Naked Economics: Undressing the Dismal Science (Fully Revised and Updated)

Productivity is the efficiency with which we convert inputs into outputs. In other words, how good are we at making things?

The more productive we are, the richer we are.

Economics starts with one very important assumption: Individuals act to make themselves as well off as possible.

Burton Malkiel, who was kind enough to write the foreword for this book, has written one of the best: A Random Walk Down Wall Street. Rather, this chapter is about what a basic understanding of markets—the ideas covered in the first two chapters—can tell us about personal investing. Any investment strategy must obey the basic laws of economics, jus

“economy is the art of making the most of life.” Economics is the study of how we do that.

Good policy uses incentives to channel behavior toward some desired outcome. Bad policy either ignores incentives, or fails to anticipate how rational individuals might change their behavior to avoid being penalized.

The key to thinking like an economist is recognizing the trade-offs inherent to fiddling with markets.

average cost of bringing a new drug to market is somewhere in the area of $600 million.

Consumers lose in two ways. First, their tax money is squandered when projects that never should have been funded in the first place go bust (or when the whole banking system needs to be bailed out because it is full of rotten, politically motivated loans). Second, the economy does not develop as quickly or efficiently as it might because credit (a