Bad Economics and the Rise of InequalityBook - 2017
Economism: 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 welfare: 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 #65533;lan 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.
From the critics
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For a society to become rich, competitive markets are not enough; there must also be pluralistic, democratic political institutions that prevent elites from monopolizing power, suppressing competitors, and seizing an excessive share of resources. In this model, inequality is not a harmless by--product. . .[it] creates the risk that economic elites will dominate the political process and use their power to cement their position in society.
Within a rich country, in short, the primary winners [of foreign trade] are people who are already well-off, and therefore one result of increased trade with poor countries is greater inequality within the US workforce.
The current [health] system provides widespread but not universal access to health care by (a) selling insurance in "competitive markets," (b) forcing everyone to buy it, (c) providing subsidies to people who can't afford it, (d) limiting the policies that insurers are allowed to sell, (e) restricting their ability to set prices, (f) subsidizing employer-sponsored plans because companies can get better deals than individuals, (g) penalizing people who get plans that they don't like, (h) reshuffling money among insurance companies.
Surely, there must be another way.
a prominent tax expert has found that tax rates on capital gains have had little impact either on savings or on economic growth.
According to Economics 101, this should be impossible.
[Economism] enabled conservatives to say that they were "pro-market" rather than "antigovernment."
This confluence of ideas and interest is the fundamental reason for the rise of economism.
Ideas matter. . . . Ideas gain power precisely when they become useful to an important segment of society - when they support the interests of that group. . . .They must be refined into easily understood form, applied to the issues that people care about. . . .That. . . requires money and manpower, which will rarely be expended without the expectation of some return.
Economism matters today. . .because it is one important vehicle that interest groups have used to pursue their objectives during the past half-century.
"I suddenly saw how free-market economics provided the maximum good to the maximum number, and I became convinced that if I had the opportunity, I'd like to serve in public office and further the cause of the free market." - Jeb Hensarling (R) Texas, chair of the House Financial Services Committee.
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