Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) Kindle Edition

I stumbled onto this book in my search to, as a curious thinker, to understand better what economics is and what it can teach us.

It has fundamentally changed my view on what constitutes an ideal government with regards to being a good promoter of a strong and thriving economy; that we need to be especially vigilant against corruption and over-regulation (corruption feeds off over-regulation, and both lead to lower economic growth). Trade, in the long-run, makes us all better off (rich and poor countries alike). This was an especially poignant argument in light of the current presidential race where Donald Trump and Bernie Sanders are both anti-trade.

Dr. Wheelan's arguments, taken as a whole, are neither conservative or liberal. He strikes a good balance in seeking the truth about how modern economies work, and more importantly, what makes them work better. For example, he makes the general argument that marginal rate tax-cuts can lead to more investment and economic activity, which in turn grows the economy. However he debunks the misguided (at best) political arguments that tax-cuts also lead to higher revenue.

I was also enlightened by his points about professional organizations (ABA, AMA, teacher's unions) and the barrier's to entry they artificially impose that can actually result in poorer outcomes. His example about "Cadillac lawyers" was amusing and make me think about high prices for legal services. Teacher's unions seek to protect their own at the expense of providing children a better education by lobbying for teacher certification requirements that research shows don't help children succeed (e.g. people with Phd's not legally allowed to teach high school). He makes a good argument for lowering these barriers of entry, along with eliminating absurd tenure rules that protect and reward under-performing teachers, to incentivize smart, competent people to enter become teachers.

These are just a very few examples in the book. As someone who has leaned left most of my life, I found Dr. Wheelan's book challenging, but refreshing. It challenged a lot of my preconceived notions of what good governance and policy means. But by no means is it a tea party manifesto. It's somewhere right in the center, where logic and rationality live.

This is an excellent introduction to economics and the broad range of issues informed by economics for the non-professional but interested reader. It is clear and accessible and punctuated by a breezy, witty style, and without a single equation or graph for those terrified of numerical relationships. The economics presented in this book is mainstream economics as befitting a journalist for The Economist and makes points that would satisfy those right-of-center and those left-of-center. For conservatives, the author reminds us (like Milton Friedman did in "Capitalism and Freedom") that a heavily regimented economy would eventually come at a steep price in curtailed political / civil freedoms just to maintain the economic regimentation. In addition, the physical and human capital underlying productivity growth, and the economic self-interest that drives their application, are key components of economic well-being. On the other hand, liberals will appreciate his contention that government is a crucial catalyst for effective market functioning in that it provides (or can provide) a legal framework, a predictable regulatory regime, and a stable macroeconomic environment. Most of the national economic failures to which the author alludes are not the result of racial, ethnic, institutional, or cultural deficiencies but are simply a result of government incompetence and corruption (see Zimbabwe). And markets are not omniscient; we get the standard analysis for market prices not reflecting social costs / benefits (externalities) and the market's failure to produce public goods.

What I also liked about this volume was the way in which it extended economic analysis to many areas of social / human behavior, but then would go no further, i.e., the author recognizes that economic analysis informs much of our public policy debates but cannot settle value-laden issues. For example, in his chapter on "Productivity and Human Capital", subtitled "Why is Bill Gates so much richer than you", he acknowledges that economics can tell us about the production of income and the creation of wealth, but can't really tell us how that income and wealth should be distributed. (Some prominent economists are on record as claiming that distribution issues are irrelevant.) This book maintains that these value-oriented issues are determined in the political process as shaped by our religious, moral, and cultural backgrounds.

I enjoyed this book very much. But I would challenge the author on two points: (1) He asserts that social security is a "pyramid scheme." While pay-as-you-go financing may superficially resemble a pyramid scheme, there are fundamental differences that any actuary at the SSA could tell you. Pyramid schemes are inherently unsustainable because of the geometric progression of the pool of investors. A pay-as-you-go system does not require increasing multiples of later-round investors but simply a stable relationship between workers and beneficiaries. Long-term economic growth and population growth would contribute to its sustainability. Our current problems refer to the demographic "bulge" of the baby-boomers which should disappear with their passing, (2) With regard to intellectual property (IP) the author (no surprise) comes down strongly for long-term protection for IP as an inducement to its creation, as opposed to less stringent protection that encourages the dissemination and use of IP. Obviously, there's a trade-off between creation and dissemination, but the current stress on protection may inhibit economic growth and innovation. How many firms pay (or refuse to pay and thus not use the IP) royalties for the use of "patents" that many would consider belong in the public domain? Do we really need copyright protection for 70 years after the author's death? Just one man's opinion.

I didn’t expect a book on the broad spectrum of economics to be such an enjoyable read. This author has quite a gift for taking a topic with the potential to operate as a sedative and instead making it clever and entertaining. Wheelan concisely and clearly explains an overview of all the facets of economies and does an excellent job of showing the ramifications of decisions by consumers, business and lawmakers. Wheelan shows the reader how our economy (or any economy) necessarily gets put into place, and then examines proposed changes by various leaders and fleshes out what the impact would be of those decisions. He also thoroughly discusses the international markets and shows how essential the connections to them are to an optimized national and global economy. He demonstrates that economics is a web that stretches through all facets of government and societal life. Most of all, he substantiates that productivity is a hinge for society, and denotes the profound impact it has played in the past and continues to play. His purpose in this book is to educate, not to persuade, and that makes it all the better. He sprinkles in many, “wow! I can’t believe that,” stories throughout his chapters that illustrate his points and, more pointedly, keep the text entertaining.
I learned so much from this book, and my thinking about economic issues has a more solid framework for having read it. I’ve learned to evaluate and appreciate the vast intricacies that the impact of proposed “fixes” that float around the news would have, and now appreciate the power of productivity in remedying many of life’s difficulties. I highly recommend this book. It gives you ideas to ruminate on well past the pages, and plus it is enjoyable and thus easy to read.