Economics Today & Tomorrow
by Roger LeRoy Miller
(New York: Glencoe, 1995), third edition, 626 pp.
General Comments: This is an attractive, hardcover book with an
abundance of photographs. The writing is good, but unfortunately the book doesnt do
very much to develop the economic way of thinking in its 626 pages. In part, this is
because Miller devotes a large amount of space to photos and other visual effects. More
important, however, is his decision to spend a great deal of time on "how to"
questions. Many chapters are concerned with subjects like these: how to shop for clothing,
how to buy or rent housing, how to plan a trip, how to start a business, and so on. This
turns the book into an amalgamation of "personal economics" and economic theory,
in which the latter plays second fiddle. The book doesnt do nearly enough to help
the student develop the "mental toolkit" of the economist.
Criterion 1: Costs and PricesHow Production is Determined.
After a broad definition of economics, Miller states that "economists gather data
from the real world and then use the data to explain events or test theories" (p.
18). Many economists have argued, however, that economics is not a science of numbers, but
is based on the logic of purposeful human action. Miller does set forth the value-free
nature of economics when he writes, "Economics will not tell you whether the result
will be good or bad" (p. 20).
The books discussion of scarcity, resources, and cost is very good. The key
concept of opportunity cost is brought out very well. So is private property, competition,
and the profit motive. The books superficiality manifests itself early, however. An
example is the treatment of the "too big to fail" phenomenon (p. 39). The
student learns that the federal government bailed out Chrysler, Lockheed, and other large
firms with loan guarantees. True, but here some economic analysis was in order, getting
the student to think about the effects of such bailouts. What were the intended and
the unintended consequences? Unfortunately, the author does not lead the reader
into that analysis.
The book contains a good profile of Adam Smith and through several "Focus on Free
Enterprise" sections, suggests to students the essence of the "invisible
hand" conceptthat you succeed only by providing goods and services consumers
will pay for.
Criterion 2: Competition and Monopoly
Miller explains the differences between perfect competition and monopolistic
competition without the erroneous notion that the former is ideal and the latter wasteful.
Also, he notes that there is "little proof that oligopolies are harmful" (p.
240). The treatment, however, is a bit sketchy and fails to analyze whether or not
oligopolies are efficient.
Missing from the books discussion of monopoly is any analysis of how hard it is
to create and perpetuate a monopoly in a free market. Some businesses, as Miller might
have noted, have turned to the government to stifle competition because they could not
succeed otherwise. Moreover, the section on mergers and antitrust is threadbare, failing
to lead the student into analysis of the costs and benefits. Millers treatment of
the economics of regulation and deregulation is also superficial.
Criterion 3: Comparative Economic Systems
The differences between capitalism and command and control economic systems is
correctly explained, but without much depth. Miller correctly observes that "all
economies are planned in one way or another" (p. 485), but does not explore the
inherent drawbacks of central planningthe problems of quality, indifference to
consumer preferences, and especially the impossibility of rational allocation of resources
in the absence of a price system. It is certainly true that "capitalist countries are
economically healthier," but the student does not get a good grasp of the reasons
why this is so. The student learns how to think like an economist by exploring such
There is a good, although brief, discussion of the transition from command and control
systems in China and the Soviet Union toward the free market, emphasizing that personal
incentives change dramatically once property is in private hands and profit-making is
The books section on economic growth is much less satisfactory. Miller describes
foreign aid at some length (amounts given by various nations, the channels through which
it flows, and the different kinds of aid programs), but he does not analyze the economic
effects of foreign aid. This leaves the impression that foreign aid relieves suffering and
promotes economic growth. Miller gives no indication that the effects of foreign
aid are different from its intentions. Learning to think from the stated intentions
of a policy to its actual effects is one of the most important economic lessons, but the
book fails to deliver here.
Furthermore, the author leaves the student with the false impression that international
trade only springs up if we first give governments in developing nations some purchasing
power through foreign aid.
Criterion 4: The Distribution of Income and Poverty
Miller devotes very little space to income distribution and poverty. Instead of a
chapter concentrating on these matters, the student only finds sprinkled throughout the
book statements that suggest the markets distribution of income is inequitable.
Missing is any sustained investigation of the economics of poverty, including the role of
government in impeding people from making economic progress on their own.
The treatment of income redistribution programs is superficial. Miller simply tells
students that the task of ensuring that everyone is provided with "a certain minimum
level of income" is "accomplished primarily through income redistribution, using
tax receipts to help citizens in need" (p. 417). Here is another instance where the
book needs economic analysis. Students should be encouraged to think about the effects
of anti-poverty programs and alternatives to them, but Miller does not do so.
Criterion 5: The Role of Government
Miller begins with the "public goods" problem and the treatment is very thin.
He gives no clear definition of public goods; he only says in a vague way that they are
"goods or services that government sometimes supplies to its citizens" (p. 416).
That "definition" may lead students to the erroneous view that whatever the
government provides is a public good. The student needs to understand why it is hard for
private enterprise to provide an optimal level of true public goods, but that is missing.
Similarly, in Millers discussion of "merit goods," he asserts that
goods can have "social value," and that "government" determines which
goods do. This reinforces the mistaken idea that value is objective and collective. Miller
would have done the student more good if, instead of saying that classical music concerts,
ballets, and so forth are "merit goods," he had analyzed the effects of
government subsidies and the process that brings them into existence.
The book needs improvement on the subject of externalities. The student is merely told
that government regulation is needed to protect citizens against pollution. The economic
problems that give rise to the problem of pollution and the consequences of pollution (or
other negative externalities) are not analyzed. In a "Point-Counterpoint" box
(pp. 76-77), Miller presents some arguments for and against pollution taxes, but this
takes the form of "some say this, but others say that"which does little to
teach economic thinking.
Students are also told that redistribution of income and economic stabilization are
both functions of government. But, inquiring students will want to know, what are the
consequences of government action?
Criterion 6: Public Choice
One of the major weaknesses of this book is the absence of public choice thinking.
There is just a fleeting reference to "the political systems overwhelming
predisposition toward government failure," but this is never developed.
Students need to be presented with a cogent exposition of the difficulties with public
decision makingthe incentives of politicians and bureaucrats, the rational ignorance
of voters, the power of interest groups, and so on.
Rather than helping the student learn to think critically about public decision-making,
the book reinforces civics class platitudes with statements like this: "Through their
elected representatives, Americans have chosen to see that almost everyone is provided
with a certain minimum level of income" (p. 417). Public choice analysis calls into
question the idea that democracy works in this idealized fashion. Government action is
rarely occasioned by the desires of "the people" in general, and a good public
choice section would explain why.
Criterion 7: The Role of Entrepreneurs
The book is very good on the subject of entrepreneurs. Students learn that
entrepreneurship is a key ingredient in economic progress, that it entails considerable
risks, and that it is motivated by the desire for profit. Most of the material is gleaned
from the several "Readings in Economics" and "Focus on Free
Enterprise" sections that appear throughout the book. These sections do a lot to
demonstrate that business success is something to be applauded, not scorned. The book
would even be stronger if Miller had shown that entrepreneurs can easily be stifled by
hostile taxes and regulations.
Criterion 8: Taxation
In the authors slender section on taxation, he asks if people should be taxed
according to their ability to pay. He then describes the different kinds of taxes, and
finally makes the point that taxes can encourage or discourage activities. None of this
really helps to develop the students understanding of the economics of
taxationits costs, the incidence problem, or its tendency to misallocate resources.
Miller says that "Taxes are also used to direct resources toward investments that are
desirable but costly" (p. 430), without leading the student to ponder why, if the use
is desirable, it is necessary to subsidize it through the tax system.
Criterion 9: The Business Cycle
Millers discussion of the business cycle is incomplete. He notes correctly that
economists are divided into two camps in their "approaches toward controlling
unemployment and inflation" (p. 443). The point that he needed to explore first was
how the two camps differ in their assessment of the origins of economic fluctuations: 1)
those who maintain that cycles are an inherent part of the market ; and 2) those who
maintain that instability is induced by poor government policy. That important debate is
only hinted at in the discussion of Monetarism, which is the only non-Keynesian theory
In discussing Keynesian theory, Miller never dissents from the idea that government
spending can "strengthen" the economy. Miller writes that, after the end of
World War II, "The economy was strong enough by then to continue operating without
the extra government aid" (p. 446). Much criticism has been leveled at the contention
that government spending can aid the economy, but unfortunately the student hears none of
it. There is also a gaffe on p. 446, where he says, "Keynesian economists believe
that as a result (of the 1964 tax cut), unemployment fell. . . ." This makes it sound
as if only Keynesian economists have figured out that cutting taxes can have economic
In the short chapter on Monetarism, Miller correctly shows that the money supply fell
significantly between 1929 and 1933, and he explains that Monetarists regard this as the
precipitating event of the Great Depression. He also includes some of the difficulties in
trying to make Keynesian "fine tuning" of aggregate demand work, but the student
is never led to question the fundamental premise that government is needed to manage
Criterion 10: Wages, Unions and Unemployment
Miller informs the student that "Supply and demand are factors in the labor
market," (p. 307) but he needs to clearly link wages to productivity. Furthermore, he
mentions in passing that minimum-wage laws "affect wages," without giving any
economic analysis of their effects. Only the exceptional student would think to apply the
discussion on price floors and ceilings (more than 100 pages earlier) to see that the
minimum wage also affects the number of jobs available to low-skilled workers. Working
through the economic effects of the minimum wage would help the student to understand
economic analysis better, but the book fails to do so.
The chapter on unions is, typically, much more descriptive than analytical. While two
full pages are devoted to a timeline of American unionism, the student reads nothing on
the extent to which unions can raise compensation to above-market levels, and if they do
so, what economic impact this has on consumers, investors, and other workers. The book
also reinforces the common assumption that because sick leave, paid vacations, and health
care benefits followed the advent of unionism, they came about because of
unionism. Unions certainly have been able to change the composition of the total
compensation package paid to workers, but many economists deny that they have or can
increase compensation in total. Miller ignores the role of competition in the labor market
to attract and keep good workers.
He briefly discusses unemployment (pp. 438-39), but says nothing on the programs and
policies to deal with it.
Criterion 11: Trade and Tariffs
The authors explanation of the reasons for and benefits of trade is very sound.
The vital point that exports pay for imports is made clearly and the analysis of the law
of comparative advantage is excellent. Also, the book helps the student to understand that
"international trade" is nothing different: "You should consider
international trade as an economic activity just like any other. It is subject to the same
economic principles. For you and everyone else in the United States, the purpose of
international trade is to obtain imports, not to export" (p. 465).
Unfortunately, in the following chapter, Miller briefly describes foreign exchange
markets and conveys the false idea that it matters whether we have a "favorable"
or an "unfavorable" balance of trade. The misleading terminology that is used
makes it seem to students that some action must be taken to stop "unfavorable"
trade balances. If a textbook uses those terms, it ought to correct the erroneous
conclusions that are apt to follow.
The economic effects of import restrictions are mentioned briefly, but there is no
in-depth treatment of their impact. Furthermore, the main arguments in favor of
protectionism are presented, but not scrutinized. The book leaves it up to the student to
decide whether there is any validity to the "infant industry" argument, among
others. Unfortunately, the book does not give the student enough competence in economic
analysis to do that.
Criterion 12: Money and Banking
The functions of money are explained well. The connection between the supply of money
and its value is also explained. However, the student never sees the market nature of
money or the damage that can be done by turning control of the monetary system over to
government. The only mention of the gold standard is in a time line (p. 371) and it is
criticized for causing periodic money shortages and economic panics. This is a dubious
attack. Many economists and historians have argued that the panics in the 19th
Century were caused by poor banking laws, occasional issues of government paper money, and
government mandated purchases of silver.
The organization and functions of the Federal Reserve System are capably discussed. The
book also gives the student a brief look at banks and other financial institutions, but
does not explain their importance in the economy. Nor is there anything on the effects of
regulating financial institutions, or on the causes and effects of the S&L crisis.