A huge task to include so many important events 2010-05-06

Reviewer: Robert Kirk

You got to love an author who would even dare to name his book "the way the world works" (I'm sure he is a bit tongue and cheek with the title) but it's a great summary of some of the most society shaping economic and political events of time. All in 350 pages. I found his description of the events leading to the '29 crash interesting and I thought he did a wonderful job describing the 30's-40's. So many of his ideas have come to fruition. In summary, this is a great overview of some of the most important people and events in history.

The Foundations of Neo Conservativism 2009-06-24

Reviewer: LJFurman

Wanniski argues against taxes. "Working together three men can build three houses in three months. Working separately, they can build three houses in six months." If the tax rate on home building is 49% they will work together ... if the tax goes to 51% they will suffer a net loss because of their teamwork and so will work separately in the barter economy and pay no taxes. ... the government loses all the revenue and the economy loses the production..."

A man can build a house in 2 months (3 in 6 = 1 in 2)
3 men can build a house in 1 month (3 in 3 = 1 in 1)
First flaw. If 1 man could build 1 house in 2 months, and get 100% of the profits, why would he want 1/3 of the profits on each of 2 houses? Suppose the profit on a house is $100,000. 100% of $100,000 is better than 33% of $200,000.

The tax rate does not effect the decision. Personally, I'd rather pay 51% on $100,000 than 49% of $66,000. In the first case I take home $49,000. In the second case I take home $32,340.

If the government will take a chunk of the profits of the houses the men build working together it will also take a chunk of the profits of the houses of the men working separately. Wanniski postulates that men can choose to work in the underground economy. Last I checked the mafia didn't advertise jobs for wiseguys.

If you want a real economics book, check out Economics Explained, by Heilbroner & Thurow, or The Wealth of Nations, by Adam Smith.

Close Enough... 2009-04-21

Reviewer: D. W. MacKenzie

If The Way The World Works proves anything beyond the futility of high taxes, it is that one can gain a sufficient understanding of economics without formal education in economics. Wanniski was not trained as an economist, yet he came to understand how incentives matter in markets and policy analysis. Those who read this book can gain the same understanding, as his writing is clear.

There are nits to pick with this book. Does the revenue maximizing level of taxation really represent the willingness of citizens to bear fiscal burdens? Public Choice theory can poke some holes in this idea, quite easily. Is the idea of general equilibrium really more correct or useful than Friedmanite-monetarist theory? I would disagree. Wanniski also comes up short on the Austrian concept of prices as knowledge of local economic conditions (see Tom Sowell's book on this subject).

Wanniski did not quite grasp some of the subtleties of Friedman, Buchanan, and Hayek, but how many people really care about that? Wanniski managed to get things right as far as tax policy is concerned. The idea that tax increases will at some point reduce revenue is now universally accepted by all economists, with Paul Krugman virtually alone in dissent (even he really must know the truth). That makes Wanniski more astute on this issue than virtually the entire post WW2 generation of economists up to the late 1970's- not bad for an `amateur'.

Critics of this book (and SSE in general) typically make empirical claims, and false ones at that. Critics must be empirical because the theoretical issues at issue are too straightforward for them to debate. On such issues nearly everyone will pick up on why the critics are wrong immediately. That is, they cannot win such a debate, because the theoretical case that Wanniski makes is open and shut.

On the empirical side, critics of this book and SSE make absurd claims about how revenue did not rise during the 1980's (ignoring the reality that revenue did rise, and also that SSE tax cuts were largely reversed during the 1980's). They also blame the Great Depression on SSE tax cuts by Harding and Coolidge (though Hoover and FDR raised effective and actual tax rates leading into and during the Depression). Critics focus on history and empirics because this is where they can sway some audiences. People who know very little real history and statistics can be taken in by fake history and data. Ignore these critics, read and learn.

300 Years of Governmental Economic Successes & Blunders 2008-04-22

Reviewer: James East

Whether you are a Democrat, Republican, Socialist, or Capitalist, Jude Wanniski's "The Way the World Works" presents a Tour de Force in the Economic successes and blunders over the last 300+ years.

Economic truths are indeed the lever that truly can both move governments, history, or re-address poverty concerns. Much like what the Gates Foundation has (or is) undertaking, unless one gets the incentives right, the ends that one is trying to achieve will not be sustainable and withers away after a few years. Though some think of economics as a zero sum game in that some win only if someone else is losing. On the contrary, Economics is not a zero sum game.

As demonstrated and proved over the last 35 odd years (a somewhat short period of time), in many countries with many economies both big and small, with the use of ingenuity, with the increase in opportunity, and the increases in production have revealed that it is not a zero sum game if the governmental incentives are set correctly. Subsequently, much like the baker, if you want to feed more people you do not devise unique ways to divide the loaf, you devise ways to make more bread !

Once we can overcome one of the deadly sins of "Envy", we will and can achieve more. Though envy is a powerful force, in the end, does it really matter if someone a thousand miles away, or in a different country, or even in your own neighborhood has a little more than you? If it does, move along and educate yourself in a different endeavor. However, if it does not bother you, then take a ride on this governmental and economic Tour de Force and increase opportunity for all.

It Does Work 2006-05-14

Reviewer: S. Topper

A man not many people know about wrote an amazing book about 20 years ago that not many people have heard about. Where has he and this book been hiding? You would think we would know him better than we do as the concepts he writes about helped forge the economic policies of President Ronald Reagan, which some state was instrumental in ending the Cold War. As I read this book, I couldn't help to think about what tragic year it has been with losing both Peter Drucker and Jude Wanniski.

The book is written as an economic lesson, but reads as a more interesting historic lesson, covering some of the most exciting and critical events over the last 200 years. Jude clearly explains and backs up his concepts with historic examples, and both the obvious and hidden drivers of those events, and brings it all back to how over that time, we have learned why all that happened.

He looks at economics not just as math or science, but in terms of and in conjunction with politics and the psychology of the individual. The dismal science does not need to be so dismal when you look at it from the context of countries and individuals in those countries, and what drives them to be productive in order to advance society.

True greatness is generally shown when you look at something someone has created, look at it years later, and still say it is valuable and effective. It can stand the test of time. "The Way the World Works" absolutely stands the test of time. This is shown in many of the concepts he refers to, being the same topics as many of the "Megatrend" themes everyone else is talking about today, as new revelations. It is also remarkable to hear common themes from Thomas Friedman's current bestseller how "The World is Flat". He also presents topics that are parallel to Peter Drucker, in how we need great people to produce great companies that produce great societies. Treating governments, organizations and individuals separately, and separating productive work from just work,

I wish Jude was still with us so he could attempt to bridge his analysis of how energy works, and how these same driving principles could be used to analyze the Internet. Maybe we can continue that work for him.