Forbes editor John Tamny spoke at Vanderbilt yesterday to promote his new book "Popular Economics
: What the Rolling Stones, Downton Abbey and LeBron James Can Teach You About Economics."
"A one-man antidote to economic obfuscation and mystification." - George Will
"The book establishes Tamny, the editor of RealClearMarkets and the political economy editor at Forbes, as the modern and American Frederic Bastiat." - Veronique de Rugy
DISCLOSURE: the author is a former student and Vandy Alum
MY TAKE: The book is filled with fun anecdotes illustrating what Henry Hazlitt called "The One Lesson of Economics
The art of economics consists in looking not merely at the immediate hut
at the longer effects of any act or policy; it consists in tracing the consequences of that
policy not merely for one group but for all groups.
So for example, when you think about taxes, you should look beyond their revenue raising potential, to their negative effect on growth. In the case of the Rolling Stones, the high marginal income tax rates (83%) and high capital gains taxes (98%) caused the Stones to move production of their "Exile on Main Street" album to the South of France.
Although the effect of the tax on the Stones was probably minimal (after all, the album was produced and turned out great), Tamny asks us to also look at the UK sound engineers, caterers, and anyone else would would have been involved in the production of the album had it been made in the UK.
This is the hardest lesson to teach students, as it asks them to step back from their natural inclination to "do something" to make the world a better place. But with enough examples like those in the book, students will eventually realize that taxing productive activity to help the less fortunate not only reduces the gains from productivity, but it also increases the gains to becoming less fortunate. And it is a whole lot more bureaucratic and inefficient.
These stories also do a good job of updating Hayek's critique of Keynes
that the aggregation of modern macroeconomics obscures the real (and perverse) effects of government spending: stories about individual transactions that were distorted or deterred by government intervention make Hayek's original critique much more accessible. In fact, in his talk, John often began his answers by reminding us that the macroeconomy is just a collection of individual transactions.
I want to close by saying that it is my second favorite economics book, behind this one