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Book Review: Popular Economics
(John Tamny)

“Popular Economics” is a well-written, glib primer. In some ways, it’s a dumbed-down version of Henry Hazlitt’s “Economics In One Lesson,” or a severely dumbed-down version of Thomas Sowell’s “Basic Economics.” Its goal is to instruct those with little economics knowledge that John Tamny has all the answers. Actually, it’s to instruct them that John Tamny has one answer to all questions, which is that government is an atrocity, and one solution, which is that the government needs to stop interfering in economic activity.

This is true, certainly. Government is an atrocity, at least to the extent it purports to guide our economy. And Tamny delivers his message with clarity and verve. But “Popular Economics” suffers from two defects, one major, one minor. The major defect is common to popular works on economics, left and right—the book is too pat. It presents all its conclusions as both simple and obvious. No possibility of nuance or variation is admitted. No possible counter examples are introduced, discussed and rebutted. In Tamny’s world, as with any ideology, it is All So Very Clear. Ironically, this gives Tamny and his kind much in common with those they despise, the heralds of government action in the economy, such as Paul Krugman, to whom it also All So Very Clear.

The second defect is that the book has entirely too many sports analogies. Yes, given that LeBron James is cited in the subtitle, that’s probably to be expected. But nearly every page has a specific sports analogy, and if, like me, you know little about spectator sports and care less, these examples both don’t resonate and tend to be unclear (though the point is usually obtainable). Tamny would have done well not to limit his audience in this way.

Aside from these defects, though, the book is, as I say, very well-written and by no means irrational. 80% of what Tamny says is probably true and eminently supportable, although his support is usually limited to cherry picked examples and sports analogies; precise data is singularly lacking.

Tamny discusses four major topics: Taxes, Regulation, Trade and Money. In all sections, Tamny has some common threads. First, the “unseen”—what we don’t have because bad choices, mostly government choices, prevented investment that would have created more for our society. You can’t show the unseen, of course, but Tamny gives classic examples such as Henry Ford to show what can (and he says will) result from private reinvestment of capital not hampered by taxes and regulation. Second, supply creates its own demand—if one does not supply value, one cannot demand anything, and if one does supply value, one does so in order to demand (this is, of course, basically Say’s Law). Third, presumably in response to unstated objections to #2, money will always go to the most productive use, whether saved or spent, EXCEPT if it goes to the government, which by definition only destroys value. What matters is that private enterprise have access to capital, and government seizure reduces that capital, thus necessarily harming society.

I am somewhat of an economic ignoramus, so I won’t provide any counter-arguments to Tamny’s claims, though I’m sure it could be done. But I still don’t understand something. Tamny says that “Savers are an economy’s most valuable benefactors,” because they provide capital (through bank deposits and subsequent lending, or direct investment themselves) to producers. But sports stars and movie directors who blow their fortunes on women and coke “stripped themselves of wealth and the economy of the capital to create it.” How are these different? Don’t the women and coke dealers take the money and, ultimately, direct it to the same place that savers do? It’s not like wealth, as measured by money, is being destroyed. (Sure, you can destroy value—see Solyndra. But that’s not what’s happening here.) It seems to me this is a question of the velocity of money, which Tamny doesn’t discuss (and, anyway, it’s pretty clear that he rejects macroeconomics as whole).

As to taxes, Tamny lays out why taxes are merely a price placed on work, but also why high taxes on the rich also harm the middling and the poor (because the rich either leave high tax environments, as the Rolling Stones did, throwing all those working below them out of work, or cut back their production). He claims that lower government spending with deficits is better than higher government spending without deficits (i.e., deficits are irrelevant)—the problem is any government spending, which reduces capital available for private use. He wants the rich to hoard wealth, and therefore rejects estate taxes, since that hoarding makes capital available for private use—giving it to charity does not, and therefore harms society overall more than charitable donations would (the unspoken allegation is that charities are largely stupid money pits). And low taxes are good because they increase inequality, and that increases envy, and that increases the incentive to produce. Eduardo Saverin (the Facebook co-founder who reduced his tax bill by renouncing US citizenship) is a hero for keeping money out of the government’s hands and thereby benefiting US citizens. And to the extent we need taxes for core, legitimate government functions, a flat consumption tax is the way to go (unsurprisingly, Tamny loves Steve Forbes, and Forbes wrote the introduction to the book).

Tamny then attacks regulation. His basic point is that regulators are stupid and therefore can never hope to successfully regulate the smarter people who went into the productive side of whatever industry they’re in, which is where the regulators would be, if they weren’t stupid—as shown by they’re working for a government wage. “Those with talent generally seek employment with other talented people, where the work is stimulating and the compensation high.” Antitrust laws are similarly pointless, because antitrust regulators (who are stupid, in case the reader forgets) can’t possibly predict the future, as shown by Blockbuster and Betamax. (By antitrust laws Tamny means laws against monopoly—he seems unaware that there are a range of antitrust laws, many of which he might support, such as rules against price fixing).

The third section, on trade, is a generic lecture on comparative advantage (as shown by the example of LeBron James playing basketball and not football), “I, Pencil,” and the wonders of globalization. Tamny rejects calls for oil independence, claiming that resources will always be available on the market, and slyly notes that the risk of global warming is overstated, as shown by no diminution in the spiraling prices of waterfront real estate (such as that owned by Al Gore). While all this is true, Tamny is too optimistic about the joys of free trade and human rationality. Israel would do well to be oil independent, whatever Tamny says (and he specifically says Israel should put no effort into energy source acquisition), and Tamny’s claim that free trade prevents war between trading partners is utterly belied by history, including World War I.

The final section, on money, is a George Gilder-esque call for the gold standard to be restored, noting that dollar fluctuation makes calculating inflation and deflation impossible. It is also a demand for letting failure delineate the economy—Tamny totally rejects all government action to save failing companies, including all actions taken in the 2008 so-called financial crisis. And Tamny concludes optimistically that after Bush and Obama, people have certainly had it with government, so he predicts a coming boom as government is cut back in 2016 and after. But you certainly can’t accuse Tamny of pessimism.

As an introduction to what a certain view of the economy is, this book is excellent. But as an introduction to comparative economic thought, it is worthless. So it all depends on what you’re looking for.

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