Introduction
Economics is the study scarce resources and how they scarce resources are distributed among the competing human wants. The focus has for long been base on the historical resources and factors of economic distribution without taking into consideration accruing changes on the subject issues and the bare truth underlying the study. To this, second world economists with different interpretations of the subject matter have risen with a new perspective on economic issues. Charles Wheelan in his book Naked Economics looked at some of the economics issues that other economists have not talked about or overlooked in one way or another.
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Charles takes us from a base of basic economic concepts to the current economic difficulties associated to the concepts. Some of the abnormalities in economics as pointed out by Charles include imperfect and perfect market situations, externalities, and effects of public goods, tax effects, certain economic models and many others. This paper therefore aims to examine some of the conceptual assumptions held by Charles Wheelan in his book, the Naked Economics.
Discussion
The first concept looked at by Charles Wheelan in his book, the Naked Economics, was the concept of Externality. Charles gives a practical example of his decision to sell his Honda Civic car and buys a Ford Explorer simply because his Honda Civic did not have a cup holder and also that his wife was pregnant and so needed to put his house in order(Wheelan Charles, 67) .
Charles decision to buy the Explorer was a person decision even though he realized that the use of this car affected everyone in his neighborhood. The smoke produced by the car melted the polar ice and was very harmful to the asthmatic children. Charles’ individual decision was now affecting others and that there existed a big gap between the social cost and the cost of his harm to the society. He called this gap the externality, meaning the gap between the private cost and social cost of some behavior. Charles then give an economic argument that if such situations are large, then the individual have incentives to do things that puts then better off at the expense of others.
According to Charles Wheelan, if this problem was left to the market to rectify it as many economics argue, then, that market itself would be the problem. Often in production, producers will tend to do all that is possible to cut down on their production cost to maximize their profits. Therefore, such companies in the very condition as Charles on externalities, will exhaust the society in a way that the people affected by the pollution instead finds it more easy or cheap to buy the products of such company leaving those of its competitors. The existing good sales by the company will be a good incentive for the company to produce more at the expense of the society’s safety. This is an exact case that other economists do not show of the failure of the market to rectify externalities as depicted by Charles Wheelan. Therefore, for such market situations to be rectified, it will require the intervention of non-market players such as the local authorities and government to come up with mechanism to rectify it.
Another concept looked at by Charles Wheelan was the perfect market economic assumption. Many economic scholars believe that a perfect market situation is self-determined. This is the point of difference to Charles’ assumption of a perfect market. First, Charles argued that a market could never be perfect to the extent of re-adjusting itself. This is because of the differences of the market players that equally carry with them different interests and objectives (Wheelan Charles, 104). According to Charles, this requires involvement of the government and other non-market players to regulate on the market to avoid exploitations and instability of thee market. All that he recognized was a stable market at the expense of a perfect market. He believed government involvement in the market was equally as important as those of buyers and sellers in the same market.
Charles gave governments roles such as issuing government subsidies, lowering the cost of doing business in private sector through ways such as providing uniform rules and regulations by Laws of contract. The government also eliminates fraud in the business and circulates currency as a medium of doing business. Through this type of government involvement, Charles gave a practical example of what occurs in the pharmaceutical industries. Earlier on in America, the governments gave huge cash requirements as a bet since production of human drugs was considered very crucial and only government sectors were at first allowed to manufacture drugs. A critical condition then arose with the manufacture of HIV/AIDS drugs that no private company would stand to production due to increased financial require as well as cost of production. Governments then engaged to give incentives through subsidies and securing contracts with interested non-governmental organizations such as United Nations for mass production that was required. This government involvement was important so as not to interfere with the private pharmaceutical markets. Charles hence proved that a stable market must at least have a government involvement to its benefits as the referee.
Another interesting concept in Charles Whelan’s book, Naked Economics, is his concept of the public goods. Charles argued that just as important as other goods are, public goods are also part of the market. Charles describes public goods as goods that make individuals better off but would not otherwise if provided by the private sector. The authorities and governments issue these goods. Here Charles gave an interesting case when he decided to buy an antimissile system to protect himself from missile lobbed by rogue nations (Wheelan Charles, 149). Charles’ neighbor declined to share with him the cost of the vaccine arguing that Charles’ antimissile system will also on equal grounds shield his house against the forthcoming missile infection. Charles recognized his neighbor’s argument has having been based on his knowledge that the service offered by Charles was to that of public good.
He called his neighbor’s action as a case of a free rider. A free rider is an individual within a society who enjoys the benefits of a good that he has not paid for incase where the good is provided for by private sector. Charles then assumed that a similar situation would exactly be where the public good were provided for by the private sector. Consumers do normally want to consume more of goods but pay less of it; free rider case. This makes the quantifying of public goods difficult during the accounting periods, an issue that other economists have ignored but is very real in economics. Charles therefore believed that public goods should equally be accounted for during the accounting period but much in it has to be considered.
Conclusion
Charles Wheelan brought up a very interesting way of considering economics arguments. He was more considerate on the real facts lying behind issues as opposed to general assumptions made in economic discipline. Charles arguments are therefore very important for scholars as he opens up the economic field much above what is in the table. For instance, Charles concepts of the perfect market that he discredits assist scholars in getting to know more of what really exist in the commodity markets and all other underlying factors. General, Charles assumptions gives the real economic citations.
Work Cited
Wheelan, Charles. Naked Economics: Undressing the Dismal Science. New York, NY [u.a.: Norton, 2010. Print.
