They don’t call economics the dismal science for nothing. As P.J. O’Rourke puts it in his latest book, “Economics is just too complicated. It makes our heads ache.” And no wonder. The economics profs turn simple ideas like people buy less of something as it gets more expensive into something arcane and incomprehensible like
Y = [1] [C+I+G+(X-M)]/1-mpc
But for those of us who invest in the capitalist system, it behooves us to know something about how our system generates wealth. What better way than to take it with a spoonful of sugar, P.J. O’Rourke style!
O’Rourke, the conservative-libertarian raconteur, sets out in Eat the Rich, subtitled A Treatise on Economics, to answer a simple question, “Why do some places prosper and thrive while others just suck?” He does it by his favorite method, visiting various places around the world and observing how they work.
If you haven’t met O’Rourke before, you are in for a treat. Possibly America’s funniest writer, the Mencken Research Fellow at the Cato Institute and regular contributor to Rolling Stone is a brilliant observer of the passing scene wherever he is and loves to poke fun at humanity’s foibles and fads.
In this “treatise”, his ninth book, he visits such varied places as Wall Street (good capitalism), Albania (bad capitalism), Sweden (good socialism) and Cuba (bad socialism).
He even takes a stab at actually explaining some economic concepts such as the law of comparative advantage (using John Grisham and Courtney Love as his guinea pig examples). He hypothesizes that John Grisham is a better novel writer and a better composer than Courtney Love. But Courtney is relatively better at song writing than she is at writing novels. So it pays for Courtney to concentrate on “caterwauling” and Grisham on “bashing the laptop”. Society as a whole benefits from this. O’Rourke draws up the usual comparative advantage chart to prove that we get more “benefit to society” units or BS from the duo’s specialization.
O’Rourke’s trip to Wall Street is a must read for fans of the stock market. He spent his first hour at the New York Stock Exchange “fascinated by the littering”. “Stockbrokers,” he notes, “are the last nonpsychotic people in the U.S. throwing garbage over their shoulders” while the rest of us fret about the environment. Over four thousand pounds of canceled buy and sell orders and other detritus is swept from the exchange floor every day.
O’Rourke explains, in his wry way, the inner workings of the exchange - the floor brokers, the competitive traders, the specialist brokers and the two-dollar brokers. The language of the exchange - upticks, downticks, the trading crowd, fill or kill, limit orders and such oddities as trading in sixteenths of a dollar - called teenies.
But humor aside, O’Rourke’s observations are quite intriguing. “When we own any financial instrument,” he says, “what we basically own is an opinion.” For example, if the British pound declines, “the number of pence in a pound doesn’t change. We just don’t feel the same way about pounds anymore.” Our collective opinions on a stock constitutes its price. So when we buy a stock, we are of the opinion that someone later on will think the stock is worth more than we think it’s worth now. As O’Rourke observes, “Economists call this - in a rare example of comprehensible economist terminology - the Greater Fool Theory.”
But as we learn, economics is important. What makes our free market economies strong, vibrant and productive, is a combination of freedom in an environment of the rule of law. Albania went from communist hell hole to anarchist hellhole in short order. From total control to no control. A country ruined by Ponzi schemes. Freedom, but no rule of law. “The Albanian concept of freedom,” observes O’Rourke, “approaches my own ideas on the subject, circa late adolescence.” When communism was overthrown, the best people “ran like hell” escaping to Greece, Italy or western embassies. Looting became endemic, finally stopping when they ran out of stuff to loot.
Sweden - good socialism - is contrasted with Cuba - bad socialism, though O’Rourke clearly doesn’t care for either. “Socialism,” he says, “is inherently totalitarian in philosophy.” Every aspect of your private life can become public property. “Witness Sweden’s Minister for Consumer, Religious, Youth and Sports Affairs.” Gee! Don’t we have one of those in Canada!
Cuba is worse. “There is one vibrant, exciting, and highly efficient sector of the official Cuban economy,” he writes. “The police!” When he made an errant left turn with his rented car, O’Rourke was pulled over a mile away in a different part of town for the transgression.
O’Rourke writes about the history of Cuba - the concentration camps, the executions. Cuba, according to the Americas Watch human rights group, holds “more political prisoners as a percentage of population than any other country in the world.” And he writes in detail about the economic mess. The American embargo on trade with Cuba, he notes, is stupid. “It gives Castro an excuse for everything that’s wrong with his rat-bag society. And free enterprise is supposed to be the antidote for socialism. We shouldn’t forbid American companies from doing business in Cuba, we should force them to do so.”
After an interlude with economics proper, including his “Ten Less-Basic Principles of Economics”, O’Rourke takes us on the best part of the journey - trips to Russia, Tanzania, Hong Kong and China. The Tanzanian and Hong Kong experiences are a study in contrasts. Tanzania has everything - beautiful landscapes, verdant forests, rich agricultural land - and extreme poverty. Hong Kong has nothing - little land, no natural resources - and fabulous wealth. Why? Appropriately the chapters are titled “How to make nothing from everything” and How to make everything from nothing”.
O’Rourke’s last stop is Shanghai, China, where the government is trying to impose a free market using totalitarian means. It can’t be done and he calls this chapter “How to have the worst of both worlds”. Yet in spite of the horror of the home of Tiannenmen Square, he keeps his sense of humor. “Omnipresent amid all the frenzy of Shanghai,” he writes, “is that famous portrait, that modern icon. The faintly smiling, bland, yet somehow threatening visage appears in brilliant hues on placards and posters, and is painted huge on the sides of buildings. Some call him a genius. Others blame him for the deaths of millions. There are those who say his military reputation is inflated, yet he conquered the mainland in short order. Yes, it’s Colonel Sanders.”
So have a laugh or two, be enthralled by exotic and fascinating places, and learn a few lessons about life and the blessings we gain from liberty. This is a superb book. Read it.
