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Executive Times |
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2006 Book Reviews |
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Myths,
Lies, and Downright Stupidity: Get Out the Shovel--Why Everything You Know is
Wrong by John Stossel |
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Rating: |
*** |
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(Recommended) |
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Click on
title or picture to buy from amazon.com |
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Entertaining Readers who
approach John Stossel’s new book, Myths,
Lies, and Downright Stupidity: Get Out the Shovel--Why Everything You Know is
Wrong, as entertainment will come away more pleased than those who expect
to find facts and convincing arguments. The star of the ABC 20/20 Give Me a Break segment presents
snappy and witty riposte by presenting one point of view, and pounding it to
show errors. His approach can be funny and entertaining. Chances are readers
will be entertaining more when they agree with Stossel’s
opinions than when they disagree. Here’s an excerpt, from the beginning of
Chapter Three, “Bashing Business,” pp. 49-55: One reason
I became a consumer reporter was that I assumed business was fraught with
cheating and deceit. Many consumer reporters believe that. Legislators and
lawyers believe it too. It’s Intuitive to despise business. Even the
rich hate business. When the steel industry stood up to President Kennedy’s
efforts to dictate its prices in 1962, the President—-the wealthy son of one
of the wealthiest men in America—exclaimed, “My father always told me that
all businessmen were sons of bitches, but I never believed it till now.” MYTH: Businesses
rip us off. TRUTH: Most don’t. Okay, some
do. Enron,
WorldCom, and Tyco became famous for it. I won Emmy
awards exposing cheaters, like milk producers who conspired to keep prices
high, RJ Reynolds Tobacco when it handed out Camel cigarettes to kids, and
vocational schools that promised jobs that did not exist. But I
eventually noticed that most cheating is pretty trivial, that the vast majority
of businesses don’t cheat, and that the cheaters rarely get away with it for
long. MYTH: Government must make rules to protect us
from business. TRUTH: Competition protects us, if government
gets out of the way. It took me a long time to learn that regulations can’t
protect consumers better than open competition, and in fact, they often harm
us. My learning curve was steep. After all, I worked in newsrooms where
“consumer victimization” was a religion and government its messiah. But
after fifteen years of watching government regulators make problems worse, I
came to understand that we didn’t need a battalion of bureaucrats and
parasitic lawyers policing business. The competition of the market does that
by itself. Word gets out. Angry customers complain to their family and
friends; consumer reporters like me blow the whistle on inferior products and
shoddy service. Companies with bad reputations lose customers. ln a free society, cheaters
don’t thrive. Once I learned more about economics, I saw how foolish I’d
been. Government uses force to achieve its ends. If you choose not to do
what government dictates, men with guns can put you in jail. Businesses, by
contrast, cannot use force, no matter how big they are. So all business
transactions are voluntary—no trade is made unless both parties think they
benefit. In 1776, economist Adam Smith brilliantly realized that the
businessman’s self-centered motivation gets strangers to cooperate in
producing a multitude of good things: “He intends only his own gain, and he
is in this, as in many other cases, led by an invisible hand to promote an
end which was no part of his intention.” Few of us appreciate the power of that invisible hand. I
don’t give my pencil a second thought, and yet I could spend years trying to
produce one without turning out anything as good as the worst pencil
available today. Leonard Read of the Foundation for Economic Education opened
my mind to this idea when I read his essay “I, Pencil.” Here is a shortened
version: I,
Pencil, simple though I appear to be, merit your wonder and awe... not a single person on the face of this
earth knows how to make me. My family tree begins
with what in fact is a tree, a cedar of straight grain that grows in The
logs are shipped to a mill. Can you imagine the individuals who make flat
cars and rails and railroad engines? These legions are among my antecedents. My
“lead” [is] graphite mined in Millions
of human beings have had a hand in my creation, no one of whom even knows
more than a very few of the others. Neither
the worker in the oil field nor the chemist nor the digger of graphite or
clay nor any who mans or makes the ships or trains or trucks nor the president
of the company performs his singular task because he wants me. Indeed, there are some among this vast multitude who never saw a pencil
nor would they know how to use one. There
is still a fact more astounding: the absence of a master mind, of anyone
forcibly directing these countless actions which bring me into being. No
trace of such a person can be found. Instead, we find the Invisible Hand at
work. I,
Pencil, am a complex combination of miracles: a tree, zinc, copper, graphite.
But to these miracles which manifest themselves in Nature an even more
extraordinary miracle has been added: the configuration of creative human
energies—millions of tiny know-bows configurating
naturally and spontaneously. People assume someone needs
to be “in charge” to achieve those miracles, but no one is in charge. What
philosopher Frederick Hayek called “spontaneous order” makes it happen. Without any central
authority or master planner, the invisible hand quietly flips the switches
that turn markets on. Competition brings us good stuff that keeps getting
better—better cars, phones, shoes, medicines. Yet we take this for granted
and demand more. We complain if the supermarket’s 30,000 items don’t include
a flavor we want. In newsrooms where I’ve
worked, it’s trendy to sneer at people in business. “They’re selfish,
greedy, tacky. We are the artists, the thinkers, the people who care about others. We demand that
government regulate business to keep the greedy bastards from ripping us off,
hurting the poor, despoiling the earth. . .“ In To be fair, antipathy
toward business existed before the media amplified it. There’s something
instinctive about resenting the people who trade for profit. Workers hate
their employers, who pay them, but love the government, even though it takes
40 percent of their money and squanders it. It’s an idea as old as it
is irrational. In feudal times, people hated the “bourgeoisie.” It wasn’t
just because they envied their wealth, says economist Thomas Sowell. People
revered royalty, no matter how absurdly rich they were, but resented
middle-class merchants who sold them what they needed. Anger at the
merchant’s profit, suggests Soweli, is the grist
for racial and ethnic hatred that has led to mass slaughters. Everywhere
there is hatred of “middleman minorities”: The Chinese in Southeast Asia, the
Lebanese in the Middle East, the Jews in Eastern Europe, Indians and Pakistanis
in Africa, and Koreans in Some folks simply loathe
profit and commerce. They want to “fix” it by making it “kinder.” One way
they think they can do that is by insisting that authorities guarantee “fair”
prices. MYTH:
Price controls protect consumers. TRUTH:
Price controls create shortages and terrible hardship. Price controls make perfect
sense to people who know little about economics: “Since business owners are
greedy and quick to take advantage of their customers’ ignorance or
desperation to ‘gouge’ them, it would be fairer to limit what those selfish
people can charge! The only losers would be those nasty capitalists who make
‘excess’ profit. Price controls would save everyone money! Why not impose
them?” Because price controls don’t work. They’ve been tried many, many times, but they’ve never worked, if by “worked” we mean
made life better for consumers. Instead, price controls create shortages and
cause all kinds of harm, from starvation in Communist countries to long gas
lines in the Even
after starving Russian mothers sent their children into the fields to kill mice
for food, and even after the Soviet Union collapsed under the weight of
central planning and price controls, many of our leaders still insist that their central planning and price
controls will work. I’ve
covered their schemes, big and small. I’ll start with the small: My former senator,
Alfonse D’Amato, was upset about your friendly neighborhood robot, the ATM. I
put ATMs up there with microwave popcorn on the list of great inventions. How
did I ever survive without cash machines? I’m old enough to remember
when getting cash meant standing in a long line and then convincing a teller
that you were you. There was always a
line. You could only
withdraw money between nine a.m. and three p.m. at your own bank. Today I can
wander out in my sweatpants at two a.m. and get cash on the corner. I like
getting cash whenever I want it, and I’m willing to pay $1.50 for that
convenience. But if D’Amato and
other self-appointed do-gooders had their way, I wouldn’t have that choice.
D’Amato proclaimed ATM fees “wrong” and “immoral.” At the time, he was not
just another congressional blowhard, but chairman of the Senate Banking
Committee, and he planned to outlaw the fees. He branded them “absolutely
unacceptable—a great scam.” D’Amato went on TV to
denounce the “usury” of ATM fees. He claimed, “They cost the average
consumer, some reports indicate, a hundred fifty dollars a year more.” “A hundred fifty
dollars?” I asked him. He stammered,
“That’s—well, begin to think of it. Think of how many transactions that would
take.” His staff got the
figure from a newspaper article. The real cost was a third of that. But the
senator decided to “solve” this nonexistent problem anyway. He was eager to pander
to constituents who didn’t like the fees. We had no trouble
finding voters who agreed with D’Amato. They told us they shouldn’t have to
pay to withdraw their own money. As
one ATM user said, “There wasn’t a service charge to put it in, so why should
there be one to take it out?” Why? Because ATM
machines aren’t free! We interviewed Barbara Stillman,
a woman who started a cash-machine business. She owned one ATM and serviced
four others. The machine she owned cost her fifteen thousand dollars (some
cost fifty thousand). Her initial outlay of fifteen
thousand dollars was just the beginning. She had to service the machines and
put her own cash in them (the banks reimbursed her four days later). Stillman drove to some of her machines, but had to pay
hundreds of dollars to fly to her busiest ATM; it was on Block Island, just
off the coast of Four dollars was the highest
fee we found, and her service charge would certainly have become illegal if
Senator D’Amato had his way. That would have taught the greedy Stiliman a lesson. Of course, it also would have hurt her
customers because it would have put her out of business, Why should the
Barbara Stillmans of this world take risks if they
can’t take profits? Here’s what she told us:
“When I’m loading a machine, I could be robbed. If somebody stole the
machine, that’s a risk. I have no incentive at all to go over there and risk
my life flying on an airplane, and why would I want to risk that for
nothing?” In fact, a few years later,
she decided “the risk wasn’t worth even four dollars per customer.” She quit
the business. Most cash machines are
owned by banks, but banks have costs too. Politicians can pretend that banks
can afford to dispense cash for free, but it isn’t so. We don’t need “consumer
advocates” like Al D’Amato to keep businesses from charging too much. In a
free society, competition holds prices down, and in the cash business,
there’s plenty of competition. If Stillman’s
four-dollar fee earns her too fat a profit, competitors will swarm in.
They’ll court her customers by offering cash for less. On When I confronted my
senator about his plan, 1 didn’t hide my exasperation. STOSSEL It’s
freedom! People are willingly paying this surcharge, and we’re getting more
machines. ALFONSE D’AMATO It’s
absolutely not freedom.
They don’t have a choice. What choice does a person have? STOSSEL You make
it sound like ATMs are like heroin, and— ALFONSE D’AMATO That’s true. STOSSEL
[Heroin!?] Aren’t you
pandering here? ALFONSE
D’AMATO No, I don’t
think so. Someone’s got to stand up for the little guy. Get out the shovel! D’Amato was hurting the little guy. And eventually, the little guys voted him
out. Bye, Al. D’Amato’s proposal was the subject of my first “Give Me a
Break” column for 20/20, and I
hope I contributed to its defeat. Consumers don’t need price controls. Controlling prices has repeatedly robbed us of convenience
and of new products and services. At least inconvenience usually isn’t fatal,
but it will be fatal if the economically illiterate succeed in imposing price
controls on the product they are most eager to regulate: prescription drugs. I don’t watch 20/20, so for me, turning the pages of
Myths,
Lies and Downright Stupidity, was fairly entertaining. I expect that were
I watching this, I would have changed channels. Those readers who like things
to be in neat categories will like this book more than those who don’t need
to seek out the capital T truth in all things. Steve Hopkins,
September 25, 2006 |
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The recommendation rating for
this book appeared in the October 2006
issue of Executive Times URL for this review: http://www.hopkinsandcompany.com/Books/Myths
Lies.htm For Reprint Permission,
Contact: Hopkins & Company, LLC • E-mail: books@hopkinsandcompany.com |
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