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BOOK REVIEW

The Fortune Encyclopedia of Economics: 141 Top Economists Explain the Theories, Mechanics, and Institutions of Money, Trade, and Markets

A Stellar Collection of Lucid, Market-Oriented Essays

MAY 01, 1994 by RAYMOND J. KEATING

Initially, one might think that reviewing an economics encyclopedia would be an arduous task—slogging through esoteric theories, statistical models, and academic prose. However, The Fortune Encyclopedia of Economics successfully dispels such commonly held concerns. The 157 essays in this collection, as well as an appendix of short biographies on a variety of economists, are well written, clear, and often lively. Considering the fact that economists are not generally known as engaging writers, this amounts to nothing less than a momentous achievement for editor David R. Henderson.

No less of an achievement is the fact that this tome weighs in heavily with essentially free-market views. With a few exceptions, the issues addressed in this encyclopedia are examined from a sound, market-based perspective. Henderson has largely banished hyperbole in favor of well-grounded economic reasoning.

This combination of style and substance makes The Fortune Encyclopedia of Economics invaluable to a wide variety of readers. For example, students and professors should find that this collection serves as an excellent supplement to various texts and courses in economics, while also as a reliable desk-top reference book when researching and writing, or for those occasional moments when the mind falters and a refresher on certain issues is in order. Both business executives and government policymakers also should find this volume a good resource in helping to sort through the jargon of economics as well as often conflicting economic news reporting.

As for the topics addressed in this one-volume, oversized encyclopedia, the editor has cut a wide swath through the economics discipline. Included are such basic topics as efficiency, profits, opportunity cost, fiscal policy, investment, inflation, and property rights, as well as more specialized areas like privatization, deposit insurance, the gold standard, recycling, natural gas regulation, public schools, and sportometrics. While such a book really is not designed to be read from cover to cover, but rather to serve as a reference or educational guide with each essay standing alone, the format does allow one to read straight through if he so desired. In fact, it offers a much smoother read than many economics textbooks.

While the essays that stand out will vary from reader to reader, depending on one’s particular interests, I found several worth mentioning here. Armen A. Alchian offers a good essay on how private property rights “protect individual liberty.” Thomas W. Hazlett writes an interesting and informative piece on apartheid and how it developed in South Africa. Deborah L. Walker and Robert Hessen supply good summary essays on Austrian economics and capitalism, respectively. Also, Allan H. Meltzer’s article on monetarism includes a good evaluation of recent monetary policy in Great Britain. Supply-side economics is given fair treatment by James D. Gwartney, as well as by Alan Reynolds in a piece focusing on marginal tax rates. Also, William Niskanen presents one of the more balanced views of Reaganomics that one is apt to find.

David Ranson’s essay on inflation registers as an outstanding piece, as he illustrates that “Inflation has tended to increase in periods of slow growth or recession and decrease in periods of expansion,” a fundamental point missed by most economists. John Cogan offers an interesting essay on the federal budget, noting that spending growth accelerates the more decentralized the federal budget process.

The growing field of free-market environmentalism is introduced well by Richard Stroup, while Jane S. Shaw supplies an essay on recycling that needs to be distributed to any policymaker or elected official dealing with the issue. In a similar vein, the Pat Buchanans and Ross Perots of the world should be supplied with Alan Blinder’s contribution on free trade. Individuals perpetuating myths about so-called shortsightedness of American business and the destructive effects of junk bonds need to read Steven L. Jones and Jeffry M. Netter’s article on efficient capital markets and Glenn Yago’s piece on junk bonds. Also of note are Mark Casson’s essay on entrepreneurship, George Gilder’s piece on the computer industry, John Chubb’s overview of public schools and educational choice, John Haring’s contribution on telecommunications, as well as editor Henderson’s essays on the true sources of economic growth in post-World War II Japan and Germany.

More disappointing are Blinder’s attempt to defend Keynesian economics, James Tobin’s archaic essay on monetary policy, and Kevin D. Hoover’s equally archaic article on the Phillips Curve. In addition, Joseph J. Cordes’ piece on capital-gains taxes offers a workmanlike analysis of the “lock-in” effect of high capital gains taxes, as well as the effect of inflation on capital gains, but nothing substantial on such critical issues as the effects of such taxes on incentives and the trade-off between risks and potential rewards.

On the whole, however, this is a stellar collection of essays by some of the world’s most knowledgeable economists. While it might seem strange to those who view economics as a dismal science, a lucid, market-oriented encyclopedia of economics is worth getting excited about. The Fortune Encyclopedia of Economics is an astounding feat.

ASSOCIATED ISSUE

May 1994

ABOUT

DAVID HENDERSON

David Henderson is a research fellow with the Hoover Institution and an economics professor at the Graduate School of Business and Public Policy, Naval Postgraduate School, Monterey, California. He is editor of The Concise Encyclopedia of Economics (Liberty Fund) and blogs at econlib.org.

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