Eat the Rich (book)

     P. J. O’Rourke Eat the Rich (1998) PJ is influenced by Friedman, and it shows. He makes the same mistakes Friedman makes: a) he confuses wealth and money; b) he assumes the market is honest; and c) he ignores the environment ("externals"). Apart from that, he makes many useful points about economics, even if he doesn’t follow through on them, and draws inconsistent conclusions from them/
     He’s right that the market is, despite its messiness, the best way to allocate economic resources. But he (like his mentor Friedman) has several blind spots. The worst is his assumption that prices are efficient when they reflect the intersection between the desire of the seller to get the highest price and the buyer’s desire to pay the lowest. He sees no necessary connection between price and costs; he doesn’t even mention this relationship. Yet he believes that subsidies for businesses are bad, and doesn’t see why: It’s because subsidies cause misstatement of the cost of goods, false prices, if you will.. So, he doesn’t see that government-built infrastructure is a subsidy; he thinks infrastructure one of the functions of government. For example, government-built highways allow truckers to operate at less than the true cost of trucking, and so underprice their services. This means that railroads can’t compete on short haul, small shipments (they could when their competition was horse-drawn transport, remember.) It seems to me that if government is to supply infrastructure, it must somehow price such goods so that each user pays a correct share of the cost. Variable license fees and taxes are the only way to do this. However, trucking companies are successful in keeping their licence fees and taxes below their share of the cost of highways. PJ would approve of this. He believes in as little (and as inexpensive) government as possible. He doesn't see less cost for government means higher costs elsewhere in the economy.
     He’s wrong about government’s redistribution function, which he thinks is evil. All economies are engines of redistribution, and the question must always be, what’s redistributed for whose benefit and under whose control.. He doesn’t ask this question, and in fact trashes the idea that government should bring some sort of fairness into the redistribution. He’s right about that, but for the wrong reason. Government must redistribute the demand for wealth (ie, money) so that the suppliers have a reasonably stable customer base. To put it another way: when the economy produces large quantities of wealth, as ours does, the problem is no longer scarcity but surplus. That means that the problem becomes one of consumption, not of production.
     PJ seems to have some inkling of this in his brief attack on military spending (done as a throw-away comment, by the way.) But, as usual, he doesn’t follow through, because he can’t conceive of any common, ie public, interest that supervenes individual desire. (He has misread Adam Smith, as so many Friedmanites do). He doesn’t in other words draw the obvious (to me ) conclusion that government spending on military hardware etc is a misallocation of resources, and a profound distortion of the market. If the money so spent were distributed more or less evenly to everyone, it would quickly find its way into the pockets of those who supply what most people want, which is neither war nor the preparation for war.
     But most of all PJ is wrong about the desirability of getting rich, in part because he has such an infantile notion of wealth. He’s quite right to say that free market capitalism (however badly implemented) is a fabulous engine of wealth creation. He doesn’t ask whether the prices paid for wealth reflect their true costs. He twits the Swedes for borrowing their prosperity, but he doesn’t ask the obvious question whether environmental degradation isn’t a more serious form of borrowing wealth.
     Part of the reason PJ doesn’t ask this question is that he doesn’t really understand money. He says it’s a symbol, and a medium of exchange, yet he still thinks of being wealthy as having lots of money. This confusion of wealth and money is a fundamental error, and leads to the insane notion that the function of an economy is to create money. Or rather, that the more money is made, the richer people are. Yet at the same time, PJ uses money correctly in a number of cases, such as in measuring relative levels of consumption (GDP per person). It’ exasperating to see someone staring at a bunch of trees and and unable to see a forest.
     The book is irritating because PJ insinuates a lot of wrong-headed notions even as he criticises equally wrong-headed ones. **