Governmental Relations to Business

Governmental Relations to Business

in the Federal Service

CHAPTER TITLE (I) The Lesson.

A. MAJOR IDEA: Economics is haunted by more fallacies, aggravated by the pleading of special interests, than other fields.

B. ELABORATION: For example, spending money now that should be saved is noted as an example. This is the special case of the American economy which encourages spending as though there is no tomorrow. The special interest group, the retailers, encourages this and government, through tax policy, enables this. Economic theorists then provide reasons for consumption when, common sense tells us, would-be consumers should be saving that money.

CHAPTER TITLE (II) The Broken Window

A. MAJOR IDEA: All of the logical consequences of an action must examined to see its full economic impact.

B. ELABORATION: The recent earthquake at Kobe, for example, has been cited as having a "silver lining" in that it will pump money into the local construction industry. This will divert money, especially that of Japanese insurers, from investing in industry that would've produced economic growth. Thus, examining all consequences reveals that what at first glance seemed tragic, in fact, is indeed tragic.

CHAPTER TITLE (III) The Blessings of Destruction

A. MAJOR IDEA: Destructive events doesn't have any constructive benefits.

B. ELABORATION: Events such as wars don't encourage production. They simply divert production, that would've been spent on other projects, into that production for that event. World War II temporarily halted auto production in Detroit, for example, in favor of tank production. Furthermore, after the war ended, most of that military production had to be scrapped, not enriching the country.

CHAPTER TITLE (IV) Public Works Mean Taxes

A. MAJOR IDEA: There is no such thing as a "free lunch" in government spending.

B. ELABORATION: When the government engages in a project, it diverts funds from individuals and business. This spending is then spent on the project. A creative means of apparently avoided this chain of events is simply to print more money, but by lowering the value of money, printing more money is actually a form of taxation.

CHAPTER TITLE (V) Taxes Discourage Production

A. MAJOR IDEA: High levels of taxation discourage enterprise resulting in production.

B. ELABORATION: When the government takes 60 to 70 % of an individuals taxes, the individual is more likely to devote his efforts to hiding his money than developing his business. This results in the proliferation of tax shelters, paper "losses," etc., and not in real economic growth.

CHAPTER TITLE (VI) Credit Diverts Production

A. MAJOR IDEA: When the government gives credit, it encourages uneconomic production.

B. ELABORATION: The government gives credit to those unable to earn credit on their own. Hence, the government is inherently backing worse risks. Further, by diverting tax revenue from better credit risks, it is encouraging individuals less likely to repay their loans at the expense of those more likely to repay their loans.

CHAPTER TITLE (VII) The Curse of Machinery

A. MAJOR IDEA: Machinery Creates jobs; it doesn't eliminate them.

B. ELABORATION: The increasing mechanization of world industry creates jobs. By deciding to use a machine (including a computer), the employer is selecting it due to its efficiency. The greater efficiency brings about lower prices for the product and higher profits, which return to the economy, creating jobs in other sectors. Machines, in short, displace, not eliminate, workers.

CHAPTER TITLE (VIII) Spread-the-Works Schemes

A. MAJOR IDEA: Cutting the work week has no economic benefits.

B. ELABORATION: Cutting the work week would either resort in more people doing the same jobs, but being paid less, or fewer people doing those jobs. The former would have put no more money into the economy. The latter would result if Unions demanded the same amount of money for a shorter work week; inevitably, employment would be cut. This is, in fact, the situation in the nineties, in which the main purpose of Unions is to preserve the jobs of older age cohorts at the expense of younger age cohorts.

CHAPTER TITLE (IX) Disbanding Troops and Bureaucrats

A. MAJOR IDEA: The ending of a war, or a cut in the bureaucracy, will result in an increase in national wealth.

B. ELABORATION: In the short run, the sudden release of the troops will put a strain on the labor market. As these new workers start to produce, however, they will create demand and this, in turn, will encourage companies to hire their fellow troops. As public workers, they were not adding to the economy, but now they are increasing the wealth of the nation.

CHAPTER TITLE (X) The Fetish of Full Employment

A. MAJOR IDEA: Full employment is a means to the ends of maximizing national output, not the reverse.

B. ELABORATION: Countries such as China have achieved full employment, but at a cost. By using primitive production methods, they continue to provide work for all, but the work is not very productive. Note that as China is modernizing in the nineties, it is finding itself more willing to deal with unemployment, as a short term condition applicable to individuals, as part of a long-term plan for growth.

CHAPTER TITLE (XI) Who's "Protected" by Tariffs?

A. MAJOR IDEA: The imposition of a tariff rewards a minority of workers at the hands of the majority.

B. ELABORATION: A tariff supports the workers of a particular industry that cannot compete. The tariff denies to the country as a whole the benefits that would come from having money remaining after purchasing lower-priced goods. This explains why the Japanese here pay such high prices for all goods.

CHAPTER TITLE (XII) The Drive for Exports

A. MAJOR IDEA: Imports and exports must ultimately balance one another.

B. ELABORATION: If we are to buy the goods of other nations, they must buy ours. Hazlitt wrote this book, originally, in the forties, when our nation had a surplus of exports and foreign loans. To apply his advice, means that we must produce goods that are exportable to pay for our enormous appetite for imports. Otherwise the currency devalues, as ours is doing.

CHAPTER TITLE (XIII) "Parity" Prices

A. MAJOR IDEA: Industrial expansion of the nineteenth century was paid for by farmers.

B. ELABORATION: The tariff on imported goods supported American industry at the expense of farmers. The tariff artificially raised the price of manufactured goods. It also provoked retaliatory tariffs against farm products, effectively lowering produce products.

CHAPTER TITLE (XIV) Saving the X Industry

A. MAJOR IDEA: An industry dying is not necessarily a bad thing.

B. ELABORATION: When an industry dies, the investments that would've flown to that industry and the workers flow to others. Buyers then substitute lower-priced foreign goods for that of the dead industry. This is not unnatural but part of a general economic pattern that can be traced throughout history. Certain industries are simply not economically viable in a country, given its resources and stage of economic growth.

CHAPTER TITLE (XV) How the Price System Works

A. MAJOR IDEA: When there is more demand for an item, prices picks up.

B. ELABORATION: This is so central to economics as to not require elaboration. The laws of supply and demand, however, is often denounced because it may not favor a particular interest or individual. Often as not the individual would rather have the government reward him or his industry at the expense of others.

CHAPTER TITLE (XVI) "Stabilizing" Commodities

A. MAJOR IDEA: Market "speculation" in commodity prices is not evil, but necessary.

B. ELABORATION: Farmers, naturally, sell their goods at harvest time, flooding the market and lowering the prices. By selling to third parties, who are willing to keep the farm products and hold out for better prices, farmers can sell at a higher price. The speculators then assumes the risks of price fluctuations that the farmer cannot well bear.

CHAPTER TITLE (XVII) Government Price-Fixing

A. MAJOR IDEA: Government price-fixing leads to reduced supply.

B. ELABORATION: This is the socialist dilemma. By fixing the price below the market price, consumers buy more than they ordinarily would, emptying the shelves. The lower price, on the other hand, discourages production. The long-term result is the kinds of lines prevalent in East Europe in the Soviet Era.

CHAPTER TITLE (XVIII) What Rent Control Does

A. MAJOR IDEA: Rent control causes shortages in housing.

B. ELABORATION: Since there is no economic incentive to build new units, no new units are built. These means that the pressure on current units increases. In Los Angeles in the 1980s, rent control was practiced in most downtown areas with the result being a massive growth of the surrounding cities and increased commutes while city housing deteriorated in quality.

CHAPTER TITLE (XIX) Minimum Wage Laws

A. MAJOR IDEA: Minimum wage laws will eliminate some industries.

B. ELABORATION: By forcing a wage above the market price, some industries will simply cease to exist. They will not be able to compete with foreign firms offering the lower wage rates. This is why some Los Angeles garment industries have resorted to hiring illegal labor to achieve those lower wage levels.

CHAPTER TITLE (XX) Do Unions Really Raise Wages?

A. MAJOR IDEA: A Union-induced wage increase does not result in real wage increases for all workers.

B. ELABORATION: The costs of a Union wage increase are borne by other workers and consumers in the economy. If the wage increase is enough, it forces the raising of prices and an effective decrease in the purchasing power of consumers, themselves workers. Thus a raise in one industry is a case of a redistribution of wealth between groups of workers and not real growth.

CHAPTER TITLE (XXI) "Enough to Buy Back the Product"

A. MAJOR IDEA: In an exchange economy, everybody's money income is somebody else's cost.

B. ELABORATION: This means that, again, an increase in wages can only come about by decreasing everyone else's wage. An increase in the price of the good sold by the effected industry lowers all other workers ability to purchase the goods sold in the effected industry, lowering their real incomes.

CHAPTER TITLE (XXII) The Function of Profits

A. MAJOR IDEA: One function of profit is to redirect investment into the most rewarding enterprises.

B. ELABORATION: Investors are not likely to channel funds into non-productive industries in the economy. The productive industries, possessing a product that is demanded at a price allowing for a profit, will draw their attention. Other enterprises will be allowed to wither and die.

CHAPTER TITLE (XXIII) The Mirage of Inflation

A. MAJOR IDEA: Inflation does create wealth; it creates the illusion of wealth.

B. ELABORATION: Wealth is material things such as cars, factories, pianos. Money, on the other, is slips of paper that, in some fashion, represent a medium for exchanging symbols of that wealth. Printing more money in no way provides more wealth; it simply changes the medium of exchange.

CHAPTER TITLE (XXIV) The Assault on Saving

A. MAJOR IDEA: Saving is another, more productive, form of spending.

B. ELABORATION: Saving money, placing it in a bank, makes it available for investment that will encourage economic growth. This is why Japan, which has a much higher savings rate, supported by government tax policies, consistently out-invests the United States, which has the opposite policy, and has enjoyed a much higher rate of industrial expansion over the last thirty years.

CHAPTER TITLE (XXV) The Lesson Restated

A. MAJOR IDEA: What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom (Adam Smith).

B. ELABORATION: A nation of savers, balancing their checkbooks, need a government that can do the same. A frugal, wise spender needs a government that is his equal. Most of economics is common sense worked out over time.

CHAPTER TITLE (XXVI) The Lesson After Thirty Years

A. MAJOR IDEA: No one has learned the lesson above.

B. ELABORATION: Hazlitt surveys the governmental economic scene of 1976 and finds serious cause for concern. Taxes have robbed individuals of incentives to invest. Various government maneuvers have caused inflation. Social security is a government "insurance system" the like of which no private insurer would support. Apparently, no one, even in 1976, could look at the future consequences of present economic actions.

Book II: Lee, Dwight and Richard McKenzie. Failure and Progress. Cato Institute., 1993.

CHAPTER TITLE (I): In Consideration of Failure

A. MAJOR IDEA: There is an inextricable link between economic success and economic failure.

B. ELABORATION: As one business goes under, it is because another has succeeded. The other has succeeded because its product was better, its salesmanship sharper, or its price more attractive. The result is that the consumer, and society, wins as a result of someone else failing. This process, though sad, is inevitable in a healthy market economy.

CHAPTER TITLE (II): The Bright Side of Economic Failure

A. MAJOR IDEA: The more failures there are, the more successes there are.

B. ELABORATION: Due to the law of scarcity in economics, businesses are in competition for workers, resources, and consumer dollars. If a lot of businesses fail, this is because other businesses in the same industries or competing industries enjoyed success at their expense. Many failures mirror many successes.

CHAPTER TITLE (III): Risk, Uncertainty, and Failure

A. MAJOR IDEA: One way of lowering the probability of failure is by extending the probability of success.

B. ELABORATION: A business can reduce its risk of failure by expanding its product line, entering into new activities, etc. While this reduces the risk of the firm failing, it increases the risk of any of these individual endeavors failing. Thus, decreasing risk means increasing the probability of failure.

CHAPTER TITLE (IV): Economic Development, Entrepreneurship, and Failure

A. MAJOR IDEA: Entrepreneurial failure is necessary to economic well-being.

B. ELABORATION: The entrepreneurial spirit is, by definition, independent and risk-taking. The entrepreneur, when his idea is rejected, will continue to believe in its essential "rightness" unless there are consequences attached. For example, the independent film-maker whose "art film" fails will have a harder time attracting backers a second time and have to make some concessions to the market to attract capital again.

CHAPTER TITLE (V): Freedom and Failure in the Transition to a Market Economy

A. MAJOR IDEA: Fear of freedom is the number one problem facing Eastern Europe.

B. ELABORATION: The freedom of the marketplace, to move goods wherever they sell for the most, to fire workers, to go out of one business or another, is a serious impediment. Not used to such freedoms, and unable to see their consequences, Eastern Europeans may rush to control these freedoms and lose the good consequences that come from failure.

CHAPTER TITLE (VI): The Fairness of Failure

A. MAJOR IDEA: A market economy is fair in that no one possesses superior knowledge of the goals of the system; they are all equally "blind."

B. ELABORATION: In a market system, no one individual can more accurately predict the goals of the market because those goals are uncertain. They are in the future. This is in contrast to a non-market economy in which government decides the goals of production and those closest to government naturally enjoy an unfair advantage.

CHAPTER TITLE (VII): The Politics of Failure

A. MAJOR IDEA: The purpose of government in a market system is, at least in part, to prevent "cheating."

B. ELABORATION: If the market can be seen as a game, provisions have to be made to keep individuals from cheating. Naturally, there will be those who violate contracts, take goods and never pay for them, refuse to do military service, etc. Without a government, they would be allowed to continue to "cheat." Government, however, can force these individuals to "play by the rules" to keep the economic game "fair."

CHAPTER TITLE (VIII): The Failure of Politics

A. MAJOR IDEA: Programs designed to help the poor, that successfully reach the poor, decrease the chances the poor will become less poor.

B. ELABORATION: The consequences of failure include poverty. By cushioning the blow against these consequences, by income redistribution, government programs do not encourage the poor to try to uplift themselves. These programs tend to increase the numbers of the poor.

CHAPTER TITLE (IX): Overcome Failure With Hard-Hearted Compassion

A. MAJOR IDEA: Aid to the poor is not easily measured by statistics.

B. ELABORATION: The transfer of money from the non-poor to the poor masks the effects that the same money might've had if invested in the economy. Had that money enabled growth then, though the percentage allotted to the poor might be smaller, the actual amount might be greater. It is difficult, then, to access the impact of government programs to help the poor.

CHAPTER TITLE (X): The Virtue of Economic Failure and the Failure of Political Virtue

A. MAJOR IDEA: Governmental action in the marketplace actually makes the system less "fair."

B. ELABORATION: While the marketplace decides the fate of its "players" indiscriminately on the basis of the laws of supply and demand, the government decides on the basis of political considerations. These tend to be driven by one interest or another to the exclusion of the majority. The government then, instead of standing on the sidelines, "cheats" in favor of one group or individual. In general, then, it is better for the government not to be involved than by its very involvement doing discriminatory acts.

CHAPTER TITLE (I): The Energy Crisis is Over!

A. MAJOR IDEA: The energy crisis was caused by government price fixing.

B. ELABORATION: The government, by artificially keeping the price of petroleum low, discouraged domestic production and encouraged spending. As a result, when domestic sources were needed the most, they were unable to provide energy. Lifting the price controls ended this "crisis."

CHAPTER TITLE (II): The Dismal Science

A. MAJOR IDEA: Doomsday ideas, involving resources, are based on false assumption about projections over time that ignore the effects of price.

B. ELABORATION: The idea is that users will maintain current levels of use, despite price. In reality, as price rises, substitution away from the item begins along with development of new alternatives. Thus, price acts as a kind of rationing device. This is how the authors can assert the world will never run out of oil: at some point the price will simply place oil out of common use.

CHAPTER TITLE (III): An Earlier "Crude" Crisis

A. MAJOR IDEA: Government intervention did NOT "save the day" during the rubber crisis of World War II.

B. ELABORATION: Producers already knew of alternate materials that could substitute for rubber. They were even producing them on a small scale. They wouldn't heavily invest in these technologies, though, until the price was right. The cutting off of Japanese sources suddenly made these alternative materials economically viable.

CHAPTER TITLE (IV): The Timber Crisis

A. MAJOR IDEA: Ideas of "scientists" are often more harmful than helpful to businesses in a commodity crunch.

B. ELABORATION: Scientists of the time encouraged the railroad industry to plant forests, place their ties in a different way, and other schemes. While the railroads paid some attention, their own "r & d" departments developed the substitution products and others means of lessening demand for a resource necessary to their businesses.

CHAPTER TITLE (V): America's First Oil Crisis

A. MAJOR IDEA: The development of petroleum was intimately related to price considerations.

B. ELABORATION: The price of whale oil had gone so high that using oil became viable. The technology for obtaining this oil had, again, been available for some time. Only the loss of cheap whaling oil, however, provided the market incentive to spur the new industry.

CHAPTER TITLE (VI): An English Energy Crisis

A. MAJOR IDEA: Whole new technologies are sometimes spurred by commodity shortages.

B. ELABORATION: In England, technologists of the time found wood substitutes for most processing using wood, except for making iron. As iron itself functioned as a substitute for wood, in some instances, it was essential that a wood-free process be developed. This led to the invention and use of wrought iron, instead of pig iron.

CHAPTER TITLE (VII): An Energy Crisis of Another Sort

A. MAJOR IDEA: The beginnings of the Industrial Revolution were caused by the plague.

B. ELABORATION: Many labor-intensive jobs were no longer feasible once the price of labor rose. The Black Death wiped out so many workers that they could command higher wages. The only solution was to invent new devices, such as water wheels. that could do the same jobs with less labor.

CHAPTER TITLE (VIII): Crises in Ancient Greece

A. MAJOR IDEA: The beginning of the Iron Age was caused by a loss of the cheap tin supply.

B. ELABORATION: During the Bronze Age, iron was far more expensive than bronze. Once the Peoples of the Sea cut off the tin supply for the Bronze Age peoples, bronze became more expensive. As the iron ore was more available, the techniques to use it developed, and the Iron Age followed.

CHAPTER TITLE (IX): Crises in Prehistory

A. MAJOR IDEA: The invention of agriculture stemmed from shortages of natural foods.

B. ELABORATION: Early man could subsist on natural and available food sources. When population began to expand, people spread out onto the marginal land. On this marginal land, only the invention of agriculture could support the population growth.

CHAPTER TITLE (X): The Next Crisis?

A. MAJOR IDEA: A water shortage is being sold as the next "big crisis" but will evaporate.

B. ELABORATION: As the price for water rises, there will attempts to use less and substitute away. In the case of the Oglala Aquifer farmers found a number of methods of cutting down on water use. They purchased more expensive sprinkler systems, switched crops, and invested in new irrigation techniques.

CHAPTER TITLE (XI): A Doomsday in Our Future?

A. MAJOR IDEA: The fall of Rome was caused by the death of its market.

B. ELABORATION: A healthy Roman market continued to support a healthy Roman Empire. In the Empire's decline, the Emperors attempted to set prices for everything. This undercut their yeoman Italian farmers, the backbone of the empire. It also discouraged trade and the influx of new ideas. Thus the later Roman Empire more closely resembled a second-world than a first world state.

This suggest that it is government, not lack of resource, that may lead America to a crisis point.

CHAPTER TITLE (I): America's Health Care Crisis

A. MAJOR IDEA: One sign that the system is not working is that when individuals pursue their own self-interest, bad consequences result for others.

B. ELABORATION: Obviously, this sort of a system does not encourage responsibility. One of the reasons health care has become so expensive is that individuals have no real responsibility for their actions. Third parties, insurers, employers, pay medical costs. If individuals were spending their own money, they would have a strong incentive to demand better service at a lower price.

CHAPTER TITLE (2): Our Present Health Care System

A. MAJOR IDEA: The true cost of medical services has become increasingly difficult to determine.

B. ELABORATION: No one, under the current system, has any incentive to find out the true costs of medical services. Physicians are encouraged to provide the best medicine possible, not to look at costs or benefits. Third party payers are interested in keeping costs down by prescriptive pricing.

CHAPTER TITLE (3): Vision of an Ideal Health Care System

A. MAJOR IDEA: The present tax system encourage employers to provide health insurance to employees, but discourages individuals from purchasing health insurance.

B. ELABORATION: Benefits paid to employees, in the form of health care, are doled out as pre-tax dollars whereas individuals purchase their policies with taxable dollars. This naturally encourages employees, and their Unions, to demand more health care as a means of getting less-taxed pay raises. Medical service provides oblige by raising prices and providing more services. The individual not covered by his company's plan ends up priced out of the market for medical insurance and opts to take his/her chances without insurance.

CHAPTER TITLE (4): Solving America's Health Care System Through Patient Power

A. MAJOR IDEA: Every form of health care "reform" features some kind of rationing, but the superiority of "patient" power is that the individual decides how to ration his own health care.

B. ELABORATION: Under a single payer system, there is a form of rationing that is performed by doctors choosing not to see patients or long lines discouraging treatment. In our current system, the bureaucracy, either insurance or governmental, chooses who receives treatment. By allowing individuals, in a true market, to determine if the service is worth the cost, we are allowing them the choice in rationing.

CHAPTER TITLE (5): Encouraging Self-Insurance Through Medical Savings Accounts

A. MAJOR IDEA: Medical Savings Accounts could provide the funds to finance most medical, non-catastrophic, health needs.

B. ELABORATION: These accounts would function just like any other bank account, only withdrawals would be limited to health care purchases. As the accounts would be linked to the individual, not a bureaucracy, the account need not be terminated by switching jobs. Young people, healthier, naturally, would build up an account that could later be spent as their health declines or "rolled over" into retirement accounts.

CHAPTER TITLE (6): A Further Agenda For Change

A. MAJOR IDEA: Health care benefits should be taxed as regular income.

B. ELABORATION: This would end the disparity in the current system. Also, it would encourage employees to become more prudent buyers of health insurance and, at the same time, allow companies to concentrate on their core businesses and exit the health care insurance business.

CHAPTER TITLE (7): Conclusion

A. MAJOR IDEA: America's health care system would be better provided under a market system.

B. ELABORATION: Time and again, industries that were not run under a market system have not proven to efficient or provide good service. The break-up of Bell Telephone provides a good example as does the deregulation of the airline industry. To expect that health care would be any different is silly. I would add a further point that the solution suggested here could just as easily be suggested to reform the social security system as it could be for health care system.

CHAPTER TITLE (I): The Enigma of Enterprise

A. MAJOR IDEA: Entrepreneurs typically begin as outsiders and rebels.

B. ELABORATION: It is the really far-out idea that is most likely to be rejected by a corporate establishment. Those same ideas, however, are the stuff of which industries are built. Xerox, for instance, never showed any interest in the iconographic computer operating systems being developed in their Palo Alto cite. Xerox refugees, however, brought just this interface to the Macintosh, and reaped billions.

CHAPTER TITLE (II): A Patch of Sand

A. MAJOR IDEA: Nothing will ever be attempted if all objections are overcome.

B. ELABORATION: The traditional model of industrial expansion is irrelevant to entrepreneurial enterprises. The entrepreneur wants to proceed now. If everything can be proven to be safe and viable, then probably some other entrepreneur is already proceeding apace at developing the product.

CHAPTER TITLE (III): The Real Economy

A. MAJOR IDEA: The rate of business failures is less an index of economic decay than industrial change.

B. ELABORATION: This ties into the Lee/McKenzie book. Far-fetched, "visionary" ventures are quite likely to fail, and usually do. The few that succeed, however, succeed in a dramatic fashion. While the Fortune 500 Companies consolidate ideas years old, it is the entrepreneurial ventures that move the economy along and into the future.

CHAPTER TITLE (IV): The Explorer

A. MAJOR IDEA: The limits to growth are found, not in nature, but in the law and in the mind.

B. ELABORATION: The entrepreneur is an "idea man," not a bean counter and so convinced of his own genius as to be unstoppable. Those supporting these men, however, may fail in their vision. Hence, the copper company that backed Canadian Hunter did not stay long enough to reap the profits of its richest finds.

CHAPTER TITLE (V): The Man Who Wanted to Clean the Water

A. MAJOR IDEA: The elimination of pollution will take business and government cooperation.

B. ELABORATION: The government can make laws about pollution, but it will take entrepreneurs to sell and market devices to achieve the standards. The government will have to be involved, to some extent, to keep businesses from simply handing the problem to the public. Entrepreneurs, however, will provide the leadership and solutions.

CHAPTER TITLE (VI): The Cuban Miracle

A. MAJOR IDEA: New immigrant groups bring new ideas and renew the spirit of entrepreneurship.

B. ELABORATION: Each new immigrant (ala The Uprooted) has brought in new ideas to our country, often a mixture of the two heritages. This result in new surges of entrepreneurial activity, such as occurred in Miami in the wake of the Cuban emigrations of the 1960s-1980s.

CHAPTER TITLE (VII): A Sad Heart in a Personal Jet

A. MAJOR IDEA: Tax shelters and elaborate tax mechanizations can harm entrepreneurial investment.

B. ELABORATION: Tax shelters have the functioning of funneling money into the most profitable hiding places. Before the IRS reforms of the 1980s, these were real estate and energy. Unfortunately, these were not necessarily the best places for investment opportunities. A simpler system, taxing all investments more equally, would allow for more creativity and enterprise.

CHAPTER TITLE (VIII): The Outsider Trading Scandal

A. MAJOR IDEA: American technology is vulnerable to Japanese financial take-over.

B. ELABORATION: The devaluation of the dollar will make Japanese investors able to take over America's technological edge in computers. The dollar devaluation was designed to strengthen the sale of goods such as farm products and retail products. This was done at the cost of devaluing high technology products and, ultimately, this lowers the value of the stocks of technology companies. The Japanese, with the yen's greater buying power, can purchase these firms.

CHAPTER TITLE (IX): Capitalism Without Capitalists

A. MAJOR IDEA: Highly progressive tax rates do not redistribute incomes; they redistribute taxpayers.

B. ELABORATION: While high tax rates may seem "fair," they have a price. They discourage the entrepreneur from investing in risky activities. For this reason, the economy doesn't grow. The poor, therefore, get a bigger slice but of a smaller pie.

CHAPTER TITLE (X): Wealth in the 1990s

A. MAJOR IDEA: The 1990s witnessed a shift from wealth of matter to wealth of mind.

B. ELABORATION: In the high growth interest rates nineties, it is intellectual assets that grow. On the other hand, hard assets do better in times of high interest and low inflation. A whole new group of entrepreneurs have become wealthy from computer programs, fiber-optic networks. etc. In the 1980s they displaced some of the wealthy whose fortunes lay in more tangible assets.

CHAPTER TITLE (XI): The Curve of Growth

A. MAJOR IDEA: Whatever the product, unit costs in an industry as a whole will tend to drop between 20 to 30 percent for each doubling of accumulated output.

B. ELABORATION: Once an industry is developed, each doubling will lower costs. As a result, the manufacturer expanding can lower his price, inducing, forcing, others to follow. Ford could afford to lower the price on the model T once he'd decide to double production. The other auto makers were forced to follow suit or risk bankruptcy.

CHAPTER TITLE (XII): Japan's Entrepreneurs

A. MAJOR IDEA: Despite the image of giant conglomerates forging into the future, Japan does have its entrepreneurs, just like America.

B. ELABORATION: The biggest advances in Japan come not from zeibatsu R&D departments but from entrepreneurs. Honda, for example, forged his own future with Honda motorcycles and cars. Rather than "toeing the line" with MITI and the government, he at best maintained an uneasy peace. Though the impetus for Japanese entrepreneurs is, more often, ideas from America, they still fit the mold of "rugged individualists."

CHAPTER TITLE (XIII): America's Digital Revolution

A. MAJOR IDEA: The biggest threat to American leadership in digital technology comes from the government.

B. ELABORATION: By making investment and entrepreneurial activity unattractive in these fields, the government risks selling off its most-promising industry. The digital industry will advance, and in America, which provides the most fertile climate for entrepreneurs. The advances, however, will come due to foreign investment, which is not restrained by tax policy, and fill foreign bank accounts.

CHAPTER TITLE (XIV): The Rise of Micron

A. MAJOR IDEA: The industrial vision triumphs over the corporate leviathan.

B. ELABORATION: Micron triumphed over IBM and others because it could flaunt conventional wisdom. While the larger company was willing to stake a certain amount of money on a project, which must show results, Micron founders were willing to stake literally everything they had. As a result, they took chances, stayed longer than a bigger firm would've dared, and emerged with a chip thought undesignable.

CHAPTER TITLE (XV): The Dynamics of Entrepreneurship

A. MAJOR IDEA: Hands-on experience is essential to entrepreneurs.

B. ELABORATION: In whatever field an entrepreneur is working, there is no substitute for hands-on work. Thus the Apple computer was actually designed by Steve Wozniak, a nerd, and not Steve Jobs, the entrepreneur. Jobs, however, had the foresight to rely on Wozniak's greater rather than his lesser computer skills. Other entrepreneurs are, themselves, experts in the field of their endeavors such as Simplot in the potato industry.