Henderson Beats Wikipedia
By Bryan Caplan
I just got my copy of David Henderson’s Concise Encyclopedia of Economics. I’ve loved this book since the first edition, and now that I’m a contributor, I love it all it the more! But seriously, this book is fun to read. Henderson’s editorial vision puts it several cuts above reading comparable Wikipedia entries.
A perhaps more important question is what are the systematic weaknesses of economists?
As we saw when elite American economists were given a chance to play a major role in Russia in the 1990s and ended up contributing to one of the worst human catastrophes of our generation, the myth of the rational economist is one that desperately needs debunking.
I was planning on writing a reply, until I noticed that I had pre-replied in my encyclopedia article:
Free-market reforms have been harshly criticized, especially the drastic reforms derided as “shock therapy.” But countries that reformed the most have seen the greatest rise in their standard of living, and those that resist change continue to do poorly. Critics lament large measured declines in output, but much of the “lost output” consists in products for which there was little consumer demand in the first place. Many former communist nations suffered hyper-inflation, but only because—ignoring all sensible economic advice—they printed money to cover massive budget deficits. The “shock therapy” prescription would have been to slash government spending and/or sell more state assets.
Economists are a convenient scapegoat for bad outcomes in the former Communist bloc. But what economist advised hyperinflation? What economist advised massive deficits?
It’s true that plenty of economists designed Rube Goldberg privatization schemes that were easy for political insiders to exploit. But what do you think these economists would have said if you’d recommended transparent sales to the highest bidder? Their response would have been: “That’s the best approach, but it’s politically impossible.” And they would have been right.