Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

How many minutes of work will a loaf of bread cost? It’s the productivity question. From a material standpoint, it’s pretty much all that matters. Nearly everything else we’ve discussed—institutions, property rights, investment, human capital—is a means toward this end (and other ends, too). If productivity grows at 1 percent a year over the next four decades, our standard of living will be some 50 percent higher by 2050. If productivity grows at 2 percent a year, then our standard of living will more than double in the same time frame—assuming we continue to work as hard as we do now. Indeed, that leads to a subquestion that I find more interesting: How rich is rich enough?

Americans are richer than most of the developed world; we also work harder, take less vacation, and retire later. Will that change? There is something in labor economics called the “backward-bending labor supply curve.” Thankfully, the idea is simpler and more interesting than the name would suggest. Economic theory predicts that as our wages go up, we will work longer hours—up to a point, and then we will begin to work less. Time becomes more important than money. Economists just aren’t quite sure where that curve starts to bend backward, or how sharply it bends.

Productivity growth gives us choices. We can continue to work the same amount while producing more. Or we can produce the same amount by working less. Or we can strike some balance. Assuming Americans continue to grow steadily more productive, will we choose to work sixty hours a week in 2050 and live richly (in a material sense) as a result? Or will there come a time when we decide to work twenty-five hours a week and listen to classical music in the park for the balance? I had dinner not long ago with a portfolio manager for a large investment company who is convinced that Americans are going to wake up one day and decide that they work too hard. Ironically, he was not planning to work less hard himself; he was planning to invest in companies that make leisure goods.

How many people will be sleeping under Wacker Drive? This is the pie-slicing question. In 2000, I was assigned by The Economist to write a story on poverty in America. With the economy still booming, I sought some way to express the striking dichotomy between America’s rich and poor. I found it right outside the front door of my office building:

A stroll down Wacker Drive, in Chicago, offers an instant snapshot of America’s surging economy. Young professionals stride along, barking orders into mobile phones. Shoppers stream towards the smart shops on Michigan Avenue. Construction cranes tower over a massive new luxury condominium building going up on the horizon. All is bustle, glitter and boom.

But there is a less glamorous side to Wacker Drive, literally below the surface. Lower Wacker is the subterranean service road that runs directly beneath its sophisticated sister, allowing delivery trucks to make their way through the bowels of the city. It is also a favourite refuge for the city’s homeless, many of whom sleep in cardboard encampments between the cement props. They are out of sight of all that gleams above, and largely out of mind. As Wacker Drive, so America.1

What are we willing to promise the most disadvantaged? The market economies of the developed world lie along a continuum, with America at one end and the relatively paternalistic European economies, such as France and Sweden, at the other. Europe offers the kinder, gentler version of a market economy—at some cost. In general, the European nations are more protective of workers and have a more substantial safety net. Generous benefits are mandated by law; health care is a birthright. This leads to a more compassionate society in many ways. European poverty rates, particularly for children, are far lower than those in the United States. Income inequality is lower, too.

It also leads to higher unemployment and a slower rate of innovation and job creation. Workers, bundled with lots of mandatory benefits, are expensive. Since employees cannot be fired easily, firms are slow to hire them in the first place. Meanwhile, generous unemployment and welfare benefits make workers slower to take jobs that might be offered. The result is what economists refer to as a “sclerotic” labor market. During normal economic times, European unemployment rates tend to be significantly higher than the American rate, particularly for youth.

The American system is a richer, more dynamic, more entrepreneurial economy—and harsher and more unequal. It is conducive to creating a big pie in which the winners get huge slices. The European system is better at guaranteeing at least some pie for everybody. Capitalism comes in all kinds of flavors. Which one will we choose?

Will we use the market in imaginative ways to solve social problems? The easiest and most effective way to get something done is to give the people involved a reason to want it done. We all nod, as if this were the most obvious point in the world—and then we go out and design policies that do just the opposite. We have an entire public school system that still does not really reward teachers and principals when their students do well (or punish them when their students do poorly). We talk about how important education is, but we make it difficult and time-consuming for smart people to become teachers (despite evidence that this training has little impact). We don’t pay good teachers more than bad ones.

We make it artificially cheap to travel by car, implicitly subsidizing everything from urban sprawl to global warming. We assess most of our taxes on productive activity, like work, savings, and investment, when we might raise revenue and conserve resources with more “green taxes.”

If we get the incentives right, we can use markets to do all kinds of things. Consider the case of rare diseases. However bad it is to have