All Commentary
Monday, January 1, 1990

A Reviewer’s Notebook: The Midnight Economist

Professor William R. Allen, who for ten years has been giving economic instruction to thousands of listeners over 200 radio stations, calls himself the Midnight Economist. He has collected his broadcasts, along with some other essays, in a book called The Midnight Economist: Meditations on Truth and Public Policy (San Francisco: ICS Press, 332 pages, $12.95 paper). Milton Friedman, in a wise introduction, notes that Allen’s genius is for bringing into the open the elementary principle involved in an issue without being hortatory about it. Friedman marvels at Allen’s versatility, the wide range of problems and issues that he covers. We can join Friedman in his admiration.

In addition to being instructive, Bill Allen is a lot of fun. He professes to giving shelter in his office to two mice. One goes by the name of Karl. The other is called Adam. Karl doesn’t like economists. They are too gloomy with their eternal insistence on scarcity. Adam humors Karl. He defends economic truth by expressing a general sympathy for Karl’s “sickness.” Karl has been snarling about the concept of market equilibrium and announcing that economists “want equilibrium at any price.”

“You may be sick for wrong reasons,” says Adam. “We don’t want equilibrium at any price; rather, we want a price at which there is equilibrium. And we want an equilibrium price, not he-cause that will solve all problems, but because it generally avoids making a hard life still harder.”

Karl, not really listening, snaps “we mice of sensitivity and compassion want government to make things better. One way is to stipulate fair prices.”

It takes Adam Mouse, reasoning like Adam Smith, a little while to make Karl Mouse see the connection between unhappiness and uncleared markets. But Adam Mouse gets there because lie has common sense on his side.

Karl Mouse accuses Adam of having no soul. But Adam has been “blessed with companionship of my rabbit Bunnie and my dog Winnie.” Neither Bunnie nor Winnie add to the Gross National Product, but they contribute to happiness. “All our cleverness and wit,” says Allen, interjecting at this point, “all our tools and technology, will leave us poor, indeed, a disgrace in the eyes of the Deity, as long as we lack the goodness and grace and gentility of Bunnie Rabbit and Winnie.”

When he is not listening to his two mice, Allen is concerned with general economic dumbness. His midnight commentary assails as “mythology” such statements as “the minimum-wage laws raise the income of the poor,” or “government jobs programs increase employment,” or “tariffs increase domestic employment and wages,” or “we could have enough of everything if we were fully to exploit our fantastic productive power.” Our Congress spends most of its time trying to put 20 separate “myths” into new laws that will become drags on our economy.

A few states—Connecticut is one, New Hampshire is another—frown upon the income tax, Allen finds it significant that the states that grow most rapidly have the lowest level of income tax and property tax per person and the highest level of per capita sales taxes.

The proof of the pudding is in the record. “After New York lowered its progressive income tax rates in 1977,” says Allen, “its economic growth increased and its unemployment fell in relation to the national average.” Tax cutting, Allen concludes, is not a panacea. “But higher income and property taxes certainly are not a long-run road to prosperity—and since 1980 such state and local taxes have been rising rapidly.”

Allen finds our Latin American policies to be mainly stupid. There have been calls for a Latin American Marshall Plan. But Europe in the late 1940s and early 1950s bore little resemblance to the Latin American circumstances of the 1980s. Anyway, contrary to nearly universally held mythology, the Marshall Plan was not a significant economic factor in European postwar recovery. It was, says Allen, basically a political strategy in economic clothing—a statement of intent to preclude further Russian advance in western Europe.

A lot of the Allen columns are pure historical exposition. He tells the story of the Roman Emperor Diocletian, who minted so many new coins that inflation from a superfluity of metal worked as do the printing presses of modern governments.

As I write this review, the homeless are descending upon Washington to demand government support of new building programs. Allen reminds us that rent control has greatly diminished financial incentives to build new housing. “Substantial homelessness,” says Allen, “is man-made. And men perversely make it mainly with rent control.”

  • John Chamberlain (1903-1995) was an American journalist, business and economic historian, and author of number of works including The Roots of Capitalism (1959). Chamberlain also served as a founding editor of The Freeman magazine.