Bob McTeer’s

Commonsense Economics

 

Several years ago the public affairs staff at the Dallas Fed undertook a project to create a little booklet with the title above containing what they regarded as nuggets of economic wisdom they found in combing through some of my speeches and writings. That project was never finished. However, in digging up bones recently, I came across some of the quotes they had selected as a beginning. Here they are in case you are interested.

PROGRESS

Job creation and job destruction are intertwined. They are both key elements in the process through which a society raises its living standards. This shouldn't be all that surprising to most Americans. It's so familiar, in fact, that the concept is captured in a single word- progress.

Most Americans look at jobs intuitively: anything that creates them is good; whatever destroys them is bad. From this vantage point, existing jobs are a national treasure to be hoarded, protected, and saved. Nothing could be more wrong. The person, not the job, is the treasure.

Instead of asking whether the economy will create enough good jobs, we ought to be asking whether the educational system will produce enough qualified workers. If its people are educated, trained and willing to work, a society with a properly functioning market economy will be able to provide an abundance of opportunities.

FREE ENTERPRISE

Free enterprise is about choices. The market system offers variety by allowing choices to be made at the individual rather than the group level. Who better to make decisions than the people most intimately involved- individuals who know their unique circumstances better than anyone else?

When the government can legally rob Peter to pay Paul, there is great potential for abuse. There will always be an abundance of worthy causes seeking government sponsorship. But the test should not only be whether the cause is worthy, but whether government is the appropriate entity to deal with it.

In an essentially free economy, there are limits to how large the size and scope of government can grow without killing the goose that lays the golden eggs.

FREE TRADE

Americans believe they have a strong domestic economy because of the virtues of competition, but when it comes to international trade, people forget the virtues of competition and think we'd be better off if we didn't compete. We shouldn't be afraid of competition; it's what makes our economy strong.

When the government embraces protectionism, the government is effectively telling American consumers that they shouldn't have quality at the lowest price- that they should pay higher prices to protect jobs in industries where, without government protection, jobs wouldn't have been in the first place.

While some may argue that saving jobs is worth the cost, using trade barriers to save them is like fishing with dynamite. You lose a lot more than you gain.

THE FED

The Federal Reserve enables people to go to sleep knowing that when they wake up in the morning, the value of their money will be the same as when they went to bed. For all practical purposes, when Americans wake up each day, a dollar bill will buy them the same amount of goods or services that it bought the day before.

Inflation not only undermines the value of our money, it also undermines our faith in our government and its institutions. No matter how many different ways we do it, additional money for society will not create wealth. If merely increasing the amount of money would make society better off, or wealthier, then counterfeiters would be heroes.

One of the few things that economists around the world agree on is that in the long run, the only thing that more money does is create higher prices.

Comments (7)

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  1. Nemo says:

    One of the few things that economists around the world agree on is that in the long run, the only thing that more money does is create higher prices.

    So do you support or oppose the Fed’s $1+ trillion dollar initiatives to purchase MBS and long-term Treasuries with new money?

  2. Bob McTeer says:

    Nemo: I’m not sure of the “only” in your first sentence. I think along the way more money leading to more spending can also stimulate output under conditions of slack in the economy.

    I’m fairly supportive of Fed actions, believing that Bernanke and Co understand the need to reverse course when the time comes.

  3. John Booke says:

    Can an economy have too many “educated, qualified workers?” Will the white-collar job market become saturated with these workers and force wages in this sector down? Also do we have an obligation to protect our workers from unfair labor practices in other countries? If “people are the national treasure and not the job” then are all people “treasured” equally? As an example are young college graduates seeking jobs as valuable as older workers wanting to retire?

  4. Joe Mitchell says:

    Bob,
    Always enjoy your appearances on Kudlow. Shame he cannot allow you more time.

    One of the most important things we can do on earth because every new child comes into this world starting from scratch within the world he inherits, is to pass on the wisdom that experience brings.

    Thanks for this.
    Joe

  5. Joe Mitchell says:

    Took the liberty of posting this to my blog, credit at the bottom.

    http://indianaoracle.wordpress.com/

  6. [...] Bob McTeer’s Common Sense Economics Bob McTeer, former President and CEO of the Reserve Bank of Dallas, posted a collection of common sense economic wisdoms on his blog today. There are those here that will not agree with Bob, but there is a lot of wisdom here so I am passing it on. Several years ago the public affairs staff at the Dallas Fed undertook a project to create a little booklet with the title above containing what they regarded as nuggets of economic wisdom they found in combing through some of my speeches and writings. That project was never finished. However, in digging up bones recently, I came across some of the quotes they had selected as a beginning. Here they are in case you are interested. full article: Bob McTeer’s | Economic Policy | Bob McTeer | NCPA [...]

  7. T-Bone says:

    There is not much to disagree with here, I don’t think, for anyone of any political spectrum, except that all the points made are limited to conservative/libertarian friendly arguments, such that people like this Joe Mitchell up above will take it and run with it as a conservative/libertarian argument. It’s like a set of facts selectively picked to make one side of an argument. Those facts may be agreed on, and I think it sits well with any economist (except for the inclusion of key “weasel words”, for lack of a better term, like “Rob peter to pay for Paul”). But liberal economists would probably like to elaborate on it further.

    For example, they would like to answer or elaborate on the question posed, “Who better to make decisions than the people most intimately involved- individuals who know their unique circumstances better than anyone else?” Interesting that this is in the form of a question. They may pose a response question of what to do in the case of where the individuals making the decisions tend to not intimately understand the situation or have perfect information, or in cases where there is a conflict of interest, etc.