Saturday, November 03, 2012

BC2012: Economics Without Illusions by Joseph Heath

I can't believe I finished my 100th book of 2012 on November 2!

Heath is a Canadian philosophy teacher, and those traits combine to make this one of the best economics books I've read. Being Canadian offers the advantage of being outside the U.S. and able to look at our country's economics and politics without a personal stake (he also doesn't have that peculiarly American disdain for all things European). Being well versed  in philosophy gives him a different perspective on economics than traditional economists (he has pursued economics as more of a hobby rather than as a career path, much as I have (though I did ace micro and macro in college)). And being a teacher means he knows how to communicate and educate, skills that some economics authors frankly lack.

The book is subtitled "Debunking the Myths of Modern Capitalism", and Heath approaches this by addressing a dozen economic fallacies, half right-wing and half left-wing. Each fallacy serves as a jumping-off point for a broader discussion of pertinent issues. It may surprise some readers that while I am wholeheartedly liberal in most cases, economically my viewpoint is closer to the middle. Thus I enjoyed Heath's debunking at both ends of the spectrum (okay, maybe I enjoyed the right-wing debunking a little bit more). I also appreciate his acknowledgment that economic problems can be very complicated and not easily resolved by knee-jerk ideological strategies.

Some of Heath's perspectives were truly eye-opening for me. For example, he asserts that taxes are essentially club fees. When you join a health club (country club, condo association, etc.), you pay a fee that is used to maintain all the facilities whether you use them or not. Taxes are like a country's membership dues. Heath goes on to say that right wingers treat taxes as something inherently evil that acts as a drain on the economy, but that would only be the case if the government collected the money and buried it. What taxes actually do is shift spending from the individual to the government, just as health club dues shift the purchase of exercise equipment from the individual to the club. It has the same economic impact regardless of who is spending the money.* Whether Nautilus sells 100 machines to individuals or 100 machines to health clubs, it's still selling 100 machines.

Writing about the government requiring forced saving or mandatory insurance (Obamacare comes to mind), Heath makes the point that "instead of trying to fiddle with these programs to make them seem less paternalistic, a more promising strategy would be to challenge the old assumptions that fail to distinguish between institutions that tell people how to live their lives and those that help people carry through on the commitments needed to live their lives more successfully."

Economics Without Illusions is a fascinating yet somewhat disheartening book. One cannot help but wonder how much better our lives could be if we could move beyond these economic fallacies, but too many people are committed to them for one reason or another so that will never happen.

* As in most economics discussions , one has to make some assumptions for simplicity's sake. For example, this statement does not take into account that sales to health clubs might have a marketing value that individual sales do not (potential customers are more likely to see and use the equipment in health clubs than in individual homes).

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