Category: Economics

80s fashionI grew up in a very small town. Our fashion purchases were limited to the dry goods store (yes, it still went by that name) which carried things like Buster Brown shoes and sensible sweaters, or the grain elevator, where you could buy durable overalls for farm work.

As someone who eagerly awaited Seventeen magazine every month and witnessed the birth of MTV, you can imagine my fashion dilemma. The closest mall was 70 miles away. I needed Calvin Klein jeans, Candies heels and Esprit tops like, now.

Steven Quartz, a philosopher and neuroscientist at Caltech, along with Anette Asp, a political scientist and neuromarketer, feel for me. In The Atlantic, Bourree Lam talked with the two about the connection between “cool” and capitalism. Quartz and Asp, believe, in as sense, that capitalism created “cool.” First, though, Quartz says there are four myths linked to capitalism (or what some would call “consumerism”) that their research shows to be false:

First, that it doesn’t make us happy. Second, that it relies on instilling false needs in us because it’s contrary to our real nature. Third, that it erodes public life.  Fourth, that it’s primarily about “stuff.”

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Dorothy Sayers“If we put our neighbor first, we are putting man above God, and that is what we have been doing ever since we began to worship humanity and make man the measure of all things. Whenever man is made the center of things, he becomes the storm center of trouble – and that is precisely the catch about serving the community.” –Dorothy Sayers

In orienting our perspective on work and stewardship, one of the best starting points is Lester DeKoster’s view about work being service to neighbor and thus to God. And yet, even here, we ought to be attentive about the order of things, keeping in mind Samuel’s reminder that “to obey is better than sacrifice.”

It may seem overly picky, but it may be more accurate to say that our work is service to God, and thus to neighbor. For without obedience to God, service to neighbor will be severely limited at best, and wholly destructive at worst.

I was reminded of this when reading Dorothy Sayers’ popular essay, “Why Work?”, which she concludes by offering a strong warning against various calls to “serve the community” — a challenge she describes as “the most revolutionary of them all.”

“The only way to serve the community is to forget the community and serve the work,” she writes, meaning that only when we work for the glory of God can we hope for the flourishing of our neighbors (and selves). “The danger of ‘serving the community’ is that one is part of the community, and that in serving it one may only be serving a kind of communal egotism,” she continues. (more…)

raise-minimum-wagejpg“I’m tired all the time.” That’s the lament of one of the working mothers in the video below (from The Guardian), as she describes her life working minimum wage jobs. She and the other women featured are all fighting for an increase in pay to $15 per hour (like Seattle’s recent mandate.)

I feel for them. I can’t imagine trying to raise a family on minimum wage salaries. But I have several issues with what I see in this video. (more…)

gravity-incomeWhen the city of Seattle recently voted to increase the minimum wage to $15 an hour, some critics (like me) snarked that if $15 would help workers why not raise it to $20, $25, or even $30 an hour.

Apparently, one CEO in Seattle didn’t realize we were joking. Dan Price of Gravity Payments recently announced that every one of his 120 employees would soon be making a minimum of $70,000 a year—a minimum wage of $33.65 an hour.

The media reaction to the story has been about as fawning and uncritical as you would expect. While Price is rightfully being praised for his generosity (he’s cutting his own pay from $1 million to $70,000 a year to fund the pay increase), few people have—so far—pointed out how his largess may soon put his employees out of a job. Here’s why.
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RefuseServiceSignIn today’s Acton Commentary, “The Logic of Economic Discrimination,” I take up a small slice of the larger controversy and discussion surrounding religious liberty laws like the one passed recently in Indiana. My point, drawing out some of the implications of observations made by others, including Ryan Anderson and Shikha Dalmia, is that anti-discrimination boycotts depend on discrimination. Or as Dalmia puts it, “what is deeply ironic is that corporate America was able to wield its right not to do business (and boycott Indiana) by circumscribing the same right of Indiana businesses.”

Now there are lots of other angles and significant points to explore surrounding this enormously complex and important debate. Many have criticized the hypocrisy of corporations like Apple for doing business in places like China and Saudi Arabia even while they grandstand against Indiana. Others are now pointing to the actions of many in Silicon Valley, which despite the proclamations of support for social justice, have actually created huge inequalities. Tech centers like Silicon Valley are great, it seems, unless you are a woman, have a family, or are a blue-collar worker.

Indiana politicians, under massive scrutiny, have since moved to “clarify” the RFRA law that was passed, a move that has mollified some but not others. From the beginning, these conversations about religious liberty and economic rights have, in my view, insufficiently included sensitivity to considerations like freedom of association. Hopefully the larger context and interactions of contracts and rights, not merely “religious liberty” narrowly defined, can help broaden and mature the conversation.
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Profit-Risk-LossYesterday I noted how Americans tend to overestimate the amount of profit earned by corporations. The actual profit margins are so thin that, as Mark J. Perry points out, for the typical company all sales revenue from January 1 to December 7 would go to cover the firm’s expenses for the year, and its sales on roughly the last 24 days of December from December 8 to December 31 would represent its profits.

For the other industries displayed in the table above that operate on thin profit margins of less than 4%, companies in those industries have to operate until the middle of December (airlines for example at December 18), or even until the last week (department stores), or in the case of grocery stores until the middle of the last week of December. Think about it — a grocery chain like Safeway or Kroger has to operate from January 1 to December 26 until it breaks even for the year, and only then will its sales revenue from the the last 4.4 days starting on December 27 represent the profits for the entire year! And that’s only if everything goes exactly right, and nothing goes wrong — like a sales slump from a recessionary slowdown or from increased competition from a new competitor like Walmart and Target (now in the grocery business); or like an unexpected increase in costs that can’t be passed along in the form of higher prices, etc.

As a percentage of operating costs, profits are often miniscule. Yet they play an outsized moral role in the creation and distribution of goods and services. “Profits motivate people to work hard for themselves and to make life bette for others,” says economist Walter Williams.

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When struggling with “work that wounds”— work that’s “cross-bearing, self-denying, and life-sacrificing,” as Lester DeKoster describes it — we can content ourselves by remembering that God is with us in the workplace and our work has meaning.

But although these truths are powerful, God has not left us with only head knowledge and philosophical upgrades. When we give our lives to Christ and choose a path of transformation and obedience, the fruits of the Spirit will manifest in real and tangible ways, despite our circumstances. We will find meaning, but we will also experience peace, patience, and joy, even when it doesn’t make sense.

In Music Box, a classic Christian film from the early 1980s, we see an apt demonstration of this. The joy of the Lord is indeed our strength, not just as some abstract idea, but in real and noticeable ways through the application of mind to hands and hands to creative service. The Gospel breathes new life, even into the most dark and plodding situations.

Watch it here:

In the film, we see a tired and moping man, who lives a life of drudgery at a factory, followed by misery and disconnect at home. The solution? On his way home from work, he finds a magical music box that triggers a chorus of angels. God reminds him of the gift of Jesus — a lesson that sets the man about gift-giving of his own joy and purpose to other people, a newfound capacity that God continues to stretch throughout the film. In short, he’s awakened to the reality that all is gift. (more…)

300px-GeocentrismGeocentrism was the belief that the sun, the planets, and all the stars revolve around the Earth. The alternative view—heliocentricism—had been around since the 3 BC but was not taken seriously until the 16th century AD. What seems obvious to us now was a matter of heated debated for almost two thousand years.

Economist Don Boudreaux says the minimum-wage debate in economics is rather like the reverse of this debate that took place centuries ago among astronomers.

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Profits-Down“Someday this will all be yours,” I said, waving my hand across the aisles of the Piggly Wiggly. I was trying to ingratiate myself with my boss, the general manager for the biggest grocery store in Clarksville, Texas. He just smirked and shook his head. “For every dollar in sales, how much do you think this stores earns in profit?”

At the time I was taking high school economics and considered myself something of a financial savant because I knew the difference between stocks and bonds. Still, I was in full-on toady mode and thought it best to undershoot what I believed the true profit margin to be. I went with a safe number that I knew must be far too low. “About forty cents?” I asked.

“One cent,” he said. “For every dollar we put in the cash register we keep about one penny in profit.”

I was stunned, both by the skimpy profit margin and by my astoundingly shoddy ability at financial estimation. Unfortunately, I wasn’t alone. A poll taken last year asked a random sample of American adults, “Just a rough guess, what percent profit on each dollar of sales do you think the average company makes after taxes?” The average response was 36 percent.

As Mark J. Perry explains, the public’s estimates are way, way off:
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Blog author: jcarter
Thursday, April 2, 2015
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food-cost1While it may not seem like it when you’re standing at the checkout line at the grocery store, food is cheaper now that it was half a century ago.

“We are purchasing more food for less money, and we are purchasing our food for less of our income,” says Annette Clauson, an agricultural economist. “This is a good thing, because we have income to purchase other things.”

A recent report published by the U.S. Department of Agriculture shows how the average share of per capita income spent on food fell from 17.5 percent in 1960 to 9.9 percent in 2013.

thr-income-spent-on-food_custom-ed63b133b0b3914191e299c179a61271caa0db71-s1400-c85

A reduction of 7.6 percent over 50 years may sound trivial, so let’s examine how it would affect an average person.
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