Friday, April 24, 2015

Book Review: What Can the Rolling Stones Teach You About Economics?

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.


  1. Macroeconomics is a term for the totality of decisions and performance results for a nation, for a group of nations or international aggregation.

    In recent history, macroeconomics was an ideological concept for what was once the Eastern European & Soviet Union economic block, before the collapse of the Berlin wall and the emancipation of the Eastern European countries out of this alliance. Each of the Eastern European countries had a special university in the nation capital, which was a political & ideological university having as a purpose to create the future communist leaders of the country.

    One branch of its research and curriculum was dedicated to the “socialist political economy” discipline, which was actually political macroeconomics: it was conducted with the purpose to integrate the regional economy performances, traditional occupations, population aspirations and their resources in a larger national concept, having national goals.

    The idea behind political macroeconomics was to run the country like one company owned by the state, and further to align this “company’s” vision and operations with other “companies” in a way similar to a cartel for the entire Eastern European region.

    Political macroeconomics for each nation was subservient to the Communist Party ideology. This ideology is little known now and here; it actually was not only a narrative similar to a credence, but had practical applicability through complex set of actions, regulations and state laws that guided responsibilities and authorities to implement the national economic system.

    Political macroeconomics is a very powerful example of modern history, which was never studied enough, or at all. It was effectively implemented and worked for almost half of century, making billions of people live happily and convinced of the superiority of their system in the world. The history of these people is the evidence of how political macroeconomics created a “paradise” style of life where the “caring for each and any person” worked well for many decades, then started deteriorating almost unnoticeable in the beginning, and eroded gradually to finally collapse.

    The danger of macroeconomics is to formulate generic ideology, or metrics, or national-wide vision narratives, which sooner or later will prove misplaced, futile, or scholar attempts to centralize or dilute competition within the nation’s entrepreneurship. The study of macroeconomics or any attempt to further apply this concept to life shouldn't disregard this extraordinary history lesson, which impacted more lives than any world war: the political macroeconomics concept and its derivatives were used and morphed into an ideological system of running the finances of a country as the final scope of the national economy, instead of allowing the national currency to vary and draw its value as a result of the successes and failures, behavior and performance of national entrepreneurship.

  2. The production move from the UK to the South of France isn’t the Rolling Stones first economic decision. Although the decision is compelling considering the high marginal income tax rates (83%) and high capital gains taxes (98%), some members of the Stones have business experience outside of the music industry.

    Take, for example, Chuck Leavell, who manages a 2,900-acre tree farm and hunting lodge in Georgia. "With the economic crisis and housing bust of the past several years, he has had to depend on alternative revenue streams such as selling pine straw to landscapers and pulp to paper makers" (Rocks 2014). "Leavell has used his association with the Stones and other rockers to advance a variety of green causes. He co-founded Mother Nature Network, an environment-focused news website, in 2009. He has written several books on conservation and forestry, and he works with numerous groups devoted to the environment” (Rocks 2014).

    - Rocks, D. (2014, Jul). Rock 'n' roll tree farmer: Inside a rolling stone's business. Business Week, 1.

  3. It’s always great to see professors, authors, anyone for that matter, spinning topics or business scenarios into terms that students can understand. It takes a certain type of individual to perpetuate something into terms that become easily understandable by the student. That being said, when you provide information (whether through the form of education, training, etc) to employee’s it shows them that you have a vested interest in them. This leads back to the notion of Information + Incentive = Good Decision making. If you leave your employee’s (who can also be viewed as the company’s assets) to their own devices or don’t put the effort to increase their value/output, you’re not getting the highest possible value out of the asset. As Froeb states in his online chapter videos, “Wealth is created when assets move from low to higher value uses”.
    Henry Hazlitt states, “Perhaps the shortest and surest way to an understanding of economics is through a dissection of such errors, and particularly of the central error from which they stem.” One error is the fallacy that we as people have a hard time to either acknowledge or know to look past the immediate effects/outcome of a rule/policy. There is always a second step further or another implication that a decision or a result has on something else. Such as the income tax example provided in this topic. In order for generations now and those yet to come to be successful in the world, they need to know and learn to have that analytic train of thinking.

    Hazlitt, H. (2008). "Economics in One Lesson". Retrieved from:

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