A book review by Senior Contributing Editor Andrew Ng, ’22

Naked Economics is a strange book. On one hand, it offers a somewhat useful and interesting introduction to basic economic concepts. But on the other hand, it is no more than a propaganda piece; like a bad sponsored Youtube video, except it’s capitalism and not Raycon earbuds sponsoring. Wheelan’s lies range from awful strawmen of alternatives to capitalism to a typical glorification of Bill Gates. Some readers might overlook these as simply par for the course for the classical economic establishment. But the real problem with Naked Economics lies in its subtitle: “undressing the dismal science.” The economics Wheelan often presents is about as far from science as Plato’s metaphysics is. Naked Economics purports to be an unbiased, neutral, and even ‘scientific’ introduction to economics. In reality, it is markedly ideological, skewed, and inaccurate. Wheelan offers some helpful explanations and his writing is generally clear (unlike the dreadful prose of The Survival of the Sickest––another awful summer reading book), but he fundamentally fails to provide the reader with anything resembling a scientific account of the dismal science. 

Because of my laundry list of grievances with Naked Economics, this review is more of a chapter-by-chapter dissection of the book rather than the sort of multi-work comparative essay I often write (see my last piece, “What Is To Be Done”). 

Wheelan’s first chapter is entitled The Power of Markets, which as you might guess, acts as a sort of advertisement for the free market, rather than a useful analysis of it. Some of his points are interesting––such as when he begins to discuss the biological basis for selfishness and altruism. Unfortunately, this analysis is painfully incomplete; if Wheelan had bothered to dig deeper, he might have found evidence that contradicts the overly rosy picture he paints of a capitalist free market. When Wheelan declares that “markets are consistent with human nature,” he fails to provide any convincing evidence whatsoever. 

Returning to Naked Economics, Wheelan provides another objectionable assertion when he states that “profit inspires some of our greatest work, even in areas like higher education, the arts, and medicine.” This is simply untrue. I will return to the topic of pharmaceutical companies and medicine later in this essay, but for now, I want to focus on art. Evidence for Wheelan’s assertion that great art is driven by the free market is scarce. Most great art produced before the development of capitalism was by artists employed by noble courts––including names from Michelangelo to Haydn. Court artists were usually paid a fixed wage and often received lifetime pensions, enabling them to pursue works of art that would be impossible in a paid-per-artwork capitalist system. Furthermore, capitalism often causes the creation of worse art––art produced simply to make money and appeal to the masses, rather than art produced for artist merit. In saying this, I do not want to denigrate art with mass appeal. I am not one of those insufferable people who believe that any non-atonal art music or non-abstract modern art is garbage––far from it. I find Rothko and 4’33” incredibly boring. But when you compare Sibelius’ great symphonies with the salon music he wrote to scrape by a living, there’s a marked difference. Profit and art are hardly the perfect match Wheelan makes them out to be.

Moving on to “Government and the Economy,” Wheelan’s third chapter, we return to the issue of big pharma I touched on earlier. Wheelan declares that “if Viagra did not get patent protection, then Pfizer would never have made the large investments that were necessary to invent the drug in the first place.” While I know absolutely nothing about Viagra in particular, Wheelan’s assertion is false when applied to pharmaceutical companies as a whole. Much advanced drug development research is funded or developed by the US government, and especially the National Institutes of Health. If you received the Moderna COVID-19 vaccine, then you can thank the NIH for partnering with Moderna to develop the shot. It is completely disingenuous to argue, as Wheelan does, that we should let Big Pharma charge exorbitantly high prices for drugs due to high research costs when many of these costs are borne by the taxpayer.

The next chapter of Naked Economics––imaginatively titled “Government and the Economy II,” contains some horrible strawman arguments. These generally revolve around a simple––yet completely false––assumption of Wheelan’s: that government is inherently corrupt and undemocratic. He asserts that “when government controls some element of the economy, scarce resources are allocated by autocrats or bureaucrats or politicians rather than by the market.” Wheelan’s strawman continues in the chapter “Financial Markets” when he claims that “capital flows to where it can earn the highest return, which is not a bad place to have it flowing (as opposed to, say, into businesses run by top communist officials or friends of the king).” For him, if the government is responsible for the allocation of resources, it will always be a corrupt process. This is often currently true in the US, was true in the USSR, and in every example Wheelan makes to back up his point. But that does not mean it is an inherent feature of government. If a government is truly democratic, then the people and not “autocrats or bureaucrats or politicians” control the allocation of resources. This is something Wheelan completely ignores. He falsely insinuates that when markets do not allocate resources, disaster and corruption always ensue. We should look for alternatives to markets that might distribute resources more equitably, rather than dismissing them as doomed to failure. The USSR failed to do this. But that should not stop us from trying. 

Wheelan makes several other inaccurate points in “Government and the Economy II”, from the usual argument against higher taxes to the usual argument against minimum wages. Needless to say, both are extreme oversimplifications that in the real world do not act as compelling evidence for lowering taxes or minimum wages. In fact, just earlier this month the Nobel Prize in economics was awarded to a group of economists whose work in field experiments included studies disproving the classical assertion that increased minimum wages will always lead to decreased employment––the same false assertion that Wheelan makes in Naked Economics. 

Later in Naked Economics, Wheelan claims that “Bill Gates . . . did not stand in the way of [the poor]’s success or benefit from their misfortunes.” This is somewhat true and somewhat false. Some of Bill Gates’s wealth is directly the result of the exploitation of his workers, just as any CEO’s accumulation of wealth is. In the capitalist system, any business leader like Gates gains wealth through this exploitation. I don’t have time to dive into the complexities of Marxist economics here––both why they can be very useful––and why they are flawed––but suffice to say that Marx would strongly disagree with Wheelan’s assertion. Further, Wheelan also asks in this same chapter whether “our free market system makes poverty inevitable?” and answers “no, no and no.” While this is true––there is an important point Wheelan completely overlooks here. In a capitalist system, while poverty is not inevitable, inequality is. Once again, a deeper dive into economic theory would be required here to fully explain my point, but the basic gist, as explained by Thomas Piketty, is as follows: R>G, or in other words, the rate of return on investment tends to be greater than the rate of growth of the economy as a whole. Thus, the wealth of individuals whose income comes primarily from investments will grow more rapidly than the wealth of individuals whose income comes primarily from wages, creating inequality. This is an oversimplification of Piketty’s theory, but my intention here is to simply point out that in claiming capitalism does not inevitably cause poverty, Wheelan overlooks the vital fact that unfettered capitalism does inevitably cause inequality. Wheelan does briefly analyze the effects of inequality, mentioning how high inequality might inhibit economic growth and how inequality affects happiness. But like his analysis of the biological basis for economics, Wheelan’s analysis here is incomplete. This would have been the perfect opportunity for an in-depth counterexample to balance the pro-free-market propaganda found throughout Naked Economics; instead, we are only left with tantalizing possibilities.

Moving on to the chapter “The Power of Organized Interests,” Wheelan’s lies strike again. This time he asks “would campaign finance reform change anything?” and responds: “at the margins, if that.” Wheelan’s argument that campaign finance reform would fail is based on his assertion that “the democratic process will always favor small, well-organized groups at the expense of large, diffuse groups.” In other words, campaign finance reforms will not eliminate the power of mohair farmers that Wheelan discusses. This is true. But the more egregious examples of corruption in the US government do not result from small organized interest groups, even if as Wheelan convincingly argues, they wield disproportionately effective power. The amount of money mohair farmers receive from the federal government pales in comparison to the amount of money the military-industrial complex receives from the government (Congress allocated approximately ​​$778 billion to the military in 2020, a large portion of which goes directly to Lockheed Martin, Boeing, Raytheon, etc.). Big Oil and Big Pharma wield far greater political power than small mohair farmers. There must be a reason why the government has yet to pass Medicare for All when according to a Pew Research poll, 63% of Americans believe “the government has the responsibility to provide health care coverage for all.” It’s not a coincidence that Big Pharma and insurance groups pour money into Super-PACs and campaign groups. Campaign finance reform would go a long way to eliminating the terrible influence of Big-Insert Industry Here in our government, even if small yet powerful groups like mohair farmers will retain the ability to influence our politics.

Wheelan raises countless other outrageous or objectionable points throughout Naked Economics but I unfortunately don’t have time to analyze them here today. Wheelan’s attempt to “undress … the dismal science” is not scientific. I don’t expect a book like this to stray too far outside mainstream economics. I wasn’t looking for an in-depth analysis of Marx. But given the rise of behavioral economics in recent years and the resurgence of Keynesian thought from the Great Recession, Wheelan spends a disturbing amount of time peddling strawmen and lies based on oversimplified classical economics. Even the infamous Paul Krugman, who Wheelan often cites, offers occasionally compelling insight despite being incredibly annoying. Joseph Stiglitz, who Wheelan also references, has written fascinating analyses of globalization Wheelan would do well to read. Even though these economists are mainstream, they offer far more compelling insight than Naked Economics. Krugman can at least recognize a great economist when he sees one, lavishing praise on the socialist Piketty’s groundbreaking Capital in the 21st Century. Wheelan does not mention Piketty once. The question remains: is a scientific summary of economics even possible? I’m not sure. But Naked Economics certainly is not a compelling attempt at one.

Andrew Ng writes about political theory, philosophy, politics, economics, science, and anthropology.



NAKED ECONOMICS

By Charles Wheelan

366 pp. W.W. Norton & Company