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THE HIGH COST OF PESSIMISM

07/04/1999

Normally, economist Michael Cox leaves ironies for the literary/academic set -- you know, the folks who deconstruct, reverberate and nuance. But this one he couldn't ignore:

Sergei Khrushchev, son of Nikita Khrushchev, is becoming an American citizen this month.

He chuckled about it when I visited him in his office at the Federal Reserve Bank of Dallas last week. There, surrounded by collections of historic microprocessors, Cox said that Sergei's decision was just another bit of proof that we've got the best economic system in the world.

"It's a shame that so few people really understand how good it is. And that so many people listen to so much bad news," he said.

"People have this idea that they need to know bad news. What they don't understand is that there is just as much to be lost by not understanding the good news, as by not knowing the bad news. Pessimism has a really high price."

Can you explain that? I asked.

"OK. Suppose you listened to the bad-news people and believed that our economy was going nowhere, that the only new jobs were low paying, that our system was about to collapse, etc. Well, then you would have bought gold in 1990. Back then it was $410 an ounce. Now it's $260. So if you had invested $10,000 in gold, you would now have $6,360.

"If you had invested the same $10,000 in Treasury bills you'd have $15,650.

"But if you were an optimist, you would have invested in stocks, and $10,000 in the Dow stocks would now be $52,960.

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"That's a big difference. There is a huge amount of money to be lost by not believing in good times.

"The people who say the market is a bubble are people who've missed the market -- they're envious. They need to give up. They shouldn't fight it.

"What they don't understand is that we're in the third round of an expanding technology, that the microprocessor is the equivalent of electricity, making more and more advances possible ...

"This boom is going to last for at least 20 years. We've only had nine months of recession since 1982. Did you know that in the entire century from 1853 to 1953, our economy was in recession 40 percent of the time? We've been conditioned to believe that's the way it was.

"We're going faster and faster. People have lost their equilibrium. That's what's making everyone nervous. It's not that things are bad, it's that things are getting better unusually fast."

Hyperbole?

Not a chance.

More than any economist since the late Julian Simon, Michael Cox has examined and chronicled the incredible cornucopia of economic freedom and human imagination. Here are just a few examples:

While the voices of doom cry that we will succumb to a crumbling health care system, AIDS and resilient microbes, he points out that life expectancy at birth has increased from 70.8 to 76.1 years since 1970; that infant mortality has dropped from 20.0 per thousand live births in 1970 to 7.0 today; that the work injury death rate has plummeted from 17.5 (per 100,000 workers) to 3.9; and that the air pollution index has dropped from 100 to 57.1.

While the harbingers of economic failure have moaned about our miserable life at work, he points out that the number of adult softball teams has ballooned from 29,000 to 184,000; that annual paid vacations and holidays have expanded from 15.5 days to 22.5 days; that attendance at symphonies, operas and theaters has zoomed from 17.3 million to 54.7 million; and that the average work week is shorter.

While the worrywarts groan that our affluence is a mirage of debt, he points out that median household net worth, in 1997 dollars, had more than doubled from 1970, rising from $27,938 to $59,398. More important, this has happened in spite of increasing the size of our homes and the number of cars we own. Not to mention broader ownership of color TVs, dishwashers, frost-free refrigerators and cable TV, or the introduction and distribution of new goods such as the VCR, microwave oven, cellular phone, CD player and personal computer.

Want to know more?

Sadly, you won't see it on TV. Doom and gloom is easier to find because it sells better.

You can, however, learn more at your local bookstore. If you read only one book this summer, make it "Myths of Rich and Poor: Why We're Better Off Than We Think" (Basic Books, $25). Co-written with Richard Alm, "Myths of Rich and Poor" is a reality tour de force. This is a great country. Terrific today. Getting better and better.

Would you like to read more of the positive view? Then check columns I've written about Michael Cox since 1993 on my Web site, www.scottburns.com.

(Questions about personal finance and investments may be sent to: Scott Burns, The Dallas Morning News, P.O. Box 655237, Dallas 75265; or faxed to (214) 977-8776; e-mail to scott@scottburns.com Check the Web site: "www.scottburns.com." Questions of general interest will be answered in future columns.)