Free Lunch Thinking: How Economics Ruins the Economy

by Tom Bergin

Economic theories and models shape our everyday lives. They are relied on by politicians when tax rises or cuts are being considered. They inform debates about everything from bonuses for CEOs to minimum wage rates to the level of job protection enshrined in law. They determine what levels of tobacco or petrol duty are charged, and influence government approaches to issues as diverse as obesity and climate change.

The question are policy makers right to be so slavishly reliant on them? Tom Bergin is sceptical, and in  Free Lunch Thinking  he subjects eight of the most prevalent economic mantras to close scrutiny, assessing how they play out in practice. Again and again, he shows how individuals, companies and markets fail to respond to policy changes as theory predicts. He exposes the missed opportunities and wasted resources that result. And by tracing the development of key economic tenets, he demonstrates how their champions' tendency to believe in phenomena for which they have little hard evidence leaves accepted economic wisdom frequently being more about faith than facts.

His book both exposes and challenges lazy thinking. It also sets out a path for more considered future.

Genres: Economics, Nonfiction, Politics

320 pages, Paperback

Published September 3, 2020

Reviews

[Appu · Rating 3 out of 5]

The author tries to debunk some of the nostrums of Neo-classical economics.
Can reduction in tax rates lead to increase in revenue?
Does job security increase unemployment?
Does linking CEO remunerations to share prices provide more incentives for the managers?
Do sin taxes help in curbing unhealthy lifestyle choices ?
Are government regulations helpful or harmful for the economy?
Does high corporate tax prevent investment by businesses and hold back economic growth?
Neo classical economists such as Art Leafier, Ronald Coase, Milton Friedman and Robert Mundell answer these questions in the affirmative. Bergin shows that economic theory is not often vindicated by empirical evidence. For instance, lowering of corporate taxes has not resulted in increase in investments anywhere, yet this policy course is adopted frequently causing overall economic damage. Bergin pleads for flexible and pragmatic economic policies informed by theory rather than mindless application of economic theory.

[Ferdia · Rating 5 out of 5]

One of the better economics books I've read, really does the job of myth busting with good examples and evidence.

[José Pereira · Rating 4 out of 5]

Extremely enlightening and persuasive. Using empirical and historical data, Bergin shows clearly and in a very accessible way how shaky the foundations of modern economic theory are. Through a meta analysis covering decades of economic research, Bergin reveals how policies taken to be obviously correct - e.g., that higher taxes cost jobs and growth, or that labor and environmental regulations stifle the economy - hinge on ridiculous assumptions and are backed by absolutely no evidence.
The history of modern economics, as he tells it, is the history of coming up with ever more complex and arcane ways to fit real world data into fantastic models. Much of this comes from ideology and the greater power of established interests, but there is also a lot of vanity and thirst for power. Once they realised how much influence and prestige the ability to predict the social gave them, economists had all the incentives to keep defending that thorough predictions were actually possible and something accessible only to them.
Moreover, the desire to "scientifize" the discipline lead to an incredible neglect of the complexity of social life and of the relevance of other modes and methods of inquiry. Concepts like price sensitivity/elasticity were hailed as the silver bullets that matched concepts of revolutionary simplicity and explanatory power like that of natural selection. Today we know that they explain only a small part of individual and collective behaviour.
This is, therefore, and a must read for anyone wanting to get familiar with the real data and arguments behind the policies hailed by centrists, right-wingers, new-leftists, and the political-economic intelligentsia.

[Ed Stoddard · Rating 5 out of 5]

An excellent and clear-headed overview of many of the fallacies of economic theory which lead to questionable policy choices by governments. For this reader it was also a useful refresher in my high school and university economics courses. Stay tuned for my in-depth review in the Daily Maverick/Business Maverick ...

[Nicole Chung · Rating 3 out of 5]

Not quite a book I found particularly interesting :( The topics discussed were quite typical in the field of economics: taxation, labor protection, corporate taxes and investments, sin taxes, regulation, and economic growth.... the main idea of the book is basically down to the limitations and flaws of economic theories and models that attempt to explain complex economic processes, but fail to take into account the impact of human behavior influenced by factors such as culture, political and judicial institutions, mood, and love. These factors play a crucial role in shaping human economic behaviors. attempts to illustrate the dangers of relying solely on economic theories in policymaking by using examples and studies to explore the various topics covered in the book.

[Libby Andrews · Rating 4 out of 5]

Very well researched and enlightening. It’s heavy on descriptions of economic theory but really opened my eyes as to how completely wrong many theories are. Worse still many governments still follow failed theories and give too much credence to economics generally. Economists place too much emphasis on price points and fail to include the human factor or tech progress when making many of their theories. The book looked at failed theories like sin taxes (cigarettes, soft drinks etc), how corporate tax reductions do not stimulate growth and how the minimum wage doesn’t have the desired effects.

[Jacques · Rating 4 out of 5]

A very enjoyable, lucid, and challenging take on some of the biggest economic topics: minimum wages, taxes on the wealthy, sin taxes, labour laws. I love how Bergin structures each chapter, giving the economic orthodoxy, discussing the papers that purport to prove this; then showing why this orthodoxy is not necessarily correct, and pointing out the flaws in those papers.

[James Sundquist · Rating 4 out of 5]

This was a good, accessible introduction to some of the shibboleths of economics, but for me didn't go quite far enough in tearing them down by explaining some of the obvious mechanisms by which they fail, rather than just sticking to a more "evidence"-based approach which suffers from the same lack of clear causation. But well researched and written from what I could tell.

[Charles Heaney · Rating 5 out of 5]

Excellent book to get an insight on modern day politics and economics

[Kerim Ramadan · Rating 4 out of 5]

A description of some prevailing views in Economics and the data that does or doesn’t back them up. An interesting read.

[Kat · Rating 3 out of 5]

Economics is more of an ideological, political, philosophical discipline than an empirical one...

[Marta · Rating 5 out of 5]

An in-depth book that explains economic matters that affect us daily in an understandable and engaging way, while debunking neoliberal myths using facts and data.