To shatter all expectations, I won't discuss the environment in this post

To begin with, I have to say I was troubled with Barro’s solutions to many problems. After expounding for paragraphs to explain an issue he quickly states the “answer” with very little factual foundation. Quotes like, “Much smaller benefits from individual currencies would be enough to outweigh the saving in transaction costs from moving to a single currency,” and “In both situations the benefits from central planning are exaggerated and the rewards from competition are underestimated” are examples of broad statements which I felt weren’t sufficiently supported.

Anyways, on to things which were adequately discussed to create a conversation. One area which I thought held interesting but unexplored applications was his analysis of sports wages. Barro claims that athlete’s competitive wages are set far above the correct wages according to a social standpoint. This is due to the unique situation of sports where relative performance is more important than absolute performance. Barro quickly notes that, “The competitive interaction of sports teams differs from that among producers of ordinary goods,” because such competition doesn’t cause economic distortions. I think Barro’s claim that there is a unique situation surrounding sports is untenable or poorly described at best. Stock holders invest in corporations depending on the relative performance of its executives among other things. If GM headhunters convinced a Ford executive to switch teams, similar distortions would be seen as in the sports world. As a result, one could argue that such executive salaries might be much higher than the socially optimal level. Barro seems to leave the door open to attack of his normally libertarian values for the inclusion of salary caps on earning in a wide variety of fields.

Another interesting area touched on by Barro was provided by his comments on diversity. One of his explanations for supporting national division was that there is a “desire to have a reasonably homogeneous population within (a country’s) borders.” This claim is later restated in defense of decentralized government when he states, “The apparent chaos from this diversity should instead be viewed as a reasonably good match between public policies and the desires of residents.” In an aside he does mention examples to the contrary such as the US, Switzerland and Belgium but I believe he doesn’t give them the proper recognition that they deserve. Three of the strongest economies of the 20^th century were based on regions of diversity. I think there is a definite possibility that diversity of individuals and preferences can help encourage competition thus increasing efficiency. In evaluating universities and colleges, it has often been shown that diversity can help the performance of all those attending the school. Why could this not hold for nations?