Smart Economics: Commonsense Answers to 50 Questions about Government, Taxes, Business, and Households

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Smart Economics: Commonsense Answers to 50 Questions about Government, Taxes, Business, and Households by Michael L. Waiden Praeger * 2005 * 202 pages * $34.95

Reviewed by George C. Leef

Thanks to a steady diet of misinformation from teachers, politicians, and the media, most Americans believe a great many false ideas regarding the economy. Many believe, for example, that a "single-payer" health-care system would improve care and lower COStS, ancj tllat ,.J16 collecnvist pitch line "the rich are getting richer while the poor are getting poorer" is true. Ideas like that incline people toward the acceptance of policies that increase the size and power of the state - to the detriment of us all.

In an effort to counteract economic misunderstanding, North Carolina State University economics professor Michael Waiden has written Smart Economics: Commonsense Answers to 50 Questions About Government, Taxes, Business, and Households. It consists of 50 short essays, usuaUy about three pages in length, each of which takes on a common misconception rooted in people's lack of economic sophistication. The virtue of the book is that it so easily and clearly identifies the errors in reasoning that lead so many Americans astray. If everyone read and understood Smart Economics, politicians and interest groups would have a much more difficult time hoodwinking the country into supporting statist, interventionist measures.

Waiden is not trying to promote any political agenda of his own. In fact, his chief motive in writing the book is to depoliticize economic thinking. He rues the fact that partisans on the left and right use deceptive economic arguments to advance their preferences for action by the state. Waiden just wants Americans to be able to see through faUacious economic arguments.

Here's a sampling from the book.

In one chapter Waiden asks whether budget deficits cause interest rates to rise. Politicians and others who want an excuse to raise taxes often point to the massive budget deficits of the federal government and say, "If we don't do something about that, government borrowing to cover the deficit will drive up interest rates, and that would be bad." (Hardly ever do we hear the logical conclusion that the government should spend less!) Waiden demolishes the supposed connection between budget deficits and interest rates with empirical evidence (sometimes rates go down when deficits are large and sometimes they go up when deficits are small) and with economic reasoning (federal borrowing is just one of many factors that affect interest rates).

In another chapter the author tackles the notion that war is an economic stimulus. …