AMA 31 – John Stapleford: Ethics & Public Policy – Part 2

John Stapleford - Bulls Bears Golden Calves

No, the above title is not a typo. According this week’s guest John Stapleford, it is possible for ethics and public policy to have a direct correlation.

Stapleford is not only a senior economist for Moody’s, professor emeritus of economic development at Eastern University and former director of the University of Delaware’s Bureau of Economic Research but is also the well-known author of Bulls, Bears & Golden Calves.

This book provides clear guidance for identifying and discussing important ethical issues connected to an economy’s organization and public policy issues from a faith-based foundation. Tune in to this two-part series and discover the crucial reasons why the study of economics should not be disconnected from ethical concerns.

Narrator: Welcome to the American Monetary Association’s podcast. Where we explore how monetary policy impacts the real lives of real people, and the action steps necessary to preserve wealth and enhance one’s lifestyle.

Jason Hartman: Welcome to the podcast for The American Monetary Association. This is your host, Jason Hartman and this is a service of my private foundation, The Jason Hartman Foundation. Today we have a great interview for you, so I think you’ll enjoy it. And comment on our website or our blog post. We have a lot of resources there for you, and you can find that at or the website for the foundation which is Thanks so much for listening and please visit our website and enjoy our extensive blog and other resources there.

Start of Part 2 of Interview with John Stapleford

Jason Hartman: Kind of wrap up on the real estate market if you would, and I want to talk about your latest book. What are your thoughts on any particularly more attractive markets? I know there are a lot of unattractive markets for sure. You’re talking about migration flows and so forth.

John Stapleford: First of all, it’s going to be a long crawl back for regional housing prices. And the prices will still decline through most of the 2000s and then will turn around and start to rebound. But the rebound will take a good long while. Probably by 2010 the decline in prices across the United States will have been around 40%. But right now it’s at about around 25%.

Jason Hartman: Yeah, and I kind of personally see California declining about another 10% or so. Where do you think these declines will be worse? Will they be in the expensive markets, will they be in the over speculated markets?

John Stapleford: You had mentioned before that California, Florida, New York, Nevada, Arizona, those are the worst. The most modest declines have been kind of in the energy belt, the rocky mountains, Texas, Oklahoma, and Dakota and Montana. Actually, Louisiana. Anywhere where they have energy that they can get an economy that can still counter what’s going on. Actually the north east, like New York there was a lot of aggressive speculation, and in Massachusetts. But Pennsylvania wasn’t that bad. And Ohio wasn’t that bad. West Virginia wasn’t that bad.

So the downturn in those states is more modest, so the recovery should be a little quicker. Over all we think the last to climb out will be Florida and Arizona, and Nevada where they had the most aggressive speculative spending. New York has been hit by the whole financial industry front. Even that is more, you mentioned this earlier and it’s a really good point, that’s more been in terms of wages than it has been in point. The number of jobs in the financial industry, the loss there is nowhere close to the loss of wages and compensation.

California, the fact that you started in so early into this decline, we think it means that in fact, the downturn is trying to play out relatively swiftly. You’re already well into the foreclosure process. And when you look at income trends, and you look at how much the prices have fallen, in fact a lot of the housing is undervalued. The areas of the country, besides the North East and stable Pennsylvania, Washington, Oregon, Utah, they have relatively good economies. The areas that have fared the best have been Texas, maybe Oklahoma. And Texas and New Hampshire actually, which is interesting.

Jason Hartman: That’s kind of an oddball in there, yeah.

John Stapleford: Well yeah, and they’re kind of the oddball in the whole North East but they have the lowest state and local tax burden in the United States. And Texas is not far behind. Texas of course has the severance tax on oil to prop them up and keep taxes low, and they have probably the most free markets out of government regulation in those two states. So their economies have not taken as big a hit, and their housing market is going to come out we think a little faster. So it’s definitely, as you had started out saying, it’s definitely location specific. And it depends on the factors of that conceptual framework that we talked about. But things are starting to turn, and housing prices are starting to go up because there are so many bargains out there that there are people who are willing to consider buying, not at the high end of course.

Jason Hartman: On the bread and butter end. One thing that you didn’t mention, Tuesday, it’s the mid-Atlantic area, the Carolinas, North and South. Any thoughts on those?

John Stapleford: Okay, again that could be sort of location specific. Because South Carolina, not bad. North Carolina, worse than South Carolina but overall not as bad as the nation. Now Charlotte right now is a disaster because…

Jason Hartman: Due to banking.

John Stapleford: Wachovia and financial services. And again it’s that conceptual framework. When you stand back and you look at those states, the growth in the United States in the metropolitan areas have been growing over the last 25 years, have been metropolitan areas with higher temperatures.

So you look at North Carolina and South Carolina, do they have high quality of life in terms of temperature, air quality, relatively low cost land because most of those two states is undeveloped, yeah they do. And so over the long haul, do they have some real competitive advantages? Yes and with air conditioning and other telecommunications and so forth, also now you can locate your corporate headquarters there and you’ll be hardly disadvantaged. So in looking at those two states, South Carolina is doing better than North Carolina. Neither one of them has had the peak to drop decline that we’ve had throughout most of the nation.

Jason Hartman: I’m sort of surprised. We’re getting kind of interested in Phoenix again, and we haven’t looked at that market for about 4 years. I think our timing was pretty good. But prices have been cut in half, it’s cheaper to own a house in Phoenix than it is to rent the same house. It seems like Phoenix is getting pretty interested. Am I wrong on that?

John Stapleford: The question in my mind with regards to Phoenix is, is their growth rate going to be positive but at a decreasing rate? And I say that because they’ve grown so rapidly that I think they’re going to hit that minor brick wall. I don’t know if it’s minor or not, but that brick wall that fast growing areas do, which is congestion, crowded labor markets, rising prices on everything, higher levels of inflation. They have a cost of living that’s about 9% above the nation, and part of that is just because they were growing so quickly, cost of doing business is not bad.

But housing markets, they’re overbuilt. So it’s going to take a while for the inventory to go down. They have a concentration of course in aerospace, and that industry has kind of leveled off. They do have a lot of computer and electronics manufacturing but that has actually been in decline. They have a mortgage delinquency rate that’s higher than the nation that will have to be worked out. So I’m sure they have some mortgage resets that are still coming.

So yeah, they’ve been a high performing in the metropolitan area. But I think they’ve taken a larger hit than most areas of the country and right now, same things are happening other places where housing prices are starting to cause a turnaround in housing sales. But will it lead to a housing permit quickly? I don’t think so. With the low cost of doing business, they still are going to be attracted to businesses in Southern California. So our outlook for Phoenix is that over the longer haul, the entrenched tech industries and solid demographic trends will drive above average growth. But it won’t be the boom growth that you had during the last recession until the current recession. It won’t be at that level. It will be more in line with the growth rates overall in the United States.

Jason Hartman: One of the things we talked about on this show, and I know we’re going to build on here, I do want to get in some stuff about your book and maybe we can have you back on to talk about it in detail because it’s so interesting, but one of the things when you look at governmental policy, I heard just last week that Phoenix or not Phoenix, but Arizona passed a new bill. The attempt is to dis-incentivize foreclosures and make people hang onto their properties now that they’ve gotten much cheaper.

And they’ve done something with deficiencies saying that if you go into foreclosure, and of course there’s going to be a big deficiency probably, the lender can go after you. I think they’ve made it easier for the lender. I know that they can do that in multiple states, and judicial foreclosures and so forth. But that was just kind of an interesting point I wanted to bring up that may stem the tide of foreclosures a little bit there, I’m not sure.

John Stapleford: We’re seeing that the peak in the migration to Phoenix was when the population of Phoenix was about 4.3 million. And in 2006 they had net in migration of around 124 thousand. They’re running right now around 49 thousand. That is for 2009. So we see that net in migration picking back up for all kinds of reasons, including retirees and businesses moving from Southern California. So when you look at that you say okay, net in migration is going to pick up which is going to continue to drive the demand for housing. For a lender it really would make sense to hold onto a property as opposed to just bailing out completely on the property. So what they’re trying to do today in fact makes sense even from the self-interest standpoint of the people who hold the mortgages.

Jason Hartman: Okay, let’s talk about your book for a moment here. This is an interesting book. Your latest book is entitled Bulls, Bears and Golden Calves: Applying Christian Ethics in Economics. And you really mentioned some really interesting things here, just looking at one of your editorial reviews about how ethics are intertwined with economic and life analysis. Possibilities and perils of economic growth, the role of government. We’ve touched on some of these things. The growth of work and the loss of leisure. Lending and borrowing. Poverty and distributive justice. Environmental stewardship. Business and social responsibility. Legalized gambling. The pornography industry. Debt relief for less developed countries, economics of immigration, and population control. That’s a lot. There’s a lot in there. Tell us about the book.

John Stapleford: When you go back to Adam Smith, and he actually wrote two books. The first one was sort of a philosophy book and then he wrote Wealth of Nations.

Jason Hartman: The famous one.

John Stapleford: The famous one. And in his first book, The Theory of Moral Sentiments he actually said you know, when people come before God they’re going to have a tough time because most of us don’t live lives that are all that commendable. And that’s the basis for him going on to say, not all people but most people act in a self-interested way. Which is a Judeo-Christian element as well, that people are fallen. Well, Adam Smith says okay, given that, how do you turn that so people won’t destroy each other when in fact you could promote social welfare? You can promote the social good, given that reality of self-interested behavior.

He said well, the first thing is competition. The only reason that the 711 doesn’t charge you $40 for a Slurpee is because there’s other 711s and there’s other places like Dunkin Donuts now that give you something similar to a Slurpee. In other words, competition forces prices down. So that’s number one. Number two, you have a judiciary system that forces contracts and it kind of holds down abusive behavior. Number three you have private property rights, which is an incentive for people to be good stewards of their resources. So you have this combination of things that will work, that steer self-interested behavior into a way that in fact is positive for society.

But he also says you have to have some degree of moral consensus. The court system can’t do it all, and competition can’t do it all. If people don’t agree that child pornography is a bad thing you’re going to destroy your society. So he recognizes that there’s a need for some agreement on basic values like honesty. If you don’t have some amount of moral consensus, transaction cost goes sky high. Even though the courts will enforce a contract, it takes two or three years. In developing countries you can’t get a contract enforced because the courts are weak and they’re also corrupt. So if you don’t have some amount of moral consensus nobody’s going to trust anybody, and it’s very hard for an economy to function, particularly a market economy.

So taking a step further, our things has set things up in such a way that free markets and economies will function more efficiently if in fact people recognize natural law, recognize God’s law, recognize God’s law. So that was one of the compelling questions. Is in fact our free markets more viable in the context of Judeo-Christian ethics?

Jason Hartman: I would say they are because if you can’t trust the other party, it’s just too hard to hold them accountable. I always say the end result is the legal system. That’s the last step anybody ever wants to take. God forbid, you have to do it sometimes but it’s never profitable.

John Stapleford: It profits the lawyers.

Jason Hartman: Well, yeah but I’m not looking to profit the lawyers – I’m looking to profit myself! See? The invisible hand: self-interest. What is the alternative though? Are you comparing it to countries where people have less of an ethical context by which they govern their interactions just on an individual level? And like you mentioned before, a court system, a legal system that isn’t transparent, it’s more corrupt and inaccessible in many countries.

John Stapleford: Right. The Judeo-Christian position is that God’s laws have been revealed to everyone. So everyone down deep in their heart realizes that cheating and taking advantage of other people are really against God’s will. Now, the Judeo-Christian ethics also says the longer you violate God’s will, those natural laws, the easier it becomes. You can get hardened.

Jason Hartman: Like a moral relativism sort of evolves within an individual.

John Stapleford: The interesting thing in developing countries with regards to corruption is that in developing countries where you have a better flow of information, there’s less corruption. In developing countries where you have more newspapers, where you have more landline phones, more cellphones, more internet connection. In fact the level of corruption goes down. Corruption is measured by… there’s a corruption perception index put out by Transparency International. And this is statistically significant. I’ve looked at it. So what does that say? It says once somebody can find out that you’re being corrupt, you’re less likely to be corrupt.

It also confirms Adam Smith. Because for example now with cellphones, people leave the coast of India from the towns and villages, they go out in their wooden boats and they catch fish. They used to come back into the fish market and they would take whatever price they were offered. Now, the catch the fish, they get on their cellphones and they call four or five fish markets and they find out what price they can get for this, that and the other and that’s where they go. Part of this increase in communication is breaking down bottlenecks and monopolies. But part of it too is just putting the light of day on practices that people feel pretty embarrassed about once they’re caught. I’m sure Madoff isn’t delighted about what he’s done over this life now that he’s been caught. That is the tie-in.

In countries like Venezuela where it’s a totally centralized power and resources are allocated on the basis of who Chavez likes, and he doesn’t like. Economy breaks down, they’ve got the worst economy in Latin America. They’re actually starting to approach the African economies in terms of their standard of living. A coercive system like that just doesn’t function as well as the system where people are given freedom and freedom of choice. The interesting thing is Jason, when you go back to the garden of Eden… in the garden of Eden God gave men and women free choice. In the book you’re looking again and again at how well do these Judeo-Christian ethics function in particularly with regards to different market activity.

Jason Hartman: That’s a fascinating topic to take on. Few economists have approached it from that angle, I would have to say, at least not that I know of. One of the things that’s interesting about the communication aspect, shining light on people committing bad deeds… you look at the internet, and you look at something like eBay, which I think is really ingenious and so many other websites are using that type of model. You look at I can go on, I look up your book if it’s a piece of junk, I’m going to look at the reviews. Knowing in looking at the reviews of a seller on eBay or a publisher of a book, that some of the reviews will be fake, take everything with a grain of salt.

You go online and you look at websites like rip off report. Everybody’s got some unhappy client out there somewhere or a competitor that is making false statements about them, but by and large I think as long as people are intelligent and they try to kind of sort in their own mind the wheat from the chaff, these things are great tools, aren’t they?

John Stapleford: Well Jason, I especially appreciate investigative reporting.

Jason Hartman: John Stossel.

John Stapleford: Yeah, and when Dan Rather came out with a condemnation of George Bush and these documents, within 15 minutes…

Jason Hartman: The bloggers got him.

John Stapleford: The bloggers said oh, these are off of typewriters that didn’t exist at the time that this document was written.

Jason Hartman: I know, that was great.

John Stapleford: Bang. And it just blew away the whole thing, and last night they came out with the information that Mary Mapes, the producer, actually knew that George Bush had volunteered for Vietnam in 1970. But the point is that as you were saying with the internet, so many people can quickly look at something, and it doesn’t matter whether it’s conservative or liberal.

There was something about Obama having a press conference or a town hall in Bozeman, Montana that we got that really was very, very critical of the president. And my wife looked it up, she couldn’t find it in the papers. She went to a number of these sites, like urban legend type sites and they say, yeah, this may be a little bit hokey. It’s terrific that the information exchange is so… but as you say, you have to be cautious. Take everything initially with a grain of salt. Don’t overreact to it. Back it up by looking at multiple sources of information.

The information is reducing the amount of discrimination, reducing the amount of oppression. Even what went on in Iran during this last election.

Jason Hartman: Oh yeah, Twitter could have saved the country. Unfortunately it didn’t quite work out, but… it was great to have it there.

John Stapleford: The whole world knows now that this is a sham. This government in Iran is a sham. So it really is terrific. So you asked the question in the case of Iran, do they realize that disadvantaging women is really not something that is in accordance with God? I think they do, because they’re so defensive of it. And the more the word leaks out that they’re beating the heck out of their wives…

Jason Hartman: The stonings and all this crazy stuff.

John Stapleford: All the stuff, yeah, the more embarrassed that they become the more likely that things will change in a more positive direction.

Jason Hartman: Yeah, that’s the great hope for humanity is that economic and informational freedom will really solve many, many of the world’s problems.

John Stapleford: Many of the economists, particularly Milton Friedman and his wife, they always felt that economic freedom was essential for political freedom. You just couldn’t have one without the other.

Jason Hartman: And that’s why I am very much in favor of a smaller government. It just seems like everything the government gets into either mucks it up over bureaucratic stupidity or corruption or some unintended consequence. I just think the whole thing is, just make the government smaller. We all have our complaints about it. Make it do the basics to protect our freedoms, to provide the basic foundational things that the founding fathers of our country wanted it to provide, and not get into all of these other things.

I mean, it’s just every time something is done like this health care debate that’s raging on right now, I don’t know, let’s just look at the health care in the VA hospitals. Let’s look at the efficiency level of the department of motor vehicles. Let’s look at the management of our social security system. No one would look at those as good examples.

John Stapleford: You’re actually right Jason, and this argument goes back further than Adam Smith, but there are certain functions like roads and stop signs and national defense, and bridges, that require some amount of liberty be given over to government. And there’s no question of that. Has it gotten out of hand? Oh my gosh…

Jason Hartman: It sure has.

John Stapleford: I think you’re absolutely right that it’s gotten out of hand. And the only thing that you can think of doing that’s effective is just reducing the size of the whole thing rather than arguing over the merits of…

Jason Hartman: This or that. Just make it smaller.

John Stapleford: Yeah, just reduce the size of the whole thing and that’s the only way to get back to some common sense.

Jason Hartman: The power grabs and the corruption, they’ll still be there, they’ll just be smaller and they’re have less impact. And that’s why you just make the government smaller, you solve a million problems.

John Stapleford: But you may have seen, I think it’s on YouTube, on the John Murtha Airport…

Jason Hartman: No.

John Stapleford: John Murtha Airport which is near Johnstown in the middle of Pennsylvania. And 150 million dollars have been put into it. They just got stimulus money to repair a runway. They have one runway that will accommodate any plane in the world, it’s so big. They have three flights a day out of there. All three are to Washington DC. Each one subsidizes the passenger’s tickets 100 dollars a ticket. They probably have 20 passengers a day.

Jason Hartman: Wow. It’s another Amtrak.

John Stapleford: Would a market economy have put an airport there? And the people who live there they interviewed say oh I love it. No parking problems are great.

Jason Hartman: Sure you do! There’s 20 people on the plane. Great!

John Stapleford: But that’s what comes when you have coercive power and resources coming out of the centralized source. You get a crazy thing like that. And for every John Murtha I’m sure there’s somebody in congress who’s a wonderful person and a forthright person. But once you centralize power like that and let somebody be able to grab money like that, you’re going to have somebody who’s not a good egg.

Jason Hartman: Yeah, no question about it. The central planning has never worked and it doesn’t work anywhere on the planet, it hasn’t worked anywhere in history, there’s no example of success that any of the proponents of it can give. When you ask them that, they just can’t come up with an example.

John Stapleford: And my feeling is, there are economists who are very much in favor of the stimulus package, and who in fact favor another stimulus. And to me, in talking to them, what they didn’t get is that you are going to lose freedom and liberty when government gets larger. And that’s not a damp in innovation and entrepreneurship. They didn’t understand the political economy. They just said, oh there’s the government multiplier, and the government chucks a couple trillion dollars out there, we’re going to get the multiplier 1.8 or whatever it might be. But you obviously grasp that. I think what’s showing up in these town hall meetings, the frustration is people see their lives being diminished because government is getting bigger.

Jason Hartman: Well, that leads me to my last question for you. And I think, of course it stifles innovation, entrepreneurship and all this stuff you just mentioned. It also I think has a devastating effect on the value of money. And I see a lot of inflation coming down the pike, maybe 18 months, two years away. I think we’re going to start seeing it. What do you think?

John Stapleford: I agree with you. We’re not in the majority. There’s a minority in the Federal Reserve and a lot of other economists that agree with you as well. But I’m in your camp.

Jason Hartman: What is that going to look like for people?

John Stapleford: I think we’re going to have a Jimi Carter economy. Because we already know that it’s going to take about four years… it’s going to take until 2014 for the national unemployment rate to get back down to between five and six percent. So in 2010, 2011 we already know we’re going to have high unemployment, 8%, 9%. And I think we’re going to have rising prices for the reasons that we talked about before. And just as you think we’re going to have. And that’s the Jimi Carter economy.

Jason Hartman: I agree. So investors need to concentrate on protecting themselves from inflation. We talk a lot about that on the show. We won’t bother getting into it now because I have kept you way too long! You are very interested John.

John Stapleford: Oh it was fun. It was fun talking to you. You really have a great deal of knowledge about a lot of things with regards to economics. So I think your listeners do well by tuning in to hear you. I don’t know about your guests, but…

Jason Hartman: Oh well, I love my guests too. John, thank you so much for joining us today. It’s been very enlightening. Bulls, Bears and Golden Calves available on and I assume in all the major bookstores, right?

John Stapleford: Right and it’s actually on Kindle.

Jason Hartman: Yes! I have my Kindle and I love my Kindle.

John Stapleford: Yeah, and for those people who are interested, there’s actually an addition of it that’s in Korean.

Jason Hartman: Well, fantastic. So for our Korean listeners.

John Stapleford: When I have to send a free copy to people I send them the Korean one.

Jason Hartman: Well you sent me the real one, so I appreciate it. Or the English version I should say. What other websites would you like to give out? Of course, I’m sure?

John Stapleford: Really, people are so internet savvy that I don’t have… is for people who are really interested in staying on top of what’s going on in the national level and then if they want to at the state or local level, our [0:27:08.2] website I think is just terrific. I enjoy it myself, so…

Jason Hartman: And that’s how we found you. Because I saw you quoted somewhere representing And I’m glad I had you on the show. Well John, thank you so much for joining us today, I really appreciate it and we’ll let you go. Thanks for staying long!

John Stapleford: Okay Jason. Have a good day. Bye now.

Narrator: The American Monetary Association is a nonprofit venture funded by the Jason Hartman Foundation which is dedicated to educating people about the practical effects of monetary policy and government actions on inflation, deflation and personal freedom. Our goal is to help people prosper in the midst of uncertain economic times. This show is produced by The Jason Hartman Foundation, all rights reserved. For publication rights and media interviews, please visit or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate professional if you require individualized advice. Opinions of guests are their own and the host is acting on behalf of The Jason Hartman Foundation exclusively.

Transcribed by Ralph

The American Monetary Association Team


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