Category: Economics

drug-pricesIf you suffer from acid reflux, your doctor may prescribe Nexium. But at $9 a pill, the price is enough to give you a worse case of heartburn.

That’s the price in the U.S. If you live in Canada, though, you can get the drug for less than a $1 a pill.

This price disparity leads many politicians to think the solution is obvious: Americans should just buy drugs from Canada or other countries where they are cheaper.

Amy Klobuchar (D-Minn.) and John McCain (R-Az.) have twice introduced legislation to allow Americans to order up to a 90-day supply of medicines from a licensed Canadian pharmacy. And Hillary Clinton and Bernie Sanders have made importing drugs from Canada part of their platform for reducing the cost of healthcare.

If this seems too easy, it’s because it’s an economically ignorant idea. Writing in the Harvard Business Review, Rafi Mohammed explains why this strategy won’t work:
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In Leonard Reed’s famous essay, “I, Pencil,” he marvels over the cooperation and collaboration involved in the assembly of a simple pencil — a complex coordination that is quite miraculously uncoordinated. 

In a short video from economist Alex Tabarrok, the same lesson is applied to Valentine’s Day roses:

“Behind every Valentine’s Day rose, there’s an extensive network of people from all over the world,” says Tabarrok, “from the farmer to the shipper to the auctioneer to the retailer—all cooperating to produce and transport roses from field to hand in a matter of days.”

But though these countless creative partners are surely acting out of some degree of self-interest, and though (in this case) they are working to enable and empower what we presume to be “loving” exchanges, there is something deeper going on throughout the activity. (more…)

Conservatives are known for arguing about the ill effects of over-regulation, reminding us how it stifles innovation, cramps entrepreneurship, and harms small businesses. Where we’re less effective is connecting this reality to the more fundamental abuses it wields on human dignity in general and the poor and vulnerable in particular.

In a 45-minute talk given at Heritage Action, Senator Ben Sasse of Nebraska offers a detailed critique of over-regulation in America.

Pointing first to the proper scope of regulatory policies, Sasse proceeds to note the increasing overreach of the federal government and the range of reasons to oppose it. Watch an excerpt here:

Although arguments about over-regulation and taxation are bound to involve in depth discussions about numbers and econometrics, Sasse reminds us that our focus must remain on the preservation of freedom and human dignity. (more…)

Original caption: Joseph Alois Schumpeter (1883-1950), Czech-born economist and professor at Harvard University. His theories on the development of capitalism made him famous Undated photograph. --- Image by © Bettmann/CORBIS

Today is the 133 birthday of the late Austrian-born economist, Joseph A. Schumpeter. A Finance Minister of Austria and later Harvard professor, Schumpeter coined the term “creative destruction” in explaining how capitalism delivers progress:

The opening up of new markets, foreign or domestic, and the organizational development from the craft shop to such concerns as U.S. Steel illustrate the same process of industrial mutation—if I may use that biological term—that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

Although a messy process, creative destruction was, according to Schumpeter, often necessary for innovation. As Joseph Klesney noted in an Acton Commentary in 2001:
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Blog author: jcarter
Thursday, February 4, 2016
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jesus_was_a_socialist_poster-ra50dbe5fff854b98ad170860c4976c88_wvg_8byvr_324The resurgence of socialism in America, especially among the young, seems to be based on a widespread form of wishful thinking and historical ignorance. Most people who support Bernie Sanders, for instance, do not realize that most of his ideas have been tried already—and discarded as unworkable.

Similarly, many Christians who support Sanders don’t realize that for centuries socialism has been considered incompatible with Christianity. Since the mid-1800s every Catholic pontiff—from Pius IX to Benedict XVI—has forthrightly condemned socialism. Protestants don’t have a single leader to make that judgment call, of course, but we too have determined that based on Scripture socialism is incompatible with biblical principles.

Yet despite the obvious disconnect between Christianity and socialism some people go even further and claim that Jesus himself was an advocate of socialism.

A solid, thorough rebuttal to this baffling notion can be found in Lawrence W. Reed’s essay, “Rendering Unto Caesar: Was Jesus A Socialist?

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What do we care about? How does the economic system affect our purpose in life? How can it enhance our purpose?

Those are the questions Arthur Brooks, president of the American Enterprise Institute, tackles in his presentation before the Aspen Institute.

Blog author: jcarter
Friday, January 22, 2016
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If the goal is to improve the economic fortunes of the least-advantaged workers and families, says economist Don Boudreaux in this short animated video, then the minimum wage is a terrible idea. On his blog, Boudreaux adds:

The minimum wage yields unfair advantages to families, such as mine, with teenagers who hail from middle- and high-income households, who are well-educated, whose parents and other relatives have social and business connections, and who have their own personal means of transportation. These advantages come at the expense – cruelly so – of minority and inner-city teens, of low-skilled immigrants, and of other workers who are poorly advantaged yet who, in most cases, need employment more than do those advantaged workers who manage to find jobs at the higher, minimum wage.