Category: Economics

And not just because their proposed Constitution enshrines secular ideology and refuses to even mention Christianity.

It needs to reject the Constitutional Treaty because of what it will do to Europe in purely secular terms, leaving aside the question of religion.

Europe has a problem with statism.

Eastern Europe was only recently freed from crushing totalitarianism, and Western Europe has been rapidly giving up its freedoms to ever-more invasive nanny regimes who are out of touch with the people and who have implemented social policies that are crippling Europe’s economies.

But there is at least one candle shining in the dark in Europe: All these invasive nanny regimes at least aren’t the same nanny regime.

To the extent countries maintain national sovereignty, they retain the ability to serve as laboratories for experimentation. They can try different laws and policies and see which ones work best. That holds out the hope that someone, somewhere in Europe may one day vote people into office who are willing to try the kind of market and regulatory reforms that have, y’know, had something to do with America being able to become the first global hyperpower and stuff.

That’s what happened here: Back during the reign of History’s Greatest Monster we were on the Euro-track, with the welfare states of France and Germany being extolled as models and our own economy in the dumpster.

But then someone (figuratively) said: "Hey, maybe this being on the Euro-track thing is what’s The Problem. Maybe if we did something diff’rent, things would improve."

That someone was Ronald Reagan, and enough people thought it was worth a shot, and the shot hit the bullseye. Our economy started growing, people started leading better lives, we won the Cold War, and, while there have been ups and downs (like the reign of History’s Other Greatest Monster), the trendline has been upward.

So, in view of the demonstrable recent success of America, might some Europeans ever get fed up enough with their oppressive nanny regimes to try to vote into office people willing to try the America-track?

They might!

Only those people won’t be able to do diddly in office if national sovereignty has been erroded away to the point that all of the big-picture decisions are being made by an elite political uberklass that is the locus of nanny regime-ism.

The creation of a pan-European nanny regime is only going to make harder the experimentation that is needed for Europe to be able to see for itself that it’s current policies spell C-I-V-I-L-I-Z-A-T-I-O-N-A-L D-I-S-A-S-T-ER and either avert or blunt the force of the disaster.

FORTUNATELY, THE FRENCH SEEM TO BE TURNING AGAINST THE CONSTITUTIONAL TREATY.

We’ll see when it comes referendum time whether they have the wherewithall to say NO or whether they’ll in the end cave in to what their Political Masters want them to do.

According to the Financial Times:

The EU constitution, which contains new rules for the expanded union
and strengthens Europe’s foreign and security policy, can come into
force only when all 25 members adopt it.

That seems like a rater dumb way to write law to me, but if it’s true then it holds out hope that someone, somewhere in Europe will say no to the treaty.

Gotta protect those national laboratories of experimentation.

PREPUBLICATION UPDATE: Before this post went live, I found THIS PIECE that makes similar points and is well worth y’all’s while to read. (Cowboy hat tip: Southern Appeal).

Recently I blogged about the Broken Household Fallacy–the idea that the economy and families are automatically benefitted if both parents work outside the home.

Other folks have been talking about the same thing, and I’ve begun to run across references to them. For example, there is a book by Elizabeth Warren and Amelia Warren Tyagi called The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke.

I haven’t read the book, but it’s getting positive reviews from some prestitious places.

Such as . . . ?

How about THE HARVARD JOURNAL OF LAW AND GENDER (formerly the Harvard Women’s Law Journal).

Excerpt:

They offer a well-researched, three-part explanation for the growing financial troubles of the middle-class family: the rising cost of being middle-class, the increased risk faced by families without a stay-at-home parent, and the emergence of a deregulated credit industry have combined to dramatically increase the financial danger faced by the American family.

A number of factors explain the problem of rising costs, including a bidding war in the housing market, a marked rise in the cost of education, and the additional burden of providing a second vehicle for the working mother. With more money earmarked for the necessities of middle-class existence—house and car payments, insurance costs, educational expenses—there is less flexibility and freedom and a greater chance that expenses will outstrip resources and compel bankruptcy if disaster strikes.

“And so the Two-Income Trap has been neatly sprung. Mothers now work two jobs, at home and at the office. And yet they have less cash on hand. Mom’s paycheck has been pumped directly into the basic costs of keeping the children in the middle class.”

That means we need to make things easier by having federally-subsidized daycare, right?

Well, Warren & Tyagi say:

"[S]uch subsidies would make financial life more difficult for these families [with stay-at-home mothers], because they would create yet another comparative disadvantage for single-income families trying to compete in the marketplace. Every dollar spent to subsidize the price of day care frees up a dollar for the two-income family to spend in the bidding wars for housing, tuition, and everything else that families are competing for . . . . In effect, government-subsidized day care would add one more indirect pressure on mothers to join the workforce."

GET THE STORY.

GET THE BOOK.

The U.N. Population Division now estimates that there will be 9 billion people alive in 2050.

That’s about 40% more than are alive now, and a number that the Earth can easily support if nations do not put economic barriers in the way of the free flow of resources (food, etc.).

In my view, the number is likely to cap out at 9 billion or a little higher, as the trend is already slowing worldwide. After it caps out, it’s like to start declining.

That’s not to say the future will be rosy in mid-century. Most of the growth will occur in developing nations whose leaders may not let them develop enough to handle their growing populations.

They may, for example, try protectionistic economic policies that spark trade wars and make it harder for their citizens to make money and buy what they need from elsewhere, leading to economic stagnation, recession, depression, and attempts by governments to start wars to get new resources (the real reason–coupled with national pride–that most wars are fought), to force abortion and other anti-child policies on their populations, or both.

Still, we’re not looking at a Malthusian crisis.

Of course, the 9 billion figure is predicated on the predictions of a department of the horribly corrupt and incompetent United Nations. It’s not an unreasonable figure, though, so

GET THE STORY. (Cowboy hat tip to the reader who e-mailed it!)

Excerpt:

“Future population growth is highly dependent on the path that future fertility takes,” the report said.

No! Really?

Remember the broken window fallacy? In case you don’t, it’s a fallacy that underlies much bogus economic reasoning, according to which, when bad things happen to people (e.g., when a kid throws a rock through your window) it is actually good for the economy because it provides economic stimulus.

Actually, it doesn’t. If your window gets broken you have to pay to get a new one, and that does give money to the window-makers and provide economic stimulus in that area, but in reality there’s a net loss to the economy: If your window was never broken then you’d have both a good window and the money you would have spent to replace it. Unless that money goes to the Land of the Lost, it’ll eventually get spent (by you or your heirs) and thus provide economic stimulus. It might not be given to a window-maker, but it’ll get given to someone.

Say that replacing a broken window costs $50 (to pull a number out of the air). Which is better for you (and society) to have: a broken window and $50 or a good window and $50? More wealth is in existence if you have a good window and $50 than if the window gets broken and $50 has to be spent to replace it. Surprise! Bad things like broken windows really are bad.

Now let’s think about this:

1. A family consisting of a dad, a mom, and children would like more money.
2. The mom decides to get a full-time job outside the home to make that money.
3. Mom makes money!
4. The family has the additional money it wanted.
5. Society benefits by having an additional worker in the workforce.
6. Every family gets the same idea and does likewise.
7. Society benefits economically from "not having half its potential workers out of the workforce."

Right?

Well, think about this (and BE SURE to read the important note at the bottom):

1. BROKEN WINDOW #1: Since mom is working outside the home, somebody has to take care of the children, so they are put in outside-the-home schools or daycare centers. The family pays for this either directly by fees or indirectly by taxes.
2. BROKEN WINDOW #2: The family is not willing to have all of mom’s salary go to paying someone else to be a surrogate mom, but the alternative caretakers are not willing to be paid only a fraction of a normal salary. They need to make a living, too, so they aggregate the children of different famlies together to get economies of scale going. This means each child gets less attention than if mom were the caretaker.
3. BROKEN WINDOW #3: It also means that the children operate in a standardized environment that is less customized to their individual needs than the home would be (e.g., if the slow learners in class set the pace of learning then the fast learners are slowed down and visa versa mutatis mutandis).
4. BROKEN WINDOW #4: By being shipped to child aggregation centers, very young infants end up not being breastfed for the first year of life, with the result that their health suffers..
5. BROKEN WINDOW #5: By being taken care of by someone other than their parents, the influence of the parents over the children is weakened as they become attached to their caretakers.
6. BROKEN WINDOW #6: The children begin to adopt the values and ideology of the aggregation environment, which can never fully reflect the parents’ wishes since it must cater to the needs of children of different families which have parents with different beliefs–and that’s assuming that the caretakers aren’t idealogues trying to push a particular agenda on the children. Further, most of the socialization (raising) is done by child-to-child interaction rather than adult-to-child interaction. In other words, to a significant degree the kids "raise" themselves.
7. BROKEN WINDOW #7: Friction errupts in the home as the values the child has absorbed from the caretakers are brought into conflict with the values of the home.
8. BROKEN WINDOW #8: Many children end up alienated from their parents and doing things that significantly harm themselves (e.g., drinking, taking drugs, having sex). These result in health problems, human suffering, and a rise in the number of children murdered by abortion.
9. BROKEN WINDOW #9: By aggregating children together on a daily basis and by making it hard for them to be pulled out unless they are really sick (e.g., mom has to take a day off to care for a sick child), the kids get sick more often, resulting in higher medical costs and human suffering.
10. BROKEN WINDOW #10: Since mom can’t be in two places at once, she can’t both be at her job and taking care of domestic needs in addition to childcare (cleaning, shopping, cooking, etc.). This means (a) that these must be done after work, increasing her stress level (and likely that of her husband as well as he will want to help if he is at all a person of conscience) or (b) someone else is paid to do them or (c) nobody does them and the family suffers.
11. BROKEN WINDOW #11: Because some domestic needs like food provision have to be done, stressed families will increasingly turn to food that is prepared outside the home and that is quick and convient. Such "for profit" food will be configured to maximize profits for its makers. This means pushing more profitable rather than more nutritious food on the public, as well as pushing more food on the public, leading to health problems, medical costs, and human suffering.
12. BROKEN WINDOW #12: Moms will increasingly feel the stress of juggling job and family, leading many to feel like they are expected to be "superwomen" and effortlessly achieve things that no one person should be expected to do.
13. BROKEN WINDOW #13: At some points in their lives, particularly in late pregnancy, with an infant in the house, or when small children are in the house, women will either put their careers "on hold" or otherwise have the consequences of what is going on in their lives impinge on their work environment (e.g., by cutting back number of hours worked), causing their career to suffer. As a result, more men than women will end up in higher and higher-paying positions, leading to dissatisfaction, charges of discrimination, and lawsuits.
14. BROKEN WINDOW #14: Calls of "equal pay for equal work" will result in the erroding of the family wage idea. Since the norm is now for a family to have two wage-earners, the idea than an individual wage-earner should be able to support a family on the income received will go away as employers begin configuring salary scales predicated on a two-income family. Thus the gains in income by the first generation of moms entering the workforce will be lost in the second generation as incomes fail to grow as quickly in order to accomodate the family wage concept.
15. BROKEN WINDOW #15: Wages are also depressed from where they would be more directly: By doubling the number of people competing for a position, labor is in abundant supply and will have the effect of lowering the salaries laborers can command by a standard supply-and-demand dynamic.
16. BROKEN WINDOW #16: As a result of the above effects, voters will turn to government to provide social programs to ease their difficulties (e.g., government-subsidized childcare). These programs represent an additional cost that the family will have to pay indirectly through taxes.
17. BROKEN WINDOW #17: As families feel the pinch of higher taxes, calls will be made for the wealthy to pay more in taxes than regular folks. This results in the wealthy having less money to invest in the economy because the money is being taken out of the economy and being shuttled through government programs that are inherently less efficient than the market because they are shielded from supply-and-demand considerations. The economy thus shrinks, meaning fewer job opportunities, fewer raises, and more layoffs.
18. BROKEN WINDOW #18: As families turn to the government to solve problems that the family once solved for itself (e.g., how to raise and educate a child), the government becomes more and more intrusive into family life, creating models that try to standardize the handling of situations, leading to a loss of parental freedom (e.g., can you spank your child or is that child abuse? must your child be taught evolution only or can he be taught intelligent design?).
19. BROKEN WINDOW #19: As families feel the pinch of the above considerations, they begin to decide that–in financial, emotional, and time concerns–they cannot afford as many children any more. There are fewer large families and more small ones. Eventually the number of children falls below the replacement level.
20. BROKEN WINDOW #20: As the childbirth rate falls below the replacement level, attempts will be made to cover the gap by increasing immigration, often illegal immigration. These attempts either will fail or will radically change the nature of American culture or both.
21. BROKEN WINDOW #21: As a result of immigration, including and especially illegal immigration, there will be more competition for jobs, depressed wages, and additional costs to the taxpayer (e.g., emergency medical care) that are not covered by the immigrants due to the fact many are illegals not paying taxes.
22. BROKEN WINDOW #22: As a result of increased immigration, and especially illegal immigration, a nativist movement will emerge resulting in friction between the nativists and the immigrants.
23. BROKEN WINDOW #23: Because birth rates begin to fall among the immigrants, and because birthrates are falling world-wide, immigration proves not to be a long-term solution to the problem, leading to proposed other solutions to keep the economy from shrinking–like extending the retirement age. That means many people will have to work longer before they get to retire. (And which also is likely not to solve the problem.)
24. BROKEN WINDOW #24: As the working population begins to shrink the burden of caring for retirees (by Social Security, Medicare, Medicaid, and direct personal care of family members) begins to grow for each two-income family. This causes further pressure to keep the number of children down since, by government mandate and human compassion, more resources must go to caring for the retirees.
25. BROKEN WINDOW #25: Because of the increase in the burden of caring for the elderly, increased deaths through euthanasia occur.
26. BROKEN WINDOW #26: Because of the pressure families are under, the divorce rate goes up, harming everybody in the family.
27. BROKEN WINDOW #27: Because of the rise in family break-ups, the out-of-wedlock birthrate goes up (harming children and single mothers, particularly), but it is not enough to offset the overall shrinkage of the population.
28. BROKEN WINDOW #28: As the birthrate continues to shrink, the economy shrinks, leading to a generational depression (because it will take a generation to turn it around by conceiving and raising the workers needed to get the economy growing again).
29. BROKEN WINDOW #29: Because of the interlinkage of the global economy, a global generational depression happens.
30. BROKEN WINDOW #30: Because of economic shrinkage. the United States starts being less generous with the rest of the world and is less able to serve as global policeman.
31. BROKEN WINDOW #31: An increase in warfare occurs as nations compete for scarcer-resources due to the depression and due to the lessened stabilizing role of the United States.
32. BROKEN WINDOW #32: A civilizational crisis explodes and the situation gets dramatically worse until a restructuring of societal values along more traditional lines (especially having more babies!) is achieved.

IMPORTANT NOTE: The above represents a line of economic reasoning rather than moral reasoning. In particular:

• It is not a policy proposal.
• It does not suggest that there should be no two-income households.
• It does not suggest that women should be driven from the workforce.
• It does not suggest that immigration should be stopped (I myself have worked very hard to facilitate the immigration of a particular individual).
• It does not suggest that no children should be cared for or educated outside the home.
• It does not suggest that the two-income family is the only source contributing to the problems mentioned above.
• It does not suggest that the two-income family will lead to the death of western civilization. Not all of the items mentioned in the above scenario may occur (especially the more futuristic ones) and alternative solutions may be found to some of them (e.g., another technological revolution equivalent to computers and the Internet increases productivity and keeps the economy growing).
• It does not even suggest that the costs of the two-income household outweigh the benefits of it.

What it does do is point out that the idea that by having two-income households be the norm does not automatically benefit the economy. There are economic and other costs (the broken windows) associated with having a society with nuclear families where both parents work outside the home. How many of those costs a society should be willing to bear and thus what degree of two-income families there should be is an entirely separate question (which gets to the morality subject).

What it also does is point out that raising and educating children in the home is itself work! It is work that makes a valuable contribution to society and, if someone is not available in the home to do it then it has to be handled another way. That means that the advent of the two-income household is not simply an economic gain to the family or to the economy as a whole. It also has significant costs that have to be weighed in determining whether or not it should be pursued.

That calculus, of what benefits one is willing to pursue and at what costs, is what economics is all about.

In preparation for the coming push for Social Security reform, some liberals are now trying to argue that there is no "crisis" (a term that is almost infinitely plastic in meaning, as it can refer either ot an imminent crisis or a looming, long-term crisis) and that the system can be "fixed" by (guess what) tax increases and benefit reductions (not for present, voting seniors, mind you, but for us when we retire).

TIME FOR A THOMAS SOWELL SMACKDOWN!

It’s obvious that what laws a country has have an impact on its economy. If you make it hard to get a business license, fewer people apply, there are fewer business licenses, less business, and thus the economy suffers.

Recent history also demonstrates that certain large-scale systems are better for the economy than others. Capitalism good. Communism bad. (Also, Fire bad!)

The logical thing to do, Mr. Spock would tell us, would be to plug as many legal and social variables as you can shake a stick at into a database and do regression analysis on them to find out which laws and social factors correlate with the success of an economy.

Who’s going to do that?

Not the politicians who make laws. They’re too busy selling economic snake oil to voters in the form of election promises.

Not lawyers. They’re too busy being lawyers to do economic analysis.

Economists? Yep. They’re the boys for the job.

And so that’s what’s happened.

Four economics sometimes referred to by their last name initials as LLSV (which sounds like a nucleotide base-pair sequences except for the fact that none of those letters represent nucleotides) have constructed such a database, regression analysis-ed it, written some papers, done further research, and in the process become the most-cited economists in the last decade (which is pretty great shakes for econmists).

Some of the things they have found seem obvious, like:

When shareholders have more rights, people are
more likely to invest in markets, because they have more protections
against dishonest executives. When creditors have more rights, they are
more likely to lend money, which spurs markets to grow. And when
countries are free from corruption, investors put more money into them.
The LLSV scholars weren’t the first to recognize that shareholder and
creditor rights spur economic growth, or that corruption stunts it, but
they were the first to connect these conditions to a country’s legal
system and to do so using cold, hard numbers.

But some of the things that they found went is rather surprising directions, like:

The regressions showed that the measures that
indicate high investor and creditor protection or low corruption
connect to common law origin. . . . The
measures that represent low protection and high corruption connect to
civil law origin.

"What does that mean?" you may be asking yourself.

It means:

[C]ountries that come from a French civil law
tradition struggle to create effective financial markets, while
countries with a British common law tradition succeed far more
frequently.

Now, that sounds like a nicely uncontroversial theory, right? Nobody’s going to be upset about a claim of this nature.

GET THE STORY.

Oh, and one post script:

[T]he French government, for obvious reasons [is] the
most elegant and persistent defender of civil law. Initially, the
French government ignored LLSV’s findings. Then it dismissed them.
Starting last summer, it began funding research through its Ministry of
Rights and Justice into what the country can learn from LLSV.

Recently I was around a bunch of people, several of whom were sick with colds and whatnot.

After getting home, I decided to look up the incubation period for the common cold to get an idea of when I might be in the clear.

Wikipedia says it’s 1-2 days.

Wikipedia goes on to say:

Common colds interfere with school attendance and can cause lost days on the job, resulting in considerable costs to the
economy. In addition, much money is spent on over-the-counter and
home remedies.

Suppose that Wikipedia had gone on to say:

The economic stimulus of these sales helps to offset the lost productivity of days at work.

QUESTION: Who can tell me why I would have had to delete that sentence?

FIND OUT MORE ABOUT THE COMMON COLD.

Down yonder, a reader writes regarding Thomas Sowell’s point that prices reflect the collective values placed by individuals on limited resources that they are competing for in the marketplace (e.g., beach-front homes):

What would he [Sowell] say about that view of pricing for things that have no limited supply—e.g., usage of intellectual property?

Unfortunately, he doesn’t seem to treat intellectual property in this book. At least "copyright" and "intellectual property" aren’t listed in the index (though he may have comments about them somewhere).

Fortunately, there is a sequel (Applied Economics), which I’m going to read afterward. He might deal with it there.

Also fortunately, I already have thoughts about this subject. As (a) information exchange is how I make my living and (b) part of my income is royalties and (c) our age presents people with the technological means to easily violate copyright law, I’ve thought though this particular area of economics in more detail than most.

It also seems that there is a limit to the supply of intellectual property. In fact, there are two limits. The first is the limited number of copies of a piece of intellectual property that are actually in existence at any one moment. This is a finite number. If I show up at Best Buy on the day that the special edition of Return of the King is released later this month and the store is already sold out, I’ll be very annoyed (which is why I plan to go during lunch).

It’s true that technology makes it very easy to make new copies of works of intellectual property, and via the Internet one can make a new copy for very little expense. For example, I just started a trial subscription to the audiobook service Audible.Com, where you pay for a work and then download a copy onto your hard drive, which means making a new copy that didn’t exist before (and that is also burnable to CD).

Technology may be making it increasingly trivial to expand the finite number of copies of a single work of intellectual property that exist at any given moment, but the effort required to do so is not zero. It still takes electricity, hardware, and plastic to get a CD copy of an audio book off the Internet, and those items have costs (both in the sense of prices and in the sense of not being able to devote those resources to a different use after committing them to this one).

The greater limiting factor on works of intellectual property, though, is the one that copyright laws are designed to encourage: the creations of such works. There are a limited number of such works created. Nobody has an infinite number of monkeys with typewriters, so we have to rely on the ingenuity of humans to write our stories and novels and textbooks and articles for us (and that’s just in the medium of print; our movies and TV shows also have to get made and our songs recorded).

People will do a lot less of this if they aren’t paid for it. If someone can’t make a living as a writer, he won’t do it full time, and he may not do it at all. If you want someone to make up a story for you every week on your favorite TV show or write a book about a subject you’re interested in, he needs to be compensated for his time in doing so.

Copyright laws, by giving the creators of a work the right to control the copies that are made of it so that they can make money off these copies, enables creators to earn a living by what they do, and so society is enriched by having more stories and more novels and more textbooks and more articles (as well as more movies, TV shows, and songs) than would exist if creators didn’t get paid for their work.

Works of intellectual property are thus resources, just as all other works are. If you don’t pay people to produce them, they won’t be produced (not in anything like the same numbers, anyway). If you want someone to dig copper out of a mine, you have to pay him, and if you want someone to dig a story out of his brain, you have to pay him as well. Copyright is the mechanism that ensures this happens on a frequent and professional basis rather than on an infrequent and hobbyist basis.

That doesn’t mean that all copyright law is good law. I, personally, am opposed to several provisions of current copyright law. I think the fines for violating it are too high. I think the term of copyrights are now too long (corporations should not be able to keep things out of the public domain indefinitely). And I fear that our copyright law is headed in the wrong direction, which is why I recently blogged about a law that would threaten the institution of "fair use" under copyright law.

But the fundamental principle of copyright law is sound. Indeed, it applies directly to me and the work I do. If I couldn’t get paid for doing apologetics, I’d do a lot less of it.

I’d have to.

I’m not Bruce Wayne. I’m not a dilettante millionaire, so I’d have to be making a living in something other than apologetics, applying my brain and/or brawn to some other field in an effort to make the bread needed to buy the meat needed to keep body and soul together. Apologetics would be something I’d only be able to do (at most) on a part-time, after-hours basis.

Copyright law thus has a natural law basis in that it provides for the overall enrichment of society by the creation of new intellectual works. That natural law basis means that we aren’t morally free to ignore it.

As to the pricing of works of intellectual property, it seems to me that as a matter of course market forces are the best mechanism to determine this, just as they are the best mechanism to determine the price of thigns in general. If someone can come up with a story that is exciting enough that people will pay $10 each to read it then he ought to be able to charge that much for it. And if someone else comes up with a story that peolple think is cool enough that they’re willing to pay $50 each to read it then that extra-cool storyteller ought to be able to charge that much for it.

If, on the other hand, the storyteller thinks that he’s got a $50 story and people think it’s really only a $10 story then he’ll find out that he needs to lower the price in a hurry.

I don’t know what besides market forces could fairly determine the price of individual stories. Governments can’t even figure out the market value of tangible goods. I don’t know how they would determine the appropriate price of intangibles like intellectual property works.

And, as with tangible goods, setting price controls on intellectual property works would have a devastating effect. If, for example, the government set a max cap of $20 for a story then nobody (or almost nobody) would write $50 stories anymore. On the other hand, if they set a minimum floor of $20 per story then people would start cranking out tons of $5 stories since they no longer had to work as hard to get a $20 sale.

A new round of bad effects once the public learned that the quality of the stories was going down, but I’ll leave those to your imagination. You get the point.

Intellectual property works are thus not so different than beach-front houses. If the market will result in people getting well paid for building beach-front houses, they’ll build more of them. And if it results in people getting well paid for writing books, they’ll write more of them. In both cases, the price isn’t simply a barrier to you getting what you want. It’s an rationing mechanism for the limited copies of something that exist. In the case of beach-front houses there is a sharper limit on how many of these there can be (due to a limited amount of developable beach space), and in the case of books there is a limit on how many unpaid copies there can be before the paying market is undermined and writing becomes unprofitable and authors stop doing it.

Since it’s Sunday, I thought I’d give a little example from Thomas Sowell’s book Basic Economics that deals with religion.

This entry also might be called "Market Ecumenism" or "How the Market Promotes Not-Killing-Each-Other-Over-Religious-Differences."

After explaining that the purchase prices different groups are willing to pay for limited goods and services competitively determines the prices of those services, the Master writes:

Most people may be unaware that they are competing [against other purchasers when they buy an item or hire a worker] and simply see themselves as deciding how much of various things to buy at whatever prices they find, but scarcity [of goods and services] ensures that they are competing with others, even if they are conscious only of weighing their own purchasing decisions against the amount of money they have available.

One of the incidental benefits of competing and sharing through prices is that different people are not as likely ot think of themselves as rivals, nor to develop the kinds of hostility that rivalry can breed. For exmaple, much the same labor and construction material needed to build a Protestant church could be used to build a Catholic church. But, if a Protestant congregation is raising money to build a church for themselves, they are likely to be preoccupied with how much money they can raise and how much is needed for the kind of church they want. Construction prices may cause them to scale back some of their more elaborate plans, in order to fit within the limits of what they can afford. But they are unlikely to blame Catholics, even though the competition of Catholics for the same construction mateirals makes their prices higher than otherwise.

If, instead, the government were in the business of building churches and presenting them to different religious groups, Protestans and Catholics would be explicit rivals for this largess and neither would have any financial incentive to cut back on their building plans to accomodate the other. Instead, each would have an incentive to make the case, as strongly as possible, for the full extent of their desires and to resent any suggestion that they scale back their plans. The inherent scarcity of materials and labor would still limit what could be built, but the limit would now be imposed politically and would be seen by each as due to the rivalry of the other. The Constitution of the United States of course prevents the American government form building churches for religious groups, no doubt in order to prevent just such political rivalries and the bitterness, and sometimes bloodshed, to which such rivalries have led in other countries.

The same economic principle, however, applies to groups that are not based on religion but on ethnicity, geographical regions, or age brackets. All are inherently competing for the same resources, simply because these resources are scarce. However, competing indirectly by having to keep your demands within the limits of your own pocketbook is very different from seeing your desires for government benefits thwarted by the rival claims of some other group. Market rationing limits the amount of your claims on the output of others to what your own produtivity has created, while political rationing limits your claims by the competing claims and clout of others (pp. 54-55).

. . . by which I mean that I’m reading his book Basic Economics. (Thanks to those who recommended additional books; I’ll check ’em out!)

Sowell’s book is very good. Quite easy to read (just like his columns). In fact, it’s designed to be able to be read by high school students. He even has a set of study questions in the back for homeschoolers to use with their kids.

I’m impressed enough with the book that if I had any homeschool high schoolers, I would set them to reading the book immediately. Having a basic understanding of economics is something that (a) virtually all young people lack and that (b) will serve them very well in life.

Homeschoolers: THIS BOOK WILL GIVE YOUR KIDS A COMPETITIVE EDGE OVER OTHER YOUNG PEOPLE AS THEY MOVE OUT INTO THE WORLD OF WORK.

It is also likely to help solidify them conservatively so they don’t flirt with braindead liberal economic policies that will hurt both them and society in the long run.

And, of course, having more voters out in society who understand economics is a boon to society as a whole that will make things better for everyone in the long run.

Now, there are occasionally a few big words in Sowell’s writing–words that I wouldn’t have known when I was in high school–but then I went to a public high school (or, as I referred to it at the time, a sucking vortex of madness and pain), and homeschoolers either will already know these terms or will know how to look them up in a magical book known as a "dictionary."

But what momentary discomfort there may be at encountering an occasional twenty-five cent word will be more than made up for (a) by the increased knowledge of economics that the kid will have and (b) the fact that he will now know the twenty-five cent word.

But beyond that, Sowell is just entertaining and easy to read. If you’ve looked at some of his columns that I’ve linked, you already know that. In his book, his style is much the same, and he illustrates his economic principles with countless interesting examples from all over the world and all through history.

Parents (and non-parents) should read this book, too. He is startlingly clear about things and puts many in a perspective that cuts through the typical rhetoric we often have economic issues wrapped in by politicians and pundits eager to advance their own causes. He even cuts through the illusions that we ourselves tend to have.

Consider:

Many people see prices as simply obstacles to their getting the things they want. Those who would like to live in a beach-front home, for example, may abandon such plans when they discover how expensive beach-front property is. But high prices are not the reason we cannot all live on the beach front. On the contrary, the inherent reality is that there are not nearly enough beach-front homes to go around and prices simply convey that underlying reality. When many people bid for a relatively few homes, those homes become very expensive because of limited supply. But it is not the prices that cause the scarcity, which would exist whatever other economic or social arrangements might be used inestead of prices (p. 7-8).

See? Bet you, like me, have often perceived prices as the barrier between you and getting what you want. But that’s too short-term a view. The real reason is that there is a limited supply of what you want and other people want it, too. In a free market, prices simply the mechanism by which you and others figure out how much value you are going to place on getting the thing you want.

If people start valuing something less, prices drop. You can see this at work on Amazon. The books that are newly out and all the rage right now are expensive. But if you look at books there were all the rage a few years ago, you can now get them dirt cheap (like for a penny plus shipping costs) on Amazon’s used book service. This is the case with a bunch of the diet and nutrition books there. The ones that everyone’s talking about this year are expensive, but the good ones that are a few years old (like Atkins’ books) are now incredibly cheap. Less demand, lower prices (and bargain-hunter’s paradise: the obvious strategy being to wait until the "fad" factor has worn off a particular book and you can get it for a song).

I’m going to be keeping Sowell’s book right next to my copy of The Rules of Acquisition.

Now if I could just get Borg implants so Sowell could tell me what to think via direct neural interface.

GET SOWELL’S BOOK.