EconoPower: How a New Generation of Economists is Transforming the World [Hardcover]

Mark Skousen (Author), Art Laffer (Foreword)

Book Description

ISBN-10: 0470138076 | ISBN-13: 978-0470138076 | Publication Date: March 21, 2008 | Edition: 1

EconoPower will provide you with a firm understanding of the influence of modern economics and how it can be used to improve the world we live in. It offers practical advice on numerous personal financial matters—earning, saving, investing, and retiring—based on the breakthrough contributions of behavioral economists. And it looks at how economists are working successfully on issues such as public education, crime, and global warming. EconoPower also examines how a new economic philosophy may dominate the new millennium.

Editorial Reviews

Review

"!offers practical advice on personal finance matters, earning, saving, investing and retiring, based on the breakthrough contributions of behavioural economics." Pensions World July 2008 "!you can pick up nuggets of insight into behavioural economics, game theory, the flat tax debate, auction theory (particularly good)!" Financial World June 2008 "...check out Mark Skousena s Econopower...The book shows how economics has come to influence every aspect of our life" (Sunday Times Ireland Edition, December 18th 2008)

From the Inside Flap

In 2006, the Nobel Peace Prize was for the first time awarded to an economist. Once ridiculed as the "dismal" science, economics has now emerged as the "imperial" science that influences every aspect of daily life, from politics to education to religion to Wall Street. Like an invading army, the science of Adam Smith is overrunning the whole of social science—law, finance, politics, history, sociology, environmentalism, religion, and even sports. In EconoPower, professional economist Mark Skousen shows how this is happening—and how economists are solving the world's problems on both the individual and national level.

EconoPower offers practical advice on personal financial matters—earning, saving, investing, and retiring—based on the breakthrough contributions of behavioral economists. It reveals exciting discoveries by economists to solve domestic problems, such as road congestion, health care, public education, crime, and other issues high on the public's list. And it looks at how economists are working successfully on international issues from global warming to religious wars. Looking toward the future, the book also reveals what kind of new dynamic economic philosophy will dominate the new millennium.

Skousen reveals how economists have gone beyond writing abstract academic papers and books and are now applying their theories in the real world by running businesses, consulting companies, and taking positions in government. Economics can change people's lives and nations' fortunes for better or for worse, he explains, depending on how closely they adhere to or violate basic principles. Those key principles include accountability, cost-benefit analysis, investments, and entrepreneurship. By understanding and incorporating these principles, better decisions will be made on individual, corporate, and government levels. To explain this thesis, the author offers analyses of key economists who have changed their views over time, an examination of major domestic and international issues, and an explanation of how economists can predict which politicians will be successful.

With EconoPower as their guide, readers will gain a firm understanding of the influence of economics and how it can be used to improve the world we live in.

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Product Details

• Hardcover: 274 pages
• Publisher: Wiley; 1 edition (March 21, 2008)
• Language: English
• ISBN-10: 0470138076
• ISBN-13: 978-0470138076
• Product Dimensions: 9 x 6.4 x 0.9 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #520,189 in Books (See Top 100 in Books)

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40 of 45 people found the following review helpful:

5.0 out of 5 stars Bringing Adam Smith to the Real World, April 2, 2008

By 

Nelson Hultberg (Dallas, TX United States) - See all my reviews
(REAL NAME)   

This review is from: EconoPower: How a New Generation of Economists is Transforming the World (Hardcover)

The late Milton Friedman was considered by many to be the libertarian ambassador to the American establishment. His sprightly laissez-faire perspective was, over the decades, a constant reminder to regnant Keynesian intellectuals of the manifold holes in the ship's hull of their paradigm. With an ever-gracious persona and unfailing logic, Friedman carried the flag of freedom brilliantly to those of this world who think. Now that he is gone, there needs to be someone to take his place.

Mark Skousen may just be that man. His works over the past two decades have been both prolific and profound. Like Friedman, he is an economist who can actually write in a prose style that is engaging. With his latest book, EconoPower, Skousen gives us a splendid analysis of why the intellectual progeny of Adam Smith is retaking the battlefield from the Keynesians.

EconoPower is all about how economists of the modern day are no longer satisfied with remaining in ivory towers to scribble out theories about the mysterious thing called Economy. Such a focus on "highly abstract mathematical modeling," says Skousen, is what is called the "Ricardian vice, named after the nineteenth-century economist David Ricardo who developed unreal and oversimplified models without testing them against factual evidence." This has taken economics "down the wrong road."

Today a whole new wave of Smithian progeny is going out into the real world -- the messy, problematic world that we all have to confront every day -- and showing how the science of economics can be applied to the ever-present problems of history to solve dilemmas often thought to be intractable. And they are doing so with dramatic results.

In the first chapter, Skousen presents seven basic economic principles that must be understood and adhered to if humans are to advance their societies. Depending on how closely intellectuals "adhere to or violate" these principles, they will bring good or evil to the world. These principles are a canon of wisdom for civilization, and every professor, politician and pundit exercising authority in this world should be required to learn them thoroughly.

They are: 1. Accountability. 2. Economizing and cost-benefit analysis. 3. Saving and investment. 4. Incentives. 5. Competition and choice. 6. Entrepreneurship and innovation. 7. Welfare.

With great clarity, Skousen demonstrates briefly how each of these concepts must be applied in order to maintain freedom and justice. Because we have not been paying attention to these crucial guides of right economic thinking for many decades now, we are gradually destroying the very essence of America and the Smithian concept of "natural liberty."

Skousen goes on to tell us about a pantheon of remarkable intellectuals and entrepreneurs such as Jose Pinera, John Mackey, Gary Becker, Robert Shiller, Charles Koch, Henry Spearman, etc. who are blazing new trails in the social sciences by using the field of Economics.

This book is packed with an incredible array of practical analyses of a whole range of problems that our authorities are tearing their hair out over. Through scintillating sketches of his pantheon of heroes, Skousen shows us how to beat the market, save Social Security and Medicare, improve the quality of education, combat global warming, and aid the poor. While Keynesians are building onerous bureaucracies to weigh us down, Skousen's heroes are fashioning clever solutions to lift us up. Nothing like the man of the mind combined with the man of action. These characters are the John Galts and Hank Reardens of real life -- saviors, savants, and liberators of the human spirit.

Yet despite a gratifying return among many intellectuals to the Seven Principles of economic wisdom, the battle for freedom and sanity in life is by no means assured. Today's world is still filled with peril, as all periods of history are when men in authority subscribe to ideological fallacies. And unfortunately such fallacious authorities saturate society today. At the end of the book, Skousen gives fair warning to us all about the lessons of the Great Depression of the 30s, and how such an event's recurrence is not probable, but also not impossible either.

"As long as the global financial system is built on a volatile, destabilizing inflationary policy coupled with a fragile fractional reserve banking system," says Skousen, "the possibility of financial chaos and a subsequent economic cataclysm should not be discounted....[T]he most recent financial panic is surely not the last, and one should never underestimate the ability of the global marketplace to react in unpredictable ways."

What is needed so desperately in this tumultuous era of history is a re-acceptance of the Seven Principles of economic wisdom outlined in the first chapter of EconoPower. Our political and intellectual leaders throughout the world should run to the bookstore and devour these principles, and then sit comfortably back for an evening or two of delightful reading as to how real men are implementing them in the real world.

6 of 6 people found the following review helpful:

5.0 out of 5 stars Something to Think About, December 16, 2008

By 

Reading Fan "Romans 8:1" (Baltimore) - See all my reviews

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This review is from: EconoPower: How a New Generation of Economists is Transforming the World (Hardcover)

According to economist Mark Skousen, there is no way we should be bailing out the banks, automakers, or whoever. Things work better if you let things fail, and then let competition take over for a better future. Government intervention should be kept at a minimum and free the supply-side of things to do its thing - - so that the money will trickle all the way down to you and me. In a nutshell, Skousen is a proponent of something called Say's Law which postulates that supply produces demand, with the keys being productivity and investment in the economy through savings. In short, don't let anything get between the buyer and the seller because "The market is wise and the state is stupid". The Keynesian economic system has been so prevalent since FDR's time but according to Skousen, it may have actually extended the affects of the Depression until after WWII, when the controls were finally lifted. On a closer-to-home level, Skousen recommends HSA's (Health Savings Accounts) to encourage competition for rendering of medical services and incentives for the individual not to overuse his account. Traffic gridlock could be solved by charging drivers according to time-of-day and traffic load according to key lanes. The voucher system for schooling our youngsters could be implemented to create competition among education providers and, at least theoretically, give kids a better education. He does recommend the Modern Portfolio Theory for personal investing - - diversify and hold, though he is skeptical of the Efficient Market Theory - - you can't beat the market because everyone has the same information at the same time.

Interesting book and good food for thought!

4 of 4 people found the following review helpful:

4.0 out of 5 stars Old Wine in New Bottles, but Pretty Good Wine, October 9, 2009

By 

Herbert Gintis (Northampton, MA USA) - See all my reviews

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This review is from: EconoPower: How a New Generation of Economists is Transforming the World (Hardcover)

The uninitiated reader will probably never realize that the intellectual roots of this interesting volume lie deep in the past, with the great thinkers of the Austrian school of economics, led by Ludwig von Mises and Friedrich von Hayek. The Austrians picked up the tattered banner of classical liberal economic thought (laissez-faire) in the first half of the twentieth century, and held it high while others were turning to Marxism, Keynesianism, Institutionalism, and other "statist" ideologies that recognized a need for state intervention in the economy to correct "market failures" and provide the tools that turn formal democracy into a substantive instrument with which the common folk can construct their society of the future.

Why does Skousen not make it clear that this "new generation" is really old wine (Austrian school economics) in new bottles (Skousen and a few modern economic policy experts who heed the ancient Austrian doctrine)? I think probably the reason is that the Austrians were extremely elitist and arrogant, having little appreciation for the ignorant masses who actually vote leaders into and out of office in a democratic society. Hayek himself, a brilliant thinker and Nobel prize winner, once said, when asked what he thought of the brutal Chilean dictator Pinochet, that he preferred a "liberal dictator" to a "democratic government lacking liberalism" (of course, "liberalism" here means classical free market ideology, not the modern American liberalism, which is more akin to social democracy, which the Austrians despised).

Because of their rigid purism in defense of free markets and a minimal state, their policy views have been largely ignored in the modern world. There is no nation that even remotely conforms to the Austrian idea of laissez-faire. Nor will there ever be one, in my opinion, because (a) the Austrians were incorrect in their belief that a laissez-faire economic could be dynamically stable, and (b) no electorate in a democratic society would ever vote for such a system, and in a despotic society, there is little chance the dictator would be of Hayek's cherished "liberal" sort, any more than would the fox in the hen house set out to establish chicken paradise.

This does not mean, however, that the Austrians have nothing to contribute to contemporary policy debates. They certainly do, and Skousen does a fine job in this book in modernizing, democratizing, and softening Austrian positions so that they make economic sense and might serve the needs of the common folk. Skousen's strategy is to start with the well-known policy suggestions of the behavioral economists (e.g., change the default position on voluntary savings plans from "not contribute" to "contribute"), as well as the solid stock market advice of previous generations of economists (e.g., treat the stock market as a random walk, diversify your portfolio, and the like). Then he moves into one of the most attractive successes of the free-market ideologues, the Chilean system of private retirement savings plans. This system was the brainchild of the Chicago school economists whom Pinochet asked to come reorganize the economy after he overthrew a democratically elected socialist government in Chile. Now, the Chicago school certainly bears the brand of laissez-faire, but they were (and are) dedicated to empirically testing theories and finding alternatives that are viable and widely popular (democracy was restored to Chile many years ago, but they have not given up their private retirement plans). As Skousen notes, the Chilean system has been copied in many countries, and parts of it are reflected in the US 401(k) retirement plans.

It is critical to understand why the Chilean system works: it is not purely private, but an intimate entanglement of state regulation and private initiative. For instance, workers are required to contribute at least 10% of their salaries to the retirement fund, although they may contribute up to 20% if they so desire. Second, workers may choose from about two dozen government approved private retirement funds, but these funds are highly regulated so that they have virtually zero possibility of bankruptcy. Finally, there is a minimum guaranteed pension provided by the government, should a worker's private savings be wiped out by market forces.

The relevance of the Chilean and 401(k) plans to the recent debate about privatizing the Social Security system is obvious. American liberals generally dislike markets and don't believe people can make choices in their own interest, and hence favor the current system of social security. Some free-market crazies believe that people should not be forced to save at all. If someone ends up in poverty after a lifetime of work, that's his or her problem. The alternative presented in EconoPower is powerful and nuanced, providing a cogent alternative to the ideologues of right and left. Most of the proposals in this book are similarly transformed Austrian ideas, presented to the public as desirable alternatives for the non-well-to-do, and without the slightest trace of laissez-faire ideology. Old wine in new bottles, but attractive wine.