Charles Wheelan, Ph.D. The Naked Economist

When I was a kid, I remember being captivated by "The Book of Lists." The title was appropriate, because it was, well, a book of lists -- the American presidents, the world's longest rivers, the oldest living humans, and so on. It was a fun book, and even instructive in some ways.

Since I occasionally get queries from people looking for more information on economics, I thought it would be interesting to create my own list for economics. Here goes:

• My Favorite Economist: Gary Becker, who won the Nobel Prize in 1992 and still teaches at the University of Chicago. Becker's genius is that he's taken the core principles of economics -- basic ideas like how rational people make tradeoffs -- and applied them to subjects ranging from crime to discrimination to childbearing.

Some of Becker's most important contributions are in the area of human capital, which is the term economists give to all the skills embodied within a person. Education is an obvious example, but the ability to throw a baseball at 98 mph consistently over the plate also counts.

For those of us interested in public policy, Becker's ideas provide enormous intellectual traction. For example, his theory of human capital can help explain why fertility rates are dropping sharply across the developed world.

As women become more educated and have greater career opportunities, the cost of leaving the workforce to take care of children (in terms of foregone earnings) goes up. One rational response, which is borne out by data, is to postpone childbearing and have a smaller family.

Meanwhile, the same theory explains that the "cost" of children is going up. No, we don't buy our children, but we are expected to invest heavily in their human capital rather than sending them out to herd goats. So Becker would say that as the cost of children goes up, we "substitute quality for quantity."

• The Best Economics Writer: Milton Friedman. For all the praise heaped upon Friedman after his recent death, I think one of his great talents got surprisingly little attention: he was a wonderful writer.

Friedman magnified the power of his ideas by communicating them powerfully. Books like "Free to Choose" and "Capitalism and Freedom" aren't the kind of books that economists typically write.

For nearly two decades, Friedman also wrote a column for Newsweek, which isn't the kind of magazine in which most academic economists aspire to publish. Yet that kind of writing can have a huge impact in terms of moving the public (and the politicians who poll them) toward economic literacy, particularly on tricky issues like trade. I suspect the world would be a richer place, figuratively and literally, if more economists were able and willing to write like Friedman.

• My Greatest Economics Frustration: There's an entire sub-discipline of economics devoted to the field of economic development. And there are huge organizations staffed with economists who work on global development issues, such as the World Bank.

Then there's Africa, which is shockingly poor and, with some exceptions, drifting sideways or even getting poorer. Economists can do a reasonable job of explaining how places like Japan developed, or how India is getting richer now. And they can document all the things that contribute to wealth: education, infrastructure, good governance, empowerment of women, and so on.

But the discipline is frustratingly bad at taking a particular place at a particular time -- whether it's the Detroit region or the nation of Chad -- and offering a prescriptive set of specific steps for growth and prosperity.

• My Favorite Economics Blogger: Greg Mankiw is a Harvard economist, a former chair of the Council of Economic Advisers, and the author of a popular introductory economics textbook. In his blog, Mankiw does a nice job of posting interesting articles from all kinds of sources interspersed with succinct and insightful comments.

• My Favorite Obscure Economics Concept: Seignorage. Why do governments so often let inflation get out of control? Because they can profit from it. Seignorage is the process in which governments implicitly tax their citizens by printing money.

Suppose you're running a small, semi-corrupt country and you don't have enough money in the government coffers to pay your army. As the soldiers grow restless, you have two choices: 1) Raise taxes, which is politically unpopular but also harder than it sounds in poor countries without the infrastructure to collect the revenue. Or, 2) Phone the central bank and instruct them to begin printing money (which, if you've been in power long enough, probably has your picture on it).

Of course, when you print money to pay the army, it depreciates the value of all the currency already in circulation, which is effectively a tax on everybody holding cash. A loaf of bread now costs 10 percent more, or 50 percent more, or 500 percent more, depending on how much money the government prints. Seignorage is technically the purchasing power that the government derives (e.g., paying the army) from printing money.

• My Favorite Economics Book: "The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers" by Robert Heilbroner. The beauty of this book is that it explains the importance of economic thinkers ranging from Adam Smith to Karl Marx and puts them in context with succinct biographical sketches.

• The Biggest Economics Charlatans: The supply-siders who continue to insist, in the face of all evidence and academic opinion to the contrary, that a country like the United States can boost tax revenues by cutting taxes.

Based on my past skepticism of the supply-siders, I know that I'll soon be bombarded by angry comments and emails pointing out government revenues went up after some favorite tax cut, such as the Reagan or Bush tax cuts.

But that alone tells us nothing, as government revenues always trend up due to inflation and economic growth. The appropriate question is not whether government revenues were higher after the tax cut than before, but rather whether revenues are higher than they would have been in the absence of the tax cut.

All credible evidence on this subject says that there are a lot of good things about tax cuts, but raising extra revenue is not one of them.

• The Greatest Economic Challenge of Our Time: Reconciling the tradeoff between a decent safety net and the bad incentives that it creates.

There isn't a politician on the planet who doesn't want to create more jobs. But, paradoxically, those same politicians often cling to policies like trade barriers and excessive protections for workers that end up inhibiting job growth. The economic reality is that creating new jobs involves creating a climate in which workers can be fired and companies can go bankrupt.

That's not intuitive. I recall an academic in India asking me, "We have an unemployment problem. Why would we make it easier to fire people?" The answer, of course, is that I'm not going to hire someone I might never be able to fire. Most developing countries, and the more rigid economies in Europe, are dealing with some variation of this challenge.

And, of course, cushioning the blow for those who are chewed up and spit out in a dynamic economy creates problems, too. Providing a safety net -- a perfectly reasonable social objective -- usually creates perverse incentives: unemployment insurance diminishes the incentive to find a new job; welfare benefits discourage recipients from working; subsidized government health insurance gives employers less reason to provide private coverage, and so on.

The challenge around the world is to enable capitalism to do what it does best -- build better mousetraps -- without leaving the people who made the old mousetrap living on the sidewalk outside their shuttered mousetrap factory.

So that's my list. I hope it provides some resources for those with a deeper interest in economics.