April 9, 2014
Vol: 21 No: 15

Arts & Entertainment

Funny money

Book Review - Economix: How Our Economy Works (and Doesn’t Work) in Words and Pictures / By Michael Goodwin

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“Economix” is a fun book. I have never read a book on economics, whether written by a professional or a novice, which is as lucid and engaging as the book that Michael Goodwin has written. This is in no small part due to the fact that Goodwin’s book is a comic book: a book with a plethora of witty graphics and a paucity of lengthy prose. But neither is it in small part due to Goodwin’s writing and knowledge of the subject. On the contrary, Goodwin’s ability to make dry, abstract academic debates accessible and relevant gives “Economix” its true vibrancy. Where others might explain such debates through utility functions, multi-variable calculus, optimization, etc., Goodwin uses everyday examples and well-documented, historical events; where others might use a graphic representation Goodwin uses a visual comic.

The vast majority of Goodwin’s book deals with economic history, not economic theory. (And the bulk of the economic theory found is macroeconomic theory.) Goodwin starts with the economy of early 17th century Europe, rapidly summarizes U.S. economy during the 18th and 19th centuries, slows down to give a fairly thorough summary of U.S. economy during the 20th century and concludes his book by summarizing the economy in the past decade and making some suggestions on economic policy. Mixed in with all of this history are key economists such as Adam Smith, Thomas Malthus, David Ricardo, John Maynard Keynes, Friedrich Hayek and Milton Friedman, who offer their explanations of certain historical events. The most enjoyable part of the book is watching these heavy-weight economists “duke it out.” For example, British political economist Ricardo presents his theories on value and comparative advantage, which calculates which country or company has the competitive edge in producing a particular good. In response to Ricardo’s statement, Alfred Marshall, an Englishman considered to be one of the founders of economics, says, “Great is the usefulness of Ricardo’s method. But even greater are the evils which may arise from a crude application of its suggestions to real problems. For that simplicity which makes it helpful, also makes it deficient and treacherous.”

Goodwin certainly has a viewpoint throughout and is not afraid to make it known. Goodwin has a largely negative evaluation of classical and neo-classical economists, his main objections being that such economists make unrealistic assumptions when building their models and that their models are much too abstract to guide economic policy. He much more favors the work of Keynes and of non-mainstream economists. To his credit, Goodwin admits in many places that what he is saying is controversial and that readers should make up their own minds as to whether his assertions are viable.

Nevertheless, I couldn’t help but feel that he didn’t give neo-classical economists their due. Sure, neo-classical economists might make unrealistic assumptions when making models, but, as Friedman more or less put it, models should be judged by their ability to predict results rather than their assumptions. And on this score, neo-classical economists have done quite well. For instance, the Solow-Swan model of macroeconomic growth — which details the relationship among a country’s long-run economic growth, capital accumulation, population growth and technological progress — has become the gold standard in economics largely because of its record of successfully predicting results. Goodwin fails to even mention either Solow or Swan, much less their model. I suspect he fails to do so either because they are too mainstream or their work is too technical. And similar examples of such neglect abound.

Of course, expecting Goodwin to cover every bit, or even most, of neo-classical economics would be an absurd expectation. But, on the other hand, if Goodwin is to dismiss neo-classical economics as he does, we should expect a more thorough treatment of the best that neo-classical economics has to offer.

The above complaint aside, I heartily recommend this book, particularly for anyone who is unfamiliar with, or daunted by, economics. You will not find a book as readable and enjoyable on the subject. I can only hope that there will be many more books like “Economix” in the future — books aimed toward engaging and informing the average citizen on the fascinating subject of our economy.



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