• John Tamny, Popular Economics, Regnery Publishing, 2015, 256 pages, $27.99.
The case for laissez-faire economic policy is overwhelming, but getting people’s thinking on track with it isn’t easy. Many of the false notions that undergird interventionism and what Ludwig von Mises called “the anti-capitalist mentality” seem to make sense. So, how do we best attack them?
In Popular Economics, John Tamny, who edits RealClearMarkets, sets out to refute bad economic ideas and replace them with sound ones. Many books try to do that; what sets Tamny’s apart is how he goes about making economics, well, popular. His subtitle is revealing: “What the Rolling Stones, Downton Abbey, and LeBron James can teach you about economics.”
To educate is to build a bridge from things a person knows to things he doesn’t yet understand. Tamny does that brilliantly by using sports and popular culture to convey key economic truths. That’s why this book is so useful for those of us who want as many Americans as possible to comprehend fundamental economic principles. On page after page, Tamny shows why laissez-faire is essential and makes interventionist ideas look absurd.
The book is divided into four main issues: taxes, regulation, trade, and money. In each, Tamny takes dead aim at the mistaken ideas that prop up big government.
On taxation, the conventional wisdom is that high taxes on businesses are necessary to make them pay “their fair share.” Most people also believe that the money extracted from them goes to the government where it is spent “for the public good.”
In his first chapter, Tamny argues that taxes are merely “a price placed on work” by the government. To explain, he doesn’t start with an economist, but instead with Keith Richards, the lead guitarist of the Rolling Stones. Richards states that the band decided to leave England because of the high taxes. “We didn’t know if we would make it, but if we didn’t try, what would we do? Sit in England and they’d give us a penny out of every pound we earned.”
Progressive taxes (in England, the United States, everywhere) are more of an impediment to people who are trying to become wealthy than to those who are already wealthy.
And what happens with all the money the government rakes in? Largely, it is squandered by politicians who want to buy popularity. Rock musicians make wiser use of money — the money they’ve earned — than do politicians who dip into the vast pot of tax dollars taken by force.
Tamny’s next target is regulation. Aren’t government officials more knowledgeable and interested in the public welfare than market participants? No, just the opposite. “Regulation does not just routinely fail; it cannot work,” he writes. “What it can do, however, is weaken businesses by forcing them to pour their resources into compliance with government rules and regulations rather than let shareholders and customers profit.”
Tamny reinforces his argument by relating a number of stories that will appeal to readers, such as the role that antitrust rules played in the demise of Blockbuster Video and the rise of Netflix.
On trade, Tamny does a superb job explaining the law of comparative advantage and how government interference with free trade inevitably makes consumers worse off. Here he refers to basketball star LeBron James, who is the world’s top player, and asks readers to ponder what would happen if James decided to play another sport where he’d no doubt also be quite good, such as receiver on a pro football team.
If James did that, he’d be turning away from the talent where he has a comparative advantage over everyone else and toward a talent where he’d have a lot of competition. He’d be worse off. Once readers understand that obvious point, they’ll see why governments should not get in the way of producers of any good or service specializing in what they do best.
Also on the subject of trade, Tamny sweeps away the confusion that often arises when people think of one country trading with another. Countries do not trade, he explains — individuals do. “A country’s economy,” he reminds us, “is just a collection of individuals.” That is why it is foolish to fret about trade deficits between countries.
When he turns to the subject of money, Tamny is all for restoring America to a sound monetary standard. “Just as the foot is never long or short, money should be neither strong nor weak. The foot is a standardized tool to measure things and money should have the same constancy,” he writes.
Gold once gave us that constancy, but when President Nixon decided to drop the dollar’s connection to gold, that ushered in great problems for Americans. Mostly, those problems are unseen, however, such as the constant erosion of the dollar’s value.
Another unseen aspect of our unstable monetary system Tamny illuminates is the waste of brainpower in currency and commodity trading markets. “Fluctuating money has led a great deal of human capital to migrate to Wall Street in order to trade the chaos,” he states. It’s necessary to deal with the uncertainty caused by floating exchange rates, but bright people are merely doing “facilitator work.” We lose out on the productive things they otherwise would have done.
I recommend this jaunty book for everyone, but especially younger people who have been brainwashed into believing that free markets are dangerous.
George Leef is a contributor to Carolina Journal.