What is the main message of The Economists’ Hour?

The main message of The Economists’ Hour is the rise of economists and their influence on policy decisions.

How long does it take to read The Economists’ Hour?

The estimated reading time for The Economists’ Hour varies, but the Blinkist summary can be read in just 15 minutes.

Is The Economists’ Hour a good book? Is it worth reading?

The Economists’ Hour is worth reading as it sheds light on the impact of economists and their ideas on the world.

Who is the author of The Economists’ Hour?

The author of The Economists’ Hour is Binyamin Appelbaum.

The Economists’ Hour Summary of Key Ideas and Review

Name: The Economists’ Hour
Rating: 4.3 (74 reviews)
Author: Binyamin Appelbaum

Introduction

What’s in it for me? A critical account of economic history.

For a long time, economists were mostly obscure academics tucked away in classrooms and libraries. Yet, in the decades after World War Two, a few would claw their way into the halls of power – and transform American life in the process.

These blinks tell the story of this astounding ascent and the repercussions it has had for our everyday lives. They trace how the often radical, market-centric ideas of thinkers like Milton Friedman, Arthur Laffer, and Walter Oi became the default ideology of so many political figures in the United States and around the world. In outlining this cultural shift, these blinks explain why governments have become so meek while corporations have become so strong.

In these blinks, you’ll learn

what made right-wingers hate the draft;
why AT&T shared its patents; and
who made a special trip to advise the Chilean dictator Pinochet.

Key idea 1 of 8

Free-market economists advocated for ending the draft – and won.

It’s May 11, 1966. Chaos erupts at the University of Chicago. Hundreds of students storm the school’s administrative buildings. They chant, wave flags, and sing protest songs. Their demand is simple: they want the United States to end the military draft.

Dramatic actions like this often claim much of the credit for the eventual end of military conscription. But they don’t deserve all the accolades. The truth is, behind the scenes, another entirely different group also fought to end mandatory military service.

So, who were these unlikely activists? Right-wing economists. Throughout the 1960s and 1970s, their constant boosting of free-market ideology helped conservative politicians justify ending the draft.

The key message here is: Free-market economists advocated for ending the draft – and won.

In the decades after World War Two, the United States used a draft system to staff its colossal military. This meant that a certain number of fighting-aged men were obligated to enlist, whether they wanted to or not. This arrangement became increasingly unpopular as the Vietnam War ramped up in the 1960s. But politicians were reluctant to end it. They believed that relying on volunteer recruits would be costly and never attract enough men.

An emerging circle of economists had a different opinion. This group included Milton Friedman, Martin Anderson, and Walter Oi. These thinkers believed that compelling men to enlist was an unethical infringement of their rights. They argued that what the government should do was to offer a fair wage for service and only hire those who voluntarily signed up. Essentially, they thought being a soldier should be like any other job on the job market.

They laid out their case in speeches, papers, and books. For them, an all-volunteer system would be fairer, but more importantly, more cost-efficient. Yes, the government would have to pay more to attract recruits, but enlistees would be more motivated and serve longer terms. Critics were worried that a system like that would disproportionately attract poorer individuals with fewer options. But this concern was brushed aside.

These ideas eventually gained traction, especially after Martin Anderson personally delivered a memo about the plan to presidential candidate Richard Nixon. Moved by the argument, Nixon campaigned on ending the draft. And, after being elected in 1968, he pushed for the creation of an all-volunteer army. He succeeded. The draft was abolished in 1973.

This policy shift was the first big victory for economists like Anderson, Friedman, and Oi. And the decades that followed would bring many more.

Key idea 2 of 8

During the 1960s, the power of Keynesian thinking began to wane.

From the launch of Sputnik in 1957 to the first man on the moon in 1969, the space race was one of the defining competitions of the 1960s. However, the contest between the USSR and the United States wasn’t the only rivalry playing out during that tumultuous decade.

There was another feud within the American government – this one between economists. On one side were the Keynesians, named after their chief theorist, John Maynard Keynes. And on the other, was the Chicago School, headed up by Milton Friedman and his associates.

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Key idea 3 of 8

Under Reagan, supply-side economics and tax cuts reigned supreme.

By the late 1970s, one word appeared in every headline, news broadcast, and watercooler conversation: stagflation. This portmanteau described the two problems ailing the economy: stagnant job growth and excessive inflation.

Stagnation was a serious problem. President Carter appointed Paul Volcker as the head of the Federal Reserve in a desperate attempt to get things back on track. Volcker believed Friedman’s monetarist views. So, he immediately began restricting the money supply. The goal was to slow inflation, but the result was high interest rates, factory closures, and spikes in unemployment.

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Key idea 4 of 8

The pursuit of economic efficiency allowed monopolies to control the markets.

In 1952, AT&T patented a revolutionary new device, the transistor. Rather than keep this novel technology to itself, the telecommunications giant did the opposite. It published a full instruction manual so that its rivals could build their own transistors. How generous!

Well, not really. AT&T didn’t distribute this information as an act of kindness. They were forced to share. The government recognized that giving one big company control of important technology was dangerous.

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Key idea 5 of 8

Economists replaced moral reasoning with cost-benefit analysis.

Let’s say you run a trucking company. One day, there’s a horrific collision between one of your trucks and a passenger car. Three people die. Afterward, engineers examine the wreckage and determine that installing a few extra components on each truck could prevent future crashes from being fatal.

Now, this seems like an obvious thing to do. But an economist might have a different perspective. Installing all that safety equipment is expensive. And, if collisions are relatively rare, you might be spending a lot to save just a few people. So, are the upgrades worth it? That depends. How much is a human life worth?

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Key idea 6 of 8

Ending fixed exchange rates created a large, volatile new system of trade.

In the summer of 1944, the Allied countries gathered at a small mountain resort in Bretton Woods, New Hampshire. Together, they hammered out a deal to manage all international trade in the capitalist world.

The result was the Bretton Woods Agreement. This contract set fixed exchange rates between currencies with the United States dollar as the standard. This arrangement aimed to make trade more predictable by stabilizing the value of currencies. And, amazingly, it worked – at least for a few decades.

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Key idea 7 of 8

Pinochet put Friedman’s ideas into practice – with chaotic results.

Santiago, Chile, 1973. Explosions rock the presidential palace. The forces of Augusto Pinochet, along with a little help from the CIA, overthrow Salvador Allende, the country’s duly elected president. In the following years, Pinochet’s army rounds up, tortures, and executes thousands of dissidents.

Pinochet’s bloody coup and subsequent reign are a dark stain in the county’s complex history. Yet, Milton Friedman saw it as an opportunity. So, in 1975, the economist flew south to personally meet with and advise the ruthless dictator.

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Key idea 8 of 8

Unregulated markets often lead to financial disasters.

In the eyes of economist Alan Greenspan, the only good form of regulation was no regulation at all. Throughout his career, he championed the idea that corporations, banks, hedge funds, and really every industry worked best when completely free from government interference.

In 1964, Greenspan made his public debut with a series of lectures defending the moral righteousness of completely unchecked markets. In the 1970s, he advocated against laws requiring banks to disclose financial information. And, in the 1980s and 1990s, as chairman of the Federal Reserve, he declined to curtail risky subprime mortgage lending.

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