A review of Naked Economics

Ok ok ok, I guess I should post something if I’m going to have a blog.  So here we go.  I figured I should start out with a review of Naked Economics: Undressing the Dismal Science, since it was what got me thinking of blogging.  Amazon has a bunch of reviews of this book.  But you should really read mine, cuz I am cool.

Naked Economics is an introduction to economics.  As the title suggests, it introduces economics in an down-to-earth and interesting way.  Instead, it’s a 250-page paperbook book that is clear, concise, and witty.  Charles Wheelan writes for The Economist.  Unlike long-winded, formula-ridden college textbooks, Naked Economics reads like a magazine you would find at the hair salon.

What does it cover?  From the table of contents: markets, incentives, the role of government, information, productivity and human capital, financial markets, organized interests, national economies, the Fed, trade and globalization, and development economics.  Ok, these topics may sound a bit stuffy.  But each topic is covered in an engaging way.  Wheelan uses lively yet relevant examples to explain all these topics.  Examples include how difficult it is to open a business in Mozambique, how a Chicago congressman found federal funds to build a parking garage for the Chicago Museum of Science & Industry, why we are ok with giving our money to a bank teller we’ve never met, why Bill Gates is richer than we are, how Wheelan’s condo association prevented the city of Chicago from building an El stop next door, and a civil case in India that finally got to court after both parties had died.

Wheelan also brings up some controversial examples.  Ethanol subsidies in the U.S., the protests against the World Trade Organization, the globalization of labor (including NAFTA), and may more.  One could conclude that this guy is biased (aside from being a capitalist), based on his commentary on these issues.  The funny thing is that on one page, you could think he’s really conservative, while on another page you could think he’s a socialist.  How could this be?  Because he’s just using these as examples to illustrate the topics he’s explaining.  He states that economics simply tells you how all these things are related.  Policy is often a matter of opinion and preference, rather than an economic truth.  For example, a classic economic tradeoff is between taxes and providing public services.  Economics won’t tell you how much you should tax and how much to fund services; it just tells you that if you consistently spend more than you collect, you’re in trouble.

So how did Naked Economics affect me?  First of all, I learned a bit about economics.  But more importantly, the concepts were very relevant to my own thoughts and values.   Some ideas were reinforced.  I’ve had to re-evaluate some others.  Let me list a few things that came to mind:

  • I thought that powerful interest groups were just an American phenomenon.  Who knew that they are predicted by economic theory?
  • Why I don’t consider myself a conservative, liberal, or moderate when it comes to economics anymore
  • How so many Americans have such strong feelings on topics (like taxes or government “intervention”) but they have no clue about economics
  • Maybe the U.S. isn’t as bad to live in as I once thought – just because other countries could be even worse off
  • The Fed won’t be able to prevent a recession this year.  Only the government can, but it probably won’t, because it would involve massive spending

The list goes on and on!  Juicy stuff, eh?  Well, I worded some of them to sound controversial.  But you’ll have to wait to read more – I will dedicate future blog entries to these topics.  Stay tuned!

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