Report of the book: Naked Economics - Essay Example

The author further breaks down how the market gears itself and aligns incentives in ways the individuals work for their own self-interest for improved standards of living. Moreover, imposing preference on others is termed as unfair by wheelan and he gives an example of how the soviet socialist economy failed due to the bureaucracy of the government controlled economy. In addition, wheelan suggests that the best way to formulate policies is by thinking in terms of incentives and disincentives. The most important role of the government in this is regulating these incentives so that they can serve their purpose.

The importance of incentives is given an emphasis by illustrating that when a material thing earns profits, that material is valuable but when it ceases to serve its purpose then that material is dispensable. Policy issues are centered on externalities as the government plays an important role in the market economy by dealing with them. Wheelan uses several examples to illustrate this. He also raises questions on several externalities both positive and negative. For example, he states that some smokers generate extra healthcare cost that is catered for by the government and that his taxes go into paying for the smokers medical bills.

In short, the author tries to convey that taxing behavior that generates negative externalities create a lot of good incentives. The government should not be the sole provider of good services unless the private sector fails to do so. Although the government has an important role to play in the economy, it should not be the actual one to do the work. This is because the government will be freer to handle the responsibilities that are meant to be handled by the government. In addition, Wheelan points out that some activities should not be carried out by the government since it will not succeed.

He gives an example of the post mail service. This shows that the technology today has radically changed and