Book Review: Economics Without Illusions

Economics Without Illusions: Debunking the Myths of Modern Capitalism by Joseph Heath

Note: I read the original Canadian version of this book called Filthy Lucre, but I believe aside from the name change they are the same.

Joseph Heath is a philosopher of economics and so this popular economics book is structured in a way favored by philosophers: examining and debunking fallacies. The first six chapters examine fallacies coming from the right-wing (specifically free market trumpeters and libertarians) and the next six chapters deal with left-wing fallacies (socialists or simply market-skeptics). Even among the highly educated, economics is riven with fallacious thinking perpetuated by ideological blindness, with many of the bad ideas having been debunked long ago but still being carried on by this or that proponent. Thus, I think it eminently reasonable to construct an economics book for the interested layperson around tackling such widely held beliefs.

I won’t list which fallacies are addressed, but the overall takeaway message is that it’s really, really hard to replace a competitive market with something else and have there be a net gain, even with the best intentions. Often, the alternatives leave people worse off than had they remained in a less “egalitarian” capitalist society. However, certain conditions need to be satisfied for a competitive market to function correctly and with particular emphasis on certain types of insurance the public sector is sometimes a more ideal provider than individual firms (think life insurance policies). Thus the right-wing fallacies come mostly from projecting the benefits of markets beyond what they can realistically offer and the left-wing fallacies originate from just plain misunderstanding markets.

I quite enjoyed this book and have been recommending it to my circle of friends, but I myself will need to reread the book at some point because some of the ideas are just plain hard because economics itself is hard. Interactions between people can have feedback cycles and unintended consequences, and following the causal chain of events can leave you somewhere totally unexpected. An example from the book is that philosophy professors make far more money today than they did 100 years ago even though they are not producing much more if any compared to their predecessors. The reason they are paid more is that other sectors have dramatically improved efficiencies and scaling, so that in order to prevent professors from migrating to other industries firms (ie. universities) have had to increase wages. Unless you’re extremely careful, trying to warp a market to fit some other purpose will often just cause it to rebound and smack you in the face.

The podcast Rationally Speaking interviewed Heath about the book which is where I heard of the book from and there’s also a Youtube clip of Heath discussing it with Allan Gregg.

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