The Invisible Heart: An Economic Romance - Essay Example

The Invisible Heart: An Economic Romance The Invisible Heart: An Economic Romance takes Mary Poppins’ advice that “a spoonful of sugar helps the medicine go down” and uses dialogue between two potential lovers, Sam Gordon and Laura Silver, to present a polemic on various micro and macroeconomic concepts including government regulation, price discrimination, self interest, risk, and several other topics. It is not really worth criticizing the book on its merits as a love story. Despite its title and the cover art, it is not earnestly trying to be a great love story, which is fine. The love story is merely the sugary coating that encapsulates the pill of economic concepts large and small, which is what the book is truly concerned with. Sam and Laura are something of an odd couple: Sam is an economics teacher completely devoted to the free market while Laura is a liberal English teacher with the suspicion that money corrupts and injures people. Sam and Laura continue to have discussions about economic issues throughout the school year and grow closer in the process. Meanwhile, another plotline unfolds elsewhere in Washington when the head of a government watchdog agency named Erica Baldwin goes after a corporation called HealthNet, which is headed by CEO Charles Krauss. The sub-plot is essentially a dramatization of some of the issues that Sam and Laura discuss, injecting some refreshing action into the plot of the story. Sam loses his job and has a misunderstanding with Laura, but the adversity is resolved in the feel-good conclusion of the book. Plot and character summaries aside, we are now ready to delve into the heart of the book which is the ongoing economic debate between Sam and Laura. Sam bumps into Laura for the first time after giving a friendly homeless person sixty cents. Laura asks Sam whether he is concerned that the homeless man will waste the spare change on drugs and alcohol and Sam responds that he looked like he needed a drink. The discussion continues until the two of them are debating government safety regulations such as motorcycle helmets, airbags, and seatbelts. During this conversation, we see that Sam is far more skilled in debate than Laura, at least within his area of specialization. This is, I think, one of the main weaknesses of the book. Sam is usually right on target with the free-market ideas that he puts forth, but Laura’s objections and counterarguments are usually too weak to even show whether his ideas are unassailable or arguable. For example, when Laura says that her brother carries around cans of V-8 to give to panhandlers, Sam has very little difficulty in showing how this is ineffective (the homeless man will simply try to sell the V-8 or drink it and skip a meal) and also arrogant (her brother thinks he knows what is best for the homeless). But what would happen if Laura put forth another idea, saying that it would be better for Sam to refuse the panhandler and save his sixty cents? If he saved sixty cents everyday for a year, he could donate $219 annually to a local homeless shelter or rehabilitation clinic. Aside from helping the homeless by making this decision, he would also be helping to clean up the city and reduce panhandlers by reducing the incentive for begging. Sam could still debate this idea and maybe even come out on top, but we don’t get the benefit of seeing how this elevated debate might pan out. Maybe it is an unfair criticism that Laura is too naïve, since her naïveté helps to make the book a very good introduction to economic ideas for people who’ve never studied it, but for people who are familiar with economics, the book might be more interesting if Laura were a Marxist economist. Perhaps someone should present the idea of a Marxist antagonist to Russell Roberts as an idea for a sequel that would present a more advanced polemic on the benefits of free-market capitalism. One of the stronger points of Sam’s worldview is that he doesn’t view money as some kind of ultimate end as economists are sometimes accused of doing. He believes that money is only a means toward the end of enjoying one’s own freedom and experiencing life to the fullest. He believes, in short, that money is the best tool for mutually beneficial trade that is in everyone’s self interest. This is a perfectly reasonable and healthy way of looking at the function of money and it helps to show that all economists aren’t money hungry greed heads. He makes a distinction between greed and self-interest when he explains his money-dangling class example to Laura. Over coffee, he uses the example of the bagels that Laura buys for breakfast at her local bakery. He asks her if she ever needs to call ahead to the baker and make sure he will have enough bagels and she replies, amused, that of course she doesn’t. Then Sam goes on to explain that, even though she takes it for granted, the baker wakes up at 3 o’clock in the morning to make a wide selection of bagels for her to choose from out of his own self-interest, because it will make him a profit. He goes on to say that this self-interest is not necessarily greedy—the baker might be saving up money to give to charity or to pay for an operation for his sick son—but it is still self-interest that makes her bagels possible. In this example Sam does a very good job of showing Laura (and the reader) how money and the invisible hand of the market create value and regulate the distribution of goods flawlessly. But when Laura comes back and says that she’ll admit that self interest is good if Sam will admit that sometimes there are bad and greedy CEOs that prosper and some regulations might be able to improve the marketplace, he comes back and asserts that the marketplace is always nearly perfect. Then, his example becomes quite abstract when he states that regulation is like saying the rainforest doesn’t have enough yellow flowers. If you try to put more yellow flowers in the rainforest, you could foul it up and kill off some red flowers, thereby killing frogs that live off the red flowers and so on. This is an example that is easily understood, but it is oversimplifying the problem. Of course regulations might have unintended consequences, but that doesn’t mean that some regulations can’t be applied carefully to the benefit of everyone involved. Take for example the recent mine disaster in West Virginia. Of course Sam would argue that coal mining is an inherently dangerous occupation and that the workers who were killed there knowingly took on the risk that they would be killed. But does that mean that there should be no regulations governing coal mining? If coal mining became completely unregulated, the coal companies would probably demand that individual coal miners would sign contracts stating that they were working as independent contractors and that the coal company would not be responsible for any injuries or deaths, even if the coal company was at fault. The cost to communities that rely on coal mining as their main source of income could be devastating. With fathers crippled and dead, mothers and children would have to rely on government welfare, in which case the government is subsidizing the employer’s irresponsibility. Unless of course little Jimmy grew big enough to work in the mine by the age of twelve and child labor laws had also been stripped away. Then the family might be able to scrape by until Jimmy got black lung or died in an explosion. Sam’s argument that regulations often have unintended consequences is a valid one, but when he argues that nearly all regulations are harmful he goes too far. The argument that Sam has with Laura’s brother Andrew during the family dinner in Georgetown is interesting because Sam is finally arguing with someone who ought to be a fair match for him, since Andrew is a lawyer for a government regulatory agency. However, we soon see that Andrew is an unlikable jerk and he also can’t debate his way out of a wet paper bag. We see in this passage, probably more clearly than at any other point in the book, that Roberts is unwilling to let Sam engage in a fair fight. Sam is endlessly charming in the way that he proves Andrew wrong and Andrew comes off as a naive bleeding-heart liberal who doesn’t know anything about the way the world works. For example, when Andrew keeps talking about the responsibilities and obligations of corporations beyond making a profit, he doesn’t even bring up the role of government regulations. By arguing that corporations should treat their workers well, make products that are safe, etc., as though the corporations have a moral obligation to do it, he ignores the role of the government in prescribing minimum guidelines. If Andrew were a real government attorney, he would probably argue instead that the government’s regulatory role is important because it prescribes by law what corporations must do in order to do business in a given country. With these minimum regulatory guidelines, irresponsible corporations wouldn’t be able to gain an advantage over corporations that choose to treat their workers like human beings. Sam might come back and argue that if we have too many regulations, then American workers would lose jobs because corporations would find the regulations too costly and they would outsource their operation to countries with fewer regulations and cheaper labor. Instead of taking the above path though, their conversation moves to the issue of outsourcing with Andrew’s naïve statement that “there are clear cases when a company acts irresponsibly. How about when a shoe company puts its plants in some Asian country and exploits the workers there?” This silly statement launches us into Sam’s explanation of why 30 cents an hour is not exploitation. He makes a good argument that the shoe factory is a benefit to the workers in Indonesia, but this is beside the point. The important question that gets entirely overlooked is, “How much regulation is too much regulation?” I would have liked to see this debate focus on that question because it is an important one. Obviously, if we had regulations that American workers must make $30 an hour and get two months of paid vacation, the American worker would suffer from high unemployment and increased outsourcing of jobs to foreign countries. And just as obviously, if there were no regulations at all children would be dying in coalmines. It’s an important question to debate, but Andrew is too stupid or drunk to bring it up. The main weaknesses of Sam’s arguments (and, by extension, Roberts’) lie in the fact that he tends to view things in black and white. An economy is either capitalist or communist; free-market economics is good and regulation is bad. He takes it as a given that the government should do only what is absolutely necessary for the free-market to exist and then the market will take care of everything else. But what is absolutely necessary? Are public schools necessary? Are public roads and parks necessary? Sam refuses to get down to the nitty-gritty details in his arguments that have to be dealt with in the real world. All in all, this book is quite useful as a primer on basic economic principles. The question and answer and debate formats provide an interesting way of presenting important economic ideas in a way that engages the reader. Someone who knows nothing about economics will learn quite a bit from this book, although the ideas they will learn are (perhaps necessarily) oversimplified. The beginner will probably remember more about economics from this book than he or she would remember from an introductory economics text. For someone who knows a little about economics already, Roberts’ oversimplifications should be troubling. He presents Sam’s opinion as the gospel truth and refuses to let any other character that knows anything about the other side of the debate confront him. Read More