Economics for the Rest of Us: Debunking the Science that Makes Life Dismal

by Moshe Adler

Why do contemporary economists consider food subsidies in starving countries, rent control in rich cities, and health insurance everywhere "inefficient"? Why do they feel that corporate executives deserve no less than their multimillion-dollar "compensation" packages and workers no more than their meager wages? Here is a lively and accessible debunking of the two elements that make economics the "science" of the the definition of what is efficient and the theory of how wages are determined. The first is used to justify the cruelest policies, the second grand larceny.Filled with lively examples-from food riots in Indonesia to eminent domain in Connecticut and everyone from Adam Smith to Jeremy Bentham to Larry Summers-Economics for the Rest of Us shows how today's dominant economic theories evolved, how they explicitly favor the rich over the poor, and why they're not the only or best options. Written for anyone with an interest in understanding contemporary economic thinking-and why it is dead wrong-Economics for the Rest of Us offers a foundation for a fundamentally more just economic system.

Genres: Economics, Nonfiction, Politics, Business, Education

224 pages, Hardcover

First published November 17, 2009

About the author

Moshe Adler has a Ph.D. in Economics from UCLA, a M.Sc. in Economics from the Hebrew University, and a B.Sc. in Mathematics from Tel-Aviv University. He is an Adjunct Associate Professor in Columbia University Graduate School of Architecture, Planning and Preservation's Urban Planning program and Harry Van Arsdale Jr. Center for Labor Studies at Empire State College, State University of New York.

Reviews

[Paul Eckert · Rating 3 out of 5]

Ever since the US subprime mortgage crisis, people have been falling all over themselves to write the next economic treatise about the fall of capitalism. This is not bad per se, because the self-regulating "free market" ideology has been proven false in practice, i.e. everyone working in their own self-interest does NOT always produce the best outcome. I'm not sure if Moshe Adler wrote this book to get into the market quick before it was too late, but it definitely feels rushed.

There's a lot of good information in this book, but I feel that Adler almost ruins it by trying to debunk old economic theories like Pareto efficiency and neo-classical wage theory. It's true, our current ideas about economics have been shaped by ideas like Pareto efficiency, but how many people still justify unbridled capitalism by citing Pareto? I don't even remember reading about him in any of the four economics classes I took in college. The history of wage theory was interesting, but way too long and a fruitless attempt at proving anything.

Adler often chastises the old economic theories for using examples that don't fit the circumstances, or for only citing a single example. However, Adler likewise plays similar games by using hypothetical arguments laden with assumptions and self-serving examples. There is a lot of data out there about real world happenings - if his ideas are so obviously correct, there should be some real world data to back him up. And sometimes he does provide real data, but often it seems like he found one good set of data and stuck with it to prove his point. It should have happened more than once to really convince me.

So what did I like about this book? Adler discusses issues that need to be discussed because the ideology behind them has been manipulated to favor the rich. Income taxes, for example, and the way lower tax rates don't spur the economy the way conservatives claim it does. Monopoly power and how it keeps life-saving drugs out of the hands of people that can't afford it. Funding for schools, and why those who claim "you can't throw money at schools" don't have as strong a case as they think they do. Also, a nice tip of the hat to Keynesian economics, which may yet still make a comeback in contemporary economics conversations.

Overall, I felt like Adler's book was too scattered, his focus too narrow, and his agenda too obvious. He may have shown how Pareto's theory works against the poor, or how neo-classical wage theory is misguided, but to me those are all mind games. Give me real world examples that have actually happened, and I'll be more convinced.

Despite its flaws, this book does have a few points to add to the conversation. However, if you want a better book on the history and flaws of American capitalism, I'd recommend How Markets Fail by John Cassidy.

[Kate · Rating 5 out of 5]

Adler's book is the perfect introduction to Economic principles that affect our daily lives. This book is ideal for anyone that wants to become a more informed citizen, critically evaluate our leader's economic decision making, or simply understand the impacts of our own decisions and ways in which we evaluate policies. I use this book to teach a basic economics course and it is invaluable to the students by providing real world examples for every concept.

If only to better understand how policy will affect your daily life, this book is a must read for anyone.

[Michael · Rating 5 out of 5]

[This article originally appeared in the Buffalo Beast]

Economics for the Rest of Us: Debunking the Science that Makes Life Dismal
Review by Michael Caigoy

Noam Chomsky is the Mick Jagger of sad mouthed intellectuals. He’s been churning out crowd pleasers since the sixties. Big auditorium anthems about massacres in the Southern Cone, US-Israeli suppression of the Palestinians, and CIA-backed coups the world over. Like Bowie and Bing Crosby, will any of us forget his stirring duet with Foucault? Or his flirtatious Sonny and Cher banter with William F. Buckley? As with Jimmy Page and P. Diddy, he's even lent street cred to young punks like Alan Dershowitz.

What’s this have to do with anything, you ask? Shut up. Don’t get ahead of me.

Sold out crowds of pale grad students, ineffectual do-gooders, and wonks from political parties so marginal the whole of their ranks could meet in a VW bug (and probably do), sit in rapt anticipation of the linguist/agitator’s words. Whisper thin men suppress their coughs and allergies, tightly wound women’s studies majors with “fuck your normativity” haircuts tremble at the suspense of his coy stammering.

After the show has reached its apex, the excitable audience graciously lavishes the anarcho-syndicalist rockstar with listless applause; it adjusts its collective sweater vest and agonizes over the question of whether getting Hegemony or Survival autographed would be tacky. As they wind out of the campus, conflicted over the carbon footprints and dubious manufacturing histories of their sensible imported sedans, a thought intrudes.

“I have no idea what to do about any of this! Everything he said plausibly describes the exploitative history of authority… but it actually seems like we’re just fucked! Forever!”

I’ll confess this has little to do with the review. Except for the last part. That impotent rage and total emotional devastation of knowing that the human experience has been a grim death march at the bayonet end of a sociopathic aristocracy — for the majority of us sad fucks — since the invention of trade. And that it will continue to be such, in perpetuity, until the selfsame majority is terminally ravaged by the tropical insects and diseases cultivated by global warming. The lucky few rabble will escape as servants, concubines, and organ banks on the spaceships — and in the Bat Caves and sea-domes — of the world’s most successful niche parasites: the elite.

I hate to ruin the ending for you; no, not of human history, but of this book. There are… no answers. Like my caricatured academic said, you are fucked. Like a, hey, what’s with all the little lightning bolts on the mooring masts, is that an iceberg, nice day for driving through Dallas in a convertible, kind of fucked. If you have any religious pretensions, I strongly suggest you try abandoning them in favor of vice and dissipation, because that’s all you got.

Unless you’re super wealthy. But if you were, you wouldn’t be reading this — and certainly not something as challenging as Economics for the Rest of Us. You’d be reading campy YA doorstops for their life-changing epiphanies (learning to “Move your cheese!” as one billionaire suggested in a mass e-mail to his inferiors).

This is a quick-read, but provides an enduring dread with its illuminations of economic and wage theories. The first thing I learned was that my ability to comprehend graphs is extremely limited. Next, I learned that an early economic theory (i.e. the one that lost) didn’t emphasize the reptilian “efficiency” so loved, and so little comprehended today. The concept of Bentham Utilitarianism considered the benefits of an economic distribution to the society it supposedly served. If moving a unit of currency from one person to another helps the latter more than it hurts the former, then why not do that? Say I have $100. If I hand (or I’m forced kicking and screaming to hand) a ranting derelict $20 so he can do what he couldn’t before: get a bump from a popular dealer spot (e.g. W 5th St in Los Angeles, by the library), I have $80 left. So I can still get four rocks for myself. It’s win-win.

Then this button-eyed prototechnocrat, Vilfredo Pareto, had his own epiphany (presumably in the same theoretical vacuum inhabited by the likes of Ayn Rand, Milton Friedman, and Alan Greenspan. Incidentally, Pareto also originated the much cited and also little comprehended “80/20 Rule”; a smug preppy meme as profound as “I’m Rick James, bitch!”). Paraphrasing the premise:

Well, what if it actually does hurt me more to give up the $20 so a dude can fix? What if my sole source of satisfaction is depriving other people of the things they enjoy or are vital to their survival? What if the only way I can get off anymore is by watching their miserable bellies bloat in the unrelenting sun? Chew on that, smartypants!

That Scrooge McDuck philosophy is pretty much how the book described Pareto Efficiency. To my “shock,” his theories form the basis of our laissez-faire utopia. A system that will definitely, any day now, stop mass murdering us with its class hostility, once socialist distortions like regulation are totally lifted. Corporations won’t just terrorize us like Somali warlords, no-siree. It's self-regulating. Trickle down economics, like Reagan said. The gold of the upper crust will shower upon us.

Wait.

Moving on to the theory of wages, the book tells us what anyone who’s ever had a boss already knows in their bones. The whole song and dance that salaries are based on productivity? Complete bullshit. Before Americans submitted themselves to be collectively spayed, neutered, sheared, and cowed into buying vapid autobiographies of Donald Trump and Jack Welch, our ancestors were acting like men and trading lead with the devious Pinkertons. Rather than lapse into a worshipful stupor, the unions knew that getting a fair wage (i.e. the kind that lets you feed each of your kids every day) came down to bargaining power. If you can inconvenience your employers enough, their fear of driving the same bimmer two days in a row will force them to the negotiation table (after a lot of workers have been clubbed to death).

There are more graphs I’m too American to understand. And then there are some purdy pictures. Like of Jeremy Bentham’s taxidermied corpse on display at University College London. An empty, withering symbol; a target of vandalism, like the promise of social mobility. There’s a charming cartoon of a Russian family trying to pull a giant turnip out of the ground, meant to illustrate an alternative theory of wages.

Like a good Chomsky lecture, Economics for the Rest of Us articulates and affirms my most cynical instincts about the world. And, like Chomsky, it offers a few perfunctory lines about how to change things, that are so vague and uninspiring you want to blow your brains out.

If anyone needs me, I’ll be at the library.

[Emily · Rating 5 out of 5]

very very good book this book discussed 2 myths that capitalists use to justify their actions a lot which is 1. that redistributing wealth is Pareto inefficient and 2. that what workers produce are equal to how much they get paid. the book also talked ab the roots of inequalities that results in ppl not being able to pay for college and old ppl not being able to retire and having to work. would recommend

[Ambrose Leung · Rating 1 out of 5]

I find this book uses a lot of specific examples to generalize. It is not so much that the examples are not relevant for their specific context, but the author's attempt to generalize is very misleading especially for readers who do not have formal economics training. I recommend NOT to read this book for those who do not have training in basic economics.

[G. Branden · Rating 3 out of 5]

Terse notes to self, in hopes that I'll come back and flesh out this review.

* Coherent, but probably too fast-paced for a novice who's never read any economics.

* The introduction of Pareto efficiency in chapter 2 is important and indeed underlies practically all that follows, but probably should have been handled more gently, with more time taken. I'm a mathy guy who's perfectly happy to see integral signs and discussions of linear spaces, and yet this material seemed to tumble headlong off the page.

* Adler seems to recognize only one form of Utilitarianism, and calls it Bentham's. However, as I understand it, J. S. Mill (also an economist) undertook significant developments of the theory, and this is nowhere discussed or alluded to.

* No bones are thrown at all here to the many Americans who have accepted (rhetorically, if not actually) the ultra-libertarian anarcho-capitalist theory of the role of government. Adler should take some time to explain why government intervention in the economy is justifiable on philosophical grounds. He gets into public vs. private goods and rivalrous vs. non-rivalrous ones, but there is not much discussion of externalities. E.g., Adler points out that clean air and water are public goods, but not that a free market system with substantial inequality will be populated by people who have no de facto recourse for cost-shifting externalities back onto those who impose them.

* There often aren't enough examples to support the arguments to my satisfaction, even where I am in sympathy with them (which is most of the time). Never cite one example when you can come up with three. Make the capitalists sound desperate when they try to refute you--make THEM pick the cherries.

* No index. Very bad.

* No recommendations for further reading.

* I'd like to see this title fleshed out as a deeper, richer book.

[Dan · Rating 4 out of 5]

There's a bit in the Maltese Falcon where Spade talks about finding a man named Flitcraft who left his family and disappeared to start another life somewhere else. When he tracks him down Flitcraft describes narrowly avoiding being killed by a falling object; he described the experience as if "somebody had taken the lid off life and let him look at the works."

That's kind of how I felt about this book. Except in this case it wasn't life, it was economics. I would have given this book five stars but I've just finished it and I'm not sure whether Adler is a crackpot. He is certainly far outside the mainstream of economic thinking. His critique of some of its basic assumptions is so fundamental (within the limits of such a short book) that it will probably either get revised to five stars or demoted to one depending on further reading. But his goal (complete refutation of neo-classical economics) is audacious and so convincingly articulated that in the first flush of exposure I want to recommend it to everyone I know--so four stars for now. Also, it serves as a kind of negative primer for some basic economics (Pareto efficiency, Kaldor-Hicks efficiency, Clark's valuation of marginal productivity of labor), with clear and cogent examples that are easy to follow as long as you read slowly.

A warning about this book: if you don't know much about economic history (like me) you'll probably end up wanting to dig up Pareto's corpse and burn it. Also, when encountering people complaining about high taxes and big government, it will be somewhat harder to resist socking them in the kisser. Maybe quite a bit harder.

[Rob · Rating 3 out of 5]

A withering condemnation of the metaphysical gymnastics that economists (the high priests of the ruling class) go through to convince the unwashed masses that this is indeed the best of all possible worlds and that in the name of efficiency their suffering must endure forever.

Of course none of their silver-tongued sophistries have an ounce of truth to them. Economic systems are arbitrarily chosen fictions that people voluntarily impose upon themselves. They are neither necessary, nor unalterable. More akin to alchemists than real scientists, economists run roughshod over any opposition by giving their specious arguments a heavy mathematical gloss which gives them a perceived aura of unquestionability. It's all a complete and utter humbug.

[John · Rating 4 out of 5]

A progressive Keynes-based primer to economics, the flip side of primers like Thomas Sowell's conservative Hayek-based Basic Economics. If you read only one side or the other, you're missing out, because each side uses sources and studies that support only their own views. This is a short book that makes the plea for more redistribution. The New Press should be ashamed that they didn't include an index.

[Lloyd Downey · Rating 5 out of 5]

An interesting book which draws a distinction between utilitarian efficiency where everybody is equally happy and Pareto efficiency where things cannot be changed in a way that will make at least one person better off without making anybody else worse off. The author suggests that the economics profession and society in general have adopted Pareto efficiency as their guiding light. But, the problem is that this can lead to outcomes that seem blatantly unfair.......Like CEO’s paying themselves outrageous amounts, against a background where, CEOs' compensation has been growing many folds faster than corporate profits since 1990. In 2007, average CEO compensation for S& P 500 CEOs was $ 10.5 million, 344 times the pay of the average worker.
I do have a bit of a problem with this book and that is that it, more or less, treats the whole field of economics as just the US economy. Fair-enough: the book is squarely focused on US readers but it is not the whole world. And for many of us, looking from the outside at the US economy and the unfairness there within society, it’s not an especially attractive scene. And not something that we aspire to.
The thrust of the book is that inequality, especially in the USA , can be sheeted home, in no small measure to this obsession with Pareto efficiency and the unwillingness of governments to make even some small group of extremely privileged people marginally worse off to improve the position of a large proportion of people who are in very poor circumstances. Inequality in the United States increased dramatically over the last twenty-five years. In 1979 the average American in the top 5 percent of the income distribution had 11 times the income of the average American in the bottom 20 percent; by 2000 the ratio was 19: 1.
Is he convincing?.....I’m not quite sure. He uses the example of rent control in New York and I’m not familiar with the situation there but I am aware that such measures always have a sting in the tail. And landlords are reluctant to invest in improvements or maintenance in rent controlled properties if they will not get rewards for this.
Lawrence Summers, was the chief economist of the World Bank from 1991 to 1993.....In an infamous 1991 internal memo he wrote, “I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.” [Might be impeccable but not nice....probably not moral]. ....Using Pareto efficiency as a yardstick, the economic logic is exactly as Summers described it. To my mind there is something really wrong when economists are recommending policies that are Pareto efficient but morally wrong....basically unfair.
Alder suggests that inequality makes the pie of things smaller, yet economists measure the size of the pie not by how much substance it contains but by its price. It is entirely possible, therefore, for economists to measure as growth what most people experience as economic decline.
Alder rather neatly sums up his arguments in the “afterword and I’ve summarised this below:
“All of us are being held hostage to a pseudoscience that perpetuates two powerful myths: the first is that economic efficiency can and should be separated from economic equity, and that any policy that would shift any of society's resources from the wealthy to the poor is
"inefficient." The second is that what a person earns, be it the meagre wage of an hourly worker or the astronomical compensation of an executive, is simply the value of the product that she has produced.
When used as the rationale for abolishing food subsidies in Indonesia neo-classical economic theories led to hunger and death.
In the United States, these theories of efficiency and wages are directly and indirectly responsible for many unhappy aspects of American life:....Tuition costs in public colleges has increased four times faster than the level of median income since 1980.
Whenever a social or economic policy that will serve the needs of ordinary people surfaces, we can be sure to find an economist standing by, poised to ask, "But is it good for the economy?" (As if "the economy" were some entity different from the best interests of the general populace.)
One of the main reasons that redistributive policies-from progressive taxes to rent control to food subsidies to Medicaid-are necessary in the first place is that modern economists have successfully sold the United States on their version of wage theory, in which workers do not earn enough to live on and executives earn obscene amounts.
The claim that a person earns an amount determined by the value of what she produces is fundamentally flawed; production is carried out by teams, and the product of one member cannot be separated from the product of the whole team.
The remedy for the rule of power is the rule of law. New laws must be developed to check the unfair distribution of the fruits of our labour.....Drastic cuts in the highest marginal tax rate following the election of President Reagan in 1980 did not cause executives to work more.
The economy is us, and we are not doing well. We need to turn economics from a weapon that is being used against us into a science that will show us how we can do better.”

Overall, I found the book slightly depressing [well it is the dismal science]. But he raises some serious issues. And I was moved by it. So five stars from me.

[Scott · Rating 5 out of 5]

Because production is carried out by teams, an individual's contribution to production, whether she is a worker, a manager, or even a piece of machinery, cannot be separated from the contribution of all of the rest of her teammates. The division of a product among those who produced it therefore cannot be determined by the process of production itself. Who then decides how the product should be divided between those who produced it? And how do they make this decision? Currently, executives are the ones who decide who gets how much, and they take the lion's share for themselves. Workers and shareholders are almost powerless. But this is not preordained. The source of executives' power lies in the fact that the ownership of corporations is diffused among many individuals. This is an inherent characteristic of large-scale production and cannot be changed. What can be changed, however, is whether executives are permitted to turn it into an advantage. It is the role of government to make sure that one person not exploit another, and, therefore, to determine the maximum ratio between the highest compensation of an executive and the lowest wage of a worker, and between the earnings of shareholders and total payments of labor. (191-192)

This book is an excellent refutation of some of the core beliefs of neoclassical economic theory. He stops short of calling neoclassical economics a religion as Michael Perelman does in The Invisible Handcuffs of Capitalism, which was published the following year, but he does hint at it in the conclusions of both his sections. "[A]s recent events have demonstrated, this human sacrifice is in vain. 'The economy' is a colossus whose pedestal is shaky largely because it rests on a concept of efficiency that renders practically all government programs inefficient" (108) is one example. The only other is "[A]rguably, the damage from the teaching of the economist's theory of wages is far greater than the damage from the teaching of creationism. Yet the theory of wages is part of economics education in any and all schools, and it continues without any notice or opposition. The reason is, of course, not hard to understand. While everyone is hurt when we teach religion and pretend it's science, not everyone is hurt when we teach economics. What workers lose, executives and capitalists gain; and it is the latter who study economics, hire economists, and endow schools" (192).

Adler's premise is that empirical data support the classical, utilitarian economics of Jeremy Bentham and David Ricardo and contradict the claims of the neoclassical economics of Vilfredo Pareto and John Bates Clark, and he uses history to show that both of them formulated their "theories" in direct attack on the working class. The immorality of Pareto is made quite bald on page ten when Adler cites a quote from Manual of Political Economy that most economists would be afraid to cite when explaining Pareto's objection to utilitarianism, "Assume a collectivity made up of a wolf and a sheep. The happiness of the wolf consists in eating the sheep, that of the sheep in not being eaten. How is this collectivity to be made happy?" If this is the basis of your argument, you might as well argue that if a poor person enjoys killing rich people, they should be allowed to do so. The de facto reverse is practically true (compare Micah Johnson to Timothy Loehmann, although Loehmann was an agent for the wealthy and not wealthy himself), and it all stems from this quotation. Pareto's argument, that redistribution of wealth via taxes could hurt the rich more than it hurts the poor, or that "a rich person derives greater utility from her last dollar may exceed the poor person's utility from the first dollar" (ibid), is absurd. Adler notes that economists do not say that this is true, only a paranoid might be, but if it were, it would contradict Bentham and make redistribution of wealth unjustified (11). This premise assumes that the wealthy are of better character than the poor, a lie that needs no further illumination here as I have covered that intensely in my review of Perelman's book. Adler summarizes Bentham, "a large difference in character between the rich and the poor was so unlikely that the government would make fewer mistakes if it operated under the assumption that the rich and the poor are similar, than if it operated under the assumption that they are fantastically different" (11-12).

Pareto did not concern himself with the question of how likely it was that redistribution would hurt the rich more than it would help the poor. For him, the theoretical possibility, no matter how remote, was reason enough to reject the lever of equality as a yardstick of economic efficiency. And based solely on this theoretical possibility, the entire economics profession removed the distribution of resources from its definition of economic efficiency and replaced it with Pareto's own definition. (12-13)

And here we see that a right-wing (as in the original definition of protection of the wealthiest over everyone else, not "conservative," or "Republican," although there is certainly overlap) view point has replaced science with pseudoscience in exactly the manner of teaching creation as science rather than religious allegory.

In order to push forward their right-wing agenda, neoclassical economists concocted the idea of the "Pareto Frontier," (shown graphically on page 22) which is nothing more than a manipulation of data to essentially say that a person who is made homeless is not made worse off by being homeless, a patently false statement that would normally get one laughed out of a university or a courtroom. It is this Pareto Frontier that is used to pseudoscientifically say that rent controlled housing is economically unsound, when the elimination of rent control has caused all housing in Boston to increase in price, which should tell any reasonable person that it should not be eliminated, as right-wingers desire, in New York City. Adler gives three reasons why the desire to eliminate rent control is problematic--it fails to address why price controls were enacted in the first place, it does not say what to do in the interim after the elimination before the "free market" can produce its abundance, and it ignores that developers generally have incentives for new construction, and that rent control laws generally are not applied to new construction (29-30).

He then lambastes right-wing nutjobs John Stossel and "Adam Smith economist" Walter Williams (often a substitute host for Rush Limbaugh when the latter is on vacation (the appellation is derived from when I listened years ago, not from Adler's book) on Primetime Live. Again, this involved manipulation.

Williams lived in Virginia, not New York, and had done no research about the housing marker in the city. In his analysis he presented no numbers about rent control in New York or in any other place in the world. Instead of giving viewers facts about rent control, host John Stossel broadcast footage of different rent-regulated buildings in NYC and Williams commented on what he saw. Stossel started by showing Williams photographs of rich and famous people who live in posh rent-stabilized apartments. He then showed his guests pictures of dilapidated buildings in the Bronx.

Stossel: Finally, the most destructive unintended consequence of rent control is that some landlords say, "If I can't raise the rent, I won't make repairs." And they don't.

Williams: Short of aerial bombardment the best way to destroy a city is rent control.

Landlords "won't make repairs"? Wasn't Williams just told of posh rent-stabilized apartments of the rich and famous, and shouldn't Stossel have concluded that what determined the condition of the buildings was not rent control but the wealth of the tenants? Anyone with knowledge about the real estate market in New York City knows the reason landlords cannot raise rents in poor neighborhoods is not rent control but . . . that the tenants are poor [...] If Stossel wanted to show viewers what an unregulated free market in housing can do to the quality of housing in New York City, he could have used the photographs in Jacob Riis's 1890 book, How the Other Half Lives. It is precisely the failure of the free market to provide acceptable quality housing to the poor that led to the creation of housing codes. (30-31)

Adler also notes Williams's failure to mention that new construction in New York City is exempt from new construction, and that new construction is booming while low income housing is being destroyed by income inequality, not rent control. When I was temping for MTA at $12.60 an hour (about $22,000 at 35 hours a week), it was impossible for me to find housing within a reasonable commute from work via public transportation that I could afford on that income without a rental subsidy, for which I received the voucher two business days after I was laid off, along with my fellow temps, all of us having college educations, one in aerospace engineering.

Adler rightly points out that developers in New York have no incentive to build low income housing, and that such housing, Stuyvesant Town/Peter Cooper Village, for example, is often converted into luxury housing, and that the prices building owners paid for rent-regulated buildings were lowered to reflect the available rental profits, all of which Williams failed to note. In spite of this, Williams is in line with 93% of economists who believe that rent regulation, in spite of empirical evidence to the contrary, reduces quality and quantity of affordable housing (32). He also debunks the claim the two made citing Mia Farrow as a wealthy abuser of rent regulation, failing to note that she has fourteen kids, many of whom are adoptees with severe disabilities and require abnormally high expenses for their care. Because of rent deregulation, the Farrows moved upstate, probably because Mia Farrow could not afford New York's astronomical market rate rents. The reality is that in 2004, rent-stablized tenants earned a median of $32,000 a year, vs. $42,000, the median for a market rate tenant (33). Now New York City's mayor makes tax incentives for "affordable housing" that bottom out at $40,000, even though the average income within the five boroughs is only $53,000 for a family of four, and spends 2/3 of its income on rent, double the national guideline. "When a policy benefits the poor, everybody is a utilitarian, calculating whether the beneficiaries are deserving. No calculations are carried out, however, when the rich gobble up the resources of society" (34). In chapter three he shows how Pareto efficiency arguments have been made that the poor eat too much and breathe too much clean air. He also cites an example in which Clarence Thomas was actually right and not playing "Uncle Tom" for Scalia, saying that the value of a home to a poor family is infinite, and no "just compensation" can be made for taking it away, while the supposedly liberal Sandra Day O'Connor got her way with "just compensation," which has been written into law in Michigan, while ignoring Thomas's concerns (50-51).

Next, Adler tackles the insane lie that is the Laffer Curve, which claims that taxing the wealthy too much reduces government revenue, showing that it has been debunked more than once by Austan Goolsbee, Richard Kogan, Peter Dreier, and others. Then he shows us that when goods are distributed on the private market, musicians make more money playing for private parties, fewer, bigger apartments; airplanes with fewer passengers, and doctors seeing a few rich patients are all more Pareto efficient than making sure that all have access to these services. He calculates 35% increases in owned apartments and a 20% increase in rental apartments if Manhattan apartments are limited to 1,200 square feet (84). He also points out the unjustifiable fact that GlaxoSmithKline has the ability to set the price of AZT, the main anti-AIDS drug, beyond the reach of millions who die because they need it, when the drug was created with taxpayer dollars by the Michigan Cancer Center and Duke University (79). Only a fool could fail to see the injustice, theft, and downright murder of the public not owning the drug for which they paid to develop.

One last point for this section is that Eric A. Hanushek of the Hoover Institute, who, surprisingly, provided his own photo for the book in spite of what Adler says about him, is the main promulgator of the idea that "You can't throw money at education," while Adler shows that close analysis of data shows that the level graphs on page 101 are misleading because of fewer high school dropouts and an increasing child poverty rate would have caused the graphs to plummet were it not for increased government funds, and that his claim requires a belief that class size does not matter, which is again debunked by empirical evidence (101-106).

This is all preparation for the main event, in which he thoroughly debunks John Bates Clark's wage theory, showing that it was developed in direct response to the Haymarket Massacre in May 1886, in which Chicago police, as the agents of wealth, gunned down countless innocent people simply for exerting their First Amendment rights to demonstrate in demand of a living wage (133-4). Adler demonstrates that neoclassical economists have no empirical grounds for separating the productivity of a worker from the team she is on. He notes that they concoct parables, citing Wikipedia (which has since been taken down, presumably for violating the "no original research" policy, but available at https://issuu.com/homeworkping/docs/1...) and SparkNotes as typical examples, to claim, as per Hal Varian's Intermediate Microeconomics, that the "law of diminishing return" is "a common feature of most production processes."

The problem with these statements is that, despite their implicit claim that they are derived from everyday experience, everyday experience actually contradicts them. First, the examples themselves do not show what the authors say they show. Dump trucks that move earth to and from construction sites travel short distances and have no use for either additional drivers or for workers to unload them. The same is true for cement trucks, since they unload their cargo automatically into concrete pumps. The marginal productivity of a second driver in all these cases would be zero, but so is the marginal product of the actual driver, because without a truck, she would not be able to deliver anything at all. How then can trucks be an example for diminishing marginal productivity of workers and for how the VMP [Value of Marginal Product] of workers explains workers' wages?
As for the Spark Notes claim--that if the marginal productivity of the second carpenter in a furniture factory is high and of the sixteenth carpenter is zero, then the marginal productivity of the workers in between must be declining gradually--this is doubtful. As the photograph below shows, carpenters work on benches and with tools, and Ricardo's dose is perhaps the best description for such a method of production. Except for differences due to individual dexterity, the marginal product of all doses is exactly the same, while the marginal product of a carpenter without a bench and tools is zero.

Even more troubling, however, is the fact that students' attention is diverted from the ubiquitous examples that are blatantly inconsistent with the VMP theory of wages. Why is it that trucks are discussed, but not taxis and buses? Is it because in these cases it is so obvious that the marginal productivities of the drivers are not separable from the capital goods they drive? Why is a parable drawn form a furniture factory when very few students have ever seen one, yet students' attention is not called to team production, even though every construction site or road that is being paved displays it so clearly? How can Varian assure his readers that declining marginal productivity is a "feature of most production processes," when most production processes that students witness every day contradict this claim?

Had students known of Clark's fear of social unrest by workers who felt exploited and of the historical events that gave rise to his fear, their antennae might have been raised. Without such discussion, they accept the diminishing VMP of labour he conjured as a scientific observation, and pass this fabrication on to their own students. (139-142)

That should be enough to disgrace any economist who has won the John Bates Clark medal in the eyes of an intelligent person.
Adler goes on to show examples of how increases in the minimum wage do not generally result increased unemployment (154-5) (although he admits that there are limits, while noting that Ricardo thought that high unemployment caused falling wages and low unemployment caused rising wages (120), shows that unemployment persists when wealthy investors refuse to invest (166-7), and debunks the concept of "efficiency wages," showing how it is simply an attack on the non-wealthy, and not based in observable fact (179). He also cites a study by David Raff showing that Alan Krueger and Larry Summers are wrong about Henry Ford paying efficiency wages, and that the higher wage did not, in fact, lead to reduced employment, but rather, increased employment (181-184). Adler repeatedly shows that a blame-the-victim mentality is constantly in place for the neoclassical economist, but that it is not grounded in facts or empirical evidence, as Adler puts it, "lacking in both theoretical merit and humanity." Adler debunks the foolish claim that unemployment is voluntary (172-4, 180-181): "The fact that they agreed gives the lie to both the claim that unemployment is voluntary and that these workers are unfit to work. Surely those who are working for a welfare check would agree to work at a higher-paying job. But nobody noticed" (173-4).

The answer to all this comes in (of all people) John Bates Clark:

The indictment that hangs over society is that of exploiting labor." "Workmen" it is said, "are regularly robbed of what they produce. This is done within the forms of law, and by the natural working of competition." If this charge were proved, every right-minded man should become a socialist; and his zeal in transforming the industrial system would then measure and express his sense of justice.

Adler has shown Clark's tests to this charge to be irrational nonsense that do not hold up under scrutiny, thus, we need to take up Clark's advice based on his and his followers' own failure to successfully challenge this charge with any valid evidence.

[Jeff Pavlick · Rating 3 out of 5]

If you're really interested in economics, I would recommend this book. However, there are many more effective books about economics out there.

- "It is the distribution of income that determines what and how much will be produced in the first place, and an unequal distribution of income often leads to a decrease in the size of the economic pie"

- "The drug companies choose to price drugs for AIDS beyond the reach of the people of the Third World because it is more profitable to sell these drugs at high prices that only people in the first world can afford, rather than sell them at low prices all over the world"

- "The transfer of a dollar from the rich person to the poor person will therefore increase the sum of utilities of these two individuals"

- "In a competitive market identical goods have an identical price"

- "When a government needs land for a project, it often chooses to condemn the houses of the poor and not just the rich, because it believes that the just compensation will be lower"

- "Competition from workers who move to cities from the countryside in the developing world, and the absence of a minimum wage law in these countries, are perhaps the main reason that wages in these countries are lower"

- "The battle for a fair distribution of products must be fought in the classroom, however, it is there that the lie that "Workers are paid what they deserve" is taught"

[Nina · Rating 4 out of 5]

Whoosh! That’s the sound of about a third of this book going over my head, but the other 2/3 was informative and thoughtful. Confirms that economics is a pseudoscience; confirms that economists formulate theories on paper with no basis in reality, and confirms they stick to their theories even when data demonstrates their thinking is incorrect. That does not stop them from advising elected officials, steering public policy, and teaching those theories in schools of economics as incontrovertible.

“’Is it good for the economy?’ The question illustrates the enormous sway of economic thinking, and is also an encapsulation of all that is wrong with it. Economists know, of course, that there is really no such thing as “the economy,” there are only people. Yet they have succeeded in obscuring this simple truth completely. News programs report hourly about the level of and changes in the levels of numerous stock indices. But about the quality of life of teachers, construction workers, health workers, or restaurant workers they report only very rarely. Have they more time to spend with their kids today than yesterday? And has the number of people with health insurance increased?”

This digital version was poorly edited. Every time there was an ellipsis, the last letter of the last word before the ellipsis was missing. Annoying!

I questioned a couple small bits of the author's thinking, but overall it was pretty good.

[Kateryna Buratynska · Rating 3 out of 5]

Moshe Adler expresses realistic opinion regarding contemporary results of economic theories, i would even say with pessimistic note. The author judged the policies that were meant to eliminate the gap between rich and poor, hence weren`t efficient. You will see questions without answers.
I agree with the author that taxes might be not that bad as we were taught they are, and implemented economic theories might need reconsideration and more empirical evidence. Yet, most of the time when economy require actions there is not much time for double checking. We have a book of historical events, thanks to our spiral history and modern technological advances, we have where to turn for empirical objective advice.
If you study economics and read Varian, i would recommend to read this book as an additional source. If you don`t have a background in economics, some terms in the book might be difficult to understand. Good to refresh memories about classical and neo classical economic theories.

[S Ravishankar · Rating 5 out of 5]

excellent read for anyone who wants to understand the world around us using the lens of economics. I would like to re-read this book several times to ensure the concepts are ingrained in my actions.

[Randy · Rating 5 out of 5]

It's a concise book with the necessary depth, surprisingly well written. It covers some of the very important questions in economics, well worth the time.

[Linda · Rating 4 out of 5]

Warning: Do NOT read this book until you’ve had your morning coffee and you’re awake.
That’s not because this book is difficult to understand. The writing style is very straight forward and easy to read. Adler uses excellent examples and walks you through them completely. He answers most questions we are likely to have even before we know we have them.

I took economics in college and never “got it.” I’ve tried a couple of times since then with the same result. I’ve always wondered why people were trying to make a hard science out of something that involves a volatile ingredient: human nature.

Adler begins the book by explaining the economic theory of Jeremy Bentham, an 18th century British philosopher. According to Bentham’s theory, called Utilitarianism, 1) the happiness of a society consists of the sum of the happiness of each of its members 2) an efficient allocation of resources is one that maximizes the happiness of society and 3) the happiness that a person gets from an additional dollar decreases as the number of dollars that person has increases. To follow this to its logical end, society would be completely leveled – everyone would have the same amount of “resources.”

Ok, you’ve got it now. Adler is a secret socialist advocating a complete turnover of society. He believes in income distribution and is going to show useless research that supports that. But no. (By the way, Jeremy Bentham was embalmed and his body is now is displayed as a “public sculpture” at University College London.)

Adler goes on to explain the alternate theory of the Italian economist Vilfredo Pareto that rich and poor are fundamentally different; it’s not a matter of simply how much income (resources) they have as Bentham would say. Think of Ronald Reagan’s tirades on the “welfare queens” and other “willfully unemployed” during the ‘80s.

The rest of the book goes on to show that the ideas of those who follow Pareto’s theory just don’t work. The disadvantage to the poor in society is that they are poor, not that they suffer from an innate inability to become rich. All of this is done dispassionately and with research and statistics (as well as common sense and logic) which makes you think that he is right. Adler never proselitizes for his position. He lets you make up your own mind.

If you lean towards Utilitarianism naturally, even if you never knew the term for it, you’ll pretty much agree with Adler. If you don’t it’s a good book to read to see how you can “defend” your own leanings to Pareto-ism.

But no matter what you think, you have to give the truth to the quote that Adler uses to open the book.

“But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings.”
Franklin D. Roosevelt

[Chris · Rating 4 out of 5]

Now this book may be for "the rest of us," but if you are unfamiliar with economics it takes some brain work. It isn't that Adler's writing isn't clear, but the traditional ideas in economics are pretty dry and aren't necessarily as obvious to everyone as they seem to be to Economists. It may be that the common man actually has a better, instinctive understanding of human behavior that makes him question certain assumptions in Economics. Adler does point out these assumptions and what is wrong with them.

So to paraphrase the jacket cover, this book shows how today's economic theories evolved and how they favor the rich. Helps you understand contemporary economic thinking and why it is wrong. It really does do this and isn't badly written. The author is Moshe Adler who teaches at Columbia University and the Center for Labor Studies at Empire State College. I liked his thinking and the book gave me much to ponder over and apply to what I was hearing in the media.

[Mckinley · Rating 4 out of 5]

The economy is not a person.
wrong myths: 1. economic efficiency should be separated from economic equity and 2. what a person earns is he value of the product she has produced.
No evidence that taxes do any harm to the economy (economy grew just as fast during highest tax rates 1948-81).
Wage disparities are harmful. Correct by 1. set maximum ratio for companies between highest and lowest paid employees, 2. set maximum ratio for division of labor and owners/shareholders, and 3. tie minimum wage to median wage thus making it a consistent living wage.
"We need to turn economics from a weapon that is being used against us into a science that will show us how we can do better."

See: Small Is Beautiful: Economics as if People Mattered by Schumacher,

[Rod · Rating 3 out of 5]

A brief, enlightening (to me) history of how we come to be where we are. Adler points out that what passes for natural law in current economic debate is actually something more akin to a religious fundamentalism with the shakiest (not to mention morally reprehensible) of foundations. Things don't need to be the way they are. We could structure an economy around different values. Learn about Utilitarianism. And wonder if we can ever change.

[Algernon · Rating 4 out of 5]

Written for the layman, Adler does an effective job of teaching some of the basic precepts of neoclassical economics, the prevailing paradigm and its influence on public policy.

This does require getting into some technical material about wage theories and the Pareto model of "efficiency," which are the more difficult parts of the book for readers not trained in economics. Difficult, but not impenetrable, and well worth it for understanding the substance of Adler's critique.

[Kyria · Rating 3 out of 5]

This book was okay. I'm not sure its for "the rest of us". it started off a bit heavy but I did get into it more as time went by. maybe it was the tiny graphs right from the get go. I feel like he could've made it a little easier to understand.

[David · Rating 3 out of 5]

I was attracted to this book because it was a cute little book at the bookstore. 200 pages was no big investment to learn some economics 101. As a short book would have it, though, it felt rushed. Material was sufficiently interesting, but it's a solid 3 stars

[James]

Pareto efficiency is oxymoronic

[Rebecca · Rating 4 out of 5]

effectively "a people's history of economics"...pretty enlightening journey away from the traditional, neoclassical, purely abstract junk intro classes tend to traffic in

[!Tæmbuŝu]

KOBOBOOKS

[Julie · Rating 2 out of 5]

It reads like a textbook. Informative, but requires attention. The focus is on efficiency theory and wages.

[Kafka]

recommended on Amazon by the reviewer of the Anti-Textbook

[Zachary · Rating 4 out of 5]

Compelling description of economic structural violence.

[Peter · Rating 3 out of 5]

Little bit difficult to digest, but still contain valuable information. First time i read about pareto efficiency