• Charles Wheelan: Naked Economics: Undressing the Dismal Science; Norton; 2002; 288 pp; $25.95
Charles Wheelan’s goal in writing Naked Economics was to introduce people who might otherwise have avoided economics texts and courses larded with graphs and equations to “a subject that is provocative, powerful, and highly relevant to almost every aspect of our lives.” Wheelan largely achieves his commendable goal, for Naked Economics is a nifty primer that does indeed “walk through some of the most powerful concepts in economics while simplifying the building blocks or skipping them entirely.”
Not surprisingly, since the author’s day job is writing for The Economist, the chapter on international trade is one of the book’s strongest. He begins the chapter by asking readers to imagine there is an invention that, in rich and poor countries alike, is capable of turning corn into stereo equipment, soybeans into cars, or Windows software into fine French wines. Wheelan then reveals that such an invention already exists and is trade. From that beginning, he proceeds to explain that trade makes us richer by allowing greater specialization in production, that trade is mutually beneficial because it is based on voluntary exchange, and that trade helps consumers by lowering the prices they pay for both imported and domestic goods. Not yet finished extolling the virtues of international trade, Wheelan turns to slaying the myths of “sweatshop labor” and a trade-fostered environmental “race to the bottom.”
Wheelan’s chapter “The Power of Markets” is another of his better ones. He uses the question “Who feeds Paris?” as a springboard for explaining how markets are “a powerful force for making our lives better,” how markets use “prices to allocate scarce resources,” how “markets are self-correcting,” and how “every market transaction makes all parties better off.” And readers of this magazine will be reminded of Hayek and Read when the author writes, “Prices are like giant neon billboards that flash important information.” The only significant weakness of this chapter is Wheelan’s nearly exclusive focus on market outcomes; the chapter could have been strengthened by the inclusion of more discussion about the mechanics of how markets work (i.e., what, in the parlance of graphics-laden texts, causes supply and demand curves to shift).
Although he does not credit it by name, Wheelan also provides a nice introduction to the public choice field of economics. In the chapter “The Power of Organized Interests,” he takes on pork-barrel spending and logrolling and reveals how small interests such as mohair farmers and ethanol producers can effectively wrangle beneficial legislation out of the political process. The chapter also introduces the concept of rent seeking and explains how regulations such as occupational licensing can become powerful tools for self-interested individuals to extract rewards that they would be unable to in the marketplace. Here, the author buttresses a superb conceptual discussion with several examples, including teacher certification laws.
There’s much else to like about Naked Economics. Wheelan debunks the notion that “overpopulation” hinders economic growth. He skewers the fixed number of jobs fallacy underlying France’s 35-hour workweek. The author recognizes the importance of property rights and institutions. That inflation is a tax on money holdings and the ability to use monetary policy for political purposes (the political business cycle) are both discussed. And Wheelan correctly labels Social Security “one big pyramid scheme” even though his discussion focuses more on demographic issues than on individual liberty.
Unfortunately, as Burton Malkiel notes in his foreword, Naked Economics is “well balanced.” Thus, while one does get nice treatments of markets, trade, and public choice, one must also endure drivel about SUVs, suburban sprawl, fast food, global warming, and trade-induced “cultural homogenization.” Readers sharing this magazine’s love of freedom should expect to utter an occasional groan. On the topics of externalities and macroeconomic policy in particular, Wheelan envisions a large and active role for government.
Early in the book, Wheelan writes, “Life is about trade-offs, and so is economics.” Indeed, so is Naked Economics. Although the reader must endure occasional rants about SUVs and outbursts of statism, the tradeoff is well worth it. For Wheelan has written a lively introduction to the sexiest discipline known to mankind: economics.
Frank Stephenson is an assistant professor of economics at Berry College in Rome, Ga.