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EconoPower: How a New Generation of Economists is Transforming the World
08/01/2008 12:00 am EST
Usually, when folks hear the word "economist," they immediately conjure up the old "guns and butter" chart, multi-page economic theories, and soon, their eyes glaze over. But there is a cadre of "new" economists who are attempting to change the mold of their staid, high-brow brethren. These highly-developed economists are actually utilizing economics to solve practical problems, bringing economics out of the ivory tower and into the streets.
The key to these practical applications is a new way of thinking. Instead of relying on the government to do everything for us (which, admittedly, hasn't worked so well!), these economists are advocating self-accountability, open, competitive markets, and a push for entrepreneurship.
In this new book, economist Dr. Mark Skousen analyzes how this trend is changing the world. He shows, by example, how historical economic thinking has been altered to attack social, behavioral, and financial problems that are preventing individuals, businesses, and countries from achieving real progress.
In his personal finance section, Skousen emphasizes the importance of savings and investing. He explains how the advent of the 401(k) plan changed the face of pension investing, empowering individuals to become accountable for their own financial futures. Furthermore, Skousen asserts that the most recent legislation continues that empowerment by way of its automatic enrollment and contribution escalations. He offers reforms for the Social Security program that include similar personal accountability.
And investors will be very interested in Skousen's chapter on "Beating the Market," in which he discusses how economists have changed our approach to investing. He talks about the pros and cons of efficient market theory, why dividend weighting beats market weighting, the importance of asset diversification, and yes, how investors might actually beat the market's returns.
Moving on to more macro problems, Skousen gives some very interesting accounts of how economists have helped to bring about solutions to problems we face in the US, including how:
- Peak pricing on toll roads is reducing traffic congestion
- Creating health savings accounts eliminates the waste that results from benefiting from a service you are not paying for
- Private-sector investing into public areas such as sports arenas are paying for themselves, instead of coming out of the taxpayers pockets
Next, Skousen tackles global issues and shows how competition and free market economics are positively impacting such diverse issues as environmental policies, taxes, religious freedom, and the war on poverty. This section also addresses why the Asian economies have prospered so greatly in the past few years, how Ireland turned its economy around, and why Egypt has gone downhill.
The bottom line, as Skousen sees it: The world, your country, your business and you, as individuals, can all find empowerment by heeding the call of these new economists. But it requires a change in our thinking. We must become self-accountable, saving and investing for our futures, and create an atmosphere of free markets and entrepreneurship, which allows competition to drive continued innovations at acceptable costs.
That is certainly food for thought. And whether or not you agree with Skousen's stance on politics, supply side economics, or gun control, the basic principles of returning to a time when folks were held accountable for their action-or inaction-has great appeal.
Nancy Zambell is a long-time proponent of increasing investor wealth through personal responsibility. She is the editor of the investment newsletter, UnTapped Opportunities, and a regular contributor of timely investment articles to a host of additional financial publications.
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