Your Teacher Said What?!
Trying to Raise a Fifth Grade Capitalist in Obama’s America
By Joe Kernen and Blake Kernen
This is a book worth reading despite its somewhat misleading title. Mr. Kernen disappointed by not establishing the bona fides for his title. Some examples of the political, economic and environmental biases conveyed by the public school system would have been helpful prior to launching into his discussion with daughter Blake.
As the subtitle says, the book is devoted to countering the influences of school, the MSM, television, and the prevailing culture. It begins, as all good discussions should, by defining terms. The ones that have dominated the national news: Cap and Trade, inflation, derivatives, mortgage, stimulus among them, and also words that are rarely if ever heard: words like creative destruction, capitalism, Hiiggs effect, supply and demand and risk. Along the way, Blake and the reader get a short course in the “ABC’s of the Free Market.”
The chapter on the “Properties of Property” delighted this reviewer by including a recap of the once famous (now mostly forgotten) Julian Simon-Paul Ehrlich 1980 wager. Economist Simon challenged scarcity-monger Ehrlich to pick any basket of commodities, hold them for ten years, and if prices increased because of Ehrlich-predicted shortages, Simon would pay the difference. However, if they decreased, Ehrlich would do the same. Ehrlich lost and paid Simon.
The reason Ehrlich lost–why ‘shortages’ are always (at worst) temporary is central to understanding free markets: So long as people have incentives to find a commodity, in the form of a price that is greater than the cost of finding it, they’ll do so. In economic terms, there are no shortages; there is simply a lag while price catches up to demand, and once it does, inventive people go get it.
Presuming, of course, that government stays out of he way and the finders are permitted to assert a property right over what they find.
(Shale oil is a case in point. Unfortunately, more than 70% of the total oil shale acreage in the Green River Formation, [portions of Colorado, Utah, and Wyoming], including the richest and thickest oil shale deposits, is under federally owned and managed lands.)
In chapter 4, Kernen recaps Leonard Reed’s classic “I, Pencil” by substituting his son’s shoelaces for Reed’s pencil. Reed demolished the case for central planning as does Kernen. The author uses his son’s shoelaces to show how people around the world–without a single government planner to direct them–guided by prices, property, profits, and incentives, combine to produce shoelaces. The point is that free markets feed, clothe, and house hundreds of millions of people at ever higher levels while centrally planned economies, i.e. the former Soviet Union and North Korea today, produce shortages, misery and famine.
A market produces just about everything more efficiently than any other system, but it might be that the most important thing it produces is information. It turns out that millions (or billions) of people choosing where to spend their money creates a giant pool of information that millions (or billions) of people can use to choose where to invest their labor and resources. The way to produce the kind of abundance that makes $3 dollar shoelaces and $50 video games available is pretty simple, though hard to understand: just get out of the way and let the information flow both ways, in the form of price signals. That’s how the self-organizing magic works.
The author’s discussion about people choosing brings to mind the iconic book by Nobel Prize-winning economist Milton Friedman entitled “Free to Choose” (1980). It was made into a PBS TV series narrated by Friedman and is available (for free) by courtesy of the Palmer R. Chitester Fund. It is a must for everyone interested in defending economic and political liberty.
But I digress. Kernen also devotes a chapter to explaining why the Obama administration in particular, and Progressives in general are so enamored of regulation.
Regulation is a way for smart people to tell everyone else what to do. And because regulations are government’s way of substituting for the free market, they don’t have to meet the first criterion of a market-based solution, which is that costs shouldn’t exceed benefits. Regulators don’t have to count, for example, the number of jobs lost because of their good intentions.
(According to an analysis by the Competitive Enterprise Institute, 953 economically significant final rules were issued in the first three years of the Obama Administration. That’s more than a thirty-fold increase over the 30 issued in the first three years of the Bush Administration.)
No book on capitalism would be complete without a chapter on unions.
The notion that everyone’s labor is equal to everyone else’s is central to the whole idea of union.” In other words, people with the same number of years on the job are supposed to be paid the same hourly wage“ regardless of competence. “As a result unions reward mediocrity–or at least they don’t punish it.
The author points out that public employee unions are a special problem for a free-market economy. And the biggest problem of all is one that directly affects the Kernen family, and every family with school-age children: unionized teachers.
At the end of the book Joe Kernen does a retrospective on Obama’s presidency.
Three years into the worst economic crisis in more than eighty years, the president of the United States is still convinced that the solution is taking money from one group and giving it to another. It’s no surprise that they don’t care either how much they spend, or even what they spend it on. Like I said, a lot happened in the last year” (since the book was written). “But actually, it was really only one thing, over and over again, which was t the government of the United States acting like it could make better economic decisions than the people of the United States. Until it stops, Blake and I will still have plenty of stuff to talk about.
Any parent trying to inoculate his offspring against the delusional contagion known as progressivism should buy Joe and Blake Kernen’s book. Their book, combined with Friedman’s “Free to Choose” (in book or video format), will explain to anyone why free market capitalism works and progressivism doesn’t.