Dr. Roy Spencer has a new book out, and I’m happy to give him space on WUWT with a plug for it. Josh of cartoonsbyjosh.com did the cover art. Looks like Roy was funded by “big fire” in writing this book 😉 Anthony
FUNDANOMICS: The Free Market, Simplified
July 4th, 2011by Dr. Roy Spencer
I’m pretty excited that today (Independence Day, 2011) is the release date for my new book, Fundanomics: The Free Market, Simplified.
Our friend, Josh, did the cover art and it perfectly captures one of the book’s main messages: the greatest prosperity for ALL in a society is achieved when people are free to benefit from their good ideas.
In Chapter 1, A Tale of Two Neanderthals, Borgg and Glogg are the tribe’s firestarters, who get the idea to invent firesticks (matches). This leads to a system of trading with a neighboring tribe which has many great hunters, and as a result the inventors’ tribe never goes hungry again.
But the favored treatment the inventors receive from the tribe’s elders later leads to resentment in the tribe, and people forget how much better off they all are than before — even the poorest among them. Technology and prosperity might change, but human nature does not.
Simply put, a successful economy is just people being allowed to provide as much stuff as possible for each other that is needed and wanted. Economics-wise, everything else is details. When we allow politicians and opportunistic economists to fool us into supporting a variety of technical and murky government “fixes” for the economy, we lose sight of the fundamental motivating force which must be preserved for prosperity to exist: Liberty and the pursuit of happiness.
The main role of the government in the economy is help ensure people play fair…and then get out of the way.
I devote each chapter to a common economic myth.
For example, it’s not about money, which has no inherent value and is simply a convenient means of exchange of goods and services that is more efficient than bartering.
It’s not even about “jobs”, because it makes all the difference what is done in those jobs. Many poor countries have a much lower standard of living than ours, yet fuller employment. If we want full employment, just have half the population dig holes in the ground and the other half can fill them up again. The goal is a higher standard of living…not just “jobs”.
And the desire of some for a “more level playing field” and for “spreading the wealth around” is simply pandering to selfishness and laziness. The truth is that most of the wealth has already been spread around, in the form of a higher standard of living. If we do not allow the few talented and risk-taking people among us have at least the hope of personally benefiting in proportion to their good ideas, then economic progress stops.
The good news is that those few talented people need help, which is where most of the rest of us come in. One person with a new idea for a computer cannot design, manufacture, market, distribute, and sell millions of computers to the rest of society. They need our help, and in the process everyone benefits.
I also examine the role of various government economic programs, most of which end up hurting more than helping. A major reason why the government is so prone to failure is the lack of disincentives against failure in government service. In the real marketplace failures are not rewarded, which helps keep us on the right track to prosperity.
Even the truly needy in our country would be better off if we allowed private charitable organizations, rather than inefficient government bureaucracies to compete for the public’s donations.
I’ve been interested in basic economics for the last 25 years, but frustrated by the technical details (marginal costs, money supply, etc.) that too often scare people away from understanding the most basic forces which propel societies to ever high standards of living. Now, with our country facing tough decisions about our financial future, I decided it was time to stop yelling at the idiots on TV (and giving away all my ideas to talk show hosts) and put the material in a short — less than 100 pages — book that would be approachable by anyone.
I’ll be signing the first 500 copies. The price is $12.95 (including free shipping in the U.S.) You can see all of the chapter first pages at Fundanomics.org. I think this book would be especially valuable to homeschoolers.
TonyG says:
July 6, 2011 at 11:14 am
“Dave – While I will definitely check on this myself later, I would very much appreciate if you could somehow recall and share the name of the person you mention. (It would make my searching much easier). I am interested in reading some of his work.”
His name is George Stigler
http://en.wikipedia.org/wiki/George_Stigler
The problem with the USA budget is simple. In 2010 the government collected $865 billion in Social Security and Medicare/Medicaid taxes. It paid out $1.494 trillion in those benefits, a deficit of $629 billion. Now add in the interest on that deficit spending and you have what you have today. Pyramid schemes never work.
@Dave Wendt: Thank you!
Ryan says:
July 6, 2011 at 9:02 am
@Dave Wendt:
” But since we cannot employ people in our Chinese factories because we can’t get any more people to move into the cities, wage inflation in China is going through the roof and now we are looking more and more at India as the next low-wage manufacturing site. ”
Recent developments suggest that the labor arbitrage calculation may be swinging back in our favor, although it has never been as bad as the conventional wisdom would have it. After all, five of the top ten autos with the most U.S. content are made by Toyota And Honda. Mitsubishi, Mazda, Subaru, BMW and others have significant manufacturing presence in the U.S., with some of them actually exporting vehicles to the world market from here.
If we could limit the EPA to regulating actual pollution, repeal Obamacare and move to covering health care with high deductible catastrophic insurance and tax deductible HSAs, redo Dodd -Frank to create a greatly simplified and more certain financial regulatory environment, unleash the choke collar from our energy sector allowing the massive resources that are now out of bounds to be effectively exploited ( North Dakota has avoided most of the wounds of the last several years because they are relentlessly expanding their oil industry), and generally rescind everything the government has done in the last 3 years, there is massive capital both in corporate and bank coffers as well as in internationally held accounts that would likely flood into our economy. The growth that would be created would probably be unprecedented, and might actually move us to a point where, with changes that could be politically sellable, our entitlements burden could be made sustainable for long enough that the real reforms required to do a long term fix on them might be possible.
If you all would agree to grant me dictatorial powers for about ten years I’m pretty sure I could get it done.
Great, I just ordered the book to update my Milton Friedman “Free to Choose”.
See http://miltonfriedman.blogspot.com/
Dave Wendt says:
July 6, 2011 at 1:34 pm
“If you all would agree to grant me dictatorial powers for about ten years I’m pretty sure I could get it done.”
Yes, the campaign slogan of all dictators. 🙂
mod: Thomas L. Friedman of the NY Times has lamented that the US did not have the system of government as China in order to implement “climate policies”.
Did Roy Spencer just leave his credibility behind? This new book is weird, and now he states he is just as biased as Hansen. Too bad:
http://climatecrocks.com/2011/07/06/roy-spencer-and-all-this-time-we-thought-you-were-a-scientist-weird/#more-5345
I cannot believe everyone rattling off nonsense about the flaws of capitalism, GDP discrepancies, flirting with socialism and communism, NAFTA, a return to confiscatory tax brackets! Put away you spreadsheets and calculators because you are exploring rabbit holes.
Thank you. Finally some sanity. It is exactly as you say Tom. Not Rocket Science!
Wikipedia: 2010 United States Federal Budget
So simple a caveman or climatologist can do it.
If you eat more calories than you body consumes, you will get heavy. But even this simple fact is lost on many people these days. Just look at all the big fat obese dummies running around your towns.
The answer is a diet. That is the only answer.
@Mark Wilson:
This is a false dichotomy Mark, all that is not Capitalism does not result in Communism. Mutual companies are not capitalist and even public limited companies are not truly capitalist as defined by Marx, since the ownership is not wholly in the hands of private individuals. So you can have situations where the ownership of e.g. land is neither in the hands of private individuals or in the hands of the state. Communism is about so much more than ownership of the means of production – it is also about limiting the ability of the individual to accumulate wealth (which inadvertantly means an economy where there is no “carrot” and thus an economy where the “stick” must be the substitute or economic collapse is the inevitable result).
In Europe we have a situation where for hundreds of years the ownership of the majority of the wealth of Europe has ended up in the hands of a few private individuals. Those individuals often do not work at all, but simply benefit from trust funds set up generations ago. The archetype in the UK would be the Duke of Westminster, one of the country’s richest men who has done not a days work in his life but benefits from a trust fund based on wealth created 900 years which has not only made his family rich but continues to make his family even richer as it squeezes the ordinary working man by buying up yet more property. What the Grosvenor family buys the rest of the UK can never have. It is because of people like the Grosvenors that Europeans were so keen to run off to the US to seize all the land from the Indians! But eventually the same will happen in the US, The population will be forced ever higher to push up land prices and the new aristocracy will be the Kennedy’s and the Bush’s and so on and so forth. Ordinary people will find that a house that costs $50,000 to build will cost $500,000 to buy just because of the land it is sitting on and the peice of paper that says it is OK to build there.
Ryan says:
July 6, 2011 at 8:37 am
“I am sorry but it seems that many people here have confused “free market enterprise” with “capitalism”.”
You too are confused. Capitalism is the subsitution of capital for labor.
An example. A farmer is working his land with his own labor. Another man comes along and offers to provide the farmer with an ox and a plow so he can increase the output of his farm. The second man asks for a percentage of the farm profits in exchange for his investment.
That is capitalism. No more and no less.
Mark Wilson says:
July 6, 2011 at 5:24 am
Dave Springer says:
July 5, 2011 at 1:41 pm
“So you honestly believe that you have a right, indeed an obligation to take 70% of another man’s income?”
I don’t have that right as an individual but the government which I help elect certainly has that right. The only obligation I feel is to not burden future generations with debt they did not voluntarily undertake. That’s a moral obligation though and your moral values may be different in that you think it’s okay to borrow money and let someone else pay your debts.
Blade says:
July 6, 2011 at 4:07 am
“(1) There is nothing American about a 90% tax bracket.”
So Eisenhower wasn’t an American?
I’m not interested in what’s American and what isn’t in any one person’s opinion. I’m interested in solutions that work.
Ryan, I never said that everything that isn’t capitalism is communism. I said that the agenda you are pushing is communism. See the difference?
Nuke says:
July 5, 2011 at 3:18 pm
“You’re on absolutely the wrong track talking about tax rates.”
Maybe, but I’m just going by what worked and what didn’t in the past.
“If you want to increase tax revenues, lower the rates.”
Channeling Ronald Reagan? That only works for a while as those with the ability to adjust declared income declare more of it shortly after the decrease takes effect. Sort of like make hay while the sun shines. Eventually they don’t have any more excesses to declare and revenue falls back to sustainable economic growth level. You want to see tax revenue really spike upward and fast announce an increase in the tax rate effective in the coming year and then watch the mad scramble to take profits before the rate increase becomes effective. These are just shell games played by those in a position to play.
“A broad, flat and low tax system is the way to maximize revenue.”
Sure. Let’s start by making SSI contributions a flat tax on all income, earned and unearned. The current number of 10% is good. Just make it flat across the board on all types and amounts of income. The biggest single spending item in the U.S. budget and the biggest single future liability would go away with the stroke of a pen.
What say you?
That’s why Russia adopted a flat tax years ago.”
Lowering tax rates only works when rates are excessive to begin with and it’s only a temporary rise in revenue as people with the luxury of deciding how much income to declare in any one year take advantage of the lower rate.
How’s that flat rate working out for Russia? Forgive my skepticism but I haven’t exactly been hearing many Americans say they wish they were living in Russia. Singapore has a flat tax and is probably a better example. They also have a benevolent dictatorship where things like chewing gum in public is a crime because the dictator didn’t like finding it stuck to the sidewalk.
That said I could support a flat rate for social security. Currently we have an anti-progressive rate on that. Everyone pays a flat rate of 14% (half direct and half in employee matching contribution) on the first $90K or so of income then the rate drops down to 1.5%. I’m working from 10 year old memories so forgive me if the exact numbers are out of date. The Social Security quagmire would be fixed overnight by a flat rate on SSI contributions.
Yeah, people are just beating down the doors to live in Russia. Great example. For me.
I wonder how far Spencer is willing to go with free market capitalism.
Would he make it legal to sell organs for transplant? Would he eliminate OSHA and leave it to industry/worker contracts to determine what level of occupational hazards are acceptable? How about pharmaceuticals – would coca cola be legal to make with real cocaine again? Would a person in pain be able to purchase opium? Go a doctor who has no license, a lawyer who never passed the bar, and things of that nature? Will Elly-Lilly be able to package snake oils and claim it cures cancer, colds, and colic without either evidence or safety testing? Or how about more touchy subjects for Roy like abortion. Is that something that should be available on the free market at least until the biblical definition (quickening) to mark the beginning of life? Back alley abortions for $10 for the needy? Prostitution? Gambling?
Or how about education. Should we do away with government interference in the business of higher education or setting standards for public education? All schools should be private, right? Or how about research and development? Who would actually pay Roy Spencer for the sattelite sensing work he does – Greenpeace? Would the free market build particle accelerators, launch Cassini, or put a man on the moon? Would the free market make sure that our ground water doesn’t get poisoned by industrial byproducts?
I could write a longer book than Roy on the bad things that can and demonstrably do happen in free markets. The root cause is the same as the problem with socialism and communism. None of them can work so long as some fraction of humans are greedy and without social conscience.
The free market ain’t no walk in the park, Roy.
Spencer is naive.
Dave Springer says:
July 7, 2011 at 4:55 am
You don’t have that right, but govt does? If a majority of people voted to bring back slavery, would that be within govt’s rights as well?
You claim it as a virtue, not burdening your children with a debt they did not vote for.
On the other hand, you have no problem forcing other people to pay for the goodies that you want, yet they did not vote for.
Nice bit of hypocrisy there.
Dave Springer says:
July 7, 2011 at 5:59 am
SO the only difference between the US and Russia is they have a flat tax and we don’t?
As to your claim that lowering taxes only works for one year, that is an utter load of bull.
Lower taxes always result in more economic activity, which in turn increases tax revenue.
That’s been proven time and time again.
Like most lovers of govt, Dave can’t envision a world in which govt doesn’t make all major decisions, since individuals who don’t work for the govt are not capable of running their own lives.
Why shouldn’t people be allowed to sell organs for transplant?
Since OSHA has done absolutely nothing to improve worker safety, why should it’s elimination reduce worker safety. Take a look at the record. Worker safety was improving since long before OSHA was dreamed of, and that rate of improvement did not increase after it was created. Employers have incentive to keep their workers safe. First, when a workplace is unsafe, you have to pay workers more to compensate. Second, training new workers to replace any worker hurt is expensive.
As long as Coca-Cola did not hide the fact that there was cocaine in it’s formula, why shouldn’t it be allowed to put it in there?
Why shouldn’t I be allowed to go to a doctor who hasn’t been approved by the govt?
Why shouldn’t I be allowed to use a lawyer who doesn’t have the official govt seal of approval. For most of this nations history, neither lawyers nor doctors had to get govt approval before opening up a practice.
Why shouldn’t Eli-Lilly sell snake oil, as long as they don’t advertise that the product has been clinically proven, what’s the harm.
Both prostitution and gambling should be legal.
If you can demonstrate that govt standards for education have improved education, please present them. Real scientists have been searching for such evidence for decades. The fact is, the more govt has gotten involved in education, the worse education has gotten.
Who would pay for scientific progess. Strange thing, there was scientific progrss for hundreds of years prior to the notion that only govt could pay for it.
Would the private market protect ground water from pollution. Of course it could. In fact it did so prior to govt getting in the way. Look up riparian rights.
Go ahead and write that book, then I will follow along and demonstrate that none of them are the result of the free market, rather they will be the result of govt interfering in the operation of the free market.
Ryan says:
July 7, 2011 at 2:12 am
“In Europe we have a situation where for hundreds of years the ownership of the majority of the wealth of Europe has ended up in the hands of a few private individuals. Those individuals often do not work at all, but simply benefit from trust funds set up generations ago. The archetype in the UK would be the Duke of Westminster, one of the country’s richest men who has done not a days work in his life but benefits from a trust fund based on wealth created 900 years which has not only made his family rich but continues to make his family even richer as it squeezes the ordinary working man by buying up yet more property. What the Grosvenor family buys the rest of the UK can never have. It is because of people like the Grosvenors that Europeans were so keen to run off to the US to seize all the land from the Indians! But eventually the same will happen in the US, The population will be forced ever higher to push up land prices and the new aristocracy will be the Kennedy’s and the Bush’s and so on and so forth. Ordinary people will find that a house that costs $50,000 to build will cost $500,000 to buy just because of the land it is sitting on and the peice of paper that says it is OK to build there.”
In regard to permanent wealth stratification the U.S. is entirely different from Europe, which should have long ago exposed the folly of “wealth redistribution”. There have been quite a number of studies done in the U.S. which actually follow the incomes of individuals over extended timeframes, usually 20 years. With significant overlaps they form a consistent record back to at least the 50s. The results of all of the studies are, within experimental limits, nearly identical. They show that those who start in the bottom quintile almost inevitably move to higher quintiles at the end, with not insignificant numbers moving all the way to the top quintile. But, even more significantly, they show that those that start in the top quintile are almost as likely to end up in lower ones, with those that move all the way to the bottom nearly matching those that made the reverse trip. Over time in the U.S. it is a small minority whose income level stays the same over time.
The stratification that is a feature of wealth in mostly Socialist Europe would seem to be the inevitable result of letting bureaucrats pick winners in an economy. History has repeatedly demonstrated that, when picking the winners of the future, they always pick from the winners of the past.
Until the election of BHO, I would have laughed at your suggestion that the U.S. will end up similarly stratified. But now I fear that if this dick ( a characterization that is my homage to Mr. Halperin who got to experience the consequences of speaking truth to liberal power) manages to get himself reelected we will end his term more like the Europe of today than the Europe of that future will be. Of course, there is the not insignificant possibility that by 2016 we will have already followed the PIIGS down the toilet bowl of history.
The Social Security quagmire would be fixed overnight by a flat rate on SSI contributions.
—
I love the way certain people just assume that every problem in the world could be solved, if only someone else had enough of their money stolen, and spent on them.
Raising SS taxes would not solve anything. The reason for that is simple if you take just a few seconds to think about it for once. SS payouts are based on SS payments. When you increase the SS taxes, yes more money comes in, NOW. But in a few years when those evil rich guys start retiring, their SS payments are going to be increased by the same amount.
Problem not solved, and a lot of people get a poorer retirement because if the money hadn’t been stolen from them, it could have been invested in something that gets an actual rate of return.
when picking the winners of the future, they always pick from the winners of the past.
—
Or they pick their friends, or the children of friends.
Socialism/Communism always results in an elite class that does what it can to make sure that it doesn’t have to suffer from the deprevations it enforces on everyone else.
And despite the delusions of some, any system that prevents individuals from owning land, as Ryan advocates, is properly called communism.
Dave Springer says:
July 7, 2011 at 9:14 am
“I could write a longer book than Roy on the bad things that can and demonstrably do happen in free markets. The root cause is the same as the problem with socialism and communism. None of them can work so long as some fraction of humans are greedy and without social conscience.
The free market ain’t no walk in the park, Roy.”
Free market creates winners and losers. That’s the way it is and should be. How did we get into this idea that no one should lose? Everyone gets a trophy just for participating. No one should keep score because losers might feel like …. losers. What bull spit.
Dave, where do you get the idea that anything should be a walk in the park?
I expected better. Most of us understand the tax rates are only vaguely related to the sitting President that signs these massive bills developed in Congress, with some exceptions like JFK and Reagan that actively hammered Congress to reduce tax rates. Eisenhower was a political general, a pencil pusher (who did learn quickly once promoted) who was a good President in the traditional figurehead sense, but was hands-off to the point of being silly putty to the Congress. But I digress here.
What would 100% tax rate be called? Slavery? I would think so, without the chains and whips no doubt but at least my ancestors got food, room and board. How can we even be discussing this in the country founded on a tax revolt, not to mention private property, individual liberty and freedom.
These things just make me harden my view that as spoiled little brats in the 21st century that somehow forgot how we got here (shortly after Independence Day no less) we need a good spanking. Let’s repeal that damn 16th Amendment and let the entire welfare state collapse. We allowed Communists/Socialists to infiltrate a free society and like cancer it is affecting many cells throughout our nation’s body. It will require radical treatment to beat this disease.
To answer your question, Eisenhower has nothing to do with it. There is nothing American about a 90% tax bracket. It would not matter who was President. It is Marxism. It is Socialism. It is Communism.
@Blade
We seem to have left it without saying that 90% tax rate during Eisenhower administration (it was still 70% while JFK was POTUS) was a top marginal rate. It didn’t kick in until earned income exceeded $10,000,000. If you think there should be no limit on how much one person should be allowed to extract from gross domestic product for personal use then we don’t really have any common ground for discussion. My position is that such a level of personal reward would not be possible without the commonly owned infrastructure so when the bills for the infrastructure come due you look for whoever benefitted the most from it to pay the most of said bill. It seems totally fair to me and I’m more patriotic than most people – how many of you can say you volunteered four years of your life to honorable service in the United States Marine Corps? I could have rode a scholarship through MIT but instead I chose to give the four years following high school to my country. So don’t even begin to lecture me about what’s American and what isn’t, “blade”.
P.S. Blade
“Most of us understand the tax rates are only vaguely related to the sitting President that signs these massive bills developed in Congress”
Not as many of us understand that without a presidential signature no bill becomes law without a 2/3’s majority in each house of congress. This includes tax laws. Eisenhower signed the bill into law. Deal with it.