The Economists’ Hour | Binyamin Appelbaum

Summary of: The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society
By: Binyamin Appelbaum

Introduction

In the book ‘The Economists’ Hour’, Binyamin Appelbaum takes us on a riveting journey through the historical sociopolitical landscape, analyzing the role economists have played in shaping society – from the end of the military draft to the transformation of global economy. This summary delves into the rise and fall of Keynesian thinking, explores the impact of free-market ideology on monopolies, examines the extent of deregulation, and evaluates the consequences of unregulated markets on economic crises. The central themes highlighted include the influence of economic thought on policy, the consequences of prioritizing efficiency over fairness, and the continuous debate on the role of the state in the economy.

The Role of Free-Market Economists in Ending the Draft

The Vietnam War sparked student protests in the US, demanding an end to military conscription. But behind the scenes, a group of unlikely activists fought for the same cause: right-wing economists. Milton Friedman, Martin Anderson, and Walter Oi were among the economists who believed that a draft system was an infringement on men’s rights. They argued that offering a fair wage for service and only hiring voluntary recruits would be a more efficient and fair system. Their views eventually gained traction, and Martin Anderson personally delivered a memo to Richard Nixon, who campaigned on ending the draft and succeeded in abolishing it in 1973. Free-market economists played a significant role in changing the policy, and their victory paved the way for more policy shifts in the years to come.

The Battle of Economic Theories

In the 1960s, while the space race between the US and the USSR was taking place, another conflict was happening within the American government: a feud between economists. On one side were the Keynesians, who believed in the power of government spending to boost the economy, and on the other side was the Chicago School, led by Milton Friedman and his associates, who believed that the government should step back from managing the economy. Despite Keynesianism being the dominant economic theory for decades, it eventually led to high inflation, which Friedman and his team argued could be controlled through monetarism, or government control of the money supply. Although monetarism was a radical departure from the traditional Keynesianism, it gained popularity in the 1970s and beyond.

The Rise and Fall of Reaganomics

In the late 1970s, America’s economy faced stagflation, and the solution was a new approach proposed by economists Robert Mundell and Arthur Laffer- cutting taxes. President Reagan embraced this and implemented massive tax cuts, but the results were less than expected. The rich got richer, inequality skyrocketed, and there was less revenue for important social programs. Despite the flaws, Reaganomics continues to be a popular economic approach in politics today.

The Rise of Monopolies

The pursuit of economic efficiency led to the rise of monopolies and the decline of government regulation in the market. In the past, the government acted as a referee, breaking up big businesses, preventing mergers, and enforcing labor laws. However, economists argued for a hands-off approach, leading to corporate mergers and deregulation, which ultimately resulted in the formation of monopolies. The airline industry is a prime example of this phenomenon. While airline deregulation made flying more affordable, it eventually led to the formation of four companies that now carry 80% of US passengers and charge higher prices than their more regulated European counterparts. This book examines the dangers of economic efficiency and the need for government regulation to prevent the rise of monopolies.

The Value of a Human Life

The replacement of moral reasoning with cost-benefit analysis in government regulations has become a controversial topic. This form of reasoning quantifies the potential benefits and drawbacks of any activity, including the installation of safety equipment in vehicles. Economists have been central to this transformation, and the cost of a human life is now used to determine whether a law is “worth it.” Though this approach has faced pushback from older regulations, it has been adopted by the government and has even led to sweeping policy changes under the Reagan administration.

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