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“Economics: The User’s Guide” a Book by Ha-Joon Chang Essay (Book Review)


Introduction

Economics affects the choices that individuals make every day by influencing their utility concerning various products, production, and behavioral consumption patterns. Economics emphasizes the interactions and behavior of various agents including individuals and markets. The sole objective of economic knowledge is to enable people to develop efficient means of satisfying the existing unlimited wants with the scarce available resources.1

Microeconomics deals with establishing how buyers and sellers exchange their various goods and services. On the other side, macroeconomics gives a critical analysis of how various countries that have different industries and consumers conduct their functions. This paper is an appraisal of the book, “Economics: The User’s Guide” by Ha-Joon Chang. The paper explores the book’s main arguments. Additionally, the paper compares and contrasts various points postulated by the author to the opinions forwarded by other authors in the field of economics.

Chang puts across a variety of arguments, which are outlined precisely in the twelve chapters of the book. In comparison to other authors in the economic field, Chang deviates from using formulas and equation. He uses a comprehensive theoretical framework to communicate the various viewpoints. The chapters are arranged in a sequence for the audience to comprehend the various arguments that the author endeavors to communicate.

Main arguments in the book

Capitalism

Capitalism is one of the dominant arguments put forward by Chang in this economics book. Capitalism takes preeminence in the first chapters of the book. Capitalism is the situation where a given economy is organized to pursue profit motives. Most people invest their time in education to achieve higher incomes.2 A capitalist has to invest in the production process to ensure that goods meet the satisfaction requirements of any given population.

Chang advocates a market capitalist system because it attracts more competition as compared to the socialist system that is dominated by a closed market economy, which leaves no room for competition. The essence of understanding the history of capitalism is important in adding to the current knowledge of economics. The slow growth in the historical Western Europe is due to the absence of capitalism.3 However, even though the author provides this argument, other diverse reasons like minimal industrialization could have resulted in the slow growth as opposed to the absence of capitalism as the author purports.

Historical background of any given nation is important while analyzing economic phenomena. Due to the capitalistic nature of the colonialists, most colonies suffered huge scars because they were robbed of their resources thus rendering them incapable of progressing economically.4

Due to capitalism, various industrial revolutions occurred to counteract the efforts of the capitalists. Most of those revolutions are underscored in the Marxism theories thus resulting in free trade and increased production. The book does not entertain monopolistic competition where one seller dominates the entire market. The author holds that every firm has its monopolistic powers that vary from the product differentiation to the copyrights and patent rights.5

According to the author, capitalistic markets are more effective in comparison to others, thus necessitating advertisement to increase the product demand in the market. However, the author fails to point to the audience that monopoly powers could result in the misuse of power by firms making them charge high prices to the consumers. Monopolistic markets may ignore both externalities like the environment and social benefits of workers.

When comparing the works of Chang with those others authors, the book titled “Introduction to Political Economy” by Charles Sackrey, Geoffrey Schneider, and Janet Knoedler seconds the views propagated by Chang that capitalists use the profit making aspect as the ultimate motive when conducting their activities.6 The authors add that capitalists make high profits by producing and availing goods and services that are most demanded by the consumers.

To top up the views on capitalism, the book outlines that capitalistic investments result in a paramount ability and dynamism to drive all the competing systems from the market. Besides, the book concurs with Chang by mutually upholding that most people were poor before the emergence of capitalism.7 However, this book paints capitalists as predators who work to violate the common good of the society because they treat workers as things and means to achieve their profit motives at the expense of upholding their social wellbeing.

Inequality

Inequality is another major argument postulated in the book and specifically in chapter nine. Chang disagrees with the previous assertions by Prof. Kuznets’ hypothesis, which holds that inequality reduces with economic growth. Chang claims that the United States has one of the highest living standards yet the citizens in the country do not earn equal incomes. Therefore, a decrease in inequality is not directly proportional to the development index of any given economy.8

According to the book postulates, the American society has not been harmed by the prevailing inequalities of incomes among the citizens. This view lacks validity because not every American is contented with the prevailing discrepancies in the income levels. The reason for the inequalities between the western countries and nations with soaring poverty levels is due to the absence of competitive markets in the developing nations. Therefore, inequality emerges due to giving priority and rewarding the investors of popular products and successful risk takers.9

As the author observes, other factors that are responsible for economic inequalities entail some competitors in the markets becoming highly innovative in inventing methods that lower the cost of producing goods and services alongside competent managers who come up with effective decisions, thus resulting in higher profits as compared to other actors in the market. Chang further indicates that inequality is not beyond human control, and thus it lies within the jurisdiction of human beings to change the condition.10 Therefore, nations should consider redistributing their revenues to those who live below the poverty lines to close the gap between the rich and the poor.

Equality is also attained when developing nations upgrade economically because they realize a competitive edge in the international market by exchanging their goods and services freely. When children are exposed to similar opportunities, the levels of inequality within the society will drastically decline. This assertion holds because the varying opportunities witnessed when kids are growing create inequality during their adult life.11

Although equality is popular with most individuals and even organization, the underlying question is the people who will be responsible for managerial and invention roles when all individuals attain similar skills and knowledge.12 Therefore, inequality is necessary to ensure that the society has attained diversity regarding knowledge base and competencies to come up with highly competitive and efficient economies.

Even though Chang alleges that inequality has no effect on the American people, the book, “Introduction to Political Economy” depicts that inequality amounts to class differences in the society. Such inequalities act as impediments to the good life that every American envisions.13 The authors also view unfair economic policies as another reason for inequality. However, the varying international responses to crises in different nations, liberalization of trade, and the raising of the average living conditions are some of the possible reasons that result in equality amongst individuals in any given nation.14

Work and unemployment

The rights of the workers are often abused. For instance, workers from the developing countries work for many hours but they earn little incomes from their invested labor.15 As the book outlines, there are high levels of unemployment in many nations, and the youth bracket is among the adversely affected groups. One of the reasons for the rising unemployment cases that the author describes is the advancement of technology.16

As the level of technology is increasing rapidly, new ways of undertaking certain tasks have been made easier by automation. The retrenchment of employees is thus witnessed because manual labor is rapidly being phased out by the use of machines. Technology also results in highly efficient processes that require minimal human input thus resulting in unemployment. Additionally, dirty politics can result in unemployment. The instabilities that are often witnessed in most developing nations finally raise unemployment because a peaceful environment is a mandatory requirement for economic progress of any nation.

The political class is involved in the formulation and implementation of various legislations including those that concern labor relations. Poor policing on economic issues will amount to deteriorating and declining investments, thus reduced employment opportunities. Corruption among those who occupy political positions and the lack of democratic accountability will further lead to the draining of a county’s resources that could otherwise be used to create new investments thereby forming new employment opportunities. To support the information in the book, frictional and cyclical are possible causes of unemployment.17

Such unemployment cases are evident when an individual is transiting from one job to another. Moreover, the same scenario plays out when sourcing for a new job while opportunities are scarce or when business is in the off-peak phase thus resulting in increased cyclical unemployment.

Chang condemns the neo-classical economics due to its focus on consumerism. The practice entails repeated and increased consumption rates of workers, which amounts to wastage. Consumerism further leads to shopping addiction, and it makes most households suffer from unsustainable debts because they consume more than they can afford. Additionally, the increased productions activities in the factories result in uncontrolled carbon emissions into the atmosphere, thus making it a nightmare to fight climate change.18

Although consumerism aims at increasing the consumption rates and boosting the economy, it results in negligible significance to the workers because they are left more susceptible to diseases associated with environmental pollution alongside with increasing debt burdens that emanate from their inflated consumption rates. To compare the views of Chang with those of other authors on the argument of work and unemployment, enterprising capitalists create employment opportunities for other people who are not capitalists thus helping them to earn a living.19 The book “Introduction to Political Economy” also depicts inflation as one of the causes of unemployment thereby making additions to the list outlined by Chang.

The international dimension

Chang highlights this aspect as one of the argument in the book. Although the author demonstrates vivid criticism on the theory of comparative advantage, it turns ironical because the theory is responsible for international trade. Comparative advantage depicts the ability of the firm to produce goods and services at a lower opportunity as compared to other competitors in the same industry.

To dismiss the author’s viewpoint, it is evident that comparative advantage breeds specialization, and it increases efficiency in the production of goods and services, thus easing foreign trade. As the author argues, it is irrefutable that international trade particularly benefits the developing countries albeit it would also be valid to uphold that the developed countries equally benefit. This assertion holds because the developing countries import most of their products from the developed world.

The author also illustrates the effects of liberalization of trade by outlining that it cultivates a culture of dependency among the developing nations, thus hindering their productive capabilities because they over rely on advanced countries.20 However, this view is not valid because the free trade will allow the removal of trade restrictions like tariffs, thus enabling the developing nations to gain a competitive advantage in the manufacturing of various products, which encourage their economic autonomy while shunning dependency.

As the book outlines, the claim that foreign direct investment is essential to develop nations is a weak postulation. This assertion holds because the foreign investors might finally end up becoming monopolies in the host countries and this aspect will affect the host countries’ economic well-being because the foreigners will drain resources.21 Foreign investors will also need regulation to keep a check on their undertakings. This aspect requires the host government to create regulatory institutions, which may be very costly. Monitoring costs are also necessary thus inflating the expenditures of the host government. When foreign direct investments are encouraged, most people from the developing nations relocate to work in the developed nations thus resulting in brain drain because only knowledgeable and skilled immigrants are accepted.

As opposed to Chang, who holds that comparative advantage bears no significance in the international trade arena, the book, “Introduction to Political Economy” depicts that businesses with a high comparative advantage are the best to invest in, and thus they should be encouraged. Additionally, the importance of comparative advantage is clear because varying nations are endowed with different resources. Consequently, some become more effective in the production of certain products and services thus gaining a comparative advantage. Additionally, the liberalization of trade marks the end of the negotiation focusing on free trade, and thus nations should sign bilateral trade relations to increase foreign trade.22

The role of the state

According to chapter eleven of Chang’s book, economics should be defined using its indigenous name of political economy. The pull and push scenario as witnessed in politics is not science according to the author.23 This claim is valid because political economy studies production, trade, and their absolute association with the law, government, and customs. Political economy also deals with issues of distribution of revenue and national wealth. Although Chang views economics and political economy to be synonymous, it is important to note that they currently exhibit some variation in their scope because economics is currently a distinct social science after the field of political economy was split.

The role of the state is to formulate the policies that have been suggested by the economists. This statement is valid because economic specialists possess a broad knowledge of the production and consumption patterns of the citizens of any given nation. Therefore, such specialists are best suited to accord the required information to government agencies that work on the formulation and implementation of proposed policies.

As the book upholds, it is the obligation of the government to respond to failures in the economic policy. This assertion holds because the government is entrusted with the role of monitoring and implementing the policies that have been recommended by the economists. As the book outlines, the government should ensure the success of all policies entailing roads, courts of law, defense, the production of public goods, and those that deter the abuse of economic powers by the monopolists.

Chang believes that most government failures are often exaggerated. However, this assertion does not hold because most governments often underestimate their failures to maintain the confidence of the citizens in the leadership. In support of the views propagated by Chang, the book, “Introduction to Political Economy”, indicates that the role of the government is to foster favorable economic policies that will enhance trade among various nations through establishing vibrant rules and regulations. This book views economic policies as means to hasten the innovation process thereby making a new observation that Chang has not outlined in his arguments.24

Furthermore, economics assist in the shaping of policy agendas alongside making agreements on various international negotiations that concern trade and politics thus depicting the role of the state in economic policy formulation.25

Conclusion

Economics entails the endeavors to understand how people in a given society focus on their satisfaction of unlimited needs using the limited available resources. The economics work of Chang seeks to highlight various arguments in the minds of the audience. Some of these arguments include capitalism, the role of the state, the international dimension, work, unemployment, and inequalities. Other authors who depict similar and contrary opinions to the works of Chang include Ravenhill through his book, “Global Political Economy”, and Sachrey and his co-authors in their book, “Introduction to Political Economy”.

Bibliography

Bennett, Douglas, and Kenneth Sharpe. Transnational corporations versus the state: The political economy of the Mexican auto industry. Princeton: Princeton University Press, 2014.

Chang, Ha-Joon. Economics: the user’s guide. New York: Bloomsbury Publishing, 2014.

Dobb, Maurice. Political economy and capitalism: some essays in economic tradition. London: Routledge, 2012.

Oatley, Thomas. International political economy. Boston: Longman, 2012.

Ravenhill, John. Global political economy. Oxford: Oxford University Press, 2014.

Sackrey, Charles, Geoffrey Schneider, and Janet Knoedler. Introduction to Political Economy. Boston: Dollars & Sense, 2010.

Wilkinson, David. “World-Economic Theories and Problems: Quigley vs. Wallerstein vs Central Civilization.” Journal of World-Systems Research 2 (2015): 506-574.

Footnotes

  1. David Wilkinson, “World-Economic Theories and Problems: Quigley vs. Wallerstein vs Central Civilization,” Journal of World-Systems Research 2 (2015): 510.
  2. Ha-Joon Chang, Economics: the user’s guide (New York: Bloomsbury Publishing, 2014), 6.
  3. Ibid, 9.
  4. Ibid, 12.
  5. Ibid, 64.
  6. Charles Sackrey, Geoffrey Schneider and Janet Knoedler, Introduction to Political Economy (Boston: Dollars & Sense, 2010), 23.
  7. Ibid, 40.
  8. Chang, Economics, 168.
  9. Thomas Oatley, International political economy (Boston: Longman, 2012), 72.
  10. Chang, Economics, 171.
  11. Ibid, 108.
  12. Douglas Bennett and Kenneth Sharpe, Transnational corporations versus the state: The political economy of the Mexican auto industry (Princeton: Princeton University Press, 2014), 83-85.
  13. Sackrey, Schneider and Knoedler, Introduction to Political Economy, 63.
  14. John Ravenhill, Global political economy (Oxford: Oxford University Press, 2014), 54.
  15. Chang, Economics, 126.
  16. Ibid, 127.
  17. Ibid, 112.
  18. Ibid, 178.
  19. Sackrey, Schneider and Knoedler, Introduction to Political Economy, 145.
  20. Chang, Economics, 212.
  21. Maurice Dobb, Political economy and capitalism: some essays in economic tradition (London: Routledge, 2012), 94.
  22. Ravenhill, Global political economy, 63.
  23. Chang, Economics, 195.
  24. Sackrey, Schneider and Knoedler, Introduction to Political Economy, 140.
  25. Ravenhill, Global political economy, 82.
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IvyPanda. (2020, July 1). “Economics: The User’s Guide” a Book by Ha-Joon Chang. Retrieved from https://ivypanda.com/essays/economics-the-users-guide-a-book-by-ha-joon-chang/

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"“Economics: The User’s Guide” a Book by Ha-Joon Chang." IvyPanda, 1 July 2020, ivypanda.com/essays/economics-the-users-guide-a-book-by-ha-joon-chang/.

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IvyPanda. "“Economics: The User’s Guide” a Book by Ha-Joon Chang." July 1, 2020. https://ivypanda.com/essays/economics-the-users-guide-a-book-by-ha-joon-chang/.

References

IvyPanda. 2020. "“Economics: The User’s Guide” a Book by Ha-Joon Chang." July 1, 2020. https://ivypanda.com/essays/economics-the-users-guide-a-book-by-ha-joon-chang/.

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IvyPanda. (2020) '“Economics: The User’s Guide” a Book by Ha-Joon Chang'. 1 July.

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