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RS51 - Joseph Heath on Economics Without Illusions

Release date: January 1, 2012

Guest Joseph Heath, author of “Economics Without Illusions: Debunking the Myths of Modern Capitalism,” joins us as we turn our skeptical eyes toward the treacherous dual terrain of economics and politics. We discuss the ways in which, with his book, he attempts to raise our economic literacy and empower us with new ideas. In it, he draws on everyday examples to skewer the six favorite economic fallacies of the right, followed by impaling the six favorite fallacies of the left. Heath leaves no sacred cows untipped as he breaks down complex arguments and shows how the world really works.

Joseph Heath is the Director of the Centre for Ethics and Professor of Philosophy and Public Policy at the University of Toronto. In addition to his academic publications, he is the author of other popular books, among them, "The Rebel Sell : Why the Culture Can't Be Jammed" and "Efficient Society: Why Canada is as Close to Utopia as It Gets" 

Joseph's pick: "The Socialist System: The Political Economy of Communism"

Reader Comments (12)

I am a long time listener and It is a pleasure and privilege to be able to listen to you guys discuss such complex, misunderstood, misrepresented topics...especially Economics and the models that attempt to interpret it (Not just Economics other topics as well)...I am just having some difficulty understanding and making sense of why you guys do such a short podcast and I use short in comparison to the other podcasts that I listen to that are free as well and are no where near the quality and controversial nature of this podcast...Don't get me wrong I appreciate your effort and commitment......I am sometimes left feeling that the show was incomplete because it is not like a sitcom that follows a consistent plot....I notice sometimes there is more left to discuss from the both of you.....Hope I didn't come off as an ungrateful bum just thought I'd leave some feedback

January 2, 2012 | Unregistered CommenterBrian

So this is what you call economics without illusions? I'm 55 years old, I'm not an economist, and I am stuck in the capitalist system for at least another five to ten years-- so, I hope it's still got a little more left before it hits the wall...or the limits to growth.

There are some fundamental philosophical flaws in the modern consumer-driven capitalist economic system that neither liberals, nor conservatives ever address. And most of them have to do with an economic system that is dependent on continuous economic growth, and is not compatible with the natural physical limits of our planet. If our world could keep providing more arable land, more fresh water, more non-renewable resources, then these theories could work indefinitely. But, resources, both renewable and non-renewable, are being depleted at unsustainable levels; global warming is wreaking havoc with agricultural production, as well as creating ocean acidification, contributing to dieoffs of most fish species and even the plankton that the ocean food chain is based upon; and the world's population is going to increase to at least 9 billion by mid-century before it plateaus, even though the present 7 billion is already an unsustainable population for the long term.

So, how does a capitalist economic model based on creating demand for more products work in a world that needs fewer people using less energy and a lower ecological footprint? The improvements in energy efficiency are not enough to make up for increased production...whether it's being done here or in China. It seems to me that the reason why these economists are so poor at predicting trends (while great at explaining ones that have already occurred) is because economists of all stripes fail to notice that all of their great theories are constrained by the limits of the natural economy -- the finite world we live in!

I'm not sure what a solution that saves future generations from extinction will look like. But it seems that it will have to provide benefits in a zero growth environment. And part of the solution is going to have to include a direct challenge to consumerism and income inequality that fuels the drive for improving status through owning the right car, clothes etc. If that sounds like North Korea, that's too bad, because I don't see any way through this mess offered up by so called moderates. It's time for something radical while there is still a chance to avoid disaster.

January 2, 2012 | Unregistered Commenterralph m

"Pareto efficiency is explicitly moral" - rather, pareto efficiency is another weapon of economists. Like calling unaccounted costs, "externalities", it is used to obscure impacts of the undiluted benefit to one.

Heath glibly claims the following reflects a realization of the morality of Pareto efficiency: "It used to be thought that there was this huge difference between efficiency and fairness but John Rawls has shown that a theory of justice can incorporate distributive considerations." However, upon unpacking, this "realization" rather appears a more sophistic excuse. Rawl's "Difference Principle allows allocation that does not conform to strict equality so long as the inequality has the effect that the least advantaged in society are materially better off than they would be under strict equality." This is meaningless since it cannot be determined what conditions would be "under strict equality".

By Rawls' Difference Principle, if the orthodox assertion that inequality under capitalism was better than equality without it were false for the least advantaged under capitalism, that inequality would be unjust. That admission is a small moral advance. But the cost of that advance is that unfairness can be branded just, as alluded in Heath's paraphrase.

Heath's proof of the morality of Pareto efficiency turns out to be a sham.

January 4, 2012 | Unregistered CommenterIndian Jones

are being depleted at unsustainable levels; global warming is wreaking havoc with agricultural production, as well as creating ocean acidificationWhen you smile, smile, smile uh huh, And in your eyes I know I don't exist, Can't resist, When I see you smile, When you smile, smile, smile uh huh, And in your eyes I know I don't exist, Can't resist, When I see you smile , I'm the one just out of view, It seems to me that the reason why these economists are so poor at predicting trends research paper writing services

January 6, 2012 | Unregistered Commenterasdasd

The podcast, as always, was very interesting, so I downloaded the book sample on my Kindle to evaluate it and maybe buy the whole text. I was quite disappointed reading the introduction, where I found an argument against recycling paper (since it would, in Heath's opinion, remove the paper industry's motivation to plant trees resulting in less trees). The reasoning is backed up by references to "The armchair economist" and a Financial Times article by John Kay (actually an open letter): both cite very few fact supporting their view, and none with reference to some actual data. I would even say that "The armchair economist" doesn't even care about facts: it builds its entirely theoretical argument saying that recycling "can cause forests to shrink", and this is copied by Heath with no doubts ("[recycling] has exactly the opposite effect" than saving trees). According to him, we should actually waste paper, because it would mean more trees!

There is no fact checking (how much paper comes from managed plantation? How much from virgin forests?) and no sign of caution against one major economical fallacy: the one that goes on saying that everything can be replaced with something else, so that old growth forests harvested in Canada and Scandinavia for new, non-recycled paper will be replaced with new plantations and everything will be allright, happily ever after.

Maybe I'm too strict, but I think that out of deference to the market economy I will exercise my economical freedom not to buy the book.

January 7, 2012 | Unregistered CommenterLopo

A topic so contentious pleads for comprehension and clarity, but Professor Heath comes off as less than a dilettante. His obfuscations might be associated with irrationality and one wonders at the irony that he is on a show titled "Rationally Speaking". Do the producers not detect this? Perhaps their cognitive dissonance is subdued by the smug conceit that the rational lies uniquely between the left and right.

In these times, one should be interrogating the consort of rationality and Darwinian progress. It's not the best time to admit you were wrong about capitalism while it devours its mother countries. Perhaps Professor Heath enjoys being contrarian a bit too much for our good.

January 8, 2012 | Unregistered CommenterIndian Jones

I thought Heath did a good job and I learned several things. While I agree with Lopo's presentation of the recycling issue, I would caution him to not judge a book by its Kindle preview. It was likely picked by the publisher to be controversial - to sell books. The whole of the book is very likely to be similar to this podcast rather than the excerpt.

January 14, 2012 | Unregistered CommenterMark Erickson

Did Heath basically brand technological unemployment as mythical, or was he simply referring to the hype surrounding the 2008 collapse? I've heard many pro-market enthusiasts wish away this problem largely through ad-hoc reasoning, but have yet to hear a logical explanation that wasn't drenched in ideology.

Capitalism is often described as a system of mutual exchange of goods and services, but rarely is the necessity of employment called into question; the principle that we must make ourselves useful to others with money or power, lest we starve. We must also perpetuate cyclical consumption for profit's sake, and thus vitality overall. As the technological trend continues to increase exponentially, more and more job displacement will occur. The more job displacement, the less purchasing power, the greater the wealth gap, the more social problems...

February 3, 2012 | Unregistered CommenterAndrew

Thanks for this podcast about economic fallacies and illusions. I understand podcasts are naturally non-technical. And that is good for me, since I haven't even passed calculus yet or taken even an undergraduate course in economics (my major is psychology).

However, a quick googling of 'tax cuts stimulates' demonstrates the idea that this is a very popular libertarian idea. Ron paul is an advocate of this idea.

Perhaps a future show could just narrowly focus on one topic really really well? Maybe tax cuts isn't the most interesting topic. I personally liked Ron Paul do to his peaceful foreign relation policies and neutrality towards Israel, which has led to a lot of problems for the USA.

But when I read about Dr. Paul's economic views, and contrast them with my very limited ability to ascertain truth from my own biased sample of experts...well I do discount Paul, but I have no strong arguments against his economic policies. One solution to the problem of who is *really* an expert is found through Bayesian Truth Serum. Perhaps you could get a panel of economic experts to ask tough questions and see how useful the serum is as a test for actual expertise.

Please email me if you are nudged in any direction at all from this comment. I would like to hear a podcast on Bayesian Truth Serum and its applications to truth finding.

March 10, 2012 | Unregistered CommenterMatthew Fuller
Nice information, thanks to the author. It’s helpful to me now, but generally, the usefulness and also significance is overpowering. Thanks again and all the best!
August 18, 2015 | Unregistered Commenterbest fitness band
Lower taxes do stimulate the economy. Controlling for regulations, the secular business cycle, and interest rates, a lower tax rate will produce higher economic growth than a higher tax rate.

In the United States, the government has an overarching commitment not to efficiency or liberty, but unfortunately has whored itself out to special interests.

Social Security redistributes wealth from those who joined late to those who joined early. The early recipients of social security only paid into the system for a few years, but can take decades of benefit out of the system. Furthermore, when FDR established social security, most people did not live past 65 years of age. Now, young people who pay into social security may not ever get much of any benefit, since with more and more beneficiaries and fewer and fewer contributors, the entire system suffers from financial instability.

Capitalism works, and Socialism always fails. Labor Saving Technology actually increases total capital, demand for labor, and per capita income.

The U.S. has idle labor and capital primarily due to burdensome regulations, laws, and taxes.
January 27, 2018 | Unregistered CommenterJameson
Social Security also suffers from financial instability due to the fact that the US Government spent all of the Social Security Trust Fund Assets, instead of investing them as would any responsible fiduciary!
February 14, 2018 | Unregistered CommenterJameson

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