Naked Economics: Undressing the Dismal Science

The free market system is the bedrock upon which economics is based, so it comes as no surprise that the author is in favor of free and open markets. While they cannot do everything and do some things poorly, in general, free markets make the best use of scarce resources. Since all resources are limited, we must use them efficiently to get the most out of them. Markets do this without regard to morals, values, politics, or other human concerns. In that way they can seem ruthless or heartless, but markets exist only to efficiently allocate resources. Wheelan makes it clear that we can certainly choose to prioritize morality and value judgments, but they will alter the market somehow.

The market system is covered explicitly in Chapter 1, but it really permeates the whole book. When Wheelan writes about government and international trade, for example, markets are still front and center. Chapter 4 explains how government action can reduce efficiency through excessive regulation. This is shown in the study that examined various countries’ rules for establishing new businesses. In poor countries, the number of steps and the costs are much higher than in developed countries. This impedes on the market, distorting it and reducing economic growth.