O’Reilly, O’Bama, and the O’Conomy

August 22nd, 2011 by Roy W. Spencer, Ph. D.

..or, It’s Not About Money…It’s Our Standard of Living

I just endured a rather inane discussion on the O’Reilly Factor with actor/pundit Wayne Rogers and economist/comedian/actor/pundit Ben Stein, over whether President Obama helps or hurts the economy.

The debate quickly turned, as it often does, to whether it would help the economy to tax the rich more.

What annoys me the most about such debates is that they equate “money” with our standard of living.

They are not the same thing.

If you think it’s about money, then let’s just have the government print a million dollars for every man, woman, and child, and we can all sit at home and order stuff over the internet.

Oh…except the stuff we want isn’t being made anymore, because all of the workers are at home ordering stuff over the internet.

The only way for us to raise our standard of living is for people to provide as many goods and services as possible to each other which are needed and wanted. (Money is just a convenient means of exchange of goods and services which almost never have equal value…otherwise, we could just barter).

And keeping our standard of living requires rewarding (1) innovation, and (2) efficiency. It almost always involves mass production…which means business — usually of the “Big” variety — which in turn requires lots of people having jobs.

Anything that government does which stands in the way of business being allowed to do what it does best hurts productivity, which in turn reduces our standard of living.

As long as people insist on arguing over where the ‘money’ will come from, rather than what needs to be done to raise our standard of living (or even just maintain it), we will continue to be misled by politicians who might be well intentioned, but are clueless about what is required for prosperity to exist.

You can learn more about such basic economic concepts — which have been known for centuries, but every generation seems to have trouble internalizing — in my book Fundanomics.

68 Responses to “O’Reilly, O’Bama, and the O’Conomy”

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  1. maxwell says:

    You know, Feynman had a pretty great quote…well he had many great quotes, but one of my favorites is,

    ‘I believe that a scientist looking at nonscientific problems is just as dumb as the next guy.’

    I know you’re trying to sell some books and move up the list of ‘conservatives liberals love to hate’, but please stick to the science.

  2. JeffG says:

    Anything that government does which stands in the way of business being allowed to do what it does best hurts productivity, which in turn reduces our standard of living.

    This is obviously not true. Businesses would prefer to dispose of their waste in the cheapest way possible, as we’ve seen in the past, which leads to pollution and associated health problems and ecosystem well-being. Government plays a vital role in protecting the Commons.

    As we’ve also seen, especially before the Great Depression, businesses prefer to exploit workers to the maximum extent possible with low wages, long hours, horrid working conditions, etc. That era’s unregulated capitalism led to boom-and-bust cycles that were dizzying and cruel. Industrial workers had miserable employment while a few capitalists got extremely wealthy. Something similar has happened recently when the unregulated financial sector required trillions of taxpayer dollars to rescue and has led to large unemployment.

    There is more to a good life than ‘business productivity.’

    • Yes, pollution used to be a big problem. And it was pressure from the private sector (citizens) that forced change…I remember, I was there.

      The same is true of exploitation of workers. But these are part of history now. Your reasoning smacks of “throwing the baby out with the bath water”.

      So, are you for ever-increasing levels of taxation and regulation to the point where business owners are no longer willing to take the risk of hiring, or expanding? Just because we *used* to have pollution problems? And because some people have more than you do?

      And the primary cause of the recent housing bubble you allude to was government intervention in lending. The government knew this was a backdoor way to redistribute wealth — “encourage” lenders to give mortgages to millions of people who could not make the payments — then force taxpayers to pay the bill.

      My daughter is a realtor and saw many people get mortgages who she could tell would not be able to make the payments.

      JeffG, it’s ill-informed attitudes like yours that are going to destroy our economy.

      • JeffG says:

        Of course, private-sector citizens enacted their demands for cleaner water and air through government regulations, not by knocking on the doors of CEOs and saying, “Please, would you pollute a little less?”

        And pollution is still a problem. Fossil fuels cause at least $156 B/yr in health costs in the US, according to a National Academy of Sciences Report. We just had the largest oil spill in US history. Shell has ruined parts of Nigeria. Asthma rates have increased. Ground-level ozone is a problem. Who knows what might be behind a rise in immuniological problems. Carbon dioxide is changing the climate and the oceans. Mercury has made it risky for some people to eat too much fish. I could easily go on. Open your eyes.

        It’s ill-informed attitudes like yours that are ruining this world.

      • blackvegetable says:

        “And the primary cause of the recent housing bubble you allude to was government intervention in lending. The government knew this was a backdoor way to redistribute wealth encourage lenders to give mortgages to millions of people who could not make the payments then force taxpayers to pay the bill.”

        This is prattle…..the data indicates that CRA loans defaulted at a lower rate than mortgages issued by non regulated originators, many of whom were under state jurisdiction. When state AGs began to go after them for predatory lending practices, Federal Regulators, under orders from a Bush appointee, told the states to back off, and provided cover for the miscreants by asserting Federal pre-emption.

        What drove the abandonment of underwriting standards was the demand for paper by those selling CMOs. According to FCIC data they accounted for two thirds of the consumption of mortgages issued from 2005-2007 – the most problematic “vintages”.

        Another factor was the utterly miserable performance of the economy under Bush, where the real income of the bulk of the population stagnated. This drove people to borrow to maintain their lifestyles. Research by Kennedy and Greenspan has shown that absent Home Mortgage Withdrawals, economic growth from 2003-2007 would have been anemic.

        The proper level of regulation is a bit like the location of t* on the Revenues/Tax Rate graph. It is not optimized at either extreme….

    • John R T says:

      There is no argument here: you commence with faulty data, and apply ignorance.

      Take a day off; read “Modern Times,” Johnson, Paul; choose a chapter which addresses an area you understand; check the notes for that chapter.

      Return and re-consider your remarks, above.

      Good luck, John R T

  3. BCC says:

    Speaking of having difficulty internalizing economic concepts, I find that conservatives often have difficulty internalizing the concept of external costs.

    I’ll provide a concise summary:

    “Externalities cause market failure if the price mechanism does not take account of the social costs and benefits of production and consumption.”

    Market failure is bad.

    • Externalities (usually bad) are handled through social (or legal) pressure on businesses, which are then eventually reflected in increased prices, if it costs more to fix them.

      I find that liberals have difficulty internalizing this concept.

      • JeffG says:

        Liberals understand very well that making businesses pay for their external costs raises prices. That’s how it should be — he who pollutes, pays. He who doesn’t, does not (and he gets reimbursed for the damage he unavoidably suffers).

  4. slimething says:


    You are wrong about what happened with the financial sector via sub prime mortgage loans. It was precisely over regulation that led to the housing bubble. Financial institutions were forced to give loans to those who could not afford them nor were credit worthy. This is not even arguable. It was accelerated by the Clinton administration in 1998.


    As for your assumption that business would prefer to dispose of their waste in the cheapest way possible, inferring purposely poisoning air, land and water, if you were CEO of said business would you do so knowing it was poisoning your local environment where you and your family live? No?

    Please research the Great Depression because what you posted is completely inaccurate. Real income rose tremendously during the 1920’s, and did you know there was a Great Depression before 1920? What was different between 1920 and 1929? Hoover mucked up the works by not allowing the economy (capitalism) to reset and his policies triggered the events after 1929. The economy did not go into a tailspin until he meddled. And despite rewriting of history, FDR did NOT improve the economy until World War II. he imposed more regulation and government takeover of the private sector in history up to that period. Keynesian economics and centralized control of the economy was an epic fail then as it is today. All he did was create generations of dependents on government, including Social Security which is now going broke as is every other country that has tried such ponzi schemes.

    Well, we’ve tried what apparently is “your way” since 2009 and it has led to the inevitable economic collapse that is coming. Government does not create wealth, it only destroys it. If this isn’t the biggest bust in modern history I don’t know what is. The problem with socialism is at some point you run out of other people’s money.

    Question: why is gold skyrocketing?

  5. RW says:

    “Question: why is gold skyrocketing?”

    Because the dollar is depreciating!

  6. kuhnkat says:

    Dr. Spencer,

    Simple and clear. Why can’t PHD economists, bankers, and politicians understand?

  7. kuhnkat says:


    add to your post that the banks and mortgage companies were also forced to loan money on property that they would not have a good chance of selling if they had to foreclose to complete the insanity!!

  8. JeffG says:


    A huge force behind the economic downturn was the implosion in the derivative market, which was completely unregulated and at its peak had $600 trillion in liabilities. Its collapse required massive government bailout (so much for those vaunted free markets capitalists like to speak of) and led Alan Greenspan to admit his Randian ideas were wrong.

    Few CEOs live where their companies dump their waste, so your second paragraph is irrelevant. History shows that before strict environmental regulations companies *did* dump their waste in the water, the air, and on land. There was horrific pollution in towns like Pittsburgh, Cleveland, Chicago, and many others. The industrialists simply didn’t care. Andrew Carnegie didn’t even live in the US when his companies were doing this.

    Government regulation has seen great improvements in our air and water, something extreme right-wingers don’t seem to understand as they seek to eliminate the EPA. Companies in all industries simply do not police themselves, as free marketers like to claim. We still have big problems in this area with carbon dioxide and many other pollutants.

    Real income rose in the 1920s, but between the Civil War and then the country saw large swings in the business cycle, and when possible company owners pitted workers against one another to drive wages down to the lowest possible rate. Factory workers worked long hours, 12 hrs/day or more, often in terrible conditions, six days a week, with two holidays a year. Children worked in factories and mines. Read “The Jungle” or “The President and the Assassin” or “The Grapes of Wrath.”

    Reforms instituted by FDR lead to the most prosperous period in the country’s history, the 1950s, which was also a time of strong unions, higher taxes, and lower income inequality. The demand created by the resulting healthy middle class led to all boats rising and a strong country.

    The 2009 stimulus was never large enough, and many economists said so at the time. Another factor of at least 3 was needed. So its no surprise it only partially worked and has left us where we are today.

    When historians and everyone else look back on this era in 75 years, the way we look back on the Great Depression, they will clearly conclude that all of this was in large part due to Bush policies, especially deregulation of the financial industry, two unwise tax cuts that went to the rich instead of being used to pay down the debt or saved for a future crisis, two unfunded wars, and an unfunded expansion in Medicare. Obama will be seen as having inherited a huge mess that could never have been easily turned around, and an opposition party that was selfishly intent on making the top 1% even richer at the expense of ordinary citizens and destroying all progress that had been made since FDR in providing a safety net for people who needed help, while avoiding the real problems of the day such as energy security.

    Gold is rising for many reasons, which no one really understands, including you. Markets are not rational at times like this.

    • Massimo PORZIO says:

      “We still have big problems in this area with carbon dioxide…”
      Ok, stop to breath, polluter!

      • JeffG says:

        Humans emit only 0.9 kg/day of CO2 via respiration, and in any case it is zero net emission but comes from the carbon they ingest. By contrast the average American emits about 55 kg/day of CO2 via energy use.

        • Massimo PORZIO says:

          So: use the bicycle instead of your car, use candles instead of electric lights, buy the meat from the butcher and eat them before they go bad, when you’ll feel bad, instead of call 911 run to E.R. (if there is one in your fantastic world) and finally turn off your computer.

          Be the first and we will follow.

        • Scott says:

          Ah, so I guess that means that eating meat is fine because the only net emissions that result from doing so come from the transportation energy usage. Thanks!


    • Shawn Torgerson says:

      ok, lol, I never post comments on anything and I read a very large amount of these, but that whole comment by Jeff has to be the most uninformed, unintelligent, and naive post I have ever read. Wow. I couldn’t even begin to decide where to begin, but there is no point. It scares me that there are people out there like that.

  9. Martinitony says:

    Spencer’s point that government regulation reduces productivity is difficult to argue with because it is true. I didn’t see him suggest that all regulation is bad. Traffic lights and stop signs reduce productivity. They physically slow down getting there and we can actually incorporate the effect into the cost of production. No one is arguing that there should be no traffic controls.
    However, just as a company would avoid sending its trucks through a school zone, any business will avoid having to deal with massive regulation and take their business elsewhere. It is foolish to use the extreme example to argue against what is obviously true. I think that Spencer’s point is obviously true and we need to get our economy back to rational balance.

  10. Deep Ocean Temperature Change Spaghetti: 15 Climate Models Versus Observations
    August 14th, 2011

    OReilly, OBama, and the OConomy
    August 22nd, 2011

    Please say we’re not going to have to wait a week for more climate science Roy.

    And not just the monthly UAH update either! 🙂

  11. Jiri Salek (UK) says:

    Taxing rich? There is a simple answer.
    1. Cut expenses to ballance the budget.
    2. Increase tax revenue to repay the debt.
    Any other way leads to disaster. Budget must be ballanced and debt must be repayed. Withouth cuts there is no way to ballance budget and without increased tax income it is imposible to repay the debt.
    Increase of tax revenue can be either from taxing rich or from economic growth. Unfortunatelly, US economy is unlikely to grow enough in the next few years.
    The path is clear but I’m afraid it is the last path US government wants to follow and window of opportunity is closing fast with growing debt. Too bad for you and too bad for us all.
    US quality of life will take a dive. Get ready for that.

  12. vboring says:

    As far as taxes decreasing incentives to improve our standard of living: Warren Buffet said that he was never put off from making a good investment because of concern over having to pay taxes on the profit from it.

    The basis of our economic models is to keep labor cheap to contain the cost of production and prevent inflation. This is obviously irrelevant to the US today. Our’s is a consumer, high tech industrial, high tech agricultural, and creative economy with minimal exposure to the cost of labor. International labor and energy needs to be cheap to maintain our standard of living.

    Cheap labor living next to rich folks is a recipe for crime, not for meaningfully increased productivity.

    We should be looking at Germany’s and France’s successes, not China’s.

  13. Frank says:

    “That eras unregulated capitalism led to boom-and-bust cycles that were dizzying and cruel.”

    Public schools’ and Keynesian economics’ propaganda aside, capitalism WAS heavily regulated both before and during the Great Depression.

    First, the Federal Reserve was created in 1913 to control the monetary supply. This would not exist in pure capitalism. Secondly, the Federal Reserve pursued an “easy credit” policy, much as it did in the 2000s. The Federal Reserve bought $1.1 billion of government securities from February to July 1932. This is not “unregulated capitalism”. See Rothbard who shows:

    “Led by President Hoover, the government embarked on what Anderson has accurately called the Hoover New Deal. For if we define New Deal as an antidepression program
    marked by extensive governmental economic planning and
    interventionincluding bolstering of wage rates and prices,
    expansion of credit, propping up of weak firms, and increased government spending (e.g., subsidies to unemployment and public works)Herbert Clark Hoover must be considered the founder of the New Deal in America. Hoover, from the very start of the depression, set his course unerringly toward the violation of all the laissez-faire canons. As a consequence, he left office with the economy
    at the depths of an unprecedented depression, with no recovery in sight after three and a half years, and with unemployment at the terrible and unprecedented rate of 25 percent of the labor force.”

    Enough of the myth that laissez-faire caused the Depression. It was government, not non-existent capitalism, that caused and exacerbated the Depression.

  14. Brandon Caswell says:

    Paying down the debt and reducing costs is very good advice. Funny how so many people argue against this idea, then turn around and try to teach their kids to live within their means. The dichotomy is painful to watch.

    What we are really dealing with is the fact that no sitting politician wants to reduce debt and spending, simply because they know it will allow the future politicians more room to increase their spending. No politician is willing to make a sacrifice today, knowing that it could benefit a future politician.

    What we really need are politicians that put the wellbeing of the country ahead of their and their parties’ political wellbeing. I am from canada and I think the current system in the states (elections every 2 years) only means that you are in perpetual campaigning. Here in Canada, our run of minority governments means that just about every day there was a threat of an election being called, so we were in perpetual campaign mode. One thing you can count on in a campaign is that politicians will only think of themselves.

    What ever happened to the idea of a politician being a “public servant”? Current politicians, and I am pointing fingers at both sides, see the public as their servant and piggy bank.

    • JeffG says:

      Paying down the debt and reducing costs is very good advice.

      I don’t see anyone arguing against this idea. They are arguing that *now* is not the time to embark on a program to pay down the debt. Now is a time to use government spending as a stimulus for an economy that lacks demand, especially as borrowing is right now very cheap and many people are willing to lend at these rates.

      The time to pay down the debt was when Clinton balanced the budget and started a surplus. Unfortunately, Bush decided to give the surplus to the wealthy instead of reducing debt or saving it for stimulus spending when needed.

      • Jiri Salek (UK) says:

        There is only one problem. Government is highly inefficient with spending. If you want to spend money then cut the tax. The money will be spent far more efficient by people and companies. Bush did the mistake that he allowed increase of the debt and did nothing against government wast of money.

  15. Chuckarma says:

    WOW. A very “Francisco d’Anconia” analysis of money. I’m highly impressed with a Climatologist’s grasp of money theory. I can’t say I see that depth of understanding from the Alarmist’s side.

    As you point out, the AGW problem can be easily solved with the same logic. Let’s just print a few hundred billion, and be done with it. And why really should we stop there? Print a few hundred trillion dollars and rid the planet of GHG’s forever!

    When it comes to this topic, people easily confuse the concepts of Price, Cost, and Value because we often use money to describe them.

  16. OReilly spins like a top, Stein is no longer funny, Rogers is now neutral; it is much worst than I thought!

  17. don penman says:

    I think it is important who gets the wealth not jut that wealth is created,in the UK we have 0.5% interest rate and yet money lenders are asking for 1500% APR for short term loans.Who is getting the wealth here?

  18. kuhnkat says:


    “A huge force behind the economic downturn was the implosion in the derivative market, which was completely unregulated and at its peak had $600 trillion in liabilities.”

    If the derivatives market was so unregulated, why did I listen to a Government appointed regulator testify that the Company showed him their plans and he thought they were OK??

    Sorry bud, the fantasy that some part of our economic situation isn’t already regulated is one of the sorriest lies I have ever heard.

    • JeffG says:

      It’s not a fantasy — watch the Frontline investigative program “The Warning,” available on their Web site.

  19. Alan D McIntire says:

    There’s another problem with the slogan “Tax the rich”, aside from revealing the speaker as having one of the 7 deadly sins – envy. Raising taxes does NOTHING to reduce the wealth already possessed by the rich- It takes money from those who are working hard to GET rich.

    Most “wealthy” people get that way by running their own businsess or profession- auto shop operators, dentists, etc. There comes a point where they figure the extra work isn’t worth the strain, and opt for vacation time. Raising taxes on “the rich” brings that point a lot closer, leaving the rest of us having to wait for the business to reopen before we can get our cars repaired or taking care of our toothaches.

    • JeffG says:

      The theory of capitalism says supply rises to meet demand. If an auto shop closes another will open as long as demand stays constant.

      Besides, auto shop owners and dentists aren’t the wealthy. The wealthy are the people who make their money via capital gains, and pay a much smaller tax rate than people who do actual work. They’re the CEOs making tens of millions a year, and the hedge fund managers who make billions of dollars a year but are odiously taxed at a capital gains rate. Removing this extremely unfair loophole would raise $6 billion/yr from just 25 people.

  20. Ray says:

    To talk of “standard of living” in purely economic terms is meaningless.
    The role of 99.9% of the population is to act as “worker ants”, producing and consuming the goods and services which make the other 0.1% of the population wealthy.
    The only difference from worker ants is that they are sterile but the role of human “ants” is also to produce more offspring, to increase the population and increase the consumption of goods further, thus making the rich even richer.
    Of course, we have been convinced by advertizing that we really need the goods and services we all make, and that acquiring them increases our “standard of living”, but in reality once we reach a point where life is reasonably secure and safe, our real “standard of living” improves little and may decline because of the general deterioration of our environment, resulting from the pursuit of growth.
    Making more and more and more advanced “things” doesn’t really improve our “standard of living”. For example, is our “standard of living” really any better now, because we have HD TV or mobile telephones than it was in the 1960’s when we didn’t, if in the process (in the U.K. at least), we have destroyed vaat swaths of countryside to build housing estates and motorways?
    There seems to be an assumption that if there is not economic growth, i.e. that we make more and more things every year, that that is a disaster, but ultimately it is not sustainable.
    In reality, we could improve our real “standard of living” with zero or even (heaven forbid), negative growth, but from the narrow perspective of “economics”, such a thing cannot be contemplated.

  21. Peter says:

    Whenever I see anything debated about the US economy it seems to come down to “why it’s the governments fault”. Did any of you ever think that mostly it isn’t the government’s fault. That maybe it’s the fault of Americans and American companies. I’m an economist and I’m writing this from Australia. We have a far more interventionist government than yours but we’re doing much better. No, I’m not saying that more government intervention is better. In fact, as hard as our government is trying to stuff up our economy, the simple fact is they haven’t managed to. Why, because, to paraphrase Dr Spencer, we are making what people want to buy. This is largely thanks to a China driven commodity boom. Without such a commodity boom we may well be floundering. But we’re doing quite well because we are good at making what China wants right now. The US simply isn’t competitive enough. You need to make things better and cheaper and your entrepreneurs need to focus on making the pie bigger, not on getting a bigger slice of the existing pie. Throw your money shuffling bankers into jail and foster those who want to make a bigger pie, rather than taking a bigger slice. As to how much to tax, basically tax as much as you want the government to spend. In other words, you need a government that pays its bills, not one that leaves debts for your children.

  22. An Inquirer says:

    The study that blames the financial mess on lack of regulation reminds me of the study by the fox family that demise of the chickens was due to the lack of foxes to patrol the farmyard.
    Of course, those who want more regulation are going to conclude that more regulations are needed. Yet, a honest evaluation of history undermines that conclusion. Under Clinton, Greenspan and other advisors successfully urged not to impose further regulation on the derivatives market, arguing that such regulation would dampen the availability of capital where there was a demand for it. And real estate is where government artificially created a demand for it. The CRA under Clinton enlarged its charter, and a $10,000 fine per application imposed if loan approval procedures were not modified to give approval to applicants that the government wanted to get approval. After the Clinton administration, Barney Frank used his pull to bully those who wanted to reduce the flow of capital to questionable real estate loans. The list goes on and on.
    It was not the lack of regulation in derivatives that causeed the problem, but it was the pervasive role of regulations and government actions that put an inordinate amount of capital into the real estate market.
    The media — and the majority of Americans — are fixated on the bailout that went to banks. But that bailout is costing taxpayers nothing; in fact, taxpayers are making a profit on it because the banks were surprisingly fundamentally sound if panic did not destroy the system. Where taxpayers are losing money is on government programs.

  23. Adam Gallon says:

    Tax the rich.
    Define who’s “rich”.
    The filthy rich, have enough money to pay very good accountants to find legal ways of keeping their money out of governments’ hands.
    Thus it’s the not-so-rich who get hit.
    I noted a comment above, about following France & Germany as examples, rather than China.
    As I live in England, I’ve noticed how things are going over in the jolly Euro Zone.
    It’s not pretty currently.
    French & German ways are quite different, you know?
    The French have generally gone down the socialism path, lots of taxation, primarily so the state employees can retire in their 50’s on virtually the same income as when they were working.
    Germany, for may years, had a “Strong Deutschmark” policy, the German politicians binned the Deutschmark (Against popular opinion, but that’s the way of the European Project, the little people can’t possibly understand what’s good for them, so don’t ask their permission)
    Now we’ve the edifying spectacle, of a crumbling Euro, with Germany still having a strong economy, much to the detriment of the countries of Southern Europe (& Ireland).

  24. harley says:

    Roy, I need to know, does CO2 cause Global Warming? Julia Gillard (Prime Minister of Australia, in case you didn’t know) says the science is in. CO2 is pollution and we need a Carbon Tax to stop the big polluters polluting. Help!

    Could we get back to discussing Global Warming/Climate Change and the like please.

    • Clarissa says:

      CO2 is clearly the cause of global warming – one of the gases that cause global warming. Actually global warming has been started long ago, but it still happened naturally . But since the industrial era began: many machines made ??and trees felled, global warming becomes severe. Characterized by temperature rise and climate change.
      Can we stop global warming? I think not. This is a process that naturally occur on earth – it’s just that human make it worse… Our task is to reduce the severity of global warming and cope with the effects it causes.
      There are still a lot to say, but I think that’s enough a while.. If you want to know more about global warming, maybe you can find many useful things on my blog : http://aboutglobalwarming1.blogspot.com 🙂

    • Waza says:


      Check the latest brochure promoting carbon tax which has been distributed to Australian Households


      On page 5 it states that; the climate is warming, high levels of carbon pollution risk environmental and economic damage, and there will be more extreme weather events. It does not link the three.

      BTW it also states Australia generates more pollution per person than any other country. What about UAE, Kuwait, Qatar and other resource(coal, oil, gas) rich countries

  25. Rich says:

    Roy, you say, “I agree *most* scientists are even more clueless about economics than your average joe. Im not one of them.”

    I’m willing to believe you’re not one of them but, even after reading, “About Roy Spencer” I don’t know why I should. Why would I ask a climatologist about economics? I’m not being snippy, I’d really like to know.

  26. steve says:

    One of the problems with a taxation system that people consider “fair” is that it is not the best taxation system for economic growth.

    Or in other words optimizing fairness does not lead to optimizing economic growth.

    Note too that what someone considers fair is a personal opinion.

  27. Riku Mellin says:

    I was actually surprise to see you being so on about economics Spencer :D. Not in a bad way as economics in my mind is the one science that anyone should know at last something about.

    But back to point of this reply. Do you subscribe to any certain school of economic though? Like for example the pioneer free-market school the Austrian school of economics or just the modern day neo-classical economics with macroeconomics burrowed from keynesians and monetarists.

  28. Noblesse Oblige says:

    There are plenty of pundits telling us what government is doing wrong, and many of them are knowledgeable and articulate. There are relatively few qualified sceintists who are effective at scientifically disentangling the alarmist dogma and communicating it broadly to scientifically trained and untrained alike. Dr. Spencer is indeed capable of doing well at both. However, the reality is that his activities in the first will be used by the alarmists to try to reduce the effectiveness of the second.

  29. Bill says:

    No actual person suggests we just print money and give it to people to let them order stuff off the internet. That is a ridiculous straw man argument offered by Dr. Spencer. It is hyperbole for what he sees as the only inevitable result of tax collection a welfare state devoid of producers. So, I understand completely why he continues to find himself in ridiculous discussions about economics. To avoid ridiculous discussions, it helps to stop making ridiculous arguments.

    Since the beginning of mankind, people have organized into ever evolving groups beginning with family, clan, tribe, state, nation, civilization, and so forth. Organizing factors may be different (religion, language, geography, etc.), but what has ALWAYS been true is that no great society persists long without good governance, and no governance can succeed without the ability to collect taxes (or tithes or whatever) to operate and undertake projects for societal benefit.

    Dr. Spencers love of laissez faire economics seems inextricably linked to his desire to pay no taxes; and his undying belief that he, you, I and the rest of the private sector can (and more importantly, will) do a better job than any government is capable of doing of providing such services as garbage collection and building levees to control the Mississippi (which gave us the rich agricultural deltas and inland shipping that so many people use to produce and trade) One reason we cant just print money and order stuff off of the internet is that the internet (and computers) may have not reached this advanced point by this time without government support in R&D and helping to set standards and protocols creating a framework in which innovation can take off and gain traction. As a young electrical engineering student, my dad worked on the very first digital computer, the ENIAC, a project supported with, yes, government funding to help with the war against Germany. Of course, we could just drive to Walmart rather than ordering stuff off of the internet. But then we might be driving on the public roads and interstate highway system that Sam Walton benefits from by being able to transport goods from ports of entry into his stores. Dr. Spencer could order his climate data off of the internet, but instead he relies on satellite data which might not exist at all if not for the helping hand of good governance to help launch (pun intended) the space program.

    We spend 60-70% of our GDP on labor and about 2% of our GDP on environmental protection, but Dr. Spencer would like you to believe it is the environmental costs, not the labor costs that lead Walton to manufacture his goods in China. When an Apple sells an i-phone for $400, only about $5 of that money stays in China, the other $395 is distributed capital a fact made possible by government protection of intellectual property through patents and international treaties (government involvement in the private economy). And, of course, our tax supported navies and coast guards help prevent the seas from being overrun by pirates who would steal Sam Waltons products before they ever get to his stores (another alternative to printing money).

    It is nice that we have good health to live long enough to innovate and enjoy the fruits of our innovation; rather than just fighting for survival. Of course, the fact that we are not plagued by cholera, dysentery, and rat vectored diseases derives, in very large part, by using taxes through good governance to help build sanitary sewer and garbage collection systems. That stuff, like a well educated populace and firemen, costs money – taxes. Private libraries might work, but I doubt it; and I am not sure how healthy a society would be where only the monied can have access to knowledge. I am guessing that the University of Alabama at Huntsville has also benefitted from government support perhaps even some of Dr. Spencers research?

    Dr. Spencer likes to believe that this all would have been possible and more efficient through the private sector alone. His problem is that throughout historys flirtations with laissez-faire economics/governance; no such system or society has proven sustainable or has effectively filled in those gaps that good governments fill in so well. Not once if such a model were sustainable, Dr. Spencer could point to that enduring example as a model; rather than talking (erroneously) about what drove the corrections that have steered away from that model. Dr. Spencer thus constantly finds himself looking at facts on the ground and saying: sure it never works in practice, but it obviously works best in theory. There have been sustainable people/groups that lack government controls they just happen to be the small isolated clans that emerge naked (and often hungry) from time to time during first encounters from the Australian bush or the Amazon rainforests. No clans have ever progressed to tribe or nation status, and certainly not to great civilization status without good governance. And those governments have always been involved in some way with collecting resources (taxes) and applying it to things like building aquaducts, building irrigation systems, and supporting specialists for which there is yet no market (e.g. mapping, advancing architecture by building pyramids, supporting the developers of a written alphabet, etc.) to help the society advance. The case has been made (by Gavin Menzies) that the European Renaissance does not happen as it does without benefitting from the efforts of the Chinese government several hundred years prior to develop global maps and encyclopedias of knowledge to help stimulate trade and innovation. It is tough to practice either good science or good economics when one is forced to look past so many inconvenient facts in order to justify their ideology. All experiments in Laissez-faire government policy have resulted in wide gaps emerging between the total wealth of the nation and the general welfare of the populace; and the populace has (voluntarily)moved to close the gap through more government (witness most recently Hong Kong).

  30. MRW says:

    Dr. Spencer,

    I am begging you. Listen to this:

  31. slimething says:

    Nice speech Bill.

    As the dollar continues to be devalued and lose its world reserve currency status, I’m comforted to know you have reassured us that Big Government, Quantitative Easing and the nanny state had nothing to do with it.

    The Euro….now there’s a strong currency (tic), and surely the socialist system modeled around it had nothing whatsoever with its demise either.

    As the U.S. has been changing the world’s dirty diapers for nearly a century, we’re broke now. It’s been fun, but who’s going to bail the U.S. out?

    It is quite clear those making speeches and philosophizing such as yours have likely never owned, operated or financed a business. In fact, I’d wager a good portion are living at the government trough in one degree or another. You have no idea what it takes to start a business, nor the risks involved. No, I’ll bet you collect a check every week and assume it is drawn from the bottomless pit of your greedy employer, who of course were just lucky to get where they’re at. And if employed by a government agency, that’s no problem either; just raise taxes! It’s a perpetual stream of money.

    You are aware that Rome also tried spending their way out of debt right? The Roman Empire was a Big Government welfare state too. Oh they didn’t have printing presses or Federal Reserve per say, but did devalue their currency. I’m sure you know that. They simply decreased the amount of silver in each coin and made more coins! Problem solved. It made them nearly worthless, but so what, Big Government must go on, until the entire system collapsed under its own weight. The situation is no different today.

    I hope you all have been buying gold 🙂

  32. slimething says:

    Oh, and Bill, on your intro? Nice that you knock down a straw man with a straw man 🙂

    “No actual person suggests we just print money and give it to people to let them order stuff off the internet. That is a ridiculous straw man argument offered by Dr. Spencer. It is hyperbole for what he sees as the only inevitable result of tax collection a welfare state devoid of producers. So, I understand completely why he continues to find himself in ridiculous discussions about economics. To avoid ridiculous discussions, it helps to stop making ridiculous arguments.”


    There’s your non-existent world. What exactly do you call the “earned income tax credit”? A fair day’s pay for a fair day’s work? Nearly 50% of the population pay zero income tax. What’s that, “social justice”?

    In your world it must be a welfare state devoid of producers? How about 50% supporting the other 50% Is that ok? We are approaching that ratio, and the system is already bankrupt.

  33. Fulco says:

    A high Standard of Living for a society means that everyone has access to basic needs no matter the size of their wallets.

    This comes at a prize paid by everyone through taxes (in a fair way).

    In my opinion this means that the United States does not have a high standard of living. The Netherlands an Sweden are examples of countries with do have a high standard of living.

    O’Bama is right if he wants health insurance for everybody,
    this is a great step towards a high standard of living.

  34. Steve says:

    The problem with health care is it is too expensive in the USA. It is 2x the cost of the other countries per person. Nobody fixed the cost problem. We put through this healthcare bill, but the cost issue was not addressed.

    The reason it was not addressed was the lobbyists in the health care industry wanted to keep their piece of the pie.

    A socialist type system cannot work in a lobbyist controlled congress. The lobbyists will suck all the money out before it helps the people.

    Obama didn’t care how much it costs, so long as he could get something passed. Now we are left with a big pile of expensive crap.

  35. Massimo PORZIO says:

    “A socialist type system cannot work in a lobbyist controlled congress. The lobbyists will suck all the money out before it helps the people.”
    Do you really believe that the public heath care problem is only that?
    Uhmmm… Not sure you ever “tasted” a great “socialist like” health care.
    We have one here in Italy. When I was 18 I had a car accident and I broken my neck bone. Thanks to the “socialist like” health care the high-qualified doctors just didn’t see the neck bone broken despite I was completely paralyzed for three months that time. After 6 years when I discovered what it was the reason I never recovered to walk well and run, an another doctor told me that I’m just lucky to be still alive.
    Do you believe I had any valuable compensation for my permanent damages?
    No, it’s not just a question of lobbyist, believe me.

  36. Steve says:

    Massimo –
    I don’t think the lobbyist problem is the only problem, I think there are lots of other problems with a socialist system. What I’m saying though it is really silly for them to try and force a socialist type of healthcare system into a system controlled by these businesses that control congress.

  37. Bill says:

    @ Slimthing:

    Interesting, I speak in very general terms about the contrast between Lassiz-faire economics (and its historical failures) and a mixed economy where a government of, by, and for the people operates as an integrated part of a successful and enduring economy and society; and you switch to monetary policy and see government as only an enemy of society. And also assume, you know all about me. I’m betting I began my first four business before you had your first job. Or, maybe not – I shouldn’t presume to know you.

    It must be depressing for you to live in such a bleak country where you see half of the people as leaches living off the other half who are “producers” merely based on the amount of federal income taxes they pay. In Texas, where I live, we pay no state income taxes. But, we do pay among the nation’s highest sales and property taxaes; and you can’t drive from point A to point B anymore without paying a toll (perhaps “user pays” isn’t a bad model for roads). Thus even the state’s poor pay taxes as a compenent of their rent (Can we agree landlords pass on the cost of their property taxes?); and of course in addition to payroll taxes for social security and Medicare, they pay federal taxes when they buy gasoline or cigarettes and through various “user fees”. I am guessing that many of these poorer, but tax paying, people you see as leaches may be caring for or teaching your children, picking up your garbage, serving you a beer, taking your blood pressure, fixing your flat tire, mowing you lawn, and otherwise trying to figure out how to provide for their families. It might make you less hostile and bitter to seem them in this light rather than as leaches.

  38. Alan D McIntire says:

    “Fulco says:

    …In my opinion this means that the United States does not have a high standard of living. The Netherlands an Sweden are examples of countries with do have a high standard of
    living. ”

    In terms of per capita income, the Netherlands would rank after our 34th wealthiest state, Sweden after our 42nd wealthiest state, and the average European Union country would average somewhat poorer than our 50th wealthiest state, Mississippi.

  39. don penman says:

    I think that raising and lowering tax rates is a better way of controlling the economy than raising and lowering interest rates.When the economy is overheating we should raise taxes and when it is deflating we should lower taxes.The Housing boom was caused by having a large amount of money chasing too few houses increasing taxation would have taken this excess money out of the economy and lowered the national debt as well as keeping houses affordable for the average buyer.The housing boom suited many people and they wanted interest rates cut in order to keep the housing boom going.

  40. dhlii says:

    It is not about free markets, it is about individual liberty – free markets are a consequence of individual freedom.

    The bleak world view is the one that does not trust people. Those living of the dole are not leaches – they are entrepeneurs pursuing their own advantage – exactly like corporations living on government welfare. What is troubling is that that choice results in permanent poverty and despair.

    The meme that greedy businessmen are responsible for the booms and busts of the business cycle has been repeatedly debunked. It is a demonstration of the sad state of public education that it is still taught. Even Keynes rejected it. Keynes is demand side economics, producers are driven, they do not drive. Everything is an effect of consumption. The supply side is absolved of responsibility for everything.

    Keynes is also the economics of top down central planning, of government by your betters, of abdicating personal responsibility. Of giving your life over to a government jesus.

    Of course Keynes has failed – repeatedly in multiple different ways.

    We are all producers. We are all entrepeneurs. We differ only in our tolerance for risk, and scale. Everyone seeks their own advantage. The progressive lie is that always and everywhere advantage for one comes at the expense of another. If that were true we would revert back to caves. There is no difference between the employer seeking the greatest skill for the least wage, and the worker seeking the most benefits and highest pay for the least effort. Each is offering something worth more to the other, and getting something worth more to themselves.
    Exchanges between free people only occur when both parties win.

  41. KBS says:


    Your foray into economics is impressive. Aquinas, Locke, Smith, Ferguson, Hume, Acton, Burke, Menger, Mises, and Hayek. I strongly suspect from your comments that you have been reading heavily from some of these folks.

    Add to your reading list political economy works of the new institutionalists such as those from Nobel Prize winners James Buchanan, Douglas North, Ronald Coase, and Elinor Ostrom. In the climate change debate, I especially recommend the works of Ostrom, who demolishes the commonplace views of the commons.

    This is classical liberal scholarship and sound economics. Hopefully these authors will become much more widely read, and the lessons of their scholarship broadly known throughout academia and the public alike.

  42. Gordon Robertson says:

    I fully expect you to remove this comment, a la realclimate, even though I support your skeptical views on the climate.

    Roy…we have already witnessed the product of businesses being left alone to operate as they liked. We had long hours, brutal and unsafe working conditions, no pensions, no Medicare as is now universal in Canada, no workers’ compensation plans, sexual discrimination in the workplace, no unemployment insurance, and so on.

    It took unionized forces to wrestle power away from the business so people could enjoy a decent level of living. Many people will argue that unions have gone too far, but I am willing to bet that if unions are suppressed, we will go right back to the way it was.

    The truth is that business people cannot be trusted to look out for more than their own interests. I am not an Obama supporter based on his ignorance about global warming. I am on your side on that. However, I think you are a bit of a loose cannon when it comes to commenting on other disciplines.

    • dhlii says:

      We have experienced several centuries of progress, during which all of the things you mention as well as many more improved – mostly naturally. Further the conditions you refer to have been prevelent throughout the world, and throughout history – but are slowly disappearing. They disappear in nations with strong unions and strong workers protection laws, and they disappear in nations without those things. They disappear as those bad approaches increasingly become unsustainable.

      It may be arguable that Unions have contributed to those improvements in some instances – but beyond advancing the timing that argument is weak. It is inarguable that unions have destroyed most of the industries they have controlled. Now they control government. Regardless, Union power in most of this country and in most industries today is negligible, and I have not noted a spike in child labor,

      I do not know Roy’s credentials in economics, but I do know the ideas he espouses are supported by almost three centuries of the classical liberal economic tradition. A tradition that has occasionally been ignored – because it does not provide the answers politicians want, but has never been proven wrong. The failures of the economic schools of the past 50 years are rife. I am shocked that any hold credibility. The resemblance to the situation with respect to Global Warming is incredible. Decades of religiously fanatical faith in something that makes little sense and is increasingly proven wrong.

      I will conclude with a Milton Friedman paraphrase – there is nothing business wants less than a free market. Free markets mean competition and often failure. Free markets require the efficient delivery of cheap goods and services at small margins. Free markets benefit the consumer above anyone else.

      Business does not ask government for free markets.It seeks barriers to entry, monopolies, protection – from the free market.

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  44. Dr. Spencer, I have to agree. It was during the Carter Malaise of the late 1970s that I first began to consider the study of economics, which I’d striven scrupulously to evade during my undergraduate and postgraduate years of formal education.

    (My father took his MBA in the early ’50s, and I’d grown up reading his textbooks. I wanted nothing whatsoever to do with Samuelson in courses where I had to grind for grades from the Keynesian professoriate.)

    When I came at the assessment of “stagflation,” it was from the perspective of a practicing physician, and I found it quite natural to look at the feedback mechanisms of the national and international economies in pretty much the same way that physiology – anabolism, catabolism, apoptosis, homeostasis – is modeled.

    The only formal economists who had a similar handle on “the dismal science” were those of the Austrian School, and you seem to be making your own approach along a congruent course.

    Keep on hammering, Dr. Spencer. You’re on the right line of attack.

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