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D. Murali

NEWSPAPER and magazines can make a story of almost anything — be it a gaffe or a disaster, an event or a non-event. Thus, when a former correspondent of The Economist sits down to study `a boring, uninteresting, unclear and dismal science' that is too full of `on the one hand, on the other hand', you get something presentable as a book.

And just as a fashion designer works elaborately on a new model, before launching her nude on the ramp, Charles Wheelan undresses `the dismal science' to present Naked Economics, a publication from W. W. Norton (www.wwnorton.com).

A book recommended for "anyone who wants to gain an understanding of basic economics with little pain and much pleasure," according to Dr Gary Becker, a Nobel laureate in economics.

And there is something in the foreword by Burton G. Malkiel that can bring cheer to accountants: "An economist is someone who is good with numbers but does not have the personality to be an accountant."

Ah, what is the problem with economists? Blame would lie on their opaque writing, inscrutable diagrams, and the excessive use of mathematics, notes Malkiel, before adding one more flaw: "Moreover, they often fail to admit what they don't know." At least, we know that they don't know.

Wheelan, who goes about the job of explaining economics without graphs, charts and equations, talks in his intro of a `shame' on two levels: "First, many intellectually curious people are missing a subject that is provocative, powerful, and highly relevant to almost every aspect of our lives."

This is a subject that can offer insights into a range of problems — `from organ donation to affirmative action'. So, before you go to bed with pulp fiction or jokes for all occasions, consider what you are missing.

Well, what is the second shame? Just that many of the brightest people are economically illiterate. "The media are full of references to the powerful Alan Greenspan," writes the author. "But how many people can explain what exactly he does?" It would be no different today, when the mid-term economic review is out, and many simply file away the inputs as mumbo-jumbo.

"Economics is like gravity: Ignore it and you will be in for some rude surprises," warns Wheelan. "Economics should not be accessible only to the experts. The ideas are too important and too interesting." So, what we need, perhaps, is the de-Sanskritisation of economics.

Chapter titles are fairly straightforward — such as `Government and the economy', `Economics of information', `Trade and globalisation' and `Financial markets'. But each head has a teaser: `Who feeds Paris?', `Why you might be able to save your face by cutting off your nose', `McDonald's didn't create a better hamburger', `Why that dollar in your pocket is more than just a piece of paper', `Why is Bill Gates so much richer than you are?', and `What economics can tell us about politics'.

Wheelan's discussion swerves from Coca-Cola to Cuban cigars, from efficient market theory to checkout queues in grocery stores, from the CIA to Silicon Valley. And there are a lot of stories. For instance, to illustrate that maximising utility is not synonymous with acting selfishly, Wheelan talks about the NYT obit of a laundress who had given away $150,000 to a university to endow a scholarship for poor students.

To educate, or at least amuse, there are numerous one-liners and questions: Scientists, like bank robbers, go where the money is. In business and sports, your competitor's misfortune is your gain. If we all had Ph.D.s, who would pass out the towels at the Four Seasons? We must first define the `good life' before economics can help us get there. In the epilogue, titled `Life in 2050', the author raises seven questions worth pondering, not so much as a prediction exercise but "because the decisions we make now will affect how we live then".

One poser is about pie-slicing and poverty. "What are we willing to promise the most disadvantaged," asks the author. There is the European system which is more protective of workers, but which also leads to higher unemployment and a `sclerotic' labour market.

This is because `generous unemployment and welfare benefits make workers slower to take jobs that might be offered'. But the US believes in an entrepreneurial economy where the aim is to create a big pie and `winners get huge slices' while some don't get even the crumbs.

Another question is whether we would `use the market in imaginative ways to solve social problems'. The answer could be yes, argues Wheelan, if we "get the incentives right", as in the case of emissions trading.

There is also the question of aesthetics — and values of culture and community that may deviate from the cold logic of market theory.

These may have to be put above the pocketbook — "to protect a way of life even if it means higher taxes, more expensive food, or less economic growth". The eternal debate of whether we need a big government or a small one is an issue regarding which both extremes, right and left, have "their heads in the sand".

The very first question that Wheelan raises is: `How many minutes of work will a loaf of bread cost?' This is about productivity — if it grew at 1 per cent a year over the next half century, our standard of living should be 60 per cent higher.

How about a 2 per cent annual growth? "Then, our standard of living will nearly triple in the same time-frame." Assumption is key — that "we continue to work as hard as we do now".

However, there is a sub-question, notes the author: "How rich is rich enough?" Economists are not quite sure, as yet.

Economics@thehindu.co.in

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