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January 2019

Episode #226: A Priest and a Rabbi...

Folks, we have the Judeo-Christian tradition on the show! Ed and Ron were honored to have back on the show for the third time, and at the same time, Father Robert Sirico and Rabbi Daniel Lapin. Join us for another fascinating conversation with these two mentors, covering issues from economics, liberty, freedom, truth, and a host of other topics.

Rev. Robert A. Sirico received his Master of Divinity degree from the Catholic University of America following undergraduate study at the University of Southern California and the University of London. During his studies and early ministry, he experienced a growing concern over the lack of training religious studies students receive in fundamental economic principles, leaving them poorly equipped to understand and address today's social problems. As a result of these concerns, Fr. Sirico co-founded the Acton Institute with Kris Alan Mauren in 1990. His writings are published in a variety of journals, including: the New York Times, the Wall Street Journal, Forbes, the London Financial Times, the Washington Times, and National Review. He is a member of the prestigious Mont Pèlerin Society, the American Academy of Religion, and the Philadelphia Society. He is the Pastor of Sacred Heart of Jesus parish in Grand Rapids, Michigan. Father Sirico holds dual Italian and American citizenship.

Rabbi Daniel Lapin was born into a prestigious Torah family. He was a student of his father, Rabbi A.H. Lapin, who served the Jewish communities in Johannesburg and Cape Town, South Africa, eventually immigrating to America with his wife where they established the Am Echad synagogue in San Jose, CA. He learned in yeshivas (Torah schools) in England and Israel as well as studying physics, engineering and mathematics in S. Africa. Rabbi Daniel immigrated to the U.S. where, along with Michael Medved, he founded the Pacific Jewish Center in California. In 1992, he and his family relocated to Washington State where he began his work strengthening the Judeo-Christian roots of this country by writing, speaking and standing shoulder to shoulder with prominent Christian leaders, leading to the establishment of the American Alliance of Jews and Christians. In 2002, Rabbi Lapin wrote his bestselling book Thou Shall Prosper: The Ten Commandments for Making Money.

Ed’s Questions

Father Sirico, you wrote in your book Defending the Free Market: Freedom is not a goal or virtue in itself. Ultimately, the aim of freedom must be the truth. You value the truth more than your freedom. Can you explain that, and then we’ll get Rabbi Lapin’s reaction.

Peter Block, a consultant and previous guest of the show [Episode #183], defines liberty as the absence of oppression, freedom is the act of commitment (a choice to have an intention to create a certain kind of world).

Father, what is your favorite story, part, or concept from the Old Testament? And Rabbi, what is your favorite story, part, or concept from the New Testament? Do you have favorite concept from the Old Testament?

We humans are said to be a tribal species, but it seems nowadays that tribalism has gotten completely out of hand, and is running amuck, with people running to quick judgment. Would you address this notion that being tribal is ok, but tribalism really seems to be a problem?

Ron’s Questions

Rabbi Lapin, on your recent podcast, you laid out a principle: The Bible is the source of morality. But the Bible’s morality applies to individuals, not to nations. Can you explain what you mean, and then we’ll get Father Sirico’s reaction.

Why do we tend confuse poverty with virtue (or piety)? Father I’ll start with you. [Rabbi Lapin wrote in Business Secrets of the Bible: “The opposite of wealth is evil. If wealth isn’t being created, then evil is being done.” And if wasn’t for the Bible, we wouldn’t have the word “poor”.

Prior Shows with Father Robert Sirico and Rabbi Daniel Lapin

Books by Father Robert Sirico and Rabbi Daniel Lapin

Episode #225: The Real Monopolies: Occupational Licensure

In 1950, one out twenty occupations required some type of licensure. Today, it is almost one out of three. There are three levels of occupational licensure:

  1. Registration

  2. Certification

  3. Licensure

Political organization is a far better predictor of licensure than the danger the profession poses to the public (measured by liability premiums).

Some Suggested Reading:

One book that really changed Ron’s mind on this topic is The Rule of Experts: Occupational Licensing in America , S. David Young, 1987 (CATO).

President Obama was likely the first president to ever discuss occupational licensing in a public speech (speech before national Governors’ Assn), and his Council of Economic Advisors issued a report, which included 80 pages that are highly critical of occupational licensure.

George Bernard Shaw: “All professions are a conspiracy against the laity.” Economists have documented the following effects of licensure:

  • Limit consumer choice

  • Raise consumer prices

  • Increase practitioner income

  • Limit practitioner mobility

  • Deprive poor of adequate services (rich drive, poor walk)

  • Restrict job opportunities for minorities, older workers

  • Stifle innovation and creativity—had retailing been subject, supermarkets, big box, Amazon could have never happened

Thomas Edison had little formal education and could not have been licensed as an engineer under today’s guidelines. Frank Lloyd Wright would not qualify to sit for the architect’s certifying exam. Cranks, crackpots, and outsiders bring innovation.

Colonial America Cotton Mather and his fellow clergyman fought to establish inoculation as a cure for small pox: their leading opponents were doctors.

The first law in the USA was in Virginia in 1639, which regulated physicians fees. The second law regulated the quality of physicians service in Massachusetts 10 years later.

The American Medical Association (AMA) was formed 1847, and by 1900 every state had mandatory licensing law.

Most licensure imposes experience requirements—usually an arbitrary length. Until courts stopped it, it took longer to become a master plumber in Illinois than to become a Fellow of the American College of Surgeons.

Citizenship and residency requirements are also part of licensure. Many of these began in the 1930s as European refugees came to the USA.

More Suggested Reading:

Another great book is The Right to Earn a Living: Economic Freedom and the Law , Timothy Sandefur, 2010 (CATO).

A Louisiana law licensed florists. It requires a one-hour written exam and 3-hour performance exam that tests on “harmony” and “effectiveness” of floral arrangements.

Since 2000, fewer than 50% have passed!

One witness testified in court in a case that was challenging the licensure law: “I believe that the retail florist does protect people from injury…We’re very diligent about not having an exposed pick, not having a broken wire, not having a flower that has some type of infection, like, dirt that remained on it when it’s inserted into something they’re going to handle, and I think that because of this training, that prevents the public from having any injury…”

This doesn’t pass the laugh test. However, it did pass the “rational basis test.”

Cause and Effect:

In 2007, psychics in Salem, MA lobbied for licensing as a requirement to protect the public. But it is literally impossible to be a competent psychic.

In 1881, the National Burial Case Association set prices for coffins across the industry. Two years later, the National Funeral Directors Association fixed the price of adult coffins at $15, a large sum in those days. For a wooden box your kid could make in wood shop.

Interior designer license is one of the most difficult to earn. Only three states and Washington, D.C. offer it. It requires 2,190 days of education & experience (6 years)!

They argue that carpets could begin sparking infernos, porous countertops could spread bacteria, mis-chosen jail furnishings can be used as weapons.

In Illinois, barbers and manicurists are licensed, but not electricians, even though shoddy electrical job could burn down your neighborhood, but your hair will grow back.

Let’s Talk Liberty and Freedom:

This is not just a dollars and cents issue, it’s a liberty and freedom issue. One doesn’t have to ask permission to exercise one’s rights. The right to earn a living: marry, travel, have children, (drive), worship, etc.

Even the Magna Carta protected the right of “any man to use any trade thereby to maintain himself and his family.”

This right to earn a living was transformed into a privilege that could be revoked whenever politicians decided that doing so would be a good idea.

In License to Work: A National Study of Burdens from Occupational Licensing , Dick M. Carpenter, Lisa Knepper, et. al., they describe a new occupation: Permit Expediter. In Los Angeles they exist for helping restaurants comply with all of their licensing. In Washington, D.C. former Consumer and Regulatory Affairs bureaucrats help with licensing.

But in Chicago, Permit Expediters are so common, they have their own license!

The book also studied 102 low-income occupations, such as: Interior designer, shampooer, florist, home entertainment installer (8 months), funeral attendant, tree trimmers (1+ year), shoe shiners (Newark).

On average, states license 43 occupations (LA = 71/102, OR = 59; WY = 24 fewest).

CA licenses 177 job categories and Hawaii imposes the most burdensome requirements, while PA has the lightest.

Most of the 102 occupations are practiced somewhere without licensure or widespread harm.

The average cosmetologist requires 372 days training while the average EMT requires 33 days.

One argument made in favor of licensure is asymmetric information, but that is true in a lot of markets (houses, cars, etc.). Information will never be perfect; it’s costly to acquire.

Reputation is stronger than regulation. And of course there is always tort law.

Milton Friedman wrote his PhD thesis with Simon Kuznets, Income from Independent Professional Practice (NBER, 1945). One excuse he constantly heard from the medical profession was: letting too many people in would lower incomes to such an extent that doctors would resort to unethical practices to increase their income.

Friedman replied: “This has always seemed…objectionable on both ethical and factual grounds. It is extraordinary that leaders of medicine should proclaim publicly that they and their colleagues must be paid to be ethical.”

Another excellent book is Bottleneckers: Gaming the Government for Power and Private Profit, by William Mellor and Dick M. Carpenter II.

The Chairman and founding GC of Institute for Justice, and director of strategic research, www.ij.org.

They define Bottlenecker as: A person who advocates for the creation or perpetuation of government regulation, particularly an occupational license, to restrict entry into his or her occupation, thereby accruing an economic advantage without providing a benefit to consumers.

Justice William O. Douglas: “The right to work is the most precious liberty that man possesses.”

Conclusion: these laws really hurt the poor and minorities, exacerbate inequality, and even harm kids (can’t have a lemonade stand).

Episode #224: The Best Books We Read in 2018

kafka.jpg

“I think we ought to read only the kind of books that wound and stab us. If the book we are reading doesn’t wake us up with a blow on the head, what are we reading it for.” -Franz Kafka

Ron’s Five Best Books in 2018

5. The Tyranny of Metrics, Jerry Muller

“Juking the stats”—the way in which institutions are perverted, as effort is diverted from its true purpose to meeting the metric targets.

Surgeon avoids tough cases—creaming, avoiding risky instances that might have negative effect impact on metrics.

“While we are bound to live in an age of measurement, we live in an age of mismeasurement, over-measurement, misleading measurement, and counter-productive measurement. The problem is not measurement, but excessive measurement and inappropriate measurement—not metrics, but metric fixation.”

Hospitals penalized % patients fail survive for thirty days beyond surgery, so they kept the patient alive for 31 days.

Metric fixation leads to a diversion of resources away from frontline producers toward managers, admin, and those who gather and manipulate data. Goodhart’s law: Any measure used for control is unreliable.

Metric fixation stifles innovation, risk-taking, and creativity, and creates a short-term vs. long-term outlook. During Vietnam War, Robert McNamara substituted civilian mathematical analysis for military expertise.

In the book, Muller covers:

  • Colleges and Universities

    • Training, oriented to production and survival

    • Education, oriented to making survival meaningful

  • Schools

  • Medicine—diagnosing and treating disease, American medicine is best in world; lifestyle patters beyond control of Drs

  • Policing

  • The Military

  • Business & Finance

  • Philanthropy and Foreign Aid—the snake of accountability eats its own tail

Sunlight best disinfectant, Wikileakism. More often, result is paralysis. Transparency becomes the enemy of performance

You can listen to Jerry Muller being interviewed by Russ Roberts on EconTalk. 

4. Strategic Cost Transformation, Dr. Reginald Lee

Ron was honored to write the Foreword, where he states:

“Dr. Lee’s distinction between noncash costs and cash costs is brilliant, not to mention essential for understanding how manipulating costs will not alter cash. The goal is to generate cash profit, not accounting profit. Most costs in organizations today are for capacity: Human capital, facilities, and technology. These costs don’t change based on how they are utilized, and yet cost accountants force math relationships that make it appear as if they did, such as cost per hour. The fact is, services and products don’t have costs, organizations do.

Besides, as Dr. Lee makes clear, “You don’t need calculated costs for managerial purposes. The data in the OC domain are precise and unambiguous [measurements]. The AD information is ambiguous and messy [metrics]. OC provides everything AD does without the drama.”

Cost accountants have all sorts of metrics in their toolboxes they claim are the magic bullet for calculating profitability per job, or per product/service. Yet these metrics of margin analysis won’t predict the need for additional capacity, or help you model cash flow, nor do they tell you from a pricing perspective if you’ve left money on the table.

Further, these metrics do not help you improve the future performance of your organization. Cost accountants are collectively plunging a ruler into the oven to determine its temperature—it is the wrong tool.

Listen to our interviews with Dr. Lee: Episode #200 and Episode #112.

3. Factfulness, Hans Rosling

Son, Ola, daughter-in-law, Anna, also co-authored the book.

Hans Rosling, R.I.P. [July 27, 1948 – Feb 7, 2017]

The book begins with a test, here are few of the questions, with the correct answer in bold.

Where does the majority of the world population live? Low income countries (9%)/middle (75%)/high income countries

In last 20 years, proportion of world population living in extreme poverty has… Almost doubled/same/almost halved

On average, 7% get it right (less than 1 in 10), all around the world, all types of professions, including Nobel Prize winners, and medical researchers worst

They did worse than random chance!

Chimps would do better—and their errors would be equally shared between the two wrong answers. The human errors all tended to be in one direction—the world is worse than it really is.

Rosling calls this an “Overdramatic worldview,” and it’s not the media’s, or the school’s fault, etc.

It’s how our brains work: illusions don’t happen in our eyes, they happen in our brains.

One linguistic change he convinced me of: there is no gap between the “developed” and “developing” worlds.

2. In the First Circle, Aleksandr Solzhenitsyn

Shunning the moral relativism that permeates modern thought, Solzhenitsyn unapologetically treats good and evil and the human soul as metaphysical realities.

Four days in a sharashka (slang for a prison research institute), December 24-27, 1949

Polyphonic principle: no single character dominates the novel.

To sum the book up: What does it mean to be a human being?

Solzhenitsyn last words to his fellow countrymen as he departed into exile: “Live Not by Lies!”

“The man from whom you’ve taken everything is no longer in your power; he is free again.”

“Lenin and Trotsky were right: If you couldn’t shoot people without trial, you would never be able to make history at all.”

“Socialism without Stalin was no different from fascism!” (Stalin to himself)

Mrs. Elanor Roosevelt: ask the prisoners whether any of them wished to address a complaint to the UN?

“They unanimously protest against the distressing situation of the blacks in America and ask the UN to look into the matter.”

There are two episodes on EconTalk on this book, with Russian Literature Professor Kevin McKenna. The first one talks about Solzhenitsyn the man, and the second discusses the book [spoiler alert for the second interview]. 

Ed’s Five Best Books in 2018

5. The Vampire Economy, Gunter Reimann

4. Tomorrow 3.0: Transaction Costs and the Sharing Economy, Michael C. Munger

Listen to our show with Mike Munger, Episode #190.

2. Win Bigly, Scott Adams

And… Ron and Ed’s #1 Book for 2018 surprising no one…

1. Life After Google, George Gilder

  • Kurt Godel: “Every logical system necessarily depends on propositions that cannot be proved within the system.” The mathematics of information, led to computers.

  • Computers required what Alan Turing called “oracles” to give them instructions and judge their outputs. Also led to Claude Shannon’s information theory.

  • Gordon Bell coined Bell’s Law: every decade a hundredfold drop in the price of processing power engenders a new computer architecture.

Listen to our interview with George Gilder on Life After Google, Episode #207.

Episode #223: 2018 - The Year in Review

2018.png

RIP

  • President George Herbert Walker Bush

  • Barbara Bush

  • John McCain

  • Charles Krauthammer

  • Marty Allen, comedian

  • Penny Marshall

  • Stephen Hillenburg, Creator SpongeBob Squarepants, ALS, 57

  • Roy Clark

  • Stan Lee

  • Paul Allen

  • Burt Reynolds

  • Neil Simon

  • Robin Leach

  • David Ogden Stiers, M*A*S*H

  • Aretha Franklin

  • Charlotte Rae (Edna Garret, The Facts of Life)

  • Adrian Cronauer, 79, American airman, radio show was inspiration for Good Morning, Vietnam

  • Joe Jackson, patriarch of Jackson family, 89

  • Anthony Bourdain, 61

  • Kate Spade, 55

  • Dwight Clark, The Catch, ALS, 61

  • Jerry Maren, 98, last surviving munchkin from The Wizard of OZ

  • Verne Troyer, Mini-Me in Austin Powers, 49

  • Tom Wolfe, 87

  • Margot Kidder

  • Larry Harvey, Founder of Burning Man Festival, 70

  • Harry Anderson, Night Court, 65

  • R. Lee Ermey, Full Metal Jacket drill sergeant, 74

  • Linda Brown, center of US Supreme Court Case ended segregation, 75

  • Stephen Hawking, 76

  • Bill Graham, 99

  • John Mahoney, Frazier, played the father, 77

  • Jerry Van Dyke, 86

  • John Young, Astronaut, walk on moon, first space shuttle flight, 87

  • Ken Berry

  • Richard Harrison, The Old Man on Pawn Stars, 77, Parkinson’s

TSOE Shows in 2018

Out of 50 live shows in 2018, we had guests on 23 of them (46%). Big shout out to our show runner, Thomas Casey, for arranging most of the wonderful guests we had on, and thank you to all the wonderful guests for appearing on the show.

Ron’s Five Favorite Shows of 2018 

  1. Bad Medicine, Episode #178

  2. Laws of Systems Thinking, Episode #175

  3. The Subscription Business Model, Parts I & II, Episodes #217 and #221

  4. Top Ten Pricing Lessons, Episode #196

  5. The Value Guarantee, Episode #179

Ed’s Data-driver Top Shows according to YOU

Top 3 interview shows

  1. George Gilder, Episode #207, Life After Google

  2. Stephan Liozu, Episode #203

  3. Russ Roberts, Episode #213

Top 3 topic-driven shows

  1. How to Have a Value Conversation, Episode #182

  2. The Subscription Business Model, Part I, Episodes #217

  3. Top Ten Pricing Lessons, Episode #196

Pull-quotes from our Guests

Mentors and Economists

Ron’s 37-year mentor, George Gilder, Episode #207, Life After Google

  • “We have to act in the darkness of time”

  • “Faith precedes knowledge, faith precedes action, faith precedes meaning”

  • “You can’t have any logical, rational system without faith”

Ed’s long time mentor, Peter Block, Episode #183

  • “Liberty is the absence of coercion; freedom is a choice, a commitment”

  • Ed sang to Peter!

  • Eisenhower asked computer, “Is there a God?” “There is now.”

Thomas Hazlitt, Episode #184, The Political Spectrum

  • The story of naming the SS Minnow from Gilligan’s Island

  • The iPhone wouldn’t have been allowed with net neutrality

Don Boudreaux, Episode #187

  • Public Choice is “Politics without romance.”

  • If mass transit is going to be measured by the number of jobs it creates, then we should have publicly funded Rickshaws, since there is a 1:1 of jobs and passengers

Michael Munger, Episode #190, Tomorrow 3.0

  • Uber is not threat to taxis, but to Amazon (Sears was first Amazon)

  • Triangulation, Transfer, Trust

  • To the customer, all costs are transaction costs

Russ Roberts, Episode #213

  • From Russ’s recent podcast, a Chinese proverb: “No food, one problem. Lots of food, many problems.”

Walter Williams, Episode #216

  • Referring to minimum wage laws: “They don’t even pass the sniff test.”

Other notable guests: a journalist, a former Thunderbird(!), authors, entrepreneurs, etc.

Mark Skousen, Episode #205

John Stossel, Episode #204

Chris “Elroy” Stricklin, Episode #214

Jeffrey Tucker, Episode #201, Right-Wing Collectivism

Barry Melancon, Episode #177, President of the American Institute of CPAs

Blair Enns, Episode #188, Pricing Creativity

Phil Rosenzweig, Episode #191, The Halo Effect

  • “Whenever someone says ‘We have the right strategy, we just need to execute better,’ I make sure to take an extra-close look at the strategy.”

Mary Ruwart, Episode #192, Death by Regulation

  • Ed: “Your book is more horrific than a Stephen King novel, because it’s real.”

  • “At least one-half of Americans who died lost at least a decade off their lives because of the 1962 FDA Amendments”

Reginald Lee, Episode #200, Strategic Cost Transformation, VeraSage Senior Fellow

Warren Myer, Episode #218, Coyote Blog, and Climate-Skeptic

Ron Quaranta and Erik Asgeirsson, Episode #212, Erik is the President and Chief Executive Officer of CPA.com, and Ron is the Founder and Chairman of the Wall Street Blockchain Alliance.

Stephan Liozu, Episode #203, Chief Value Officer of Thales Group, Professional Pricing Society Faculty, author

David Meikle, Episode #206, How to Buy a Gorilla

Ryan Lazanis, Episode #210, Founder of Xen Accounting

Alessandra Lezama, Episode #195, AbacusNext CEO

Jeff Kanter, Episode #197, Co-founder of HealthExcellencePlus.com 

Honors

Michael Palin, Knighted, Sir Palin 

Predictions Made about 2018