Naked Economics

CHARLES WHEELAN

Reviewed by Todd

The most-often quoted sentence from Peter Drucker must be this one from his 1954 book, The Practice of Management: “There is only one valid definition of a business purpose: to create a customer.” Here, Drucker found a simple way of saying what economists have said for a hundred years. In market-based economies, customers and firms are doing a dance. The former are looking to fulfill their own needs and desires, and the latter are trying to make a buck. So, if you find Drucker’s insight illuminating, then Charles Wheelan’s Naked Economics will provide your most refreshing economics lesson yet.

“Why did the chicken cross the road? Because it maximized his utility.”

Many people have a hard time understanding economics, let alone finding a useful way to apply economics in their daily lives. Much of that has to do with Econ 101 courses gone bad—the supply and demand curves, anecdotes involving firearms and dairy products, the need to fill required courses in your university curriculum. But in his introduction Wheelan describes his intent to offer something different: “This book is not economics for dummies; it is economics for smart people who never studied economics (or have only a vague recollection of doing so).” You will not find graphs, equations, or incomprehensible terms in Wheelan’s presentation of economics. Instead, you’ll find him talking about how the The Gap determines what price to charge for its new wool sweaters. Or why Burger King has the nice note at the register that says you get a free meal if you don’t get a receipt. Or what clean bathrooms, seven-days-a-week service, and consistently made hamburgers do for McDonald’s restaurants. With each of these stories, Wheelan gets you thinking about concepts such as supply and demand, incentives, and information. The concepts become tangible and relevant to everyday life, and you find that economics can give us very useful information about how people and companies make decisions.

Wheelan starts his lesson with microeconomics, covering markets and incentives. Chapters 3 and 4 cover the role of government and how markets would have a hard time existing without government. There is a chapter on the economics of information as a transition to macroeconomics in the second half of the book. Productivity, financial markets, the Federal Reserve, and globalization round out the major topics. The epilogue takes a look ahead to 2050 and encourages readers to use some of their newly gained knowledge to think about potential problems that lie ahead.

This book delivers an entire college economics course, albeit an introductory one, in 228 pages. Wheelan moves quickly and covers an expanse of ground with the goal of exposing you to the not-so-dismal science and allowing you a look at the world around you through another lens. TS

Naked Economics: Undressing the Dismal Science, W.W. Norton & Company, Paperback 2002, ISBN 9780393324860

WHERE TO NEXT? Here for application of economic theory Here for more application of economic theory Here for what the boss wants you to know | EVEN MORE: The Economic Naturalist by Robert H. Frank; New Ideas from Dead Economists by Todd G. Buchholz; The Undercover Economist by Tim Harford