In Popular Economics, John Tamny, editor of RealClearMarkets, sets out to refute bad economic ideas and replace them with sound ones. Many books have tried to do that, but what sets Tamny’s apart is how he goes about making the “dismal science,” well, popular. His subtitle is revealing: “What the Rolling Stones, Downton Abbey, and LeBron James can teach you about economics.”
Quite a bit, as it turns out.
To educate is to build a bridge from what 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. Tamny ably demonstrates why laissez-faire is essential to prosperity and progress — and along the way he shows interventionist ideas to be absurd.
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 demonstrate how, he doesn’t start with an economist or a chart, but instead with Keith Richards, the lead guitarist of the Rolling Stones. Richards explained 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, and 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.
What about 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 business by forcing them to pour their resources into compliance with government rules and regulations rather than let shareholders and customers profit.”
Tamny relates a number of stories that will appeal to readers' real experiences, such as the role that antitrust rules played in the demise of Blockbuster Video and the rise of Netflix.
On trade, he does a superb job of explaining the law of comparative advantage and how government interference with free trade inevitably makes consumers worse off. He refers to basketball star LeBron James, 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 and toward a role where he’d be more marginal. He’d be worse off. Basketball would be worse off. Fans would be worse off. Once readers understand that point, they’ll see why governments should not get in the way of producers specializing in what they do best.
Tamny also 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 used to give 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 would otherwise have done.
I recommend this jaunty read to everyone but especially younger people who have been brainwashed into believing that free markets are dangerous. Tamny’s book would be an ideal introduction to hook them on the need for freedom, to be followed by Hazlitt, Friedman, and other luminaries of free markets.