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.
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Tom in Florida says:
July 7, 2011 at 1:31 pm
“Free market creates winners and losers”
Of course. And upward mobility is the carrot at the end of the stick that keeps the losers determined to become winners. If you make the bottom quintile too comfortable with public largesse many become fat, dumb, lazy, and content to stay comfortably on the bottom with fellow bottom dwellers. On the other hand if you make it too easy for the top quintile to accumulate wealth you end up with a small number of unelected people controlling virtually all economic activity. Hypothetically a large middle class in a representative democracy maintains a healthy balance because they are close enough to the bottom to know “there but for the grace of God go I” so they are uncomfortable letting too many people sleep in the streets and close enough to the top to keep reaching for it.
This has been foiled in recent decades by massive borrowing and spending on social programs with a concommitant reticence to raise the taxes needed to pay for it on some demonstrably unworkable economic principle that lowering tax rates somehow generates increased tax revenue through accelerated economic growth. This was popularized by Reagan and called “voodoo economics” because it seemed like magical thinking and indeed after a few decades of testing it turned out the detractors were right. There’s no such thing as a free lunch and unlike a tide which raises all boats the tide from Reaganomics lifted some boats a lot higher than others and, unfortunately, the boats it raised the most were never in any danger of hitting bottom. Social programs meanwhile made the bottom too comfortable and while this had the effect of decreasing overall poverty it was an illusion because the massive borrowing was driving the middle class into poverty once the bill came due. The bill is coming due now. Everyone needs to tighten their belts to pay it. Nobody is willing to do so and the national debt and unfunded future liabilities just keep piling up deeper and deeper. Something’s gotta give and there isn’t a long term solution put in place it’ll give all at once. Sort of like not opening up the flood gates on a dam and just letting water pile up behind it until the dam fails. There’s a choice between having some small floods over a long period of time or one catastrphic flood all at once leaving you with no flood control at all in the future.
. 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.
Dave Springer says:
July 8, 2011 at 7:40 am
” 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 t honorable service in the United States Marine Corps?”
David, I spent 9 years in the USMC and a lot of others have spent their time serving our (their) Country in the military so let’s not go there. Semper Fi
“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.”
I have to disagree of your wording that a wealthy person “extracts” from the economy. Only the government extracts via taxes. If a person wants to strive for unlimited wealth than good for them. Along the way they will create jobs, spend money, pay taxes and contribute more to building our economy than they will ever take out of it.
” 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. ”
Your term “benefited the most” is very subjective. The bottom 50% of wage earners pay almost not tax yet they use the commonly owned infrastructure made possible by those paying the taxes. Do they not reap benefits from others contributions? When large companies build new buildings they are required to improve the commonly owned infrastructure around those buildings to the benefit of all. People that create wealth benefit everyone. Restricting end rewards would only make those willing to invest restrict their investments. Who gets hurt the most then?
Dave Springer says:
July 8, 2011 at 8:32 am
Let’s us not forget several things that were done that have had great effect on the budget process:
1. baseline budgets. They go up by an amount no matter what. Stupid idea. But it eliminates blame from Congress. Started in the Carter years.
2. placing social security taxes in general revenue. Again stupid idea but since at the time social security taxes were raking in 50-100 billion more than paying out congress could not help themselves. Started in the Carter years I think.
Things that went along with changing taxes;
3. When the rates were reduced deductions were eliminated as offsets. I used to be able to deduction the interest on I paid on buying a car (back in the late “60’s early “70’s) can’t anymore. Many have swapped deductions for rates.
4. EITC(earned income tax credit). Pay no taxes but get money back. Stupid idea. I have actually heard people say they will stop working so they don’t go over the allowed amount for getting the EITC. Nixon did this.
You want to stop generational wealth accumulation then get congress to do away with trusts, foundations, and the like. The Waltons, Kennedy’s, Fords, etc have good tax lawyers that set up trusts etc and pay no(very little) taxes. Warren Buffet gives 35 million to the Bill Gates Foundation so Buffet rights that off as a deduction but gets to help Gates decide how the money is spent. Professional athletes do this all the time.
For me a flat tax of say 15% for all persons. One deduction of 2 times poverty level say $30000 and pay 15% on the remainder. Looking in anothers wallet and seeing how much he should pay shows envy as far as I am concerned, and anyway “thou shalt not covet” seems to apply to taxes. Those wanting higher taxes appear to violate that one.
Don’t get snippy with me Dave. We can all sit here and compare service histories, past security clearances, post-service careers, people employed, taxes paid (etc) and it won’t advance the argument a single iota because it is irrelevant (excepting those unemployed momma’s boys who think they have a right to set my tax rates). I was careful not to attack you personally (because more often than not we are playing on the same team) only the position that government completely controls MY money.
Enough obfuscation, Congress sets taxing policy, sometimes with input from the President, but regardless of how they sneak through their bills, by 2/3 or or 3/4 or 50% + 1, each one is a trojan horse. Plausible deniability is built-in to the system which the DC bureaucrats enjoy immeasurably. Dead-of-night deals made to 218 members affecting 300 million people (e.g., Obamacare). Even the old Politburo looks good these days. Someday, if a clean standalone tax rate hike sails through the Congress so that the critters voting for it can be identified and ridiculed is the day we can point to a President or Senator Schmuckface or Representative Retard and blame them personally. All I was doing was pointing out that pinning that tax completely on Eisenhower, was juvenile and beneath you. And why do it anyway, just to somehow justify a 90% tax bracket by using Eisenhower? I think you have insulted him. Deal with it 🙂 Anyway, we know how the game is played, it’s how we got here. It is how taxpayers funded ‘Piss Christ’ and the mating habits of snail darters.
This stuff about what a free person has for ‘upper limits’ of being ‘allowed to extract from GDP’, that Government can decide what people have for earning limits and for what use, is just so alien to me. Is this what we have come to: Government can specifically target a small minority of people and literally confiscate 90% of their private property because it is politically correct? But 100% is presumably over the line though? Haven’t we explored similar territory already? I will agree with you about one thing, we have no common ground here. Dave, just to be clear the rest of this comment is not addressed to you personally! It is just me babbling about Marxism vs the Founders and other things which often happens when I read Socialist philosophy that makes me throw up a little.
The Framers did not get together in the summer of 1787 to create a monster. Even the very few ardent believers of a strong central government at the time would be ‘radical’ TEA Partiers today because the monster now far far FAR exceeds anything that England tried to ram down their throats. This is self-evident. Hamilton and Adams would be fire-breathing Jeffersonians if they got a look at today’s federal monster. Everything thing they did in Philadelphia was about kneecapping the growth of the federal monster. If current Socialists had been present then, they would have been tarred and feathered. If colonialists had a view of today’s federal monster, there would have been no USA, just endless wars between the various European landlords of American colonies and territories. Things went terribly wrong somewhere along the way.
What is dangerous to our future descendants is that with each generation we are actually slipping further down the slope, taking for granted the things the previous did not take for granted. We used to make fun of those that gave us Prohibition and the Income Tax, however at least they were honest enough to realize that they required a Constitutional Amendment for such a radical change (although that does *not* make them moral or legal or ‘American’). Fast forward 80 years to today and we have people now putting forth opinions that the FedGov is omnipotent, in charge of all private property, no Amendment needed or expected. This is a symptom of ignoring the Declaration of Independence, the spirit of our founding and all the profound arguments in the Federalist. Our rights come from God (or whatever someone chooses to believe in), they most certainly do NOT come from FedGov which is a creation of the states and the people. If there is a clear definition of ‘American’, it is that our rights do not come from man.
Government that decides what we can keep (“One for you nineteen for me”) is about as bad an idea as any that came from man’s mind. It is even worse when it is done under the color of law or the banner of democracy because it is an appeal to authority to shield it from accountability. That is immoral. That is NOT American. What is American? It is that government does not own the people, the people own the government. To prove how far we have slipped into the logical inverse just consider this, under those pushing the Socialist big government view today, it would now require a Constitutional Amendment to protect private property and ban progressive taxation. Roles are now completely reversed …
From this …
God >> People >> States >> FedGov
To this …
FedGov >> States >> People:
Making things worse yet is that in our modern era, Santa-Hood Socialism is even more diabolical. Politicians routinely TAKE someone’s private property and then take credit for giving it to someone else! It is bribery using the victim’s money to buy someone else’s votes to in turn pass legislation to go after the victim yet again! Personally, I have far more respect for an average street thug junkie that tries to rob me, than for these political thugs that do rob me and then spend my money on ‘Piss Christ’ and buying votes of welfare seeking malcontents so that they can come at me yet again later, perhaps in some AGW related tax.
Coveting other people’s money is nothing new, it is positively biblical. Marx and his sycophants merely plagiarized earlier wannabe criminals, Diggers and such (known and rejected by the founders) and so on it goes century after century. Inevitably someone comes along to cheer this philosophy of theft, using any number of justifications to legitimize it, allowing it to evolve and survive rather than die the embarrassing death it deserves. I am well aware of what my ancestors had to go through, what it took to end that era, so I am not going to yield to Socialism and just give away my self-determination and private property because it is politically correct and because we have fiscal problems caused by Socialism. Socialism is not the cure to our ills today, it is the disease itself.