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A crash course in common sense (the economics version). One thing is made astoundingly clear: economics is all about maximizing utility!

Reading Naked Economics feels like having a one-on-one Q&A session with a venerable author. The first six chapters touch upon the "essentials" of this famously dismal science: incentives, trade-offs, opportunity costs, human capital, and externalities. Wheelan spares us from having to work through potentially intimidating equations and strips economics bare so that we can develop a robust conceptual understanding of it. I particularly enjoyed sections where he explores certain paradoxes that we face as individuals and as a whole. He introduces us to the concept of perverse incentives - incentives that lead to unforeseen consequences. In a somewhat tragic way, we see how a concoction of good intention and bad policy can backfire spectacularly. For example, America's public education system is plagued by adverse selection, a form of selection that worsens an already dire situation; in this case, fixed salaries discourage a merit-based system. Good teachers aren't rewarded and, as a result, aren't compelled to stay in a profession that turns a blind eye to their potential. Underperforming teachers, on the other hand, are shielded and more likely to keep the job. Compounded onto that, American policymakers have instated more barriers for aspiring teachers to protect existing teachers from unemployment. All this inadvertently prevents the entry of talented individuals into an already compromised pool of teachers.

Reading the second half of the book feels as if I'm flipping between pages of a dictionary and a commentary. We cover fiscal and monetary policy, GDP (real and nominal) and other wealth indicators, ERM and currency (appreciation and depreciation) among many other things. Sounds dull, doesn't it? Luckily, Wheelan makes this a painless learning process with apt anecdotes and analogies. Although I could tell he is trying to lighten the mood here and there, I'm not entirely sure if his humor resonates with me (perhaps a little sarcasm just doesn't do it for me). Despite all that, I greatly appreciate his insight/criticism on tackling poverty in developing countries. Wheelan posits that developed countries are faced with the Samaritan's dilemma - an act of charity that may hinder the recipient's well-being in the long run. Paradoxically, developed countries are also thwarting economic growth in third world countries through protectionist sanctions, whether it be in the name of the environment, human rights, or poor competitiveness domestically. Commodities produced in developing countries are known to be cheaper but often expend greater amounts of energy by "inhumane" means. We may want to look beyond such shortcomings for now if we want to see these countries lifted from the merciless grip of poverty.

All in all, I think this was worth the read!