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Economism: Bad Economics and the Rise of Inequality
Here is a bracing deconstruction of the framework for understanding the world that is learned as gospel in Economics 101, regardless of its imaginary assumptions and misleading half-truths.
an ideology that distorts the valid principles and tools of introductory college economics, propagated by self-styled experts, zealous lobbyists, clueless politicians, and ignorant pundits.
In order to illuminate the fallacies of economism, James Kwak first offers a primer on supply and demand, market equilibrium, and social the underpinnings of most popular economic arguments. Then he provides a historical account of how economism became a prevalent mode of thought in the United States—focusing on the people who packaged Econ 101 into sound bites that were then repeated until they took on the aura of truth. He shows us how issues of moment in contemporary American society—labor markets, taxes, finance, health care, and international trade, among others—are shaped by economism, demonstrating in each case with clarity and élan how, because of its failure to reflect the complexities of our world, economism has had a deleterious influence on policies that affect hundreds of millions of Americans.
an ideology that distorts the valid principles and tools of introductory college economics, propagated by self-styled experts, zealous lobbyists, clueless politicians, and ignorant pundits.
In order to illuminate the fallacies of economism, James Kwak first offers a primer on supply and demand, market equilibrium, and social the underpinnings of most popular economic arguments. Then he provides a historical account of how economism became a prevalent mode of thought in the United States—focusing on the people who packaged Econ 101 into sound bites that were then repeated until they took on the aura of truth. He shows us how issues of moment in contemporary American society—labor markets, taxes, finance, health care, and international trade, among others—are shaped by economism, demonstrating in each case with clarity and élan how, because of its failure to reflect the complexities of our world, economism has had a deleterious influence on policies that affect hundreds of millions of Americans.
256 pages, Paperback
First published January 1, 2017
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2030 people want to read
About the author
James Kwak
7 books35 followersJames Kwak has had a successful business career as a consultant for McKinsey & Company and as a software entrepreneur.
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Displaying 1 - 29 of 109 reviews
May 10, 2017
James Kwak emerged on the scene when it was time for Simon Johnson to expand on his seminal article in the Atlantic (the one about how our governments are “captured” by finance and about how he recognized the pattern of “capture” from his previous experience at the IMF) and turn it into a book.
Kwak was the co-author of the resulting opus, “13 Bankers.”
I enjoyed that book a lot less than the much punchier original article, but the premise behind “Economism” appealed to me enough that I thought I’d give it a try. The bar it had to clear, the previous effort by an academic economist to “debunk” economics, was the rather dreary “23 Things they don’t tell you about Capitalism” by Ha-Joon Chang.
It is a bar it clears with ease: it’s a good book, basically. It’s not a great book, though.
My spell-checker has the funky squiggly line under the word “Economism” that indicates it’s not yet a real word. Time will tell, but my view is the line will stay there. The reason I doubt the term will ever hit the mainstream is that the main argument the author makes (namely that in distilling the principles of economics into over-simplified maxims, Economics 101 has done more harm than good) leaves me unconvinced: I don’t for one second buy the argument that people who bandy about “Economics 101” as an argument in a debate or a campaign are victims of a simplistic education. Given that their ranks include my former teacher Greg Mankiw, for example, they more often than not consciously choose to misunderstand Economics.
In short, poor understanding of Economics is not the enemy. People who are guilty of what James Kwak calls “Economism” are merely being disingenuous. The problem is not “Economism,” basically: it’s politics! And there’s a lot of lying in politics.
Regardless, I recommend reading the book, because it’s a lot of fun. Once you’ve given up on the main premise, you will no longer care that many of the topics the author refers to (for example the Health Care debate, the regulation of financial products, the relative tax rates of labor and investment) never appear in introductory Economics classes and therefore fail to clear the first hurdle of the argument that is presented here. You will instead enjoy the fantastically clear exposition of the David Ricardo argument for free trade, the equally clear explanation of the cases where it falls down (with no Balassa-Samuelson mumbo jumbo thrown in), you will be reminded of those DWL triangles you may have forgotten about, and you will benefit from a crystal-clear and deep discussion of the debate around the minimum wage, one of only two issues here, alongside trade, where the premise of the book holds water, in my view.
The angle of the author is quite “liberal,” in the American sense of the word, but I promise, this does not get into the way of discussing the Economics. It’s totally first-class, crisp and level-headed.
That’s if you somehow manage to get the first one-third of the book over and done with, though. In what is a rather big weakness of this tome, pages 1-63 of the book amount to a history of right-wing funded economic think tanks in America. Seriously, nobody cares. Perhaps it could all have fitted into a long appendix to an otherwise rather interesting 127-page book. It takes somebody who’s stuck in the Tube, like I was, to read through the origins of the American Enterprise Institute, the Cato Institute etc. etc. Why why why?
And if you’re going to write a book about all that’s wrong with the mis-application of Economics today, and especially so if you’re going to do the work to explain what consumer surplus and economic rent is, why don’t you dedicate a chapter to the biggest threat we’re facing today, market power? Yes, yes, I know, this is not a case of people getting Economics 101 backwards, but, frankly, most of the book isn’t either. So get it in there, maybe in the next edition.
So I enjoyed reading “Economism.” But the term won’t stick, the first 63 pages should have been summarized in 15, max, and the choice of topics is, let us say, eclectic. It’s 3.49 stars, from where I’m sitting. Perhaps a bit harsh.
Kwak was the co-author of the resulting opus, “13 Bankers.”
I enjoyed that book a lot less than the much punchier original article, but the premise behind “Economism” appealed to me enough that I thought I’d give it a try. The bar it had to clear, the previous effort by an academic economist to “debunk” economics, was the rather dreary “23 Things they don’t tell you about Capitalism” by Ha-Joon Chang.
It is a bar it clears with ease: it’s a good book, basically. It’s not a great book, though.
My spell-checker has the funky squiggly line under the word “Economism” that indicates it’s not yet a real word. Time will tell, but my view is the line will stay there. The reason I doubt the term will ever hit the mainstream is that the main argument the author makes (namely that in distilling the principles of economics into over-simplified maxims, Economics 101 has done more harm than good) leaves me unconvinced: I don’t for one second buy the argument that people who bandy about “Economics 101” as an argument in a debate or a campaign are victims of a simplistic education. Given that their ranks include my former teacher Greg Mankiw, for example, they more often than not consciously choose to misunderstand Economics.
In short, poor understanding of Economics is not the enemy. People who are guilty of what James Kwak calls “Economism” are merely being disingenuous. The problem is not “Economism,” basically: it’s politics! And there’s a lot of lying in politics.
Regardless, I recommend reading the book, because it’s a lot of fun. Once you’ve given up on the main premise, you will no longer care that many of the topics the author refers to (for example the Health Care debate, the regulation of financial products, the relative tax rates of labor and investment) never appear in introductory Economics classes and therefore fail to clear the first hurdle of the argument that is presented here. You will instead enjoy the fantastically clear exposition of the David Ricardo argument for free trade, the equally clear explanation of the cases where it falls down (with no Balassa-Samuelson mumbo jumbo thrown in), you will be reminded of those DWL triangles you may have forgotten about, and you will benefit from a crystal-clear and deep discussion of the debate around the minimum wage, one of only two issues here, alongside trade, where the premise of the book holds water, in my view.
The angle of the author is quite “liberal,” in the American sense of the word, but I promise, this does not get into the way of discussing the Economics. It’s totally first-class, crisp and level-headed.
That’s if you somehow manage to get the first one-third of the book over and done with, though. In what is a rather big weakness of this tome, pages 1-63 of the book amount to a history of right-wing funded economic think tanks in America. Seriously, nobody cares. Perhaps it could all have fitted into a long appendix to an otherwise rather interesting 127-page book. It takes somebody who’s stuck in the Tube, like I was, to read through the origins of the American Enterprise Institute, the Cato Institute etc. etc. Why why why?
And if you’re going to write a book about all that’s wrong with the mis-application of Economics today, and especially so if you’re going to do the work to explain what consumer surplus and economic rent is, why don’t you dedicate a chapter to the biggest threat we’re facing today, market power? Yes, yes, I know, this is not a case of people getting Economics 101 backwards, but, frankly, most of the book isn’t either. So get it in there, maybe in the next edition.
So I enjoyed reading “Economism.” But the term won’t stick, the first 63 pages should have been summarized in 15, max, and the choice of topics is, let us say, eclectic. It’s 3.49 stars, from where I’m sitting. Perhaps a bit harsh.
August 13, 2018
There is a basic theory taught in introductory economics classes that goes something like this:
Maximum economic efficiency is achieved through market forces of supply and demand.
Extending this premise, the following conclusions may be (and have been) derived.
-Government intervention in free markets is detrimental.
-Regulations on business activities stifle production and innovation.
-Restrictions on the financial sector lead to misallocation of capital.
-Lowering taxes on wages incentivizes work.
-Lowering taxes on the wealthy incentivizes investment.
-A person’s earnings reflect the value of the work he or she performs.
-Raising the minimum wage makes labor more expensive and increases unemployment.
-Universal health care encourages overuse and makes it more expensive.
-Free trade unleashes market forces and therefore benefits everyone.
It all seems incredibly logical, doesn’t it? If you accept the premise of Economics 101, then the resulting conclusions must also be true. In Bad Economics and the Rise of Inequality, James Kwak, a professor at the University of Connecticut School of Law, tells us why they’re not. His goal, as he says on page 17, is “to demonstrate that an unwavering adherence to simplistic models has had a pernicious impact on debates and policies that affect hundreds of millions of people.”
Unquestioned belief in the sanctity of market forces is the foundation of an ideology, which the author calls economism.* Adherents of this belief system view real world economics through the distorting lens of the simplistic theoretical models of Economics 101. For believers, the theory remains true despite its failures when applied to complex real world situations. “Because economism’s arguments are rooted in pure theory, they can never be disproven by mere facts.” (page 152)
To me, the idea of basing national economic policies on simplified models of supply and demand is rather like basing building codes on The Three Little Pigs. Even in a hard science like physics, simple models based on established theories don’t necessarily work when applied in a real world setting. Take gravity, for example. We know that objects fall at the same rate regardless of their mass. Galileo proved this, and in a textbook situation, in a vacuum, with no other influencing forces, it holds true. But if you go outside right now and drop a feather and a bowling ball at the same time, the ball will hit the ground first. The basic physical law doesn’t yield the result the model says it should because of other factors. And this is in a case in which we are fairly sure the law is valid. This is far from true with economics.
I don’t know how many professional economists actually hold Professor Kwak’s concept of economism, but it seems as though a good many politicians do. When they argue against raising the minimum wage, or on raising taxes on the wealthy, or when opposing regulations to protect employees, consumers, or the environment, they may be basing their opinions not on fact or on history but on an unquestioned belief in the simplified models of supply and demand that they remember from Economics 101.
This book is an excellent summary of basic economic theories as well as a good explanation of when they may not apply outside a freshman classroom. I highly recommend it, especially for politicians and anyone else responsible for shaping public policy.
———————————
*I probably would have called it “faith-based economics.”
This review is also posted on the Avery Slom Philosophical Laboratory https://philosophylaboratory.wordpres...
Maximum economic efficiency is achieved through market forces of supply and demand.
Extending this premise, the following conclusions may be (and have been) derived.
-Government intervention in free markets is detrimental.
-Regulations on business activities stifle production and innovation.
-Restrictions on the financial sector lead to misallocation of capital.
-Lowering taxes on wages incentivizes work.
-Lowering taxes on the wealthy incentivizes investment.
-A person’s earnings reflect the value of the work he or she performs.
-Raising the minimum wage makes labor more expensive and increases unemployment.
-Universal health care encourages overuse and makes it more expensive.
-Free trade unleashes market forces and therefore benefits everyone.
It all seems incredibly logical, doesn’t it? If you accept the premise of Economics 101, then the resulting conclusions must also be true. In Bad Economics and the Rise of Inequality, James Kwak, a professor at the University of Connecticut School of Law, tells us why they’re not. His goal, as he says on page 17, is “to demonstrate that an unwavering adherence to simplistic models has had a pernicious impact on debates and policies that affect hundreds of millions of people.”
Unquestioned belief in the sanctity of market forces is the foundation of an ideology, which the author calls economism.* Adherents of this belief system view real world economics through the distorting lens of the simplistic theoretical models of Economics 101. For believers, the theory remains true despite its failures when applied to complex real world situations. “Because economism’s arguments are rooted in pure theory, they can never be disproven by mere facts.” (page 152)
To me, the idea of basing national economic policies on simplified models of supply and demand is rather like basing building codes on The Three Little Pigs. Even in a hard science like physics, simple models based on established theories don’t necessarily work when applied in a real world setting. Take gravity, for example. We know that objects fall at the same rate regardless of their mass. Galileo proved this, and in a textbook situation, in a vacuum, with no other influencing forces, it holds true. But if you go outside right now and drop a feather and a bowling ball at the same time, the ball will hit the ground first. The basic physical law doesn’t yield the result the model says it should because of other factors. And this is in a case in which we are fairly sure the law is valid. This is far from true with economics.
I don’t know how many professional economists actually hold Professor Kwak’s concept of economism, but it seems as though a good many politicians do. When they argue against raising the minimum wage, or on raising taxes on the wealthy, or when opposing regulations to protect employees, consumers, or the environment, they may be basing their opinions not on fact or on history but on an unquestioned belief in the simplified models of supply and demand that they remember from Economics 101.
This book is an excellent summary of basic economic theories as well as a good explanation of when they may not apply outside a freshman classroom. I highly recommend it, especially for politicians and anyone else responsible for shaping public policy.
———————————
*I probably would have called it “faith-based economics.”
This review is also posted on the Avery Slom Philosophical Laboratory https://philosophylaboratory.wordpres...
December 15, 2017
This is a short must-read. I found several of Kwak's points to be a perfect summation of our current political problems. Economism has become a dogma and I think calling it out like Kwak has done is the first step in loosening its grip from our policies.
March 22, 2018
Kwak (rhymes with rock) puts forth the theory that purely free-market economics, which he calls Economics 101, is not complex enough to explain real life. As someone used to encountering economics books that fall firmly on the Keynesian (big government) or Hayekian (free market) sides, Kwak’s perspective is refreshing. Economism is the word he uses to describe people’s picking a side—traditionally that of the free market—and sticking with it dogmatically, no matter the evidence.
February 11, 2017
A well-argued debunking of the ideology of free markets, perfect competition, and rational actors, the book explains how these have become the excuses for cruel policies leading to the impoverishment of the overwhelming majority in the USA. The book is deceptively simple in its organization: the first chapters is an overview of the book's argument, the second explains the economistic (Econ 101) model of markets and the third covers the marketing of the model. Following chapters explode, with data, economism as applied to the minimum wage, taxation, health care, the mortgage market, and international trade. The last is a summary and prospect.
The short-short summary here is that an oversimplified model of economic behavior and outcomes has become the excuse for policies which impoverish the vast majority of Americans and much of the world. When politicians say that raising the minimum wage makes people poorer, that is an economistic argument, and the data does not support it. When they say that taxation invariably decreases overall wealth, that is an economistic argument, and the data does not support it. And so on.
It is a short simple book, and the text is within the reach of any literate adult. The footnotes carry you into the economic literature, and that is not so accessible, but that is the point of such a book; to make economic conclusions and data available to the literate public without extensive study.
It's a quietly written, rather academic book — the author is a law professor — but that is, in many ways, its strength. Instead of being a loud, blatant polemic, it quietly destroys the intellectual underpinnings of US economic policy since Reagan.
Recommended.
The short-short summary here is that an oversimplified model of economic behavior and outcomes has become the excuse for policies which impoverish the vast majority of Americans and much of the world. When politicians say that raising the minimum wage makes people poorer, that is an economistic argument, and the data does not support it. When they say that taxation invariably decreases overall wealth, that is an economistic argument, and the data does not support it. And so on.
It is a short simple book, and the text is within the reach of any literate adult. The footnotes carry you into the economic literature, and that is not so accessible, but that is the point of such a book; to make economic conclusions and data available to the literate public without extensive study.
It's a quietly written, rather academic book — the author is a law professor — but that is, in many ways, its strength. Instead of being a loud, blatant polemic, it quietly destroys the intellectual underpinnings of US economic policy since Reagan.
Recommended.
May 24, 2018
Kwak sets up a straw man of economics and believes he really beats it down, but he doesn't even really do a good job of that.
Edit: I thought I was being a bit harsh with a 1 instead of 2 star, as it is at least readable. But this averages nearly 4 stars? It's a poorly thought out 'take down' of more or less a high school economics syllabus. Just because the author doesn't understand the nuances of the things he allegedly disproves doesn't mean they don't exist. If you think this was meaningful, please reevaluate what you actually understand about economics.
Edit: I thought I was being a bit harsh with a 1 instead of 2 star, as it is at least readable. But this averages nearly 4 stars? It's a poorly thought out 'take down' of more or less a high school economics syllabus. Just because the author doesn't understand the nuances of the things he allegedly disproves doesn't mean they don't exist. If you think this was meaningful, please reevaluate what you actually understand about economics.
March 23, 2025
a great basic intro to dif econ subjects incl wages, taxes, healthcare, the 2008 financial crisis, and free trade. although this book was published in 2018, its takes are still relevant as we are in the second trump administration. it gives a great look into how we need to change the healthcare market in the us and why, as well as good simple explanations for what led to the great recession. i thought the free trade chapter was particularly interesting, as trump advocates for tariffs and why the author doesn’t necessarily think that free trade is the best. def also makes me consider reading more into the healthcare market and studies of the economics of a single payer system.
February 25, 2021
This was a great book. Everyone should read it!
May 16, 2017
Economism: Bad Economics and the Rise of Inequality, by James Kwak, is an interesting look at Economics 101 principles and how prevelent they are in modern political discourse. If you have ever studied economics, introductary courses are usually basic, theoretical and idealized. One looks at supply and demand equilibrium in a small market, concepts such as price elasticity, marginal utiility and so on. These principles are useful tools to quantify and understand economic principles. Kwak takes aim at the over-use of these principles in the political sphere, looking at the uses of various economic principles, and how they are often unjustly used to argue for market-based changes in social issues. Concepts such as minimum wages and salary - based on productivity of a worker idealistically, are examined both from the theoretical economics side and from a practical side. For example, economic wisdom wuold have it that higher minimum wages leads to less jobs all around, as companies shed workers to ensure they can meet costs associated with their employees. A politician might argue for lower minimum wages to esnure greater employment for all. Kwak examines the economics 101 princples behind this theory, and why it is almost always overly-simplistic and theoretical.
Concpets in the book range from marginal utility, to supply side economics, and market based compensation packages, medical care and so on. Kwak examines the principles that are relevent in todays political landscape, and why these principles, although solid economic theory, are not necessarily the best ways to examine social and political policy. Kwak has written a level-headed, concise and interesting book. This can be easily recommended for those looking for a more neutral examination of current political hot topics in the Western world (US in particular) and in particular a critical examination of basic economic principles, and why they do not always work when implemented as social and public policy.
Concpets in the book range from marginal utility, to supply side economics, and market based compensation packages, medical care and so on. Kwak examines the principles that are relevent in todays political landscape, and why these principles, although solid economic theory, are not necessarily the best ways to examine social and political policy. Kwak has written a level-headed, concise and interesting book. This can be easily recommended for those looking for a more neutral examination of current political hot topics in the Western world (US in particular) and in particular a critical examination of basic economic principles, and why they do not always work when implemented as social and public policy.
September 25, 2018
I should have known better than to pick up a book on economics that is (a) so thin and (b) written by a lawyer with apparently no degree, training, or in-depth education in economics. The preface hints at the political motivations behind the book, inasmuch as the author yearns for the vision of FDR and calls for “the Democrats” (as opposed to all Americans) to fight for something new and better. That is a minor flaw, however, when set against the book as a whole: The author takes only the most rudimentary principles taught in the first week of Economics 101 and argues that such principles do not completely or accurately describe the world and therefore, the bulk of economic thinking must be revised. What the author ignores is that no legitimate economist stops at the first week of Economics 101. Where is the discussion of applied or advanced economics? Nowhere. This not-so-sly trick is akin to examining what is taught the first week of Biology 101 and claiming that because those basic principles do not adequately explain the diversification of life, the entire opus of evolutionary biology must be revised. As such, this book will likely appeal only to the most partisan.
June 20, 2018
Much of what is preached as economics gospel is really the abuse of primitive, Economics 101 supply and demand frameworks, to malign any and all government intervention as welfare-reducing (i.e., aggregate surplus). It's these silly models and fleeting time in economics lectures that allows people to freely dispense such wisdom as, all trade is good, all minimum wage laws are bad, all attempts to stabilize rent prices are counterproductive, and so on.
This is Economism's central critique. While the profession is fully aware that these simple models are only starting points, given advances in modeling behavioral biases, information asymmetries, consolidated market power, and a range of search/relocation frictions, the criticism is really lobbed at the pundit and business class who opportunistically repeat these mantras to cloak personal interests.
For people with limited exposure to economics, this would be an informative read and a gentle introduction to some of those basic 101 models. For people familiar with the minimum wage literature and the origins of the financial crisis, there's less of interest here. I did find the final section unpacking the distributional consequences of free trade quite compelling, especially given the empirically estimated small efficiency gains from NAFTA and TPP-like agreements.
This is Economism's central critique. While the profession is fully aware that these simple models are only starting points, given advances in modeling behavioral biases, information asymmetries, consolidated market power, and a range of search/relocation frictions, the criticism is really lobbed at the pundit and business class who opportunistically repeat these mantras to cloak personal interests.
For people with limited exposure to economics, this would be an informative read and a gentle introduction to some of those basic 101 models. For people familiar with the minimum wage literature and the origins of the financial crisis, there's less of interest here. I did find the final section unpacking the distributional consequences of free trade quite compelling, especially given the empirically estimated small efficiency gains from NAFTA and TPP-like agreements.
August 3, 2020
In a sentence: conservatives (mis)use Econ 101 to justify their bad policies and further their own interests. Pretty simple book. There are chapters on how the basic supply and demand, producer plus consumer surplus model of Econ 101, but applied in an overly simplistic literal fashion to complicated real-world policies, which Kwak calls economism, spread, and how it applies to minimum wages, taxes on the wealthy, health insurance, banking regulation, and free trade. One short intro chapter on the supply and demand model in case it's been a while/you never took econ. The book does a pretty good job dealing with the economic model on its own terms, showing how the assumptions the model makes are incorrect and lead to incorrect conclusions, and sometimes just says the model isn't relevant because efficiency isn't our only goal.
I'm not sure this book would convince a lot of people (what does?) but I could definitely see assigning it in an Econ 101 class as it illustrates the limitations of the models.
I'm not sure this book would convince a lot of people (what does?) but I could definitely see assigning it in an Econ 101 class as it illustrates the limitations of the models.
August 21, 2018
Really excellent primer as to why thinking in Econ 101 terms isn’t just simplistic, it’s bad for society as a whole. Kwak does a great job breaking down why economics is far from a hard and fast science and treating the American economic consensus as orthodoxy is a net negative for our body politic. While he definitely seems in favor of more social democrat policies, I thought he managed to critique American economic policy pretty objectively. Ultimately, his issue seems to be with anyone thinking we’ve got human behavior all figured out and that the market can solve all our woes. In this climate, those questions aren’t just important to raise, they’re essential.
July 13, 2023
Heel helder betoog.
December 19, 2017
Kwak defines economism as an idea that "reduces complicated issues to a simple abstract model that is immune to facts. Its simple, catchy arguments are not published in peer-reviewed journals, they are generated by politically-motivated think tanks, amplified by the media, repeated by lobbyists, and adopted by politicans as applause lines in stump speeches. Economism is economics 101 retold as a fable, as narratives that lodge easily in the popular consciousness."
Here's what Kewk coveres, as he summarizes near the end of the book:
Pretty much all of this is topical to the legislation and regulation battles that happened under Obama and now even more so under Trump, and have been covered heavily by the wonkier news outlets (e.g., Vox, Marginal Revolution, the Economist). This does serve as a nice summary, though.
Here's what Kewk coveres, as he summarizes near the end of the book:
IN INCOME
1. Economism's claim is that the minimum wage causes unemployment and harms poor people. The more likely reality is that the minimum wage has little impact on unemployement and reduces poverty.
2. Economism's clain that people's earnings are closely based on the value of their work. The more liekly reality is earnings are very roughly related to productivity and highly dependant on bargaining power
3. Economism's claim that reducing tax rates on labor causes people to work more, increasing economic growth. More likely reality is tax rates have a small affect on work, primarily for married women.
4. Ecomomism's claim that reducing tax rates on investments causes people to save more, increasing economic growth. More likely reality is savings rates are not affected by tax rates around current levels.
IN HEALTHCARE
5. Economism's claim is that cost sharing [with insurance] causes people to make smarter choices, reducing waste and improving health. More likely reality is cost sharing causes people to spend less on all types of care, sometimes harming their health.
6. Economism's claim is that competitive markes are the best way to give high-quailty affordable healthcare. More likely reality is countries with universal government sponsored systems have lower costs and equal or better outcomes.
IN FINANCIAL MARKETS
7. Economism's claim is that people only buy financial products that are good for them. More likely reality is many people make poor choices about complex products, such as option ARMs
8. Economism's claim is that complex financial products improve the allocation of capital. More likely reality is that extreme complexity can produce excessive risk-taking and systemmic instability
IN INTERNATIONAL TRADE
9. Economism's claim is that international trade makes everyone better off. More likely reality is that international trade may benefit people on average, but make some people much worse off.
10. Economism's claim is that free trade agreements contribute to overall prosperity. More likely reality is that some free trade agreements have less to do with free trade than with corporate rights.
Pretty much all of this is topical to the legislation and regulation battles that happened under Obama and now even more so under Trump, and have been covered heavily by the wonkier news outlets (e.g., Vox, Marginal Revolution, the Economist). This does serve as a nice summary, though.
May 30, 2017
Good overview of current uses (and mostly misuses) of economic. Specifically, how one brand of economics theory has been accepted as Gospel Truth in part because it oversimplifies things dramatically and doesn't really reflect really. Decent job by Kwak, but you can find a half-dozen other books making similar arguments.
One thing I never understood: why does he term it "Economism"? He's making up this term for it, when the ideology he's opposing already has a name: Market fundamentalism. I've seen that term used in more than a few books, and it's essentially the same thing Kwak is talking about here - but for some reason he doesn't use the term. Instead he invents his own. Huh? I kept thinking of that line from Mean Girls, "Quit trying to make `fetch' happen. It isn't going to happen."
Anyhow, regardless of if you call it economism or market fundamentalism, it's the philosophy that comes from the works of Hayek and Friedeman that stresses the efficiency of the market and how it'll always produce the best for everyone, and how any government activity to do otherwise will prove ruinous and counter-productive. (This is why everyone not named James Kwak calls it "market fundamentalism" - it assigns the same all-knowing perfection to the market that religious fundamentalists assign to the Bible and God.
Kwak also calls it the Econ 101 approach - basic things people learn in an intro-level economics course are prattled out as if holy writ. He says in the intro that he thinks five changes should be made to Econ 101: 1) people are not hyper-rational decision makers, 2) politics matter, 3) devious strategies work well, 4) income distribution can be tilted (so the market is imperfect), and 5) all property rights are not created equal.
Kwak denounces economism believers as modern day Panglossses (the character from Candide who said that whatever is, is best). The problem is that economism is based on unrealistic assumptions. Good economic analysis should note its limitations and problems in their assumptions - but that is lacking here (though not in the writings of founders like Hayek or Friedman themselves). Economic models rarely work in the real world. Kwak notes that price-gouging actually makes sense by traditional economic models, but people have to figure efficiency versus fairness.
Kwak notes that ideas matter, they shape how we view the world. The main success of economism is that it's become the prism through which so many view the world - politicians (of both parties), business leaders, pundits, and so much of the general public. Economism's power is that it is packages a particular ideology in clothing that seeming non-ideological. It rose up from the 1940s to the 1970s and finally came of age in the 1980s.
Those are the opening chapters. The rest of the book, Kwak looks at some particulars.
Economicism opposes raising (or even having) a minimum wage. They say it'll lead to more unemployment, but you look at the historical data and you don't see much of a correlation. When the US minimum wage peaked (adjusted for inflation), unemployed was and stayed low. Kwak also notes that even if there are job losses, that doesn't mean the cons outweigh the pros if it means more families can get out of poverty and pay their bills. We don't see restaurants closing down more often, it apparently just cuts into their profits. Meanwhile, since 201, the 0.1% have gained 10% of all growth in income. By economism, pay equals productivity, but there is really no reason to think the recent decades increase in executive pay matches productivity at all. He says it's just the businessman version of the Great Man Theory.
Dividends and investment taxes are lower than income taxes, because economism says it should be. The theory says that taxes ALWAYS hurt production and discourages people from working, but the evidence is meager. Warren Buffett noted that he's never seen someone turn down a wise investment because the person was afraid of being taxed for his investment. People have other motives to work - personal achievement, they like it, and they can still get richer. But it does explain why the GOP is more eager to cut taxes for the wealthy than for the middle class. Kwak notes there is a diminished margin of utility for tax cuts for the wealthy. A little less makes a bigger difference to the middle class, not to them.
Economism's attitude on health care: we have too much of it. People should bear more of the cost themselves to avoid needless use of it. They call it consumer-driven health care. Cost sharing is a big phrase - more out of cost expenses. Their magic words are choice and competition. They want to not only undo Obamacare but also gut Mediare and make it a voucher system. They like talking about a HDHP with a HSA. ... BUT health care is not a normal market. It's incurred irregularly and people often don't know what kind they need until they need it. Studies show that people lack knowledge/experience to be smart shoppers on this front. It's hard to find good info on quality/price of health care insurance costs. People often counter-productively cut back (you get less doctor visits, but more hospitalizations). In most markets, those with the most needs pay the most, but it's hard to do that here. One-fifth of those with insurance still have trouble paying costs. There is an alternate model: a universal health care system like every other industrialized country has. But that goes against economism.
Economism also opposes financial regulation despite such regulation succeeding for decades. The old system wouldn't allow the subprime mortgage crisis to exist. Legislation allowed banks to do more risk-taking and led to incentives for fraud. By pure economism, a failing business should be allowed to fail but in reality we got the phrase Too Big To Fail. The notion of economism survives the 2008 crash.
People are upset at trade deals, but economism always loves trade. To be fair, this is something everyone from Keynes to Hayek love. But the real world doesn't always go according to plan. Costs and benefits both exist - but they aren't felt equally in all places or all economic sectors. Even if you can say the pros outweigh the cons on the macro level, there are people at the micro level really suffering. NAFTA overall has had a small economic impact on the US, but in some places it has a really big impact. The biggest engine is the rise of China. TPP is not really about trade so much as it is about regulating relations between workers, consumers, companies, and governments. It's rules are mostly influenced by business interests. Most controversially, it sets up its own court system essentially to oversee disputes. This would be fully removed from national courts.
Economism ultimately benefits the wealthy and businesses. That's what it's designed to do without explictly saying that's what it's doing. But inequality itself can impact overall prosperity. We should teach economics with more historical context and not just as math. Say this for Hayek and Friedman: they realized that they needed not just a set of policies to advance but an overall worldview (and have the policies flow from that). We need a new social framework to address this. Kwak suggests focusing on the richness of life and not just the richness of the economy. (I think he means quality of life).
Decent job, though not groundbreaking. He makes some good points, especially when discussing Hayek & Friedman. But ... why make up a term to describe your topic when the term already frickin' exists?
One thing I never understood: why does he term it "Economism"? He's making up this term for it, when the ideology he's opposing already has a name: Market fundamentalism. I've seen that term used in more than a few books, and it's essentially the same thing Kwak is talking about here - but for some reason he doesn't use the term. Instead he invents his own. Huh? I kept thinking of that line from Mean Girls, "Quit trying to make `fetch' happen. It isn't going to happen."
Anyhow, regardless of if you call it economism or market fundamentalism, it's the philosophy that comes from the works of Hayek and Friedeman that stresses the efficiency of the market and how it'll always produce the best for everyone, and how any government activity to do otherwise will prove ruinous and counter-productive. (This is why everyone not named James Kwak calls it "market fundamentalism" - it assigns the same all-knowing perfection to the market that religious fundamentalists assign to the Bible and God.
Kwak also calls it the Econ 101 approach - basic things people learn in an intro-level economics course are prattled out as if holy writ. He says in the intro that he thinks five changes should be made to Econ 101: 1) people are not hyper-rational decision makers, 2) politics matter, 3) devious strategies work well, 4) income distribution can be tilted (so the market is imperfect), and 5) all property rights are not created equal.
Kwak denounces economism believers as modern day Panglossses (the character from Candide who said that whatever is, is best). The problem is that economism is based on unrealistic assumptions. Good economic analysis should note its limitations and problems in their assumptions - but that is lacking here (though not in the writings of founders like Hayek or Friedman themselves). Economic models rarely work in the real world. Kwak notes that price-gouging actually makes sense by traditional economic models, but people have to figure efficiency versus fairness.
Kwak notes that ideas matter, they shape how we view the world. The main success of economism is that it's become the prism through which so many view the world - politicians (of both parties), business leaders, pundits, and so much of the general public. Economism's power is that it is packages a particular ideology in clothing that seeming non-ideological. It rose up from the 1940s to the 1970s and finally came of age in the 1980s.
Those are the opening chapters. The rest of the book, Kwak looks at some particulars.
Economicism opposes raising (or even having) a minimum wage. They say it'll lead to more unemployment, but you look at the historical data and you don't see much of a correlation. When the US minimum wage peaked (adjusted for inflation), unemployed was and stayed low. Kwak also notes that even if there are job losses, that doesn't mean the cons outweigh the pros if it means more families can get out of poverty and pay their bills. We don't see restaurants closing down more often, it apparently just cuts into their profits. Meanwhile, since 201, the 0.1% have gained 10% of all growth in income. By economism, pay equals productivity, but there is really no reason to think the recent decades increase in executive pay matches productivity at all. He says it's just the businessman version of the Great Man Theory.
Dividends and investment taxes are lower than income taxes, because economism says it should be. The theory says that taxes ALWAYS hurt production and discourages people from working, but the evidence is meager. Warren Buffett noted that he's never seen someone turn down a wise investment because the person was afraid of being taxed for his investment. People have other motives to work - personal achievement, they like it, and they can still get richer. But it does explain why the GOP is more eager to cut taxes for the wealthy than for the middle class. Kwak notes there is a diminished margin of utility for tax cuts for the wealthy. A little less makes a bigger difference to the middle class, not to them.
Economism's attitude on health care: we have too much of it. People should bear more of the cost themselves to avoid needless use of it. They call it consumer-driven health care. Cost sharing is a big phrase - more out of cost expenses. Their magic words are choice and competition. They want to not only undo Obamacare but also gut Mediare and make it a voucher system. They like talking about a HDHP with a HSA. ... BUT health care is not a normal market. It's incurred irregularly and people often don't know what kind they need until they need it. Studies show that people lack knowledge/experience to be smart shoppers on this front. It's hard to find good info on quality/price of health care insurance costs. People often counter-productively cut back (you get less doctor visits, but more hospitalizations). In most markets, those with the most needs pay the most, but it's hard to do that here. One-fifth of those with insurance still have trouble paying costs. There is an alternate model: a universal health care system like every other industrialized country has. But that goes against economism.
Economism also opposes financial regulation despite such regulation succeeding for decades. The old system wouldn't allow the subprime mortgage crisis to exist. Legislation allowed banks to do more risk-taking and led to incentives for fraud. By pure economism, a failing business should be allowed to fail but in reality we got the phrase Too Big To Fail. The notion of economism survives the 2008 crash.
People are upset at trade deals, but economism always loves trade. To be fair, this is something everyone from Keynes to Hayek love. But the real world doesn't always go according to plan. Costs and benefits both exist - but they aren't felt equally in all places or all economic sectors. Even if you can say the pros outweigh the cons on the macro level, there are people at the micro level really suffering. NAFTA overall has had a small economic impact on the US, but in some places it has a really big impact. The biggest engine is the rise of China. TPP is not really about trade so much as it is about regulating relations between workers, consumers, companies, and governments. It's rules are mostly influenced by business interests. Most controversially, it sets up its own court system essentially to oversee disputes. This would be fully removed from national courts.
Economism ultimately benefits the wealthy and businesses. That's what it's designed to do without explictly saying that's what it's doing. But inequality itself can impact overall prosperity. We should teach economics with more historical context and not just as math. Say this for Hayek and Friedman: they realized that they needed not just a set of policies to advance but an overall worldview (and have the policies flow from that). We need a new social framework to address this. Kwak suggests focusing on the richness of life and not just the richness of the economy. (I think he means quality of life).
Decent job, though not groundbreaking. He makes some good points, especially when discussing Hayek & Friedman. But ... why make up a term to describe your topic when the term already frickin' exists?
January 6, 2024
Rating: 8.5/10
One sentence summary: highlights the ideology of economism, which distorts basic economic theory to justify social, political, and economic inequality in society
Likes
> Challenges traditional economic theory
> Almost makes a mockery of politicians, business owners, and economists who cling so tightly to basic economics to justify inequality, despite new research and studies proving otherwise
> The entire book is built on the supply and demand framework, which is the most referred to and easily skewed law of economics
> Incorporates a small amount of behavioral economics, which is important since it challenges traditional economic theory by stating that humans are highly irrational (as opposed to rational) when making financial decisions
> Challenges the "well that's the way it's always been" attitude in economics, policy, and business
Dislikes:
> Kwak could have done a better job constructing convincing arguments
> He'd spend a good chunk of the chapter thoroughly explaining traditional economic thought, only briefly explaining its errors. It should be the other way around; briefly explain traditional economic thought, then thoroughly explain its faults
> I disagree that the government should increase the tax rate (it's high enough, at least in Canada). Instead, governments should rethink the allocation of taxes and annual budgets. During economic hardships, highly used sectors (like education and welfare) are the first to receive cuts while sectors that cost the most and are sporadically used (like the military) continue to receive an excess of cash.
One sentence summary: highlights the ideology of economism, which distorts basic economic theory to justify social, political, and economic inequality in society
Likes
> Challenges traditional economic theory
> Almost makes a mockery of politicians, business owners, and economists who cling so tightly to basic economics to justify inequality, despite new research and studies proving otherwise
> The entire book is built on the supply and demand framework, which is the most referred to and easily skewed law of economics
> Incorporates a small amount of behavioral economics, which is important since it challenges traditional economic theory by stating that humans are highly irrational (as opposed to rational) when making financial decisions
> Challenges the "well that's the way it's always been" attitude in economics, policy, and business
Dislikes:
> Kwak could have done a better job constructing convincing arguments
> He'd spend a good chunk of the chapter thoroughly explaining traditional economic thought, only briefly explaining its errors. It should be the other way around; briefly explain traditional economic thought, then thoroughly explain its faults
> I disagree that the government should increase the tax rate (it's high enough, at least in Canada). Instead, governments should rethink the allocation of taxes and annual budgets. During economic hardships, highly used sectors (like education and welfare) are the first to receive cuts while sectors that cost the most and are sporadically used (like the military) continue to receive an excess of cash.
March 30, 2017
Full disclosure: James is a good friend.
But even if he weren't, I would think this book was just terrific. Clear, compelling, and persuasive, it creates both a powerful critique of economism and an effective argument for both better economic policies and a better way to look at what makes for a good society.
Highly recommended.
But even if he weren't, I would think this book was just terrific. Clear, compelling, and persuasive, it creates both a powerful critique of economism and an effective argument for both better economic policies and a better way to look at what makes for a good society.
Highly recommended.
January 2, 2021
Hablar de economía parece un completo despropósito por las circunstancias tan complejas que envuelven a cualquier ciencia social. Conforme pasan los semestres, un estudiante universitario de la carrera de economía tiene que masacrar todo lo que aprende en las materias introductorias de su pregrado.
Resulta contraintuitivo asumiendo que siempre se parten de modelos matemáticos que distan poco de la aparente perfección, en el que las palabras de oferta y demanda concretan unos precios determinados en el mercado de competencia perfecta, y cualquier anomalía, dígase impuestos, intervención gubernamental, restricción de comercio internacional, etc, resulta en una pérdida total de eficiencia, es decir, todo intento de regulación por cualquier motivo conlleva a un resultado deficiente en comparación con un mercado sin fricción alguna.
Hacer uso de esta lógica teórica en la realidad es lo que Kwak denomina 'economism', una tendencia de la mayoría de la población a emitir comentarios u opiniones con respecto a las nociones más básicas e irreales de la ciencia económica. Para el autor, lo que aquí en Colombia serían cursos de fundamentos de economía han sido los promotores del statu quo en materia económica de Estados Unidos. Desde que las raíces teóricas fueron plantadas por Samuelson, Friedman y Hayek en políticos como Margaret Thatcher o Ronald Reagan, o en eminentes personalidades de la materia como Greenspan, la opinión pública entre foros virtuales como las redes sociales, o en el foro público del a contienda política la economía no pasa de ser para el público una tendencia que debe llegar a su punto de equilibrio sin la menor complicación.
Kwak hace una revisión extensiva de literatura económica con el fin de mostrar cómo ha sido promovido este pensamiento en el pueblo americano desde la burocracia y los empresarios con el fin de evitar intervenciones en el mercado laboral, el de salud, el financiero, y el de importaciones-exportaciones. Tras una aparente lógica simplista de la economía se esconden instituciones que activamente hacen lobby para sus intereses privados en la academia, al punto de que aquel que trate rebatir dicha lógica con argumentos sólidos en favor del bienestar social es visto como un analfabeta en la materia.
Tras la lectura de este libro, y como una persona involucrada en la economía desde la academia, concluyo que se requieren capacidades pedagógicas eficientes y diferentes para desmontar lo que han sido más de cincuenta años de lobby. Si bien repito que un estudiante promedio tiene que atravesar su carrera destruyendo dicho modelo de fundamentos de economía, pareciera que en el mundo laboral un economista profesional tiene como tarea reconstruir dicho modelo y hacer caso omiso de lo que aprendió en la universidad. Grave situación.
Resulta contraintuitivo asumiendo que siempre se parten de modelos matemáticos que distan poco de la aparente perfección, en el que las palabras de oferta y demanda concretan unos precios determinados en el mercado de competencia perfecta, y cualquier anomalía, dígase impuestos, intervención gubernamental, restricción de comercio internacional, etc, resulta en una pérdida total de eficiencia, es decir, todo intento de regulación por cualquier motivo conlleva a un resultado deficiente en comparación con un mercado sin fricción alguna.
Hacer uso de esta lógica teórica en la realidad es lo que Kwak denomina 'economism', una tendencia de la mayoría de la población a emitir comentarios u opiniones con respecto a las nociones más básicas e irreales de la ciencia económica. Para el autor, lo que aquí en Colombia serían cursos de fundamentos de economía han sido los promotores del statu quo en materia económica de Estados Unidos. Desde que las raíces teóricas fueron plantadas por Samuelson, Friedman y Hayek en políticos como Margaret Thatcher o Ronald Reagan, o en eminentes personalidades de la materia como Greenspan, la opinión pública entre foros virtuales como las redes sociales, o en el foro público del a contienda política la economía no pasa de ser para el público una tendencia que debe llegar a su punto de equilibrio sin la menor complicación.
Kwak hace una revisión extensiva de literatura económica con el fin de mostrar cómo ha sido promovido este pensamiento en el pueblo americano desde la burocracia y los empresarios con el fin de evitar intervenciones en el mercado laboral, el de salud, el financiero, y el de importaciones-exportaciones. Tras una aparente lógica simplista de la economía se esconden instituciones que activamente hacen lobby para sus intereses privados en la academia, al punto de que aquel que trate rebatir dicha lógica con argumentos sólidos en favor del bienestar social es visto como un analfabeta en la materia.
Tras la lectura de este libro, y como una persona involucrada en la economía desde la academia, concluyo que se requieren capacidades pedagógicas eficientes y diferentes para desmontar lo que han sido más de cincuenta años de lobby. Si bien repito que un estudiante promedio tiene que atravesar su carrera destruyendo dicho modelo de fundamentos de economía, pareciera que en el mundo laboral un economista profesional tiene como tarea reconstruir dicho modelo y hacer caso omiso de lo que aprendió en la universidad. Grave situación.
September 8, 2022
I agree with a lot of the author says but I'm not sure I like the way he says it. In fact, this feels a little bit like a book I would write, albeit with better sources - a rant about the spread of an idea from someone who is does not have a background in the subject area. I think Kwak is mostly correct about what he says, but it would help his case with the other side if he was an economist and actually demonstrated his arguments in the language of economics rather than just citing studies.
But I think my biggest problem, or at least one of my biggest problems, is how, as a historian of ideas, he treats ideas as causal. (I am guilty of this myself which is probably why I hate when other people do it.) Kwak's history of "economism" is all about the people who propagated the ideas. To use the language of Economics 101 against him, he focuses entirely on the supply side and ignores the demand side. It feels as if he is arguing that, without Hayek et al., and without their fans in the media and politics, and without CEOs championing these ideas, they wouldn't have taken hold. I'm not sure I buy that. Are we supposed to be believe that the reaction to stagflation would have been entirely different without a culture of free market fundamentalism on one side of the political spectrum? I guess that's plausible but Kwak entirely ignores questions like that. If he honestly believes that reactions to economic problems of the last 40 years would have been different, it would help to argue the case.
And, like so many of these books, it's so US-centric. One way the case could be made better is if he compared say, the US and the UK, or the US and Canada, or the US and Australia, and showed how different political cultures had different outcomes. (There are similarities and differences and they might prove illustrative, given how much more popular "economism" is in the US.)
The book is just too short to cover these things. And that's a huge problem because it feels like Kwak is just preaching to the choir. But his stated goal is that he wants to change minds. And we're presented with something that I fear will utterly fail to do so. I can just hear the criticisms: "He's not an economist!" "People have agency! They don't believe everything they're told!"
Despite that, I do think he's mostly correct, many American people believe the world (mostly) boils down to a fake, simplistic supply/demand curve, and they're 100% wrong about that.
But I think my biggest problem, or at least one of my biggest problems, is how, as a historian of ideas, he treats ideas as causal. (I am guilty of this myself which is probably why I hate when other people do it.) Kwak's history of "economism" is all about the people who propagated the ideas. To use the language of Economics 101 against him, he focuses entirely on the supply side and ignores the demand side. It feels as if he is arguing that, without Hayek et al., and without their fans in the media and politics, and without CEOs championing these ideas, they wouldn't have taken hold. I'm not sure I buy that. Are we supposed to be believe that the reaction to stagflation would have been entirely different without a culture of free market fundamentalism on one side of the political spectrum? I guess that's plausible but Kwak entirely ignores questions like that. If he honestly believes that reactions to economic problems of the last 40 years would have been different, it would help to argue the case.
And, like so many of these books, it's so US-centric. One way the case could be made better is if he compared say, the US and the UK, or the US and Canada, or the US and Australia, and showed how different political cultures had different outcomes. (There are similarities and differences and they might prove illustrative, given how much more popular "economism" is in the US.)
The book is just too short to cover these things. And that's a huge problem because it feels like Kwak is just preaching to the choir. But his stated goal is that he wants to change minds. And we're presented with something that I fear will utterly fail to do so. I can just hear the criticisms: "He's not an economist!" "People have agency! They don't believe everything they're told!"
Despite that, I do think he's mostly correct, many American people believe the world (mostly) boils down to a fake, simplistic supply/demand curve, and they're 100% wrong about that.
October 8, 2017
Really well written and solid thinking. You can tell by the fact that economists got mad about it. Ivy tower academics that fail to consider that the world is drastically different from the models upon which they base their "theories" (that don't equal the true scientific meaning of the term theory).
The sheer volume of their reliance on a historical cannon of work by wealthy white men from eras in which women were not allowed to work (except the poor perhaps, taking in poor single men's laundry), or where women were not allowed education, or where women had no choice but to become pregnant willingly or not AND of course give birth over and over again until death. Economics casually discusses "population" in a vacuum where it is ASSUMED that women will carry on giving birth, keeping the wage slave worker force topped up to prevent workers from having the freedom to demand just compensation when the ECONOMIC MODEL is WAGE WORK or DIE.
And then the academics develop their theories to demonstrate why this exploitation of workers, especially women (whose billions of hours of unpaid labor doesn't even count in the GDP) with their double/triple/more duty as wage earner and housewife and baby factory and care giver, is justified by the this cabal of old white men of privilege as if their THEORIES have any basis in reality.
Econ 101 is a joke, a laughable game of simplifying complexity based on false assumptions, deliberate exclusion of entire sociological realities, upon which, alas, the exploitive class of the wealthy elevate the professors to positions of policy making that simply further entrenches their privilege and denies the true makers of wealth -- labor (paid and unpaid) everything they can: living wages, medical care, education, leisure, and recreation. You only are allowed to have what you can pay for and the wealthy elites and their pet Econ 101 professors push their propaganda to make sure policy making puppets fall in line and continue to criminalize poverty and legalize exploitation of people and the environment for profit. They are the true "takers" in Econ 101 despite efforts of their academic sycophants to promote the notion that the poor deserve to be poor and the wealthy are "better" people proven by the fact of their wealth. Someone needs to take a class in Logic 101.
The sheer volume of their reliance on a historical cannon of work by wealthy white men from eras in which women were not allowed to work (except the poor perhaps, taking in poor single men's laundry), or where women were not allowed education, or where women had no choice but to become pregnant willingly or not AND of course give birth over and over again until death. Economics casually discusses "population" in a vacuum where it is ASSUMED that women will carry on giving birth, keeping the wage slave worker force topped up to prevent workers from having the freedom to demand just compensation when the ECONOMIC MODEL is WAGE WORK or DIE.
And then the academics develop their theories to demonstrate why this exploitation of workers, especially women (whose billions of hours of unpaid labor doesn't even count in the GDP) with their double/triple/more duty as wage earner and housewife and baby factory and care giver, is justified by the this cabal of old white men of privilege as if their THEORIES have any basis in reality.
Econ 101 is a joke, a laughable game of simplifying complexity based on false assumptions, deliberate exclusion of entire sociological realities, upon which, alas, the exploitive class of the wealthy elevate the professors to positions of policy making that simply further entrenches their privilege and denies the true makers of wealth -- labor (paid and unpaid) everything they can: living wages, medical care, education, leisure, and recreation. You only are allowed to have what you can pay for and the wealthy elites and their pet Econ 101 professors push their propaganda to make sure policy making puppets fall in line and continue to criminalize poverty and legalize exploitation of people and the environment for profit. They are the true "takers" in Econ 101 despite efforts of their academic sycophants to promote the notion that the poor deserve to be poor and the wealthy are "better" people proven by the fact of their wealth. Someone needs to take a class in Logic 101.
May 12, 2017
The author, James Kwak, writes out an easy to follow set of examples about why economic policy is failing in this country. Economism is the term used for applying a very simplified of Econ 101 principales to everything in the world. The assumptions made by policy makers are distorted by simple thinking and a simple graph. The world of humans is messy and does not follow any consistent set of rational rules. My take is Economism is trying to make human psycology a set of logical rules. Unfortunately hilarity doesn't ensue, it is inequality.
The most hurtful part of the book, for me, is the fact that Economism thinking is social engineering over the last several decades. The corporations & rich wanted to change the mindset after World War II, that the New Deal was bad for capitalism. So they put together Economics schools to "educate" business leaders and even circuit court judges on what supply and demand means. We have a screwed up system because the masses want an easy sound bite understanding of a complex thought. The rich ensure that the Economism tilts policy thinking in their favor, thus giving justification of why the minimum wage is bad & health care for all will destory the country.
Evidence shows that a high minimum wage will benefit society and the rest of the developed world shows us what happens when everyone has access to good health care. Inequality was lowest when taxes were the highest in the US. Money flowed into education and infrastructure. Low taxes do not make anything magical happen, other than to widen the gap between rich and poor.
The book should be essential reading for any policy maker in the country. It would open their eyes to why current economic policies will generally fail. Why competition within health care makes everyone worse off. Why the 1% and the elite economics schools are lying about how humans and money actually work.
Read the book and gain a clearer perspective on how the world actually works. The author's writing style is fluid and not bogged down with dry academic jargon. My impression he made sure he could have the widest audience understand the points he puts forth.
The most hurtful part of the book, for me, is the fact that Economism thinking is social engineering over the last several decades. The corporations & rich wanted to change the mindset after World War II, that the New Deal was bad for capitalism. So they put together Economics schools to "educate" business leaders and even circuit court judges on what supply and demand means. We have a screwed up system because the masses want an easy sound bite understanding of a complex thought. The rich ensure that the Economism tilts policy thinking in their favor, thus giving justification of why the minimum wage is bad & health care for all will destory the country.
Evidence shows that a high minimum wage will benefit society and the rest of the developed world shows us what happens when everyone has access to good health care. Inequality was lowest when taxes were the highest in the US. Money flowed into education and infrastructure. Low taxes do not make anything magical happen, other than to widen the gap between rich and poor.
The book should be essential reading for any policy maker in the country. It would open their eyes to why current economic policies will generally fail. Why competition within health care makes everyone worse off. Why the 1% and the elite economics schools are lying about how humans and money actually work.
Read the book and gain a clearer perspective on how the world actually works. The author's writing style is fluid and not bogged down with dry academic jargon. My impression he made sure he could have the widest audience understand the points he puts forth.
July 17, 2025
Highly recommend this to anyone who is interested in politics, economics, business, and the like.
Kwak explains fundamental issues that persist in the way the United States props up the free competitive market model as a solution to all our problems. The idea of 'economism' in being an ideology of nativity and oversimplification of basic economic principles all in order to push self interested policy should be more well known. Reading this book while taking introduction economic courses or learning through passion, will NOT change your mind on whether or not economic fundamentals can be trusted. What we learn in these intro courses, and as Kwak also discusses, is a way to understand the basic forces of economics in capitalism. And only that - the basics. Those basics however should not be applied broadly to explain complex societal and economic issues like minimum wage, access to healthcare, taxes, and international trade. Yet unfortunately they are by most.
I have two takeaways from this book. Firstly, whatever stance you may be confident in defending in regards to an economic issue, you should take the time to research before coming to a conclusion. Second, this book lets you take in the perspective of republicanism and libertarianism values that was unknown to me. As a voter in this country, its important to understand those perspectives.
Just remember, a single term of ECON 101 does not teach you enough to truly understand what the hell you are talking about.
Kwak explains fundamental issues that persist in the way the United States props up the free competitive market model as a solution to all our problems. The idea of 'economism' in being an ideology of nativity and oversimplification of basic economic principles all in order to push self interested policy should be more well known. Reading this book while taking introduction economic courses or learning through passion, will NOT change your mind on whether or not economic fundamentals can be trusted. What we learn in these intro courses, and as Kwak also discusses, is a way to understand the basic forces of economics in capitalism. And only that - the basics. Those basics however should not be applied broadly to explain complex societal and economic issues like minimum wage, access to healthcare, taxes, and international trade. Yet unfortunately they are by most.
I have two takeaways from this book. Firstly, whatever stance you may be confident in defending in regards to an economic issue, you should take the time to research before coming to a conclusion. Second, this book lets you take in the perspective of republicanism and libertarianism values that was unknown to me. As a voter in this country, its important to understand those perspectives.
Just remember, a single term of ECON 101 does not teach you enough to truly understand what the hell you are talking about.
June 24, 2018
I was a student at the London School of Economics, economics wasn't the main focus of my study like most, but I did partake in an Economics 101 equivalent, Economics and Public Policy. I can say from personal experience that the caricature developed in the book of what is taught in Economics 101 and what is retained by most of my peers, is 100% true. At the time, I took the ideas of supply, demand, and supremacy of the markets to heart despite it's contradictions.
And boy are there contraditions. Since I left university, I have become increasingly aware of the limitations and failiures of these models to describe the real world in a meaningful way. This book goes further though to systematically decomposing the many arguments of Economism on minimum wage, health care, CEO pay, taxes, and much more.
This book does an amazing job of capturing the status of intellectual discussion about public policy and it's grounding in the simplistic, unnuanced lessons of Economic 101. Why these lessons have been supported systematically by foundations financed by large corporations. Why these ideas serve to greatly benefit the elite and wealthy.
To every student of economics in passing, or who seeks to understand the economic implications of public policy. This is a must read.
And boy are there contraditions. Since I left university, I have become increasingly aware of the limitations and failiures of these models to describe the real world in a meaningful way. This book goes further though to systematically decomposing the many arguments of Economism on minimum wage, health care, CEO pay, taxes, and much more.
This book does an amazing job of capturing the status of intellectual discussion about public policy and it's grounding in the simplistic, unnuanced lessons of Economic 101. Why these lessons have been supported systematically by foundations financed by large corporations. Why these ideas serve to greatly benefit the elite and wealthy.
To every student of economics in passing, or who seeks to understand the economic implications of public policy. This is a must read.
August 31, 2019
Was surprisingly objective for an economics book by steering clear of straw-manning and misrepresentation of the opposing viewpoints in favor of steel-manning neoclassical outlooks on the national/global economy, a feature I always look for in credible and reliable books. Did a marvelous job at addressing and rebutting economic orthodoxies that make the mistake of not accounting for various factors that might end up completely invalidating the theory. As Kwak laid out, this is apparent with subjects like the minimum wage and even more evident as you begin gravitating towards an activity as unpredictable as derivatives trading, with it’s many quarks and components on both the producer and consumer side that supply and demand curves simply don’t and cannot account for. Kwak did all of this very succinctly - in a manner that doesn’t make it a requirement for the reader to be versed in economics. This book demonstrated that almost all economic arguments that assume that any intervention in the economy is negative can be boiled down to one assumption about universal market behaviors.
I wholeheartedly enjoyed this book and I’ll be returning to it periodically for future references. Highly recommend.
I wholeheartedly enjoyed this book and I’ll be returning to it periodically for future references. Highly recommend.
July 11, 2017
About how traditional economy taught in school and nailed down in press articles and current politics is ... wrong. It's simplistic and monomaniacal and leads to poor results (inequality, financial ruin such as that in 2008, poverty etc.). About how the wealthy hijacked the political and economic system by using economics to justify their success, claiming that minimal wages are bad, increase in taxes are the worst, free trade is just for all and free medical care is horribly wrongheaded.
Beautiful explanations about how the simplistic supply/demand model does not fit real life, about how mathematical equations fail to explain people's urges and their blind spots.
"What rules the world is ideas, because ideas define the way reality is perceived" (says a Mr. Irving Kristol quoted as motto somewhere in this book). The simplified models of economy are just that - ideas, which should be up for debate as most sociological issues are; because economy is a social science after all, meaning it's irregular and unruly and creates pockets of unlawfulness if left on its own. Enjoyable reading!
Beautiful explanations about how the simplistic supply/demand model does not fit real life, about how mathematical equations fail to explain people's urges and their blind spots.
"What rules the world is ideas, because ideas define the way reality is perceived" (says a Mr. Irving Kristol quoted as motto somewhere in this book). The simplified models of economy are just that - ideas, which should be up for debate as most sociological issues are; because economy is a social science after all, meaning it's irregular and unruly and creates pockets of unlawfulness if left on its own. Enjoyable reading!
October 1, 2017
A somewhat dry exploration of an important concept, Economism is ultimately frustratingly better at explaining the positions it argues against than at making the case for the alternatives. Kwak does a good job of explaining the worldview he calls Econ 101, efficiently describing the fairytale that comes from naively applying basic supply and demand theory to very complex real-world problems. Unfortunately, Kwak is on far less firm ground when it comes to explaining how these naive stories are at best incomplete, and more often quite incorrect. He offers a mix of more nuanced economic theories and real-world stories that's well targeted, but not as well told, coming across as drier and more equivocal than the overly simple stories he's attacking. This is not a fatal flaw, and ultimately the book offers valuable explanations of where and how economism doesn't explain what it claims to -- and who benefits from this. I think the book is valuable for someone who already accepts its basic premise and who wants to arm herself with more solid arguments. But it's not going to convince many who are on the fence, and it doesn't offer the rhetorical power to drive a call to arms.
June 8, 2021
Nice, elementary (i.e., no economics knowledge required) introduction to an important topic: the abuse of "basic" economic language/theory perpetuated by "mainstream" american politicians/media in order to justify horrendous policies. Kwak baptizes the underlying ideological trend "economism", and emphasizes the fact that it uses its supposed theoretic justifications to (mostly succesfuly) "naturalize" itself.
The strongest (and perhaps of most interest) is the second section, describing the rise of the neoclassical "chicago school" and friends (Heritage foundation et al). The rest of the chapters present case studies of particular instances were economism is invoked and often cited, such as the minumum wage, taxes, and regulation of financial institutions. The book is filled with interesting anecdotes of all kinds, and the easygoing language and tone make for a quick reading, though it can get a bit repetitive.
I quite disliked the final section, whch talks about some possible futures for economism as well as hypothetical counters to its hegemony, a bit too optimistic for me. Still, it was a nice, enjoyable read.
The strongest (and perhaps of most interest) is the second section, describing the rise of the neoclassical "chicago school" and friends (Heritage foundation et al). The rest of the chapters present case studies of particular instances were economism is invoked and often cited, such as the minumum wage, taxes, and regulation of financial institutions. The book is filled with interesting anecdotes of all kinds, and the easygoing language and tone make for a quick reading, though it can get a bit repetitive.
I quite disliked the final section, whch talks about some possible futures for economism as well as hypothetical counters to its hegemony, a bit too optimistic for me. Still, it was a nice, enjoyable read.
January 1, 2018
A fluid, well-written account of how descriptions of supply and demand curves taught in Econ 101 classes fail to describe the way the economy works in the real world. After a long chapter summarizing the principles of supply and demand, he shows how textbook supply and demand justifications for wages, incentives, rational consumerism, unleashed financial capital, and comparative advantage simply fail to explain what happens when we examine the empirical data. Theory and practice are split asunder. Since most people, including politicians, rely on what they remember from Econ 101, they too often rely on solutions proven not to work. Witness the recent shameful tax bill passed by Republicans in Congress. If Kwak is right in his analysis, then we will be faced with more stagnant wages and the rich getting richer and the poor getting poorer. A virtue of the book is that Kwak unravels complicated ideas in straightforward easy-to-understand prose. Highly recommended.
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