"From Subsistence to Exchange: and other essays" (FSE), is a wonderfully insightful little book that throws light on the problems of the Third World economies, egalitarianism, the "mathematized" economics profession, and, among other things, offers rigorous arguments against foreign aid and Western guilt (for allegedly causing Third World poverty).
I found this book to be both a great introduction to development economics and Peter Bauer, as well as a handy catalog of refutations of popular economic myths. Additionally, the critical essay on the mathematization of the economics profession is valuable: It helps to buttress Bauer's thesis that economics is not an "ivory tower profession" (my words): It is a social science that must rely heavily on historical investigation and direct observation; it is not, nor can it ever be, like the natural sciences of physics and chemistry. The attempt to make it more "respectable" by hiding simple truths among complex formulae, or worse, by deriving conclusions from mathematical models that do not resemble the real world, has resulted in putting elaborate clothes on a non-existent emperor (Bauer's words). It has also fueled fallacious attacks on the entire field and reduced both public understanding of and respect for economics. Bauer's essay on that topic is a breath of fresh air.
In discussing popular myths, Bauer tackles the "viscous circle of poverty," among numerous others, e.g., that the West is rich because the Third World is poor. Often these myths are based on similar false premises. For example, the refutation of the vicious circle argument also undermines the exploitation one (noted above).
Here's how: If the vicious circle of poverty is correct, then this statement is also: Without outside investment, third world countries cannot break out of the circle of poverty, because they can not save in order to invest in capital, because they live at a subsistence level and (usually) produce only enough to meet short-term needs.
Bauer states it better, but that's a decent summary. Bauer takes this to the limit of its logic: If the above were true, then the human race could never have left the stone age: the world never received capital (or any) investment from outside of itself. The vicious circle argument ignores the factors that Bauer notes are crucial to finding answers to economic problems: namely, "that economic performance depends on personal, cultural, and political factors, on people's aptitudes, attitudes, motivations, and social and political institutions."
That kind of outlook, intuitively valuable, is inimical to modern applied "mathecomics," the practitioners of which typically deride an outlook like Bauer's as mere "empiricism." Indeed, Bauer discusses just such a caricature.
The argument against the circle of poverty implies that there is no fixed amount of income to be distributed. Again, for someone with an eye on economic history, that should be intuitively true. Yet if there is no fixed income, then the people in the West are not necessarily rich only because the Third World is poor. Bauer notes, having extensively studied the Third World countries and its people, that those with the least number of ties to the West are the worst off!
There are so many other insights in this book that to adequately catalog them all would require thousands of words. Yet FSE is short and easy to understand. I read this book alongside Chomsky's "World Orders Old and New" until I realized that Chomsky, when he actually gave an argument, was eviscerated by Bauer's arguments and knowledge. Of course, this represents the merits of Bauer's historical and observational approach to Chomsky's pronouncement from on-high approach. Bauer lives in and describes reality. Chomsky does neither.
As a final note, although this book is repetitive as the reviewer below me noted, Bauer's points need to be drilled into people's minds. Repetition of key points and arguments helps to cement them in one's memory; Bauer's excellent and fascinating writing does not get the justice it deserves from this review, and it is not something that, once read, you will want to forget.
