The Undercover Economist

Content Warning: This section includes descriptions of the famine of the Great Leap Forward.

Chapter 9 begins with the example of Bruges, a town that was known for its prosperous trading from the ninth century onward. However, in the 15th century, the river on which Bruges sits “began to silt up” (216). No trading ships could reach Bruges, and the trading moved up to Antwerp instead. Bruges quickly became a “backwater.” Meanwhile, Antwerp became the “greatest economic power in Western Europe” and remains powerful to this day (216). Through this example, Harford makes it clear that wealth requires development; cities that stagnate, like Bruges, cannot remain an economic force.

Harford then introduces the economic concept of “comparative advantage,” which is the principle that people, countries, and institutions should not do what they are better at than others but what they are best at as a whole. The United States, for example, curtails trading with China in order to help American manufacturers since China is able to make goods like TVs and furniture more cheaply. However, Harford believes that America should not use trade barriers to artificially alter the economy. Without trade barriers, China and America can trade with one another and both be better off.