Naked Economics: Undressing the Dismal Science

Naked Economics: Undressing the Dismal Science is a nonfiction book by Charles Wheelan published in 2002. The author holds a PhD from the University of Chicago and is a senior lecturer and policy fellow at Dartmouth College. Previously, he was a correspondent for the magazine The Economist. He has written a number of other books, including Naked Statistics and Naked Money. This study guide refers to the 2019 third edition of Naked Economics.

Summary

Naked Economics is Wheelan’s simplified introduction to economics—no graphs, charts, or complex mathematics. His purpose is to engage people through critical thinking and interesting ideas relevant to their lives. He covers the same material that an introductory textbook might, just with a different style and approach. The first chapter explains how markets work and touches upon fundamentals such as individuals seeking to maximize utility and businesses looking to maximize profits. Chapter 2 explains incentives and how they determine so much of human behavior. The next two chapters examine the interaction of government and the economy.

Chapter 5 looks at the role information plays in economics and what happens when there is an information differential between interested parties. The next chapter discusses productivity and human capital, two things that play a vital role in economic growth. In the seventh and eighth chapters, Wheelan reviews what economics can teach us about financial markets and how organized interests influence economics through politics, respectively. Chapter 9 covers how to measure the size of national economies and the economic well-being of a country. In Chapter 10, Wheelan explains central banking systems, particularly the United States Federal Reserve System, and the tools they have available to influence the economy when needed.

The final three chapters review international economics, starting with how economics between countries differs from economics within a single country. Chapter 12 reviews international trade and the role of globalization, and the final chapter discusses the dynamics and challenges involved in developing economies. Wheelan closes with a forward-looking epilogue that examines some of the main factors that will determine economic life in the mid-21st century.

Throughout the book, Wheelan advocates keeping markets as free and open as possible. He admits that markets are imperfect but argues they are better than the alternative. He does, however, claim that we have the power to choose what kind of society we want, which determines which “flavor” of capitalism we ultimately have. It all depends on our priorities. Using the tools of economics, most notably incentives, we can shape our world as we envision it.