JOHN STOSSEL JOINS
THE REVOLUTION
John Stossel is
the award-winning news anchor and correspondent for
20/20
and
The
John Stossel Specials
on ABC. His
programs take a skeptical look at a wide array of issues, from education
to gun control, and have earned him 19 Emmy Awards and recognition as
“the most consistently thought-provoking TV reporter of our time.”
Stossel recently joined The Investing Revolution to discuss his most
recent book,
Myths, Lies and Downright Stupidity: Get Out The Shovel; Why
Everything You Know Is Wrong.
The interview
covered a wide range of topics and his thoughts on several issues are
included below.
On price gouging
...
Nobody in
economics calls it gouging, they just call it sudden price spikes. It’s
only dumb politicians and reporters that call it price gouging. When
there’s a disaster, it’s common for prices to go up because they’re in
short supply and that’s good because that’s what encourages people to
bring more stuff in. I interviewed a guy who after Hurricane Katrina saw
people had no power in Mississippi so he bought 20 generators, loaded
them into his truck and drove 600 miles to Mississippi. People
surrounded his truck eager to buy them—he was going to sell them for
twice what he paid for them—but Mississippi authorities locked him up
for four days and confiscated his generators. Now, who did that benefit?
The Mississippi Attorney General proudly bragged of how they’d enforced
their law against evil price rises during the time of an emergency. But
people needed the generators. It was the big price spike that got him to
drive there. Likewise the “kind” store that doesn’t raise the price for
water, batteries and things like that after the disaster, sells out.
Soon the shelves are empty. People stock up; they buy more than they
need. By raising the price, he makes sure the batteries go to the people
who really need them and by raising the price he inspires other people
to get off their butts and bring new batteries in. Milton Friedman, the
economist, was the one who in my 20/20 program summed it up by saying
the price gougers are heroes. It’s tough to explain to people but prices
are more than just prices, they’re information—and when government locks
them into place, they just create shortages.
On people paying
more than they ever have for gas ...
They’re not paying
more than they ever have. It’s only true if you don’t adjust for
inflation and then you might as well say
Rush Hour 3
is one of the highest grossing movies of all time. It’s just silly. If
you adjust for inflation, gas cost about 20 cents a gallon more in 1980
and 1920. But beside that, [consider] what it takes to get gas here:
It’s got to be dug out of the ground from 5 miles beneath the earth (the
drills even bend to get to it) and then it gets shipped across an ocean,
refined into three types of gasoline, put in trucks that cost $100,000
each, shipped to stations that have all this expensive equipment so you
don’t blow yourself up and it still costs less than the bottled water
they sell at these gas stations. The government’s take—the taxes—are far
greater than the profits from the oil companies.
On why we
shouldn’t restrict the outsourcing of jobs ...
It would kill
jobs. It’s the freedom of trade, of goods, and of jobs that have created
the millions of jobs we have in America. We have lost 390 million jobs
over the past 10 years and some of that’s because of outsourcing. But
during that same time we gained 410 million jobs, 20 million more than
we lost and it’s outsourcing that partly makes that possible. A study at
Dartmouth found that companies that outsource most are the ones that
hire the most Americans. The money they save on that Indian engineer
does get reinvested in American workers and things that Americans do
better. And people say, “Well, all the leftover jobs are
hamburger-flipping service jobs,” but that’s not true. If it were true,
average wages would be going down in America and they’re not.
On raising the
minimum wage ...
We all want poor
workers to make more, but if government could do that with a minimum
wage, why stop at $7 an hour? That’s not very much. Why not $12, why not
$30 an hour? When government artificially raises wages above the market
price, above supply and demand, then some of those employers won’t hire
those workers or they’ll ship the jobs to India or they’ll buy a machine
instead. It’s the low minimum wage that allows entry level workers to
get a start in the workforce. We used to have people washing our
windshields in gas stations. We don’t now because it doesn’t pay the gas
station to hire a kid because they have to pay the higher wage. Kids
can’t learn construction on the job because they have to be paid a
minimum wage and because of all the regulations. We’re taking the bottom
rung off the opportunity ladder by passing these laws.
On investing
“experts” ...
All kinds of
people make these predictions and act like they know what they’re
talking about and you would think they would. They work at it full time,
they’re smart guys, they went to good colleges and they study the stocks
long hours every day. Who should know better? And yet, Morningstar,
which keeps track of the actively traded mutual funds, found that 95% of
them do worse than the averages, than the S&P. In other words,
blindfolded, throwing darts at the stock table or having a monkey pick
the stocks for you would do better than 95% of the professional stock
traders. It’s because all the information is out there. Everybody has
the same information and to beat it, you have to be unbelievably smart.
Only 5% of them are able to do that and because you invest with these
funds that do a lot of trading—and they all want you to trade because
that’s where they make their commission money—odds are you’re going to
do worse than just buying an index fund.
On Americans
becoming more gullible ...
I don’t think we
have evidence that we’re more gullible than we were. People have always
been gullible about some things. Some things are just intuitive and
wrong. The idea that more weird stuff happens on the night of the full
moon is because we remember patterns. If you’re at the police station
and it’s pretty wild and you look out the window and you see a full
moon, you draw conclusions. And if it’s wild on some night when there’s
no full moon, you don’t remember that. So, there’s always been
misinformation. What’s surprising now is that with all the new media we
have, there’s still so much garbage out there, but that’s because
reporters by and large are ignorant when it comes to economics. They’re
not interested. They’re interested in what happened today, they’re
interested in politics, theater, but not economics. People interested in
it tend not to go into journalism.
You can
hear
Stossel’s interview in its entirety, as well as all other past
programs, by visiting the program’s website at
www.theinvestingrevolution.com. Stossel’s book,
Myths, Lies and Downright Stupidity,
is available in
bookstores.
