The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society

Americans have had a love affair with Adam Smith’s book, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS. First published in 1776, Americans often assume it must have had something to do with the Revolution.

Smith was Scottish. He had no doubt heard of the Rebellion in the colonies that started in 1775, but the Wealth of Nations had nothing to do with it.

Yet, many Americans believe he described pure capitalism; supply-side capitalism in more modern terms.  The Wealth of Nations was only part of a greater work that began with The Theory of Moral Sentiments. He is called the Father of Economics, but he was a moral philosopher.

Mr. Appelbaum picks up the story in the US about 1960, though with many flashbacks to the three preceding decades. His first chapter describes the rise of Milton Friedman, one of the most ardent spokesmen for supply-side economics.

Appelbaum presents a picture of Freidman’s ideas that made me wonder if Appelbaum was himself a supply-sider. Never fear. Neither is he a socialist.  What Appelbaum describes is the gradual development of the idea that the market place operates best when there are no outside controls placed on it.  By outside controls, Freidman and others mean government regulations.

What Freidman argues is that whether I want to sell a truckload of fresh sweet corn on the street corner or a million shares of IBM stock, there should be no one policing that activity. The reason is simple: no seller will cheat because he would lose customers. The market always self corrects.

Appelbaum includes numerous examples of the failure of self-correction.  People cheat and lie. Bernie Madoff worked his pyramid scheme for years before being caught. Just last week the FBI arrested a man for trying to sell thousands of surgical masks to the Federal Government when he actually had no masks. He counted on getting the money and leaving the country before they figured it out. The 2007 sub-prime housing scheme basically stole money from millions of people. Do you remember Enron?

Appelbaum does not trash capitalism, he does show us the weaknesses.

Binyamin Appelbaum is the lead writer on economics and business for The New York Times Editorial Board. From 2010 to 2019, he was a Washington correspondent for the Times, covering economic policy. He previously worked for The Washington Post, The Boston Globe, and The Charlotte Observer.

This is a book every American should read. Yes, it’s about macroeconomics, but it is readable. It may take longer than the average novel but is well worth the time.

Mike Lawrence

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