Economics

The Mystery of Capital

The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else Hernando De Soto Basic Books, 2000 The problem with most third world countries, Mr. De Soto tells us, is not that there is no capital, it's that the capital is dead. Dead in the sense that it can't be used to its full economic potential. It can't be mortgaged, it can't be divided into shares, and it simply can't be used in the same way we make productive use of our assets in the West. What is the difference between the West and the third world?…
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Common Sense Economics: What Everyone Should Know About Wealth and Prosperity

Common Sense Economics: What Everyone Should Know About Wealth and Prosperity James D. Gwartney, Richard L. Stroup, and Dwight R. Lee St. Martin's Press, 2005 This is a wonderful book that can teach anyone what is important to know about economics. It teaches the insights that people can use to understand and evaluate the mechanism of our economy and government themselves. It is not a textbook with charts, graphs, and formulas. It requires no special prerequisite from the reader. The book contains four parts: The ten key elements of economics, seven major sources of economic progress, economic progress and the…
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Wal-Mart. More hypocrisy.

Writing from Jackson, Mississippi Currently it is quite fashionable to criticize Wal-Mart as the starting point for everything evil about American business. Critics allege that Wal-Mart earns too much profit, pays its employees too little, doesn't provide its employees health insurance so they have to rely on the government, it exploits low-paid workers in China, and might even be responsible for avian flu, for all I know. There is no doubt that Wal-Mart is a powerful force in the economy. The Wall Street Journal on December 3, 2005, wrote "Wal-Mart employs about 1.3 million people, about 1% of the American…
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Hypocrisy over oil profits abounds

Writing from Orlando, Florida The recent swell of criticism over oil company "windfall" profits, some even coming from people who should know better, is truly remarkable in its hypocrisy. It seems that the critics feel that oil companies did nothing extraordinary to earn these profits. Therefore, they don't deserve them. What's wrong with this criticism? First, I don't think we want to let the government get in the position of deciding who deserves to keep the profits they earn. It does enough of this already. Second, most people would be delighted to find themselves in the position of the oil…
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Employer-paid health insurance

In the past I have written on how the system in America where almost everyone gets their health insurance through their job (Let's Pay for Our Own Health Insurance) does not serve us well. Now I have become aware of even more evidence as to why we should all choose and pay for our own health insurance. A Harvard study (Illness And Injury As Contributors To Bankruptcy) concluded that of families that declared bankruptcy, about half cited medical bills as the reason. Of those, 76% had medical insurance at the time they became sick. Some of the problem is that…
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Prices ration scarce goods

As the price for gasoline rises, politicians hear increased calls for regulation of gas prices. We hear news stories of hotels increasing prices for victims of hurricane Katrina, and prices for needed goods in the destructed area could rise, too. In Wichita, when gasoline prices rose rapidly, someone told me that this was price gouging, because the price the gas stations pay for gasoline hasn't increased yet. I'm sure that's true, their cost hasn't increased yet, as they're still selling gasoline they already bought some time ago. This analysis, however, doesn't consider the most important role of prices: to strike…
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What to do about gasoline prices

Almost anything the government does in response to the recent high gasoline prices is bound to fail. The easy political solution is to place price controls on gasoline, as Hawaii has done. Basic economics tells us that when a price is held artificially low through price controls, demand will be higher than what it would otherwise be, and supply will be less than it would otherwise be. What does that spell? A shortage, as was the case the last time there were price controls on gasoline. The misery of dealing with lines at gas stations was much worse than slightly…
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Book Review: Basic Economics: A Citizen’s Guide to the Economy

Basic Economics: A Citizen's Guide to the Economy Revised and Expanded Edition Thomas Sowell Basic Books, 2004 This book is a general introduction to economics written in a non-technical way. It provides excellent coverage of many introductory topics in economics, and you don't have to be a mathematical sophisticate to understand it. It is very readable by anyone who is interested in this topic. One of the best things the author does in this book is to distinguish between what politicians want to happen and say they are doing when they implement economic policies, and what incentives are actually created.…
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I, Pencil

I, Pencil Leonard E. Read (Click here to read the article.) Do you think there exists a single person who knows how to make a lead pencil? In this article, Mr. Read shows us how there is no one who knows even a small fraction of what is necessary to produce even this simple, everyday item. How, then, does a lead pencil come to be manufactured? Through the uncoordinated actions of many people, each exchanging their own small amount of knowledge for something else they want. The absence of a master mind, of anyone dictating or forcibly directing these countless…
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The downside of Being the Air Cap

Harry R. Clements of Wichita contributed this article, which is a summary of a larger study he performed. Click here to read the full study in pdf format. Mr. Clements's article makes a striking conclusion as to why airfares in Wichita were so high. I would be curious as to whether any of our government leaders have read the study. We should also ask why our government leaders are not performing research like this when they propose to spend large sums of taxpayer money. Wichita State's Center for Economic Development and Business Research recently placed a guest article of mine…
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