Naked Economics: Undressing the Dismal Science pdfdrive com

party candidate in 1992 (when Bill Clinton and George H. W. Bush were
running as the mainstream candidates); Perot argued emphatically during the
presidential debates that the North American Free Trade Agreement would lead
to a “giant sucking sound” as jobs left the United States for Mexico. The phrase
was memorable; the economics were wrong. It didn’t happen.
The Perot campaign was, as he might have put it, “a dog that didn’t hunt.” But
that does not mean that those world leaders who do get themselves elected have
a solid grasp of basic economics. The French government in 2000 undertook a
program to tackle chronic double-digit unemployment with a policy that was the
economic equivalent of fool’s gold. The Socialist-led government lowered the
maximum workweek from thirty-nine hours to thirty-five hours; the supposed
logic was that if all people with jobs work fewer hours, then there will be work
left over for the unemployed to do. The policy did have a certain intuitive
appeal; then again, so does using leeches to suck toxins out of the body. Sadly,
neither leeches nor a shorter workweek will cause anything but harm in the long
run.
The French policy was based on the fallacy that there are a fixed number of
jobs in the economy, which must therefore be rationed. It’s utter nonsense. The
American economy has created millions of new Internet-related jobs over the
last three decades—jobs that not only didn’t exist in 1980, but that no one could
have even imagined—all without the government trying to divvy up work hours.
In 2008, the French government under Nicolas Sarkozy passed legislation
allowing companies and workers to negotiate away the thirty-five-hour
workweek, in large part because the policy did nothing to fix the unemployment
problem. No sane economist ever thought it would—which doesn’t necessarily
mean that politicians (and the people who elect them) were willing to listen to
that advice.
Which is not to say that America doesn’t have its own economic issues to deal
with. Antiglobalization protesters first took to the streets in Seattle in 1999,
smashing windows and overturning cars to protest a meeting of the World Trade
Organization. Were the protesters right? Will globalization and burgeoning
world trade ruin the environment, exploit workers in the developing world, and

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put a McDonald’s on every corner? Or was New York Times columnist Thomas
Friedman closer to the mark when he called the protesters “a Noah’s ark of flat-
earth advocates, protectionist trade unions and yuppies looking for their 1960’s
fix”?
1
During the 2008 presidential primaries, Barack Obama criticized the North
American Free Trade Agreement, which was negotiated during the presidency of
fellow Democrat Bill Clinton. Were Obama’s comments good economics, or just
good politics (since he happened to be running against Bill Clinton’s wife)?
After Chapter 12, you can decide.
I offer only one promise in this book: There will be no graphs, no charts, and
no equations. These tools have their place in economics. Indeed, mathematics
can offer a simple, even elegant way of representing the world—not unlike
telling someone that it is seventy-two degrees outside rather than having to
describe how warm or cool it feels. But at bottom, the most important ideas in
economics are intuitive. They derive their power from bringing logic and rigor to
bear on everyday problems. Consider a thought exercise proposed by Glenn
Loury, a theoretical economist at Boston University: Suppose that ten job
applicants are vying for a single position. Nine of the job candidates are white
and one is black. The hiring company has an affirmative action policy stipulating
that when minority and nonminority candidates are of equal merit, the minority
candidate will be hired.
Further suppose that there are two top candidates; one is white, the other is
black. True to policy, the firm hires the black candidate. Loury (who is black)
makes this subtle but simple point: Only one of the white candidates has suffered
from affirmative action; the other eight wouldn’t have gotten the job anyway.