Economics for People Who Hate Capitalism

If you’re like me, you’ve spent a lot of time (probably too much time) searching for the perfect introductory guide to economics, something to recommend to people who are interested in learning more about the subject or who, in your own arrogant opinion, would benefit from learning more about the subject. Such a book, to be ideal, would have to meet two criteria:

1) It would have to set forth the sometimes difficult and/or counter-intuitive ideas of economics in a way that is compelling and easy to understand (yet not overly simplistic); and

2) It must be a book that people will actually read.

Sadly, finding a book that meets these criteria is harder than it might appear. I’ve looked at plenty of contenders, but virtually every book I’ve come across has had some major drawback or flaw. Either it’s too technical, or too dated, or it leaves too much out, or most of it is excellent, but there is one part that will turn off anyone who reads it so thoroughly as to nullify any effect the rest of the book might have.

After viewing this episode of Bloggingheads, I’m considering making Filthy Lucre: Economics for People Who Hate Capitalism my standard recommendation, at least for people who are broadly speaking left-of-center. The book’s author, Joseph Heath, is a philosophy professor at the University of Toronto, student of Charles Taylor, expert on Habermas, and author of The Efficient Society: Why Canada is as Close to Utopia as it Gets and The Rebel Sell: How the Counter Culture Became Consumer Culture. Heath is no one’s idea of a right-winger, but he also acknowledges that a lot of arguments made by the left are premised on a faulty understanding of how the economy can and does work.

Of Bootleggers and Baptists

Last week I was accused of being a stooge for the powerful. It wasn’t the first time, and it probably won’t be the last. What did I say that caused this charge? I suggested that the market should be given a greater role in the provision of health care.

Well, then, you might say, what more need have we of witnesses. Everybody knows that free markets are in the interests of the powerful. That’s why big businesses are so opposed to government intervention in the economy.

Changing the subject completely, I was reading an article in the DC Examiner only a few hours later when my eyes fell upon the following sentence:

Philip Morris, openly and without qualification, backs Kennedy’s and Waxman’s bills to heighten regulation of tobacco.

Like Breadlines, But For Healthcare

In the LA Times, Ezra Klein extols the advantages of Britain and Canada’s healthcare systems as against the American system:

Britain and Canada control costs in a very specific fashion: The government sets a budget for how much will be spent on healthcare that year, and the system figures out how to spend that much and no more. One of the ways the British and Canadians save money is to punt elective surgeries to a lower priority level. A 2001 survey by the policy journal “Health Affairs” found that 38% of Britons and 27% of Canadians reported waiting four months or more for elective surgery. Among Americans, that number was only 5%. Score one of us!

Well, sort of. American healthcare controls costs in another way. Rather than deciding as a society how much will be spent in the coming year and then figuring out how best to spend it, we abdicate collective responsibility and let individuals fend for themselves.

Writing at Econlog, Arnold Kling takes issue with the claim that Americans are left to fend for themselves when it comes to health care. But whether or not this is how America deals with healthcare costs, it is how we control the costs of lots of other things. Like food.

The Great Inflation and Its Aftermath: Review

Robert Samuelson’s The Great Inflation and Its Aftermath tells the story of America’s battle with double digit inflation in the 1970s. As Samuelson tells the story, in the post-WWII period economists and politicians began to think that they could use the insights of Keynesian economics to fine tune the economy. According to Keynes, there was a fundamental economic trade off between inflation and unemployment. By using its control over the money supply, then, the government could induce a small amount of inflation, which would lead to lower unemployment and hence higher overall output.

The problem was that while inflation did in fact lead to a drop in unemployment, the effect was only temporary. At first an infusion of cash into an economy would boost demand for goods and services and lower interest rates (as people mistook the increase in dollars with an increase in wealth). Eventually, however, people would begin to catch on to what was happening, at which point a higher level of inflation would be needed to achieve the same effect. By the early 1970s, the United States was facing both high unemployment, high interest rates, and high levels of inflation, something which according to standard Keynesian theory should have been impossible.

First Do No Harm, Redux

The state is trying to shut down a New York City doctor’s ambitious plan to treat uninsured patients for around $1,000 a year.

Dr. John Muney offers his patients everything from mammograms to mole removal at his AMG Medical Group clinics, which operate in all five boroughs.

His patients agree to pay $79 a month for a year in return for unlimited office visits with a $10 co-pay.

But his plan landed him in the crosshairs of the state Insurance Department, which ordered him to drop his fixed-rate plan – which it claims is equivalent to an insurance policy.

Muney insists it is not insurance because it doesn’t cover anything that he can’t do in his offices, like complicated surgery. He points out his offices do not operate 24/7 so they can’t function like emergency rooms.

More. Dr. Muney’s idea is reminiscent of the minor health clinics Wal-Mart and CVS having been opening, though on a different scale.

Confessions of an Economic Hitman: Review

Part memoir, part polemic, Confessions of an Economic Hitman tells the story of John Perkins, a former economic forecaster for the engineering firm of Chas T. Main, Inc. As a forecaster, Perkins’ job was to provide estimates of the effect various infrastructure projects (mainly electrification) would have on economic growth in developing countries. These estimates were then used to justify loans to developing countries from international aid agencies, which would then hire Main to complete the project.

Perkins makes two claims about his work for Main. The first, that he inflated his estimates so Main could get more and bigger contracts, sounds fairly plausible. It’s true, for example, that the actual growth resulting from foreign aid has often fallen far short of projections. I’m inclined to think that this was more often the result of wild eyed optimism than crass cynicism, but I have no doubt that this sort of corruption did occur, and my only objection to Perkins’ remarks on this score would be to the idea that corruption in transfers of money from Western governments and agencies to developing world governments somehow represents an indictment of the free market.

In addition to profit-seeking, however, Perkins claims that he was in reality an agent of the NSA, and that his true mission in getting developing world governments to agree to these loans was to so saddle them with debt so that they could be forced to abide by Western economic and foreign policy interests.

Questions to Ponder

From Bryan Caplan:

All ideology aside: If the government had followed a laissez-faire policy for the last six months, and output, employment, housing, and financial markets stood exactly where they stand today, what fraction of people would conclude that “Events decisively prove that laissez-faire is a disaster”? Can you honestly give any answer less than 90%?

On the Rich Doing Their Own Laundry

Brad DeLong recently quoted the following snippet from an email he received on his blog:

In Agatha Christie’s autobiography, she mentioned how she never thought she would ever be wealthy enough to own a car – nor so poor that she wouldn’t have servants…

Today, having servants is a luxury only open to the rich, whereas owning at least one car is a standard part of middle class life, outside of a few major cities. In Christie’s youth, however, it was just the opposite. Automobiles were the luxury, whereas most middle class families could afford live in servants (the same is true of many developing countries today).

The Christie quote (or paraphrase, rather) reminds me of something a Papal legate wrote about the habits of the Byzantines back in the day: “Their treasuries are overflowing, yet they do their own laundry.”

In both cases there is the same basic phenomenon at work. As a society gets wealthier, the real cost of most things goes down, but the real cost of human labor goes up. To quote John Nye:

Who Protects the Worker?

In the comments to my post last week on the minimum wage, reader Matt Talbot posed to me the following question:

Blackadder, I’m expecting your answer to be characteristically parsed and lawyerly, but I’ll ask anyway: Do you think there is any imbalance in power between Walmart (say) and a door greeter or stocker that works there? If so, in your libertarian utopia who or what would protect the workers from abuse by management?

It’s a good question.

Pelosi on the Minimum Wage

While the interviewer in this clip can be a little annoying, he also has a point. Speaker Pelosi says everyone who works should be paid the minimum wage, yet many of the people who work for her don’t make the minimum wage. The fact that we choose to label one “employment” and the other “an internship” would not seem to make much difference from a moral point of view. If it did, then as the interviewer rightly notes, businesses could simply evade minimum wage laws by classifying their employees as interns. On the face of it, then, Speaker Pelosi’s stance here would seem to just be another example of a trend I’ve noted previously, namely that many advocates of the minimum wage think an exception ought to be made in their own case.