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Economics Without Illusions: Debunking the Myths of Modern Capitalism Paperback – March 30, 2010
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About the Author
Excerpt. © Reprinted by permission. All rights reserved.
Capitalism Is Natural
Why the market actually depends on government
People often complain about the absence of “big ideas” in contemporary political debate. There is some truth to this. Politics in the twentieth century was often characterized by sharp disagreements over fundamental issues, with various factions wanting to completely overhaul society in all sorts of dramatic ways. In the 1920s, for instance, eugenics—the selective breeding of human populations—was all the rage in political circles. Winston Churchill, an enthusiastic proponent, thought it was essential to stem what he called, with a candor typical of his era, “the unnatural and increasingly rapid growth of the feeble-minded and insane classes.”
Then, of course, there were fascism and the “world communist revolution”—both of which involved what were, in retrospect, rather unlikely proposals. Consider V. I. Lenin, in 1918, still confi dently predicting the “withering away of the state” under communism. Getting rid of the market economy and replacing it with central planning would be no big deal, he thought—a matter of “watching, recording and issuing receipts,” tasks that were “within the reach of anybody who can read and write and knows the fi rst four rules of arithmetic.”
In the ’50s, it seemed there wasn’t a problem in the world that couldn’t be solved by “science.” Women in the United States stopped breastfeeding en masse, figuring that baby formula had to be better—after all, it was made by scientists! How much longer could it be before they solved other social problems, like crime or disease? John F. Kennedy spoke for many when he predicted that technocracy, not democracy, was the future. “Most of the problems that we now face,” he claimed, “are technical problems, are administrative problems” best dealt with by experts.
This technocratic consensus lasted long enough for Daniel Bell to publish his famously ill-timed book, The End of Ideology, in 1960. The ink was barely dry on the page before things went completely haywire, ushering in one of the most intensely ideological periods in Western history. The ’60s counterculture arose, promising no less than a complete transformation of both human civilization and consciousness. Sex, drugs, and rock and roll were presented not just as entertaining distractions from the serious business of life, but as forces that would fundamentally transform the family, the economy, the state, and the geopolitical system.
While the boomers didn’t exactly deliver on these promises, one must admit that they gave it a college try. To take just one tiny example, by the early 1970s there were thousands of communes across the United States engaged in various forms of collective child rearing, trying to render the nuclear family obsolete through communal parenting. (A friend of mine in grad school had, in his youth, belonged to an ill-starred venture of this sort. He wound up with a dozen or so “kids” from this period, some of whom would occasionally drop by to visit him. Only one was his biological daughter.)
The point is this: There was a time, not so long ago, that when people talked about changing society, they generally had Big Plans. These plans were big in the sense that, had any of them worked, the world we live in would have been changed almost beyond recognition. Things are different now. People may complain just as loudly, but they generally
lack big ideas about how things should be redone. Or to speak more precisely: The big ideas that do remain are so obviously bad ideas (such as Islamic theocracy) that almost no psychologically well-balanced individual feels tempted by them. There is a stark difference between this ethos and a time when mild-mannered, middle-class people actually thought it might be helpful to tear down various pillars of Western civilization and rebuild everything from the ground up.
Nowadays, the disagreements that do remain tend to be over matters of detail. Political protest still carries the trappings of radicalism, but when you scratch the surface a bit, ask people what they really want, you typically end up with some fairly modest proposals. Antiglobalization protesters may still call for the overthrow of capitalism, but they’re
usually willing to settle for an environmental protection rider or an amendment to the arbitration mechanism of the next free trade agreement. In France, activists have even insisted upon using the term altermondialisation to describe the movement, rather than antimondialisation, to emphasize the fact that they are not opposed to globalization—they
would just like to see it done a bit differently.
Where have all the radicals gone? The movie The Corporation, after more than two hours of bluster about the “psychopathic” pursuit of money and power on the part of the modern business enterprise, ends with a call not for workers to seize control of the means of production or for the state to nationalize big business. Instead, it celebrates the outbreak of “grassroots democracy” in the town of Arcata, California (pop. 16,651), where citizens got together to—brace yourself—limit the number of franchise-operated fast food restaurants in the town to nine.
It’s a reminder of the old joke about a Fabian socialist rally, where the protesters chant, “What do we want? Gradual change! When do we want it? In due course!”
In a sense, we are all Fabians now.
This state of affairs has been described in a variety of ways. Francis Fukuyama referred to it as the “end of history.” Jürgen Habermas, in a slightly less upbeat mood, described it as “the exhaustion of utopian energies.” The central element is the fact that liberal democracy has emerged out of the twentieth century as the only credible form of political organization, alongside some sort of regulated capitalism as the only plausible form of economic organization. As a result, all the serious participants in the political process—and even a fair proportion of the wacky ones—find themselves espousing what are essentially variations on the same basic blueprint for society. Everyone winds up defending—or, better yet, presupposing—some version of welfare-state capitalism. Of course, the welfare state has all the characteristics that a woman typically seeks in a husband, not a lover. It’s safe, reliable, and a good provider. As a result, it tends to generate a fairly steady stream of grievances. But as everyone knows, there’s a big difference between complaining about your husband and actually leaving your husband. Suffice it to say that, right now, divorce does not look imminent.
Top Customer Reviews
"Economic illiteracy on the left," says Heath, "leads people of good will to waste countless hour promulgating or agitating for schemes and policies that have no reasonable chance of success or that are unlikely to actually help their intended beneficiaries.'' (p. 5) He gives the example of a documentary on worker cooperatives in Argentina. "While the material is quite affecting and some of the footage is remarkable, the events of the film are presented in what can only be describes an intellectual vacuum...You would never know, watching the film, that there is an extensive economic literature on the subject of cooperatives---written by socialists and nonsocialists alike---dating back over a century, that raises serious doubts about the possibility of structuring an economy along these lines." (p. 5)
Heath begins by asserting that there has been a real "end of ideology" narrowing-down in the past several decades of substantive disputes concerning how an economy should be run. "There is a stark difference," he notes, "between [the current] ethos and a time when mild-mannered, middle-class people actually thought it might be helpful to tear down various pillars of Western civilization and rebuild everything from the ground up." (p. 23) This is precisely the case, in my estimation.Read more ›
Don't be put of by the sub title "Economics for those who hate capitalism". This book is excellent and deserves to be widely read by everyone with an interest in economics which, as Heath points out, should be all of us.
Heath deals to six 'right wing' fallacies and then subjects six 'left wing' fallacies to what he calls sympathetic testing of their economic plausibility. He discusses the role that governments play in setting the scene for markets, looks at incentives, competition, taxes, free trade and personal responsibility. He then examines pricing, profit, the impending 'collapse' of capitalism, equal pay, wealth disparities and leveling down.
His discussions of the Peacocks tail as an argument against the market is flawed although his use of game theory payoff tables is excellent. He overstates the case for state as opposed to contract based intervention in market creation and enforcement of breaches of contract. However, in my opinion these are minor issues.
His discussion on free trade is masterful and he has the grace to admit that he changed his mind on this from youthful opposition to free trade.Read more ›
I highly welcome this book, though I doubt it will have much effect on its intended audience, the Left. And I also doubt that the average Right voter will read it. Both would gain, though this book is an uneven effort.
In each of his 12 chosen subjects, Mr. Heath mostly has the correct basic idea and addresses popular and distressing misconceptions (6 on the right, 6 on the left). He makes his point quickly and points out what is dangerous about those false beliefs.
Where he gets in trouble, most of the time, is his analogies and his detailed opinions. Strangely, he seems better at dissecting holes in socialist dogmas rather than capitalist ones. Maybe because he is more familiar with them?
His chapter on wage analysis is brilliant and so is his analysis of consumption. Contrast that with the chapter on taxes. Sure, there are goods and services that are best procured at an universal level so the State is best equipped to tax and fund them. Not necessarily to provide those services, but he doesn't see that (you can have publicly funded health or education, delivered competitively by non-governmental entities, for example). But he makes it seem as if governments stick to only those services that need to be purchased and provided collectively. If only.
Still in the tax section, a rather silly statement that "no one cares about their taxes, only their gross relative salary".Read more ›
Most Recent Customer Reviews
A strong philosophical analysis of economics that is unfortunately somewhat diluted by what felt to me like overreach. Read morePublished 2 months ago by John Gibbs
By pulling apart the economic shibboleths of both the right and left, Joseph Heath's Economics Without Illusions presents a balanced, interesting, and readable primer on basic... Read morePublished 3 months ago by Stephen Wirth
I plan on re-reading this book again. I plan on giving it to anyone I can talk into reading it. I've read a fair amount of economics and finance books and I can tell you that it... Read morePublished 3 months ago by Max R.
Started good but tended to get a bit repetitive by half way throughPublished 9 months ago by Margaret Galt
A must read no matter your political views. Entertaining and somewhat thought provoking, at least makes you question and rethink some of your own perceptions.Published 9 months ago by TROND ARILD RØVANG
This was an excellent read. Having had the obligatory semester course in Economics many years ago, I have tried to make sense of our current times by reading way too many... Read morePublished 11 months ago by Interested customer
I don't agree with many of Heath's arguments, but they are well presented and valuable. It has been said that you cannot really understand a concept until you are aware of its... Read morePublished 13 months ago by Timothy Ryan
If you liked Freakonomics, you will love this. It answers such pressing questions as why taxi drivers work fewer hours when it rains. How smokers benefit society. Read morePublished on July 19, 2014 by Maggie T