Naked Economics – Undressing the Dismal Science 2e

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Despite our growing knowledge about public policy, good policies often don’t get implemented due to politics and interest groups. Generally, interest groups lobby for what they want (e.g. subsidies, tax breaks) or what they don’t want (e.g. protection from new technologies and international trade). 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.

In these chapters, we’ll explore how economists measure the health of an economy, what causes an economy to fall into recessions, and how governments can respond to recessions to fix them (or better yet, to prevent them). Gross Domestic Product (GDP) 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.

There are other important lessons in this book, but if you take away any two, for my money, it'd be the ones above: what a market economy is and what human capital is. Your interests may vary. More stories, this time about incentives. Why they matter and why it is hard to fix markets that have bad outcomes because of bad incentive structures. He repeats Steven Levitt's story about real estate brokers. On p. 33 (bottom) " Economics teaches us how to get incentive right." but the whole chapter is stories about how attempts to change incentives have failed. 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. A highly ideological piece masquerading as a non-controversial introduction to economics. Wheelan proclaims that economics is amoral and apolitical, and then goes on to give very detailed political descriptions about what government should be. He also seems attached to the false dichotomy of 'free' markets vs. communist state economies - though he does recognize that the neoconservative vision that markets will operate efficiently without government is, as he puts it, 'nonsense.'

Can real GDP be used to measure the well-being of a nation ? The answer is both yes and no. GDP can be used as an indicator of a nation’s well-being for a few reasons. Firstly, a nation cannot consume more than its GDP (through direct consumption and trade). As GDP per capita grows, the nation becomes richer, and the time of work needed to buy an item decreases, even though the price of the item may increase. Human 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 market economy can make our lives better, because the only way firms make profits is by delivering what we want to buy. 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 IndicatorsNaked Economics” by Charles Wheelan is a book that breaks down the complex subject of economics so that the average reader can understand what makes an economy thrive or fail. It offers clarity into the morals, ethics, and regulations associated with economic decisions. For more routine matters, parties can come to an agreement without government intervention and will reach a mutually beneficial solution. There are 2 key assumptions which explain pretty much how the world works, and why market mechanisms are so powerful. 1. Individuals Act to Maximize Utility

Increasing productivity through specialization: Trade frees people up to focus their efforts where they can be most effective. For example, if you buy a car that someone else built rather than building a car for yourself, you will not only get a better car, but you will have time to do other things that you’re better skilled at.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 The goal of global economic policy should be to make it easier for nations to cooperate with one another. The better we do it, the richer and more secure we will all be. A market is a collection of billions of separate transactions that form a complex economy in which people can earn and spend money to fund their lives. A capitalist market allocates resources by matching supply with demand, thereby directing resources to where they will be most productive. In doing so, a market improves society by increasing opportunities for people to make income and increasing the variety of goods available to consumers. Prices Reflect Supply and Demand Trade is also good for poorer countries because it is based on voluntary exchange. Voluntary exchange occurs when both parties involved in a trade are better off after the trade than they were before.

Globalization creates more opportunities for skilled workers while leaving the unskilled workers worse off in the short run, since it increases competition. But as a whole, the pie grows larger. The question is how much should we care about the size of the pieces, but there is no unanimous answer. From the producer point of view, branding also solves the problem of sale prices being pushed toward production cost because of competition. Producers can charge more for products made under a respectable brand.Naked Economics: Undressing the dismal science” is a book that points out all of the problems and tradeoffs in economics. It offers ideas from top economists on what makes an economy thrive, and it uses morals, ethics, and regulation to help explain why some industries fail or succeed. Economists use tools like indexes to predict how much money people will make. Although most economies around the world seem somewhat miserable these days, we are actually better off than other economic eras because of how globalized our economy has become. For example, if someone earns more money with one choice rather than another then they can give their values more importance over others’. When it comes time to decide how best spend ones’ resources They must understand all variables involved before making any significant decision or trading favors. The author believes there’s something missing in this equation-human emotion; this emotion leaves less room for reflection as well as challenges communication between parties when following standard protocol, which ultimately contributes to miscommunication within an economy when certain individuals know more about their motives so they choose not share them with those around them who may influence their decisions leading toward mismanagement.(excerpts) 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.