparently, these pricing strategies could as well explain fancy names in Starbucks, an unavailability of cheaper drugs in developing countries ('leak' issue), organic food, and DVD regions.

Ok, I go read the third chapter.


Oh another thing, now I know how Thai Airways can charge that much for its NYC-BKK route (the unique direct flight flying over the north pole one). It’s all about Ricardo’s scarcity model and the difference between a plain cup of cappuccino and a cup of white-chocolate mocha with whipped cream on top.

(Hint: that executive economy class is just a plain cup of cappuccino filled with low-to-no-extra-cost frills to make passengers feel super special and become price-insensitive.)