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The Way the World Works (Gateway Contemporary)

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"The Way The World Works" is a brilliant andprovocative book that illuminates the reader on a full range of political, economic, and social issues. Mr. Wanniski alerts us to what he describes as "the global electorate." The author sees human civilization as an unfolding story where societies find the best political and economic systems through a trial and error process. This process, which continues through the present, is largely progressive. "The global electorate" has rewarded systems that work, like American democracy, and dissolved systems that don't work like Soviet communism. History moves forward to suit the needs of its people. When Mr. Wanniski wrote this book in the late 1970s, such ideas as "historical progress" seemed out-of-date. Assertions of Western superiority over other political systems seemed naive. After all, the Communist empire was expanding into remote corners of the globe like Afghanistan and Nicaragua while the United States and Europe sputtered economically and splintered socially. But from his home in New Jersey, Mr. Wanniski anticipated the revival of the West. Led by Ronald Reagan and Margaret Thatcher, the capitalist democracies rediscovered the secrets of their success - classical "supply-side" economics. Much of the book articulates current economic issues through the prism of supply-side economics. Mr. Wanniski offers keen insight into the origins of the Great Depression and the causes behind the oil price surge of the 1970s. You may be surprised. He is especially persuasive in articulating the need for tax cuts. Mr. Wanniski argues that tax cuts pay for themselves by encouraging more entrepreneurship, unleashing more economic growth, and thus funneling more tax revenue into the Treasury. For example, after World War I, the U.S. and Britain took different approaches in shifting from a wartime to a peacetime economy. The U.S. slashed its tax rates and prospered during the 1920s while Britain kept its rate high and remained stuck in Depression. Britain never really corrected its mistake and spent most of the century in retreat as a world power. Mr. Wanniski sees tax policy as the key intangible in explaining why some Third World nations have prospered since decolonization whereas others have regressed. The U.S., in particular, was ahead of the curve until the late 1960s when Washington abandoned classical economics for Keynesianism. "Tax-and-spend" policies, designed to spark consumer-driven demand, only undercut the private economy. When taxes were raised, counter- intuitively, tax revenues fell. By painfully experiencing the shortcomings of Keynesianism during the 1970s, the U.S. stumbled into the success of the 1980s. Federal revenues doubled in the 1980s even as tax rates held constant. The new Western dynamism could not be ignored by citizens in socialist countries. By decade's end, communist dictatorships in Europe and Asia were throwing in the towel. A new chapter in the story of "the global electorate" is just beginning. One of the most intriguing points in Mr. Wanniski's book is that politics has been absolutely crucial to economic development. A nation's prosperity rests in large part, he contends, on the wisdom on its political leaders. This may be a lot for some conservatives to swallow but the author documents his points thoroughly and convincingly. If Mr. Wanniski is correct, then the next presidential election becomes even more significant. Is the current prosperity the handiwork of a) President Clinton, b) the Republican Congress, c) both, or d) none of the above. The answer, even now, isn't clear. But if the next president ignores "the global electorate" and strays from the supply-side course, the citizens will eventually correct their error in time - just like they did by dissolving Keynesianism in the 1980s. According to this book, we will collectively get where we need to go. Whether we reach our ultimate destination peacefully and rapidly, or on the other hand - painfully and slowly, is the question before us.

Mr. Wanniski spends most of this volume examining world events in light of supply-side theory. He covers a remarkable range, from the beginnings of history to the present century; I have never read as cogent an explanation of both the Great Depression and the stagflation of the Carter years.

This book scares the Keynesian establishment, and it should--they are gradually going the way of the Newtonians. The only criticism of Wanniski (and of supply-side in general) seems to be ad hominem--some of which may be read in other reviews here (the nonsense written by Donald about Hoover and the Depression demonstrates a complete misunderstanding of the book's major theme).

Even irretrievable leftists, though, can find much in this book over which to ruminate. Wanniski is notably non-partisan and seems willing to share his ideas with whomever will listen. I found his group's web site after reading his book, and he posts a daily letter which is usually just as absorbing. If you have doubts about ordering the book, go to the site and read a few of his memos.

Over time, I think that _The Way the World Works_ will join _The Wealth of Nations_, _Das Kaptial_, and _The General Theory of Employment, Interest, and Money_ as one of the great treatises on economics--and it is by far the most fun to read.

This is an excellent look at the world through the view of supply-side economics. Jude Wanniski is very insightful in using supply-side theory to model real world situations and the conclusions have for the most part been borne out in the 20 years since the book was first published. Unfortunately, Mr. Wanniski can be somewhat obtuse (at least to me) in his writing style. While this book does not provide a complete nor concise text of supply-side theory, it does provide an excellent starting point and a reference for comparing various economic theories. As someone who subscribes to the Austrian school defined by Menger, Bohn-Balwerk and Von Mises, I found much in common and some interesting new perspectives within this book. Anyone who enjoys studying economics should read this important and impressive book. Mr. Wanniski provides continuing information through the Supply-Side University at his website (as of May 2001): www.polyconomics.com.

There are two common misconceptions about supply-side that still pervade common thought. The first is confusion between supply-side theory and what was packaged as supply-side economics during the 1980 U.S. Presidential campaign. The latter was merely a limited set of policy positions, mainly dealing with tax issues, designed to combat the prevailing condition of the day known as stagflation. The prevailing Keynesian theory did not even consider such a condition possible and hence provided no solution to the problem. Hence the harsh and caustic rhetoric that was used to finally displace the Keynesian "Tax and Spend" policies of the day. [Keynes never intended for deficit spending to go on forever and in his defense, F.A. Hayek (Austrian school) wrote later that had Keynes lived longer he would have been a determined figher against the inflationary policies pursued in his name.] While these politically packaged policies did follow supply side theory, they were not representative of a total economic model and therefore were criticized on that basis.

The second issue is the even more ridiculous notion that supply-side theory has been disproven or violates all other economic thought. This could not be further from the truth as Canadian economist, the father of supply-side economics, Robert Mundell won the 1999 Nobel Price for his theoretical work (Art Laffer compliled most of the emperical evidence). In fact, after 35 years of consumption based (demand side) Keynesian theory, supply-side was a reaffirmation of [Jean Babtiste] Say's Law: Commodities are ultimately paid for with other commodities. Say stated that "The encouragement of mere consumption is no benefit to commerce; for the difficulty lies in supplying the means, not in stimulating the desire of consumption...Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption" (1834). All economic schools embrace Say's law including Classical, Monetarist, Austrian and Supply-Side, except Keynesian. Even President Clinton's 1994 economic report stated "It is undeniable that the sharp reduction in taxes in the early 1980s was a strong impetus to economic growth". Unfortunately 40 years worth of economists forced homage only to Lord John Maynard Keynes are having a hard time adjusting to the failure of demand side theory.

This may be the most revolutionary work on Political Economy since Kark Marx, less in terms of economic theory than in terms of political import. In ways that often parallel James Buchannan's "Public Choice" school of thought, Wanniski looks at people as an electorate, both economically and politically, and he lays out a theory which shows how the decisions of the electorate are translated into policy. It was by reading this book that I was first exposed to the diea that even dictatorships could be a kind of democracy, if "rule by the people" can be taken to mean that anyone, regardless of birth, may aspire to the top job without revolution or a coup d'etat. By this standard, for example, the USSR was democratic, if one examines the up-from-the-bottom origins of men like Khruschev.

The economics of the thesis are called "supply-side," and this is the first modern, book-length exposition of the doctrine, but in reality the tenents are really a restatement of Classical economics. Adam Smith would find little to argue with here. As an admirer of the Austrian School, I find Wanniski to be philosophically a very close fit, although not a libertarian in the Rothbardian sense; he would be closer in spirit to Wilhelm Rhopke ("A Humane Economy"). The idea that tax policy alters economic behavior is not new, but after 40 years of Keynesean domination (admittedly, Keynes would be opposed to much of what is offered in his name, and he considered himself a Classical economist) the ideas emerge with a freshness that was more striking in 1978 than in the post-Reagan/Kemp era.

One of the most pleasant things aboutthe book is the lack of hostility in its' pages, and the absence of partisanship. One gets the impression that Mr. Wanniski would be just as pleased if the liberal wing of the Democratic Party had triumphed on a supply-side platform, so long as they faithfully implemented the policy.

-Lloyd A. Conway

After graduating from college with a degree in economics it is nice to see that there are still writers out there who have heard of economists other than the "great" Keynes. This is by far the best book on economics that I have ever read. If you have often thought there were better reasons for events happening than what the so-called scholars have told you, then this book is for you.

Wanniski first published this work in the throes of the Carter administration's stagflation malaise. For those who never experienced them, they were days of double digit inflation and unemployment, coupled with sky high interest rates. If the "Reagan revolution," undergirded by both Milton Friedman's Moneterism and Jude Wanniski's Supply Side Economics had not occured, a bloodier one may well have...the failed policies of Keynesian styled big government had failed that badly.

Though the entire book has been updated and revised over its long lifespan, Chapter 13; "Energy in Abundance" is extremely vital today. In it he describes the folly of the "doom & gloom," energy scarcity adherants - "The planet itself is a ball of energy, that rides in a sea of energy." Just how untapped are the earth's energy resources? Even today, over 80% of the oil wells ever drilled, have been drilled on the continental United States! Wanniski notes that, "Indeed, it can be argued that at present, there are more organic hydrocarbons being formed than are being consumed by the entire world population."

Wanniski does the best job of explaining why the Great Depression occured since Murray Rothbard addressed it in his work, "The Great Depression." In both his and Rothbard's view, protectionism (the Smoot-Hawley tariff among other protectionist measures) moved the world into a spiraling depression as international trade virtually dried up.

Wanniski coined the term "Supply Side Economics." A term that has been attacked but not reputed by proponents of Command Economies. Most of the world today operates under some sort of Supply Side structure. Even Russia has adopted a 13% flat tax with no Capital Gains nor "business taxes," which are actually "people taxes, as they're always passed on to the consumer.

"The Way the World Works" is a classic that puts the vagueries of economic theory into every day language and explains why individuals as entrepreneurs do a far better job of supplying the things we need than government bureaucracies do. A must read for anyone intersted in how and why both wealth and poverty are created.

A man not many people know about wrote an amazing book about 20 years ago that not many people have heard about. Where has he and this book been hiding? You would think we would know him better than we do as the concepts he writes about helped forge the economic policies of President Ronald Reagan, which some state was instrumental in ending the Cold War. As I read this book, I couldn't help to think about what tragic year it has been with losing both Peter Drucker and Jude Wanniski.

The book is written as an economic lesson, but reads as a more interesting historic lesson, covering some of the most exciting and critical events over the last 200 years. Jude clearly explains and backs up his concepts with historic examples, and both the obvious and hidden drivers of those events, and brings it all back to how over that time, we have learned why all that happened.

He looks at economics not just as math or science, but in terms of and in conjunction with politics and the psychology of the individual. The dismal science does not need to be so dismal when you look at it from the context of countries and individuals in those countries, and what drives them to be productive in order to advance society.

True greatness is generally shown when you look at something someone has created, look at it years later, and still say it is valuable and effective. It can stand the test of time. "The Way the World Works" absolutely stands the test of time. This is shown in many of the concepts he refers to, being the same topics as many of the "Megatrend" themes everyone else is talking about today, as new revelations. It is also remarkable to hear common themes from Thomas Friedman's current bestseller how "The World is Flat". He also presents topics that are parallel to Peter Drucker, in how we need great people to produce great companies that produce great societies. Treating governments, organizations and individuals separately, and separating productive work from just work,

I wish Jude was still with us so he could attempt to bridge his analysis of how energy works, and how these same driving principles could be used to analyze the Internet. Maybe we can continue that work for him.

This book explains supply-side, or "classical economics" in a way that most people can (and need) to understand it. It is effective in expanding the subject beyond the limited notion that supply-side economics is simply a "Republican" political view- but it does not ignore the obvious play between the political and economic reality. The demand side model is clearly in the death-throws, and "The Way the World Works" is an excellent guide to understanding the necessary change that lies ahead. The world at large now has ample evidence to support the idea that supply drives economies rather than demand (nevermind the obvious question of how there could be demand for something not supplied???). The issue before us now is to strive to embrace the new/old reality.

The Way the World Works (TWWW) is absolutely the best book that I have read my entire life. Wanniski has an extremely sharp mind, and his analysis combines the theories of the best economists of our times with his own in-depth knowledge of political science.
Wanniski has been able to forecast events in our national economy and society with outstanding accuracy.
The greatest thing that you will learn in this book is the ability to "think on the margin" which will help you understand not only economics and politics, but can help you be more successful in all areas of your life.
You can read materials published by Wanniski, for free, in his website
Marcelo Rocha Da Silva

Jude Wanniski's masterpiece will get its due in years to come. A common sense analysis of the far reaching effects of economic policy decisions. Mr. Wanniski truly understands the way the world works. His analysis and thesis are backed up with detailed historical analysis of the effects of different economic policies on the people of the world. His analysis of the Depression demonstrates his ability to think outside the box. Far from a theory to help only the rich, Mr. Wanniski's model is in fact the formula to lift all boats. Highly recommended.