Way the World Works

Wanniski first published this work in the throes of the Carter administration's stagflation malaise. For those who never experienced them, they were days of double digit inflation and unemployment, coupled with sky high interest rates. If the "Reagan revolution," undergirded by both Milton Friedman's Moneterism and Jude Wanniski's Supply Side Economics had not occured, a bloodier one may well have...the failed policies of Keynesian styled big government had failed that badly.Though the entire book has been updated and revised over its long lifespan, Chapter 13; "Energy in Abundance" is extremely vital today. In it he describes the folly of the "doom & gloom," energy scarcity adherants - "The planet itself is a ball of energy, that rides in a sea of energy." Just how untapped are the earth's energy resources? Even today, over 80% of the oil wells ever drilled, have been drilled on the continental United States! Wanniski notes that, "Indeed, it can be argued that at present, there are more organic hydrocarbons being formed than are being consumed by the entire world population."Wanniski does the best job of explaining why the Great Depression occured since Murray Rothbard addressed it in his work, "The Great Depression." In both his and Rothbard's view, protectionism (the Smoot-Hawley tariff among other protectionist measures) moved the world into a spiraling depression as international trade virtually dried up.Wanniski coined the term "Supply Side Economics." A term that has been attacked but not reputed by proponents of Command Economies. Most of the world today operates under some sort of Supply Side structure. Even Russia has adopted a 13% flat tax with no Capital Gains nor "business taxes," which are actually "people taxes, as they're always passed on to the consumer."The Way the World Works" is a classic that puts the vagueries of economic theory into every day language and explains why individuals as entrepreneurs do a far better job of supplying the things we need than government bureaucracies do. A must read for anyone intersted in how and why both wealth and poverty are created.

This may be the most revolutionary work on Political Economy since Kark Marx, less in terms of economic theory than in terms of political import. In ways that often parallel James Buchannan's "Public Choice" school of thought, Wanniski looks at people as an electorate, both economically and politically, and he lays out a theory which shows how the decisions of the electorate are translated into policy. It was by reading this book that I was first exposed to the diea that even dictatorships could be a kind of democracy, if "rule by the people" can be taken to mean that anyone, regardless of birth, may aspire to the top job without revolution or a coup d'etat. By this standard, for example, the USSR was democratic, if one examines the up-from-the-bottom origins of men like Khruschev.The economics of the thesis are called "supply-side," and this is the first modern, book-length exposition of the doctrine, but in reality the tenents are really a restatement of Classical economics. Adam Smith would find little to argue with here. As an admirer of the Austrian School, I find Wanniski to be philosophically a very close fit, although not a libertarian in the Rothbardian sense; he would be closer in spirit to Wilhelm Rhopke ("A Humane Economy"). The idea that tax policy alters economic behavior is not new, but after 40 years of Keynesean domination (admittedly, Keynes would be opposed to much of what is offered in his name, and he considered himself a Classical economist) the ideas emerge with a freshness that was more striking in 1978 than in the post-Reagan/Kemp era.One of the most pleasant things aboutthe book is the lack of hostility in its' pages, and the absence of partisanship. One gets the impression that Mr. Wanniski would be just as pleased if the liberal wing of the Democratic Party had triumphed on a supply-side platform, so long as they faithfully implemented the policy. -Lloyd A. Conway

"The Way The World Works" is a brilliant andprovocative book that illuminates the reader on a full range of political, economic, and social issues. Mr. Wanniski alerts us to what he describes as "the global electorate." The author sees human civilization as an unfolding story where societies find the best political and economic systems through a trial and error process. This process, which continues through the present, is largely progressive. "The global electorate" has rewarded systems that work, like American democracy, and dissolved systems that don't work like Soviet communism. History moves forward to suit the needs of its people. When Mr. Wanniski wrote this book in the late 1970s, such ideas as "historical progress" seemed out-of-date. Assertions of Western superiority over other political systems seemed naive. After all, the Communist empire was expanding into remote corners of the globe like Afghanistan and Nicaragua while the United States and Europe sputtered economically and splintered socially. But from his home in New Jersey, Mr. Wanniski anticipated the revival of the West. Led by Ronald Reagan and Margaret Thatcher, the capitalist democracies rediscovered the secrets of their success - classical "supply-side" economics. Much of the book articulates current economic issues through the prism of supply-side economics. Mr. Wanniski offers keen insight into the origins of the Great Depression and the causes behind the oil price surge of the 1970s. You may be surprised. He is especially persuasive in articulating the need for tax cuts. Mr. Wanniski argues that tax cuts pay for themselves by encouraging more entrepreneurship, unleashing more economic growth, and thus funneling more tax revenue into the Treasury. For example, after World War I, the U.S. and Britain took different approaches in shifting from a wartime to a peacetime economy. The U.S. slashed its tax rates and prospered during the 1920s while Britain kept its rate high and remained stuck in Depression. Britain never really corrected its mistake and spent most of the century in retreat as a world power. Mr. Wanniski sees tax policy as the key intangible in explaining why some Third World nations have prospered since decolonization whereas others have regressed. The U.S., in particular, was ahead of the curve until the late 1960s when Washington abandoned classical economics for Keynesianism. "Tax-and-spend" policies, designed to spark consumer-driven demand, only undercut the private economy. When taxes were raised, counter- intuitively, tax revenues fell. By painfully experiencing the shortcomings of Keynesianism during the 1970s, the U.S. stumbled into the success of the 1980s. Federal revenues doubled in the 1980s even as tax rates held constant. The new Western dynamism could not be ignored by citizens in socialist countries. By decade's end, communist dictatorships in Europe and Asia were throwing in the towel. A new chapter in the story of "the

After graduating from college with a degree in economics it is nice to see that there are still writers out there who have heard of economists other than the "great" Keynes. This is by far the best book on economics that I have ever read. If you have often thought there were better reasons for events happening than what the so-called scholars have told you, then this book is for you.

Mr. Wanniski spends most of this volume examining world events in light of supply-side theory. He covers a remarkable range, from the beginnings of history to the present century; I have never read as cogent an explanation of both the Great Depression and the stagflation of the Carter years.This book scares the Keynesian establishment, and it should--they are gradually going the way of the Newtonians. The only criticism of Wanniski (and of supply-side in general) seems to be ad hominem--some of which may be read in other reviews here (the nonsense written by Donald about Hoover and the Depression demonstrates a complete misunderstanding of the book's major theme).Even irretrievable leftists, though, can find much in this book over which to ruminate. Wanniski is notably non-partisan and seems willing to share his ideas with whomever will listen. I found his group's web site after reading his book, and he posts a daily letter which is usually just as absorbing. If you have doubts about ordering the book, go to the site and read a few of his memos.Over time, I think that _The Way the World Works_ will join _The Wealth of Nations_, _Das Kaptial_, and _The General Theory of Employment, Interest, and Money_ as one of the great treatises on economics--and it is by far the most fun to read.