Naked Economics – Undressing the Dismal Science 2e

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Regulation prevents the free flow of resources that would otherwise be dictated by the market, and taxation makes people less likely to want to work or invest. Economics still awaits its Darwin. Keynes came close, but not close enough. Keen comes closer still. Economics, like biology used to be, remains mostly faith-based. No book poses a bigger threat to that faith than the second and expanded edition of Debunking Economics. In contrast to Wheelan, Hazlitt takes on a humble objective: to deliver an “unblushingly ‘classical,’ ‘traditional,’ and ‘orthodox’” synthesis of economics. This is the most fitting way to approach the layman, who will only retain a few lessons from an introductory book. Hazlitt offers just one lesson. Correcting Externalities. An “externality” is the gap between the private cost and the social cost of a specific behaviour (e.g. littering, drunk-driving, smoking etc.). When the gap is large, individuals tend to do things that make them better off at the expense of others.

Naked Economics: Undressing the Dismal Science is written by Charles Wheelan— an American economist, author and speaker. He founded The Centrist Party in the US and was an unsuccessful Democratic candidate. Wheelan graduated from Dartmouth College, where he’s a member of Alpha Delta fraternity. He has worked as a correspondent for The Economist, & contributed to several papers & radio shows. Naked Economics QuotesHuman capital is the combination of the skills in a person, including education, work experiences, charisma, vigor, talents etc. Resources invested in human capital today will yield a return in the future, and historically, the pie has been growing, with more jobs being created than lost. Find out more from our full summary about how investments in human capital can lead to better quality of life and a larger pie in the long run. Financial Markets The book is an interesting primer on economics. It is no doubt ideological but the author has given strong arguments for the ideological position he has taken. The book, however, is limited as it is only good for understanding market based economy. It doesn't shed light on feudalism and tribal societies economics and the complex socio-political and economic relations such societies wield. Apart from such limitations, the book convincingly give arguments for free trade, globalization and market based capitalist system. It doesn't touch on 'exploitation' and merely brushes it away by calling the more skilled earn more profit than the less skilled. The place where I live, the landowner who inherits his agricultural land makes money while his tenants toil for a far lower sum. The question of the skill and ability doesn't matter here. Here it is all about inheritance! The author takes the assumption that everyone starts from zero and develop skills in life which will decide his/her income -countries included- He misses the point that it is about their inheritance advantage too. A family/country already rich is more likely to remain rich and the same holds for poor families/countries. In this chapter, we’ll explore the different ways a government can facilitate a functioning market economy. We’ll also explore the ways it can destroy one: Government intervention in the economy isn’t always beneficial. A Government Enforces Laws However, his earlier work “for people who never studied economics” fails to distill the most fundamental elements of the discipline. Rather, it is a broad survey that delivers a muddy message, reflecting what has come of academic economics. By taking on too many topics and engaging in political rhetoric—belittling critics of US federal overreach, for example—he sets himself up for failure. Many readers have no doubt come away from Naked Economics more confused than when they went in. From 1997 to 2002, Wheelan was the Midwest correspondent for The Economist. His story on America’s burgeoning ex-convict population was the August 10, 2002, cover story. He has written freelance articles for the Chicago Tribune, the New York Times, the Wall Street Journal and other publications.

Speculation (not the primary purpose, but financial instruments facilitate this, as was the case with CDS in 2008) In this chapter we’ll examine currencies, and how the international market uses them to function, covering: But is the market always rational? No, because humans are prone to making behavioral errors. However, over time these inefficiencies tend to correct themselves. Now that we’ve discussed currencies, we’ll look at international trade in general, and how it can be used to improve living standards around the world. We’ll also look at what countries generally need to thrive economically. Economics is the study of how we allocate resources—not only tangible resources like food, clothing, and money, but also intangibles like time, effort, and knowledge. To understand this process, economists begin by examining incentives: the driving forces behind our decisions. This study makes up the field of behavioral economics, a relatively recent branch of economics, and one of the most applicable to our everyday lives.Political actions are often counter-productive, economically-speaking. They bring votes, but they also incur costs that are spread over a large, unorganized part of the population. This leads to inefficiencies in the market economy, and it begins to disrupt the efficient flow of inputs and outputs. Financial markets function like all other markets – capital flows to where it can earn the best return, given available information. Financial Instruments & Investment Principles Your human capital is the sum of what makes you valuable and marketable as an individual—your intelligence, athletic ability, education, and work experience, as well as your charisma, work ethic, creativity, and honesty. People react to incentives and disincentives. The right incentives align the interests of various parties so they act towards a common desired outcome.

When it comes to interest group politics, it’s better to be small – the favours given by the system is spread over a small number of people (making it more lucrative for each one), while the costs are spread over a large number of people (making it smaller, less painful and less prone to resistance). Economics & Economic Indicators The government is responsible for providing the public goods that make us all better off, but these are things that the private sector would not provide. For example, private entities do not pay for public lightning. That’s because it benefits everyone and there would be too many people taking advantage of the service without paying anything. In 2007, Naked Economics was selected by 360 Degrees of Reading as one of the 360 books that every college bound student should read, alongside authors ranging from Sophocles to Malcolm X. Naked Economics was also selected as one The 100 Best Business Books of All Time by 800-CEO-READ. In March of 2009, Wheelan ran unsuccessfully for Congress as the representative from the Illinois 5th District in the special election to replace Rahm Emanuel. In its editorial assessing the race, the Chicago Sun-Times wrote, “Voters will find a ballot filled with impressive and thoughtful candidates . . . especially Charlie Wheelan, a University of Chicago lecturer who combines a razor-sharp mind with a boatload of charm and an impressive expertise in economics and foreign policy. We expect great things from Wheelan in the future.” The challenges of economics as an academic field are vast and will continue to be a pertinent topic in my financial writing. In particular, the trend towards less theoretical and more empirical economics is becoming obvious, as are the consequences. As documented by Econ Journal Watch, progressive ideology and central-banking biases have long been undermining classical economics, polluting the field, and orienting it towards policy interventionism.The speed limit of the US is somewhere close to 3% GDP growth per year. Thus the Fed has to keep a fine balance given this imprecise variable. Sure, I might quibble with the book here and there. Some of Wheelan’s policy prescriptions are dubiously supported, and some of his facts are wrong. He confuses the existence of the administrative state with the rule of law. It is not true that the now-canceled Superconducting Super Collider particle accelerator was located in Texas because George H.W. Bush was President—that decision was made in the 1980s, and if a politician mattered, it was the corrupt Democratic Speaker of the House, Jim Wright. Nor did Arthur Laffer originate the idea that tax cuts might increase revenue—that idea was well known to Calvin Coolidge, who carefully tested it in practice. It is also not true that “trading [securities] on any information not available to the public is against the law.” But none of these minor problems erode Wheelan’s basic analysis Charles Wheelan is the author of the best-selling Naked Statistics and Naked Economics and is a former correspondent for the Economist. He teaches public policy at Dartmouth College and lives in Hanover, New Hampshire, with his family. Professor Keen has written a book that will shake the economics community to its core, and for good reason. It could not have been written at a better time. Programs, organizations, and systems work better when they get the incentives right. It is like rowing downstream.”