Great—and unmet—expectations

A book review of P. J. O’Rourke on the Wealth of Nations

P. J. O’Rourke reads Adam Smith so you don’t have to.

Or so says the blurb—printed in boldface—on the front inner flap of his latest opus.

Entitled “On The Wealth Of Nations,” the work is the American journalist’s take on Smith’s classic as part of Atlantic Monthly Press’s Books That Changed The World series.

The offer is just too good to be passed up, both for fans and first-time readers of America’s funniest Republican.

Besides allowing readers to experience the dense, wry prose of the famous Scottish economist, On the Wealth of Nations also promises to showcase O’Rourke’s biting wit once more.

Considered as America’s funniest republican, O’Rourke has conjured highly original one-liners while avoiding wayward missiles in Iraq, periodic gunfire in Lebanon, and corrupt policemen in the Philippines (his piece about Edsa I is included in Holidays in Hell, one of his very best books, next to All the Trouble in the World and Give War A Chance).

As Rolling Stone magazine’s foreign affairs desk chief, he was also the most well-traveled conservative commentator, giving his readers something to laugh about every time he submitted dispatches from abroad.

Sad to say, his latest work falls below expectations.

Like his previous two books—The CEO of the Sofa and Peace Kills—On The Wealth Of Nations arguably shows that being something of a television celebrity—through his regular appearances at HBO’s Real Time with Bill Maher—may have blunted his edgy, no-holds barred, take-no-prisoners writing style.

This is not helped by the fact that O’Rourke in On The Wealth of Nations is “all over the place,” according to one discerning Facebook user, noting the author’s awkward attempt to establish a unifying theme to hold the book together.

Instead of dishing out outrageous, racy, and funny diatribes, O’Rourke simply quotes liberally from Smith and then provides weak insight that does not befit someone of his stature.

Originally printed in a shorter and different form in a UK publication, the book also includes an Adam Smith Philosophical Dictionary, as compiled by O’Rourke, his literary nod to Voltaire and Ambrose Bierce whose The Devil’s Dictionary remains cited to this day.

In an entry called “Homeless, an alternative view on the,” he quotes Smith as saying “The beggar who suns himself by the side of the highway, possesses that security which kings are fighting for.”

While the material—900 pages long in two volumes—may have cramped his style, the O’Rourke faithful, myself included, can still take refuge that the work is not totally devoid of humor.

“At my house I see a Made in China label on everything but the kids and the dogs,” O’Rourke says in Chapter 8. “And I’m not sure about the kids. They have brown eyes and small noses.”

Here’s hoping that his next book would prove to be funnier than his British Airways commercial (which, by the way, is available on YouTube.)

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Picture of the book is taken from the Cato Institute, whose members include O’ Rourke.

Book Review: The Magic of Market Design

Book cover

FOR many economists and executives, free enterprise is an article of faith. Dismantle trade barriers, demolish monopolies, privatize public utilities, and the resulting system will be nothing short of heaven on earth, thanks to Adam Smith’s proverbial invisible hand. Unfortunately, whenever trouble arises in this paradigmatic paradise, free marketeers are quick to judge and pin the blame on the usual suspects: big government and its supposed malicious intent to intervene in the hallowed marketplace.

This, all too often, is the knee-jerk reaction of free-marketeers the world over, especially when their faith is put to the test. While it is not easy to dispute their unswerving faith in the free enterprise, especially after another religion—that of the centrally-planned economy—has been debunked, it is nevertheless difficult for them to recognize that unfettered markets do not automatically transform Third World economies into lands of milk and honey.

Fortunately, John McMillan in Reinventing The Bazaar: A Natural History Of Markets, explains this point thoroughly. Through studies, stories, and anecdotes, he recognizes that the market, left alone and unchecked, is not exactly the perfect solution to the grinding poverty and the ever-increasing income gap between the rich and the poor in countries around the world.

“The collapse of central planning is sometimes held up as proof that the government should stay right out of the economy,” McMillan writes. “This is a non sequitur. Observing that something is not black, we are not impelled to infer that it must be white. That governments often fail does not prove the ideal state is the minimal state. To frame the choice as planning versus completely free markets is oversimple. Public goods, offering widespread benefits, must be produced by the state or at least funded by it.” To prove this thesis, McMillan examines markets around the world and throughout history—the Makola marketplace in Ghana, California’s electricity market, prisoner-of-war camp markets during World War II, the highly-complex auction of spectrum rights in the American telecommunications industry—and asserts that well-built markets which work smoothly can only be the result of good market design, something that governments can do and do well.

He adds that for any market system to work well, it has to possess five prerequisites: trust in trading partners, secure property rights, free flow of information, reduction of side-effects of economic transactions for third-parties, and the existence of competition; exactly the very things decent government can provide and enforce. At the same time, McMillan distinguishes between similar market systems and analyzes why one succeeded and the other did not. This is best exemplified by Russia, which went through “shock therapy” in its transition to capitalism, and
China, which undertook the more gradual approach.

The difference, he says, lies in the manner by which government performed its role. In Russia, immediately after privatization, the state continued to bail out and subsidize its industries, many of which were monopolies. Thus, industries were not forced to improve their operations because there was no competition at all.

But in China, the communist party agreed to allow its factories to produce extra output to sell in markets at market-determined prices, on top of their state-required output which are sold at state-fixed prices. According to McMillan, this dual-pricing “avoided the chain-reaction disruption that shock therapy generated.”

“Permitting the state-owned firms to sell extra outputs and to buy extra inputs in markets allowed new interfirm relationships to grow around the stable platform of the existing ways of doing business,” he says. Moreover, unlike traditional free-marketeers who insist on absolute global enforcement of intellectual property rights, McMillan, true to form, swings both ways.

“Unconditional assertions about intellectual property are rarely valid. The trick is to find the right balance,” he says. As an example, he points out that in 2000, during the height of Napster.com, an online service which allowed users to download and exchange music, sales of CDs were higher than ever. This dispelled the widely yet falsely held contention among record companies that online music exchanges would kill their industry.

The same can be said for Microsoft’s global dominance of computer operating system software. Because of software copying, it became widely distributed among PC users and owners, making it the predominant operating system. Later on, since users were already accustomed to the platform, they began to buy legitimate copies. Which explains why Microsoft became the software giant it is now. (It can even be argued that Microsoft Windows 95—produced by a company which strongly disallowed illegal duplication and distribution—was virtually a copy of the pre-OSX Macintosh operating system. However, a lawsuit filed by Apple, which made Macintosh computers, did not prosper.) “Bill Gates owes his fortune to us,” said Dan Sokol, member of Homebrew club, a group of San Francisco Bay Area computer buffs who exchanged ideas about computers and programming in computing’s early days. “If we hadn’t copied the tape, there would never have been an explosion of people using his software.”

But while many may not agree with McMillan’s controversial positions on many issues, his heart, no doubt, lies with the market. “The market system is…the worst form of economy, except for all the others that have been tried from time to time,” he says. “It succeeds precisely because…it admits variety and permits criticism. We should cheer it because it solves some all-but-intractable problems, which have been tackled by none of the alternative forms of economic organization. It generates wealth. It alleviates poverty. But it has its limits. There are things it cannot do. It does not necessarily do even what it is supposed to; it works well only if it is well-designed.”

Originally published, although partially, in the Manila Times