Read an Excerpt
I had one fundamental question about economics: Why do some places
prosper and thrive while others just suck? It's not a matter of brains.
No part of the earth (with the possible exception of Brentwood) is dumber
than Beverly Hills, and the residents are wading in gravy. In Russia,
meanwhile, where chess is a spectator sport, they're boiling stones for
soup. Nor can education be the reason. Fourth graders in the American
school system know what a condom is but aren't sure about 9 x 7.
Natural resources aren't the answer. Africa has diamonds, gold, uranium,
you name it. Scandinavia has little and is frozen besides. Maybe culture
is the key, but wealthy regions such as the local mall are famous for
Perhaps the good life's secret lies in civilization. The Chinese had
an ancient and sophisticated civilization when my relatives were hunkering
naked in trees. (Admittedly that was last week, but they'd been drinking.)
In 1000 B.C., when Europeans were barely using metal to hit each
other over the head, the Zhou dynasty Chinese were casting ornate wine
vessels big enough to take a bath in--something else no contemporary
European had done. Yet, today, China stinks.
Government does not cause affluence. Citizens of totalitarian countries
have plenty of government and nothing of anything else. And absence
of government doesn't work, either. For a million years mankind
had no government at all, and everyone's relatives were naked in trees.
Plain hard work is not the source of plenty. The poorer people are, the
plainer and harder is the work that they do. The better-off play golf.
And technology provides no guarantee of creature comforts. The most
wretched locales in the world are well-supplied with complex and up-to-date
technology--in the form of weapons.
Why are some places wealthy and other places poor? It occurred
to me, at last, that this might have something to do with money.
But I didn't know anything about money. I didn't know anything
about money as a practical matter--did I have enough to pay the mortgage?
And I didn't know anything about money in a broad or abstract
sense. I certainly didn't know anything about economic theory. And I
wasn't alone in this.
I couldn't answer the central question of this book because I was an
economic idiot. I got to be an economic idiot by the simple and natural
method of being human. Humans have trouble with economics, as you
may have noticed, and not just because economic circumstances sometimes
cause them to starve. Humans seem to have an innate inability to
pay attention to economic principles.
Love, death, and money--these are the three main human concerns.
We're all keen students of love. We are fascinated by every aspect
of the matter, in theory and in practice--from precise biological
observations of thrusting this and gaping that to ethereal sentimentalities
marketed in miles of aisles at Hallmark stores. No variety of love is
too trivial for exegesis. No aspect of love is so ridiculous that it hasn't
been exhaustively reviewed by the great thinkers, the great artists, and
the great hosts of daytime talk shows.
As for death, such is the public appetite for investigation of the
subject that the highest-rated television program in America is about
an emergency room. The most hardheaded and unspeculative of persons
has his notions of eschatology. The dullest mind can reason extensively
about what causes kicking the bucket. Dying sparks our intellectual
But money does not. All we care about is the thing itself, preferably
in large amounts. We care a very great deal about that. But here
our brain work stops. We don't seem to mind where our money comes
from. And, in an affluent society, we don't even seem to mind where
our money goes. As for larger questions about money, we shrug our
shoulders and say, "I wish I had more."
Why is it that we are earnest scholars of amorosity and necrosis
but turn as vague and fidgety as a study hall in June when the topic is
economics? I have several hypotheses, none of them very good.
Love and death are limited and personal. Even when free love was
in vogue, only a certain number of people would allow us to practice
that freedom upon them. A pious man in the throes of Christian agape
may love every creature in the world, but he's unlikely to meet them all.
And death is as finite as it gets. It has closure. Plus the death ratio is
low, only 1:1 in occurrences per person.
Economics happens a lot more often and involves multitudes of
people and uncountable goods and services. Economics is just too complicated.
It makes our heads ache. So when anything economic goes
awry, we respond in a limited and personal way by searching our suit-coat
pockets to see if there are any wadded up fives inside. Then we
either pray or vote for Democrats, depending on our personal convictions
Or maybe economics is so ever present, so pervasive in every aspect
of our lives that we don't really perceive it. We fail to identify economics
as a distinct entity. We can watch a man slip and fall and almost
never hear him say, "God-damned gravity!" And we can watch a man
fall ten times and not see him become interested in how gravity works.
Almost never does he arise from the eleventh tumble saying, "I went
down at a rate of 32ft./[sec..sup.2]--the force being directly proportional to
the product of the earth's mass times my weight and inversely proportional
to the square of the distance between that patch of ice on the front
steps and my butt." And so it is with economics. No amount of losing
our jobs or our nest eggs sends us to the library for a copy of John
Maynard Keynes's The General Theory of Employment, Interest, and Money.
The very pervasiveness of economics keeps us from getting intellectual
distance on the subject. We can view death from afar for an average
of 72.7 years if we're a male American, and 79.5 years if we're a
female. Although love is notorious for fuddling the brain, there is matrimony
to cool the passions or, failing that, sexual climax will work in
the short term. But there is no such thing as a dollargasm. Money is always
with us. What am I going to do to take my mind off money? Go
shopping? Drink and drugs will cost me. I suppose I can play with the
kids. They need new shoes.
Constant money worries have a bad effect on human psychology.
I'd argue that there is more unbalanced thinking about finance than
about anything else. Death and sex may be the mainstays of psychoanalysis,
but note that few shrinks ask to be paid in murders or marriages.
People will do some odd things for political or religious reasons,
but that's nothing compared to what people will do for a buck. And if
you consider how people spend their dough, insane hardly covers it.
Our reactions to cash are nutty even when the cash is half a world
away and belongs to perfect strangers. We don't ridicule people for
dying. Or, in our hearts, despise them for fooling around. But let a man
get rich--especially if it happens quickly and we don't understand how
he did it--and we can work ourselves into a fit of psychotic rage. We
aren't rational and intelligent about economics because thinking about
money has driven us crazy.
I'm as much of a mooncalf as anyone. I certainly had no interest in economics
as a kid, as kids don't. Children--lucky children at least--live in
that ideal state postulated by Marx, where the rule is, "From each according
to his abilities, to each according to his needs." Getting grounded equals
being sent to a gulag. Dad in high dudgeon is confused with Joseph Stalin.
Then we wonder why so many young people are leftists.
I had no interest in economics at college, either. I belonged to that
great tradition of academic bohemia which stretches from the fifteenth-century
riots of Francois Villon's to the Phish tours of the present day.
For university hipsters, there is (no doubt Villon mentions this in his
Petit Testament) nothing more pathetic than taking business courses.
My friends and I were above that. In our classes we studied literature,
anthropology, and how to make ceramics. We were seeking, questing,
growing. Specifically, we were growing sideburns and leg hair,
according to gender. It did not occur to us that the frat-pack dolts and
Tri-Delt tweeties, hurrying to get to Econ 101 on time (in their square
fashion), were the real intellectuals. We never realized that grappling
with the concept of aggregate supply and demand was more challenging
than writing a paper about "The Effects of Cool Jazz on the Poetry
of Edgar Allan Poe." What the L-7's were being quizzed on was not only
harder to understand than Margaret Mead's theories about necking in
Samoa, it was also more important. The engine of existence is fueled by
just a few things. Unglazed pottery is not among them.
If the Rah-Rah Bobs and Pin-Me Sallys had been taking 'Love or
Death' courses, we would have been right there with them. But money
was a different matter. We weren't interested in money. Actually--what
we weren't interested in was work. Maybe we guessed that it would be
a lot of work to b.s. our way out of memorizing such formulae as:
% Change in Supply
Price Elasticity = ------------------
% Change in Price
Not that we weren't up to the task: "Like, price--that equals wasting
natural resources and the pollution thing, if you're into the whole capitalist,
monopoly rip-off, man."
And, of course, we were interested in money. I remember we'd
get excited whenever we had any. It's just that we were determined
not to earn it. We would never go in search of money. Money was
something that would come looking for us after we'd choreographed
our world-shattering modern-dance recital or mounted our famous
empty-gallery show of preconceptual post-objectivist paintings or
when our folk-rock group, Exiles of Dayton, learned to play "Kum Ba
Ya." And we weren't going to "sell out" no matter how much money
was lavished upon us.
Business majors intended to (it was a loaded phrase in those days)
"make money," and they were going to do this even if it involved some
activity that wasn't a bit artistic, such as running IBM. We artsy types
would have been shocked if anyone had told us (and no one had the
nerve) that making money was creative. And we would have been truly
shocked to learn that a fundamental principle of economics--"Wealth
is created when assets are moved from lower- to higher-valued uses"--is
the root of all creativity, be it artsy, IBMsy, or whatever.
"Putting money first" was crass. It was as if you'd gone to a party
with dozens of wild, swinging chicks and, instead of drinking Mateus
and making small talk about Jean-Paul Sartre, you just whipped out your
unit. Except we would have thought that was a blast. But go into business?
If you don't count selling drugs. Which we were all doing. We knew
everything about price elasticity when it came to pot, not to mention
aggregate supply and demand. In point of fact, we hirsute weirdos probably
had more real business experience than any business major on
campus. And one more thing--we all fancied ourselves to be Marxists.
As a philosophic recipe, Marxism is a cannelloni of the economical,
stuffed with economics, and cooked in economic sauce.
Still, we were not interested in economic ideas. And, to be fair, the
business majors weren't, either. Econ was not something they took because
they were fascinated by the elegant complexities of economic relationships
or because mankind cannot survive without economic activity.
They took Econ and forgot everything in the text so they could get a job
from somebody else who took Econ and forgot everything in the text.
I turned into a square myself, of course, as everyone who lives long
enough does. I got a job as a journalist--but without ever considering
that journalism was a business. (Although I would have been unpleasantly
surprised to get a hug instead of a paycheck at the end of the week.)
And I continued to ignore economic issues even though I had a press
pass to the most spectacular extravaganza of economics in this century.
It was the 1970s, and the economy was changing almost as often
as bed partners. The Great Depression may have been more dramatic,
but it was a one-trick pony. In the '70s, globalization suddenly included
the other three-quarters of the globe. The places that used to make our
windup toys were making our automobiles. Everything was being imported--except
oil, which had hitherto been given away free with a
windshield wash and a set of highball glasses at most brand-name gas
stations. Then, one day, you couldn't buy oil for money. Not that there
wasn't plenty of money around in the '70s. It just didn't happen to be
worth anything. We had a previously unimaginable combination of
fever inflation and hypothermia business slump. You could make more
money buying Treasury bills than you could make breaking into the
Treasury. The gold standard disappeared from the scene. Maybe it joined
a cult. International currency-exchange rates were determined with
mood rings. The most powerful nations in the world had, at their helms,
an amazing collection of economic nincompoops--Nixon, Carter, Mao,
Harold Wilson, Georges Pompidou, Leonid Brezhnev. And the electronic-media
revolution was under way so that bad ideas about economics
were spreading around the world at neural speed.
I dozed through it. And I was covering politics, too. Even I realized
that money was to politicians what the eucalyptus tree is to koala
bears: food, water, shelter, and something to crap on. I made a few of
the normal journalistic squeaks about greed and self-interest, and let
the thing slide.
It wasn't until the 1990s, when I'd been a foreign correspondent
for ten years, that I finally noticed economics. I noticed that in a lot of
places I went, there wasn't anything you'd call an economy. And I didn't
know why. Many of these countries seemed to have everything--except
food, water, shelter, and something to crap on.
I decided to go back to the Econ texts I'd finessed in college and figure
things out. And my beatnik loathing returned full-blown. Except this
time it wasn't the business majors I despised; it was the authors of the
books they'd had to study. It turns out that the Econ professors were
economic idiots, too.
Looking into a college textbook as an adult is a shock (and a vivid
reminder of why we were so glad to get out of school). The prose style
is at once puerile and impenetrable, Goodnight Moon rewritten by Henry
James. The tone varies from condescension worthy of a presidential
press conference to sly chumminess worthy of the current president.
The professorial wit is duller than the professorial dicta, and these are
dulled to unbearable numbness by the need to exhibit professorial self-importance. No idea, however simple--"When there's more of something,
it costs less" --can be expressed without rendering it onto a madras
sport coat of a graph and translating it into a rebus puzzle full of peculiar
signs and notations. Otherwise the science of economics wouldn't
seem as profound to outsiders as organic chemistry does. And then,
speaking of matters economical, there's the price of these things--$49.95
for a copy of Economics, fifteenth edition, by Paul A. Samuelson and
William D. Nordhaus.
Economics has been, as its edition number indicates, in use as an
Econ text forever--that is, since 1948, which counts as forever to the
baby-boom generation. The book is considered a fossil by many economists,
but it has been translated into forty-six languages, and more than
4 million copies have been sold. Economics was what the current leaders
of international business and industry were afflicted with in school.
And here was another shock. Professor Samuelson, who wrote the early
editions by himself, turns out to be almost as much of a goof as my friends
and I were in the 1960s. "Marx was the most influential and perceptive
critic of the market economy ever," he says on page seven. Influential,
yes. Marx nearly caused World War III. But perceptive? Samuelson
continues: "Marx was wrong about many things ... but that does not
diminish his stature as an important economist." Well, what would? If
Marx was wrong about many things and screwed the baby-sitter?
Samuelson's foreword to the fifteenth edition says, "In the reactionary
days of Senator Joseph McCarthy ... my book got its share of
condemnation." I should think so. Economics is full of passages indicating
that Samuelson (if not William-come-lately Nordhaus) disagrees with
that reactionary idea, the free market. The chapter titled "Applications
of Supply and Demand" states, "... crop restrictions not only raise the
price of corn and other crops but also tend to raise farmers' total revenues
and earnings." Increase your corn profit by not growing corn? Here's
a wonderful kind of business where everybody can get rich if they'll
just do nothing.
In the chapter "Supply and Allocation in Competitive Markets,"
the book seems to be confused about the very nature of buying and
selling. "Is society satisfied with outcomes where the maximal amount
of bread is produced," it asks, "or will modern democracies take loaves
from the wealthy and pass them out to the poor?" Are the rich people
just going to keep those loaves to grow mold? Why would they produce
"the maximal amount of bread" to do that? Or are we talking about
charity here? If so, let us note that Jesus did not perform the miracle of
the loaves and taxes. We all know how "modern democracies take loaves
from the wealthy." It's the slipups in the "pass them out to the poor"
department that inspire a study of Econ.
It was not reassuring to learn that the men who run the companies
where our 401(k)s are invested have minds filled with junk from
the attic of Paul A. Samuelson's Economics.
There were newer texts than Economics for me to look at, and what
they said wasn't so obviously wrong. But then again, what they said
wasn't so obvious, period. Here are the first three sentences of
Macro-economics by David C. Colander (donated by Eric Owens, who lives next door to me and is taking Econ at the University of New Hampshire):
"When an artist looks at the world, he sees color. When a musician looks
at the world, she hears music. When an economist looks at the world,
she sees a symphony of costs and benefits." Somebody change the CD,
The textbooks weren't good. This sent me to the original source
material, the classics of economic thought. But here I had to admit, as I
was tacitly admitting thirty years ago, that I don't have the brains to be
a Tri-Delt. The Wealth of Nations, Das Kapital, The General Theory of
Whatchmacallit were impressive works and looked swell on my bookshelf,
but they put me to sleep faster than the economic news of the '70s had.
There were, of course, popular books on economics, but the really
popular books were about extraordinary people doing extraordinary
things and getting fabulously wealthy or going to jail--preferably
both. I was interested in ordinary people doing ordinary things and
getting by. And the less popular but more worthwhile books on economics
all seemed to presume that I'd made it through something like
Economics without blowing a fuse.
So I gave up trying to be smart about economics. I decided that if I wanted
to know why some places were rich and other places were poor, I should
go to those places. I would visit different economic systems: free market,
socialist, and systems nobody could figure out. I'd look at economically
successful societies: the U.S., Sweden, Hong Kong. I'd look at
economically unsuccessful societies: Albania, Cuba, Tanzania. And I'd
look at societies that hadn't decided whether to be successful or not:
Russia and mainland China. I'd wander around, gape at things, and
simply ask people, "Why are you so broke?" Or "How come you're shitting
in high cotton?"